<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 1999.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MARIMBA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7372 77-0422318
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
440 CLYDE AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 930-5282
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KIM K. POLESE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MARIMBA, INC.
440 CLYDE AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 930-5282
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
SCOTT C. DETTMER, ESQ. GORDON K. DAVIDSON, ESQ.
BENNETT L. YEE, ESQ. DAVID K. MICHAELS, ESQ.
BRANDI L. GALVIN, ESQ. JEFFERY L. DONOVAN, ESQ.
AMY S. COHEN, ESQ. CYNTHIA E. GARABEDIAN, ESQ.
GUNDERSON DETTMER STOUGH FENWICK & WEST LLP
VILLENEUVE FRANKLIN & HACHIGIAN, LLP TWO PALO ALTO SQUARE
155 CONSTITUTION DRIVE PALO ALTO, CALIFORNIA 94306
MENLO PARK, CALIFORNIA 94025 (650) 494-0600
(650) 321-2400
</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, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.0001 par value............... $56,350,000 $15,666
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (Subject to Completion)
Issued , 1999
Shares
[MARIMBA, INC. LOGO]
COMMON STOCK
MARIMBA, INC. IS OFFERING SHARES OF ITS COMMON STOCK AND THE
SELLING STOCKHOLDERS
ARE OFFERING SHARES. THIS IS OUR INITIAL PUBLIC OFFERING AND NO
PUBLIC
MARKET CURRENTLY EXISTS FOR OUR SHARES.
-------------------------
WE HAVE APPLIED TO LIST OUR COMMON STOCK ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "MRBA."
-------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
-------------------------
PRICE $ A SHARE
-------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND PROCEEDS TO TO SELLING
PUBLIC COMMISSIONS MARIMBA, INC. STOCKHOLDERS
-------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Per Share................. $ $ $ $
Total..................... $ $ $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Marimba and certain selling stockholders have granted the underwriters the
right to purchase up to an additional shares of common stock to
cover over-allotments. Morgan Stanley & Co. Incorporated expects to deliver the
shares of common stock to purchasers on , 1999.
-------------------------
MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON
BT ALEX. BROWN
HAMBRECHT & QUIST
, 1999
<PAGE> 3
[ARTWORK TO COME]
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 3
Risk Factors........................ 4
Special Note Regarding
Forward-Looking Statements........ 17
Use of Proceeds..................... 18
Dividend Policy..................... 18
Capitalization...................... 19
Dilution............................ 20
Selected Consolidated Financial
Data.............................. 21
Management's Discussion And Analysis
of Financial Condition and Results
of Operations..................... 22
Business............................ 33
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management.......................... 49
Certain Transactions................ 59
Principal And Selling
Stockholders...................... 61
Description Of Capital Stock........ 63
Shares Eligible For Future Sale..... 66
Underwriters........................ 68
Legal Matters....................... 70
Experts............................. 70
Additional Information.............. 70
Index To Consolidated Financial
Statements........................ F-1
</TABLE>
------------------------
We were incorporated in Delaware in February 1996. Our principal executive
offices are located at 440 Clyde Avenue, Mountain View, California 94043, and
our telephone number is (650) 930-5282.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of the
prospectus or of any sale of the common stock. In this prospectus, unless the
context indicates otherwise, the "Company," "Marimba," "we," "us" and "our"
refer to Marimba, Inc., a Delaware corporation.
Unless otherwise indicated, all information in this prospectus (1) gives
effect to the conversion of all outstanding shares of preferred stock into
shares of common stock effective upon the closing of the offering, (2) assumes
no exercise of the underwriters' over-allotment option and (3) assumes no
exercise of an outstanding warrant to purchase 16,865 shares of our common
stock.
Until , 1999, all dealers that buy, sell or trade our
common stock, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
For investors outside the United States: Neither we nor any of the
underwriters have done anything that would permit this offering or possession or
distribution of this prospectus in any jurisdiction where action for that
purpose is required, other than in the United States. You are required to inform
yourselves about and to observe any restrictions relating to this offering and
the distribution of this prospectus.
------------------------
Marimba(R) and Castanet(TM) are our trademarks. This prospectus also
contains trademarks of other companies.
2
<PAGE> 5
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our Company and the common stock being sold in this
offering and our financial statements and notes thereto appearing elsewhere in
this prospectus.
MARIMBA, INC.
Marimba is a leading provider of Internet-based software management
solutions that enable companies to expand their market reach, streamline
business processes and strengthen relationships with customers, business
partners and employees. Our Castanet product family provides an efficient and
reliable way for enterprises to distribute, update and manage applications and
related data over corporate intranets, extranets and the Internet.
Companies are increasingly relying on the Internet to deliver business
critical applications and services to users inside and outside the enterprise.
As the Internet has evolved as a business tool, demands on its infrastructure
have grown and the enterprise computing environment is becoming more complex.
Furthermore, as business applications are increasingly being advertised and
delivered as services, companies and their customers are demanding the same high
levels of availability, ease of use and quality of service that they expect from
common utilities, such as electricity and telephone systems. This has created
significant software management challenges. As a result, a need has arisen for a
new management solution designed specifically for the Internet.
Marimba develops Internet services management solutions that enable
companies to deploy and manage e-business applications and services across the
extended enterprise. Castanet centralizes and automates the ongoing distribution
management of applications and services. Our strategy is to extend the Castanet
foundation to manage the array of infrastructure, systems and components upon
which business applications and services depend. We believe that by using
Castanet, organizations can leverage the Internet more efficiently by reducing
software management costs, delivering greater functionality and improving
customer loyalty.
Our global customer base spans multiple industry segments including
financial services, insurance, retail, manufacturing and telecommunications.
Castanet customers include such industry leaders as Bear Stearns, Charles
Schwab, EarthLink, Home Depot, Intuit, Ingram Micro, Seagate Technology and Sun
Microsystems. We market our Castanet product worldwide through a combination of
a direct sales force, resellers and distributors.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by us.................................. shares
Common stock offered by the selling stockholders............ shares
Common stock to be outstanding after the offering........... shares(1)
Over-allotment option....................................... shares
Use of proceeds............................................. Working capital and general corporate purposes. See "Use of
Proceeds."
Dividend policy............................................. We do not anticipate paying cash dividends in the
foreseeable future.
Proposed Nasdaq National Market symbol...................... MRBA
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED
FEBRUARY 21, 1996 DECEMBER 31,
(INCEPTION) TO -----------------
DECEMBER 31, 1996 1997 1998
----------------- ------- -------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ -- $ 5,563 $17,085
Loss from operations........................................ (1,310) (7,902) (6,128)
Net loss.................................................... (1,245) (7,718) (5,681)
Basic and diluted net loss per share........................ $ (.81) $ (1.57) $ (.59)
Weighted-average shares of common stock outstanding used in
computing basic and diluted net loss per share(2)......... 1,528 4,912 9,606
Pro forma basic and diluted net loss per share
(unaudited)............................................... $ (.37)
Shares used in computing pro forma basic and diluted net
loss per common share (unaudited)(2)...................... 15,359
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
(UNAUDITED)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 7,825 $
Working capital............................................. 2,912
Total assets................................................ 14,862
Long-term portion of capital lease obligations and equipment
advances, and other long-term liabilities................. 747
Redeemable convertible preferred stock...................... 18,953
Stockholders' equity (net capital deficiency)............... (13,743)
</TABLE>
- -------------------------
(1) Based on the number of shares outstanding as of December 31, 1998. Excludes
2,192,568 shares of common stock issuable upon exercise of outstanding
options as of December 31, 1998 at a weighted average exercise price of
$3.16. Also excludes 16,865 shares of common stock issuable upon the
exercise of a warrant outstanding as of December 31, 1998 at an exercise
price of $1.48 per share. See "Management -- Employee Benefit Plans" and
Note 6 of Notes to Consolidated Financial Statements.
(2) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the number of shares used in per share computations.
(3) Adjusted to reflect our sale of shares of common stock offered
hereby (at an assumed initial public offering price of $ per share and
after deducting estimated underwriting discounts and commissions and
offering expenses payable by us and the application of our net proceeds from
this offering. See "Capitalization."
3
<PAGE> 6
RISK FACTORS
This offering and an investment in our common stock involve a high degree
of risk. You should carefully consider the following risk factors and the other
information in this prospectus before investing in our common stock. Our
business and results of operations could be seriously harmed by any of the
following risks. The trading price of our common stock could decline due to any
of these risks, and you may lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED OPERATING HISTORY
We were founded in February 1996 and have a limited operating history. We
began offering our Castanet product in February 1997 and released Castanet 3.0
in June 1998. The revenues and income potential of our business and market are
unproven. Our limited operating history makes an evaluation of our prospects
difficult. An investor in our common stock must consider the challenges,
expenses and difficulties we face as an early stage company in a new and rapidly
evolving market. These challenges include our:
- Dependence on our Castanet product family;
- Dependence on the growth of our new and evolving markets;
- Need to expand our customer base;
- Need to develop new products;
- Need to compete effectively;
- Need to manage expanding operations;
- Need to expand our sales and professional services organizations;
- Need to establish and maintain reseller, systems integrator and original
equipment manufacturer relationships; and
- Dependence on key personnel.
We may not be successful in meeting any of these challenges, and the
failure to do so would seriously harm our business and results of operations. In
addition, because of our limited operating history we have limited insight into
trends that may emerge and affect our business.
WE HAVE INCURRED LOSSES AND WE EXPECT FUTURE LOSSES
We have experienced operating losses in each quarterly and annual period
since inception. We incurred net losses of $1.2 million for the period ended
December 31, 1996, $7.7 million for the year ended December 31, 1997 and $5.7
million for the year ended December 31, 1998. As of December 31, 1998, we had an
accumulated deficit of $14.6 million, and we expect to incur significant losses
in the future. We expect to continue to incur significant research and
development, sales and marketing and general and administrative expenses and we
expect these expenses to increase in dollar amount in 1999. As a result, we will
need to generate significant increases in our quarterly revenues to achieve and
maintain profitability. Although our revenues have grown in recent quarters, we
may not be able to sustain these growth rates or achieve or sustain
profitability. Our failure to achieve and sustain profitability would seriously
harm our business and results of operations. See "-- We Expect Significant
Increases in Our Operating Expenses," "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
4
<PAGE> 7
OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND FUTURE OPERATING RESULTS
REMAIN UNCERTAIN
Our quarterly operating results have varied significantly in the past and
will likely vary significantly in the future. Operating results vary depending
on a number of factors, many of which are outside of our control, including:
- The size, timing and contractual terms of orders for our products;
- The number of large orders, a small number of which can significantly
affect our revenues;
- Our limited order backlog, which makes license revenues in any quarter
substantially dependent on orders booked and delivered in that quarter;
- Our revenue recognition policy for sales to resellers and distributors,
under which we do not recognize revenues until the products are sold
through to end-users;
- The markets in which we operate, which may not develop as rapidly as we
anticipate;
- Our lengthy sales cycle, which varies substantially from customer to
customer;
- Our ability to develop, market and sell new products and enhancements on
a timely basis;
- The level of market acceptance for our products, and for new products or
product enhancements introduced by us or by our competitors;
- The effectiveness of our reseller, systems integrator and original
equipment manufacturing partners, particularly Tivoli Systems, Inc., in
selling our Castanet products;
- Changes in pricing by us or our competitors;
- Changes in information systems resource allocation by our customers due
to their operating budget cycles, which may also include their Year 2000
preparedness programs and expenditures;
- Our uncertain ability to manage costs given the variability in our
quarterly revenues;
- Potential seasonality in our sales;
- Technological changes in our markets;
- Deferrals of customer orders in anticipation of new products, services or
product enhancements introduced by us or by our competitors;
- The cost of ongoing or future intellectual property litigation;
- Personnel changes; and
- General economic factors.
As a result of the foregoing factors, our future operating results are
difficult to predict. In addition, we anticipate that the size of customer
orders may increase as we focus on larger business accounts. As a result, a
delay in the recognition of revenue, even from just one account, could have a
significant negative impact on our results of operations for a given period. In
the past, a significant portion of our sales have been realized near the end of
a quarter. Accordingly, a delay in an anticipated sale past the end of a
particular quarter could negatively impact our results of operations for that
quarter. In addition, in certain instances, we have entered into contracts with
our customers which include extended payment terms. In these instances, we
recognize revenue when payment is due, rather than when product is delivered.
We expect that revenues in the first quarter of each year will be lower
than revenues in the fourth quarter of the preceding year. We believe this trend
will be primarily due to the annual nature of budgetary, purchasing and sales
cycles. For example, we expect our license revenues to decrease for the quarter
ending March 31, 1999 and our net loss for that quarter to increase, compared to
our license revenues and net loss for the quarter ended December 31, 1998. See
"-- We Have Incurred Losses and We Expect Future Losses." In addition, our
expense levels are relatively fixed and are based, in part, on expectations as
to future revenues. Consequently, if revenue levels fall below our expectations,
our net income (loss) will decrease (increase) because only a small portion of
our expenses vary with our
5
<PAGE> 8
revenues. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
We believe that period-to-period comparisons of our results of operations
are not meaningful and should not be relied upon as indicators of future
performance. Our operating results will likely be below the expectations of
securities analysts and investors in some future quarter or quarters. Our
failure to meet such expectations would likely seriously harm the market price
of our common stock.
WE EXPECT SIGNIFICANT INCREASES IN OUR OPERATING EXPENSES
We intend to substantially increase our operating expenses in the future as
we:
- Increase our sales and marketing activities, including expanding our
direct sales force;
- Increase our research and development activities;
- Increase our general and administrative expenses;
- Expand our customer support and professional services organizations; and
- Expand our distribution channels.
With these additional expenses, we must significantly increase our revenues
in order to become profitable. We anticipate that these expenses could
significantly precede any revenues generated by such increased spending. If we
do not significantly increase revenues from these efforts, our business and
results of operations would be seriously harmed. Although our revenues have
grown from 1997 to 1998, we may not maintain this rate of revenue growth. In
fact, we may not experience any revenue growth in the future, and our revenues
could decline. Our efforts to enhance our products and expand our sales and
marketing activities, direct and indirect distribution channels and professional
services may not succeed or may prove more expensive than we currently
anticipate. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
OUR SUCCESS DEPENDS ON OUR CASTANET PRODUCT FAMILY AND NEW PRODUCT
DEVELOPMENT
We currently derive, and expect to continue to derive, substantially all of
our revenues from our Castanet software product family and related services. Our
strategy requires Castanet to be highly scalable and for our customers to be
able to use our products to deploy applications to large numbers of end users.
If we are unable to achieve this level of scalability, the attractiveness of our
products and services would be diminished. A decline in the price of, or demand
for, Castanet, or our failure to achieve broad market acceptance of Castanet,
would seriously harm our business and operating results. We cannot predict
Castanet's life cycle for several reasons, including:
- The recent emergence of the market for Internet services management
solutions;
- The level of acceptance of our new products and product enhancements;
- The risk of technological changes; and
- Future competition.
We are currently developing new product features and in the future we may
expand our operations by promoting new or complementary products and services.
In addition, our objective of providing a comprehensive Internet management
services solution will require us to develop and introduce new technologies and
product suites and to offer functionality that we do not currently provide. Any
development of these new technologies and product suites will require
significant research and development resources and will involve many challenges.
We may not be able to expand our product offerings or develop a comprehensive
Internet services management solution in a cost-effective or timely manner or at
all. In the past, we have experienced delays in new product releases, and we may
experience similar delays in the future. If we fail to deploy new product
releases on a timely basis, our business and results of operations could be
seriously harmed. Furthermore, if we are unable to expand our product offerings
to provide a comprehensive Internet services management solution, our business
and future
6
<PAGE> 9
operations could be harmed significantly. In addition, such efforts may fail to
increase our overall market acceptance, and the Internet services management
market may not ultimately prove to be viable. If we were to incur delays in the
introduction of new product features, or if these features do not provide the
benefits expected or do not achieve widespread market acceptance, our business
and results of operations would be seriously harmed. See "Business -- Research
and Development."
WE DEPEND ON THE GROWTH OF OUR CUSTOMER BASE
Our success is substantially dependent on the continued growth of our
customer base and the retention of our current customers. Our ability to attract
new customers will depend on a variety of factors, including the reliability,
security, scalability and cost-effectiveness of our products and services as
well as our ability to effectively market such products and services. In the
past, we have lost potential customers to competitors for various reasons,
including lower prices. If we fail to increase our customer base, our business
and results of operations would be seriously harmed.
WE DEPEND ON INCREASED BUSINESS FROM OUR CURRENT CUSTOMERS
Our ability to generate repeat business from current customers depends on
many factors. Most of our current customers initially purchase a license for a
small portion of our products and services for pilot programs. Even if these
pilot programs are successful, customers may not purchase additional licenses to
expand their use of Castanet. Purchases of expanded licenses by these customers
will depend on their success in deploying Castanet, their satisfaction with the
product and our support services and their perception of competitive
alternatives. A customer's decision whether to more widely deploy Castanet and
purchase additional licenses may also be affected by factors that are outside of
our control or which are not related to our products or services. In addition,
as we deploy new versions of Castanet or introduce new product suites, our
current customers may not require the functionality of our new products and may
not ultimately license such products. If we fail to generate repeat and expanded
business from our customers, our business and results of operations would be
seriously harmed. The terms of our standard license arrangements provide for a
one-time license fee and a prepayment of one year of software maintenance and
support fees. The maintenance agreement is renewable at the option of the
customer. Since the total amount of our maintenance and support fees we receive
in any period depends in large part on the size and number of licenses that we
have previously sold, any downturn in our software license revenues would
negatively impact our future service revenues. In addition, if customers elect
not to renew their maintenance agreement, our service revenues would be
adversely affected. Our business and operating results could be significantly
harmed if our customers choose not to renew their maintenance agreements.
WE HAVE A LONG SALES CYCLE THAT DEPENDS UPON FACTORS OUTSIDE OUR CONTROL
A customer's decision to purchase Castanet is discretionary, involves a
significant commitment of resources and is influenced by the customer's budget
cycles. In addition, selling Castanet requires us to educate potential customers
on its use and benefits. The sale of our products is subject to delays from the
lengthy budgeting, approval and competitive evaluation processes that typically
accompany significant capital expenditures. For example, customers frequently
begin by evaluating our product on a limited basis and devote time and resources
to testing our product before they decide whether or not to purchase a license
for deployment. Customers may also defer orders as a result of anticipated
releases of new products or enhancements by us or our competitors. As a result,
our products have a long sales cycle, and we face difficulty predicting the
quarter in which sales to expected customers may occur.
WE DEPEND ON OUR RELATIONSHIP WITH TIVOLI
Tivoli, a subsidiary of International Business Machines Corporation, has
been a reseller of our products since 1997. Tivoli accounted for $3.1 million,
or approximately 18% of our revenues in 1998. This includes $1.9 million, or
approximately 40% of our revenues in the third quarter of 1998 and
7
<PAGE> 10
$1.1 million, or approximately 19% of our revenues in the fourth quarter of
1998. Our reseller agreement with Tivoli provides for the resale of our products
at substantial discounts from list price. Consequently, the gross margin on such
sales is generally lower than the gross margin on our direct sales. Establishing
market acceptance for our products requires significant sales and marketing
efforts by Tivoli. In addition, the success of our reseller relationship with
Tivoli frequently requires that our technical and sales staff assist Tivoli with
its sales of Castanet products, which reduces the resources available for direct
sales efforts.
In March 1998, we entered into an original equipment manufacturer agreement
with Tivoli pursuant to which Tivoli is building upon the Castanet
infrastructure to develop a product called Cross-Site. Any revenues from Tivoli
under this original equipment manufacturer agreement will be from per seat
royalty payments on sales of Cross-Site that contain the Castanet
infrastructure. The per seat payments under the original equipment manufacturer
agreement will be less than the per seat payments we currently have under our
reseller agreement with Tivoli. Tivoli has announced that it expects to release
Cross-Site in the first quarter of 1999. Consequently, we expect to generate
revenues from royalties on sales of Cross-Site beginning in 1999 and expect that
revenues from the resale of Castanet pursuant to the Tivoli reseller agreement
will rapidly decrease and become immaterial as Tivoli transitions its efforts to
the release and sale of Cross-Site. However, Tivoli might be unable to introduce
Cross-Site by its expected release date. Furthermore, because Cross-Site is a
new product, Tivoli might not be able to successfully market and sell
Cross-Site, and the level of demand for Cross-Site is uncertain. Any failure of
Cross-Site to achieve widespread market acceptance could significantly harm our
business and results of operations. Because a significant amount of our revenues
have been, and are expected to continue to be, derived from Tivoli, we are
dependent on our relationship with Tivoli. Any disruption of our relationship
with Tivoli would seriously harm our business and results of operations. Our
reseller agreement with Tivoli expires upon the earlier of May 1, 1999 or
written notice provided to us by Tivoli. If the release of Cross-Site is delayed
beyond May 1, 1999, Tivoli would no longer resell our Castanet product unless we
and Tivoli extended the term of the reseller agreement. Furthermore, it is
possible for Tivoli to terminate the reseller agreement prior to the release of
Cross-Site. Because Cross-Site is built upon the Castanet infrastructure, we
expect Cross-Site to compete with our Castanet products. See "-- Our Market Is
Highly Competitive."
NOVADIGM HAS CLAIMED THAT WE INFRINGE ITS INTELLECTUAL PROPERTY
On March 3, 1997, Novadigm filed a complaint against us in the United
States District Court for the Northern District of California, alleging
infringement by us of a patent held by Novadigm (U.S. Patent No. 5,581,764, the
"Novadigm Patent"). Novadigm alleges that our infringement relates to certain
methods for updating data and software over a computer network that we use in
our Castanet products. Novadigm later identified claims 1, 4, 5, 23, 24, 25, 31,
33 and 34 of the Novadigm Patent as being infringed. In its complaint, Novadigm
requests preliminary and permanent injunctions prohibiting us and other
specified persons from making, using or selling any infringing products, and
claims damages, costs and attorneys' fees. The complaint also alleges that we
have willfully infringed the Novadigm Patent and seeks up to triple damages
pursuant to the United States Patent Act.
On May 2, 1997, we filed our answer to Novadigm's complaint and filed a
counterclaim against Novadigm. Our answer denies Novadigm's allegations and
asserts defenses to Novadigm's claim. Our counterclaim seeks a declaratory
judgment that we do not infringe the Novadigm Patent and that the Novadigm
Patent is invalid and unenforceable. On October 3, 1997, we received an opinion
from outside patent counsel that Castanet did not infringe the Novadigm Patent.
Since then, we have released two new major versions of Castanet. However, we do
not believe that any changes to Castanet made in the newer versions cause
Castanet to infringe any claim of the Novadigm Patent.
On August 25, 1997 and January 26, 1998, we filed motions for summary
adjudication asking the court to rule that one of the relevant claims of the
Novadigm Patent is invalid because it was anticipated
8
<PAGE> 11
by two prior art references. In response to each motion, Novadigm argued that
the motion was premature because it pre-dated certain claim construction
proceedings, because only limited discovery had been taken, and because our
motion failed to demonstrate that we were entitled to summary adjudication. The
court denied our motions in part because (1) discovery was ongoing, (2) the
court had not had an opportunity to construe the relevant language in the
Novadigm Patent and (3) the court found there were triable issues of fact as to
the disclosures in those references. The court stated that we could re-file our
motions once discovery has been substantially completed and after it had held a
claims construction hearing.
On December 17, 1998, the court held a claims construction hearing on the
appropriate interpretation of certain terms in the Novadigm Patent, and on
December 28, 1998 the court issued an order setting forth its ruling on the
interpretation of those terms.
On January 19, 1999, Novadigm detailed its position as to why Castanet
Version 1.1 infringes the asserted claims of the Novadigm Patent and contended
that the alleged comparison of file level and channel level checksums in
non-optimized updating and the comparison of channel level checksums and their
associated update commands in optimized updating infringes the claims of the
Novadigm Patent. Novadigm's claim is not limited to Version 1.1, and Novadigm
has also stated that it believes that all or some code from subsequent versions
of Castanet work substantially the same way. We do not believe that Novadigm
accurately states the functionality of Castanet Version 1.1 or establishes that
Castanet Version 1.1 infringes the Novadigm Patent. We also do not believe that
the relevant portions of other versions of Castanet work in substantially the
same way or infringe on any claim of the Novadigm Patent. However, it is
possible that Novadigm may allege additional ways in which Castanet infringes
claims of the Novadigm Patent in the future.
To date, both parties have conducted substantial discovery. We expect that
in the first half of 1999, the parties will complete discovery, including the
exchange of expert reports. If the court does not enter judgment based on any
dispositive motions, a jury trial of this action is currently scheduled to begin
in September 1999.
We believe, and have been advised by our outside patent counsel, that we
have strong defenses against Novadigm's lawsuit. Accordingly, we intend to
defend this suit vigorously. However, we may not prevail in this litigation.
Litigation is subject to inherent uncertainties, especially in cases such as
this where sophisticated factual issues must be assessed and complex technical
issues must be decided. In addition, cases such as this are likely to involve
issues of law that are evolving, presenting further uncertainty. Our defense of
this litigation, regardless of the merits of the complaint, has been, and will
likely continue to be, time-consuming, costly and a diversion for our technical
and management personnel. In addition, publicity related to this litigation has
in the past, and will likely in the future, have a negative impact on the sale
of our Castanet products.
A failure to prevail could result in:
- our paying monetary damages (which could be tripled if the infringement
is found to have been willful) and which may include paying an ongoing
royalty to Novadigm for the sales of Castanet products or paying lost
profits to Novadigm for particular sales in which we competed with
Novadigm and closed a sale;
- the issuance of a preliminary or permanent injunction requiring us to
stop selling Castanet in its current form;
- our having to redesign Castanet, which could be costly and time consuming
and could substantially delay Castanet shipments (assuming that such a
redesign is feasible);
- our having to reimburse Novadigm for some or all of its attorneys' fees;
- our having to obtain from Novadigm a license to its patent, which license
might not be made available to us on reasonable terms, particularly
because Novadigm is a competitor; or
9
<PAGE> 12
- our having to indemnify our customers against any losses they may incur
due to the alleged infringement.
Any of these results would seriously harm our business, results of
operations and financial condition. Furthermore, we expect to continue to incur
substantial costs in defending against this litigation and these costs could
increase significantly if our dispute goes to trial. It is possible that these
costs could substantially exceed our expectations in future periods. See "-- Our
Market Is Highly Competitive."
OUR MARKETS ARE HIGHLY COMPETITIVE
Our markets are new, rapidly evolving and highly competitive, and we expect
such competition to persist and intensify in the future. We encounter current or
potential competition from a number of sources, including:
- Sellers of enterprise-wide management systems which include electronic
software distribution such as Tivoli, Computer Associates, Inc. and BMC
Software, Inc.;
- Companies such as BackWeb Technologies, Inc., Novadigm, and Sterling
Commerce, Inc., through its subsidiary XcelleNet, Inc., which address
certain portions of our market; and
- Desktop software management suites, such as Microsoft's SMS and Intel's
LanDesk.
In addition, we compete with various methods of application distribution
and management, including the web browser, and with application server vendors
and others which have introduced software distribution capabilities into their
products.
As new participants enter the Internet services management market, we face,
and expect to continue to face, additional competitors. In addition, potential
competitors may bundle their products or incorporate an Internet services
management component into existing products in a manner that discourages users
from purchasing our products. For example, future releases of Microsoft's
Windows and NT operating systems are expected to include components addressing
certain Internet services management functions. Furthermore, it is possible that
new competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Our competitors may be able to respond more quickly to
new or emerging technologies and changes in customer requirements than us.
Some of our competitors have longer operating histories and significantly
greater financial, technical, marketing and other resources than we do. Many of
these companies have more extensive customer bases and broader customer
relationships that could be leveraged, including relationships with many of our
current and potential customers. These companies also have significantly more
established customer support and professional services organizations than we do.
In addition, these companies may adopt aggressive pricing policies to gain
market share. As a result, we may not be able to maintain a competitive position
against current or future competitors. Our failure to maintain and enhance our
competitive position within the market could seriously harm our business and
results of operations. See "-- We Depend on Our Relationship with Tivoli" and
"Business -- Competition."
PROTECTION OF OUR INTELLECTUAL PROPERTY IS LIMITED
Our success and ability to compete are dependent on our ability to develop
and maintain the proprietary aspects of our technology. We rely on a combination
of patent, trademark, trade secret and copyright law and contractual
restrictions to protect the proprietary aspects of our technology. These legal
protections afford only limited protection for our technology. We presently have
three U.S. patent applications, and several trademark registrations and
applications in the United States and certain foreign countries. Our patent and
trademark applications might not result in the issuance of any patents or
trademarks. If any patent or trademark is issued, it might be invalidated or
circumvented or otherwise fail to provide us any meaningful protection. We seek
to protect our source code for our software, documentation and other written
materials under trade secret and copyright laws. We license our software
pursuant to signed license agreements, which impose certain restrictions on the
licensee's ability
10
<PAGE> 13
to utilize the software. Finally, we seek to avoid disclosure of our
intellectual property by requiring employees and consultants with access to our
proprietary information to execute confidentiality agreements with us and by
restricting access to our source code. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our
products or to obtain and use information that we regard as proprietary.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets and to determine the validity and scope of
the proprietary rights of others. Any such resulting litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on our business and operating results. In addition, we sell our products
internationally and the laws of many countries do not protect our proprietary
rights to as great an extent as do the laws of the United States. Our means of
protecting our proprietary rights may not be adequate and our competitors could
independently develop similar technology. Our failure to adequately protect our
intellectual property could have a material adverse effect on our business and
operating results.
Our success and ability to compete are dependent on our ability to operate
without infringing upon the proprietary rights of others. Any parties asserting
rights against us would force us to defend ourselves or our customers against
alleged infringement of intellectual property rights. We could incur substantial
costs to defend any such litigation and intellectual property litigation could
force us to do one or more of the following:
- Cease selling, incorporating or using products or services that
incorporate the challenged intellectual property;
- Obtain from the holder of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not be
available on reasonable terms; and
- Redesign those products or services that incorporate such technology.
In the event of a successful claim of infringement against us and our
failure or inability to license the infringed technology, our business and
operating results would be significantly harmed. Currently, we are engaged in
litigation with Novadigm concerning the alleged infringement by us of a patent
held by Novadigm. See "-- Novadigm Has Claimed That We Infringe Its Intellectual
Property" and "Business -- Legal Proceedings."
WE DEPEND UPON THIRD-PARTY DISTRIBUTION RELATIONSHIPS AND NEED TO DEVELOP
NEW RELATIONSHIPS
Our sales strategy requires that we establish multiple indirect marketing
channels in the United States and internationally through resellers and systems
integrators, and that we increase the number of customers licensing our products
through these channels. We have a limited number of agreements with companies in
these channels, and we may not be able to increase our number of distribution
relationships or maintain our existing relationships. We currently have a
reseller agreement with Tivoli pursuant to which we derive a significant amount
of our revenues. We expect that revenues under this reseller agreement will
rapidly decrease and become immaterial after Tivoli releases products under its
original equipment manufacturer agreement with us. The per seat payment under
our original equipment manufacturer agreement will be less than the per seat
payment under our reseller agreement with Tivoli. Netscape, a reseller of our
products, accounted for $1.0 million, or approximately 18% of our revenues in
1997, and $3.8 million, or approximately 22% of our revenues in 1998. A majority
of the $3.8 million of 1998 revenues was recognized in the first half of 1998,
with only $1.3 million in revenues recognized in the second half of 1998.
Netscape is no longer an active reseller, and we do not expect material revenues
from Netscape in the future.
Our current agreements with our channel partners do not prevent these
companies from selling products of other companies, including products that may
compete with our products, and do not generally obligate these companies to
purchase minimum quantities of our products. These distributors could give
higher priority to products of other companies, or to their own products, thus
reducing their
11
<PAGE> 14
efforts to sell our products. In addition, sales through these channels
generally have a lower price than direct sales. Accordingly, while the loss of,
or significant reduction in sales volume to, any of our current or future
channel partners could seriously harm our revenues and results of operations, a
significant increase in sales through these channels could negatively impact our
gross margins. See "-- We Depend on Our Relationship with Tivoli,"
"Business -- Sales, Marketing and Distribution."
WE NEED TO DEVELOP AND EXPAND OUR SALES, MARKETING AND DISTRIBUTION
CAPABILITIES
We need to expand our marketing and direct sales operations in order to
increase market awareness of our products, market Castanet to a greater number
of enterprises and generate increased revenues. In the future, we anticipate
that our revenues from direct sales efforts will increase as a percentage of
revenues compared to revenues derived from our third-party resellers and
distributors. In this regard, we are expanding our direct sales force and plan
to hire additional sales personnel. However, competition for qualified sales
personnel is intense. Our products and services require a sophisticated sales
effort targeted at senior management of our prospective customers. New hires
will require extensive training and typically take at least six months to
achieve full productivity. Our recent hires may not be able to become as
productive as necessary, and we may not be able to hire enough qualified
individuals in the future. In addition, we have limited experience exploiting
our marketing resources to stimulate broad product demand over a large number of
potential customers. We must be successful in this endeavor if we are to expand
our customer base. See "Business -- Sales, Marketing and Distribution."
WE NEED TO EXPAND OUR PROFESSIONAL SERVICES
Customers that license our products typically engage our professional
services organization to assist with support, training and consulting. We
believe that growth in our product sales depends on our ability to provide our
customers with these services and to educate third-party resellers and
consultants on how to provide similar services. As a result, we plan to increase
the number of our service personnel to meet these needs. However, competition
for qualified services personnel is intense. We operate in new markets and there
is a limited number of people who have acquired the skills needed to provide the
services that our customers demand. We may not be able to attract, train or
retain the number of highly qualified services personnel that our business
needs. See "Business -- Customer Support and Training."
We expect our service revenues to increase in dollar amount as we continue
to provide support, consulting and training services that complement our
products and as our installed base of customers grows. This could negatively
impact our gross margin because margins on revenues derived from services are
generally lower than margins on revenues derived from the license of Castanet.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
EXPANDING INTERNATIONALLY IS EXPENSIVE, WE MAY RECEIVE NO BENEFIT FROM OUR
EXPANSION AND OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO GOVERNMENTAL
REGULATION
We received approximately 22% of our total revenues in 1997 and
approximately 7% of our total revenues in 1998 from sales to customers located
outside of North America. We plan to increase our international sales force and
expand our operations abroad. However, we may not be successful in increasing
our sales to new or current international customers. In addition, our
international business activities are subject to a variety of risks, including
the adoption of laws, actions by third parties and political and economic
conditions that could restrict or eliminate our ability to do business in
certain jurisdictions. Although we currently transact business in U.S. dollars,
if we transact business in foreign currencies in the future, we will become
subject to the risks associated with transacting in foreign currencies,
including potential negative effects of exchange rate fluctuations. To date, we
have not adopted a hedging program to protect us from risks associated with
foreign currency fluctuations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Governmental regulation and requirements influence our sales
internationally. For example, export, and in certain cases, import clearances
must be obtained before Castanet can be distributed internation-
12
<PAGE> 15
ally. Current or new government laws and regulations, or the application of
existing laws and regulations, including those related to property ownership,
content and taxation, could expose us to significant liabilities, significantly
slow our growth or otherwise seriously harm our business and results of
operations.
WE MUST MANAGE OUR GROWTH AND EXPANSION
Our historical growth has placed, and any further growth is likely to
continue to place, a significant strain on our resources. We have grown from 20
employees at December 31, 1996 to 145 employees at December 31, 1998. We have
also opened seven sales offices and have significantly expanded our operations.
To be successful, we will need to implement additional management information
systems, improve our operating, administrative, financial and accounting systems
and controls, train new employees and maintain close coordination among our
executive, engineering, accounting, finance, marketing, sales and operations
organizations. In addition, our growth has resulted, and any future growth will
result, in increased responsibilities for management personnel. Any failure to
manage growth effectively could seriously harm our business and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
WE MUST RETAIN AND ATTRACT KEY PERSONNEL
Our success depends largely on the skills, experience and performance of
the members of our senior management and other key personnel, including our
President and Chief Executive Officer, Kim Polese, and our Chief Technical
Officer, Arthur van Hoff. None of our senior management or other key personnel
is bound by an employment agreement. If we lose one or more of these key
employees, our business and results of operations could be seriously harmed. In
addition, our future success will depend largely on our ability to continue
attracting and retaining highly skilled personnel. Like other companies in the
San Francisco Bay Area, we face intense competition for qualified personnel. We
may not be successful in attracting, assimilating or retaining qualified
personnel in the future. See "Management."
WE RELY ON THIRD-PARTY SOFTWARE AND APPLICATIONS
We integrate third-party security and encryption software as a component of
our software. We would be seriously harmed if the providers from whom we license
software ceased to deliver and support reliable products, enhance their current
products or respond to emerging industry standards, third-party product
introductions and technological changes. In addition, the third-party software
may not continue to be available to us on commercially reasonable terms. If we
cannot maintain licenses for such third-party software and applications,
shipments of our products could be delayed until equivalent software could be
developed or licensed and integrated into our products. Furthermore, we might be
forced to limit the features available in our current or future product
offerings. Either alternative could seriously harm our business and results of
operations. See "-- We Must Respond to Rapid Technological Change and Evolving
Industry Standards" and "Business -- Proprietary Rights and Licensing."
Almost all of our products are written in Java and require a Java virtual
machine in order to operate. Although we currently ship almost all of our
products with Java virtual machines made available free of charge by Sun
Microsystems, Inc., we have no assurance that Sun will continue to make these
implementations available at commercially reasonable terms or at all.
Furthermore, if Sun were to make significant changes to the Java language or its
Java virtual machine implementations, or fail to correct defects and limitations
in such products, our ability to continue to improve and ship our products could
be impaired. In the future, our customers may also require the ability to deploy
our products on platforms for which technically acceptable Java implementations
either do not exist or are not available on commercially reasonable terms. Our
customers may also have dependencies on particular implementations of the Java
virtual machine or runtime environment which may not be technically or
commercially acceptable for integration into our products.
13
<PAGE> 16
SOFTWARE DEFECTS IN CASTANET WOULD HARM OUR BUSINESS
Complex software products such as ours often contain errors or defects,
including errors relating to security, particularly when first introduced or
when new versions or enhancements are released. In the past, we have discovered
defects in our products and provided product updates to our customers to address
such defects. Despite internal testing and testing by current and potential
customers, Castanet and other future products may contain serious defects,
including security breaches and Year 2000 errors. Such defects or errors in
current or future products could result in lost revenues or a delay in market
acceptance, which would seriously harm our business and results of operations.
Since many of our customers use our products for mission-critical
applications, errors, defects or other performance problems could result in
financial or other damage to our customers and could significantly impair their
operations. Our customers could seek damages for losses related to any of these
issues. Although our license agreements typically contain provisions designed to
limit our exposure to product liability claims, existing or future laws or
unfavorable judicial decisions could negate our limitation of liability
provisions. We have not experienced any product liability claims to date.
However, a product liability claim brought against us, even if not successful,
would likely be time consuming and costly to defend and could adversely affect
our marketing efforts.
YEAR 2000 ISSUES COULD AFFECT OUR BUSINESS
We are in the process of assessing any Year 2000 issues with the computer
communications, software and security systems that we use to deliver and manage
our products and to manage our internal operations. If our systems do not
operate properly with respect to date calculations involving the Year 2000 and
subsequent dates, we could incur unanticipated expenses to remedy any problems,
which could seriously harm our business.
Customers' purchasing plans could be affected by Year 2000 issues if they
need to expend significant resources to correct their existing systems. This
situation may result in reduced funds available to implement solutions based
upon our products. In addition, some customers may defer the license of our
products until after the Year 2000. A decrease in demand for our products due to
customers' Year 2000 issues would seriously harm our business and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Year 2000 Compliance."
We have identified one Year 2000 date-related limitation in earlier
versions of Castanet. Versions of Castanet prior to 3.2 display certain data to
the user in a manner that uses only two digits to represent a year. A two-digit
display of the Year 2000 could cause a user to believe the year represented was
the year 1900 instead of the Year 2000. This limitation does not affect either
computation of data in our products or operation of the products. All versions
of Castanet currently being shipped use four digits for the display of date
data. Despite our testing and remediating, our products may contain errors or
faults with respect to the Year 2000. Our efforts to address Year 2000 issues
are described in more detail in "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Year 2000 Compliance."
OUR FUTURE CAPITAL NEEDS ARE UNCERTAIN
We expect the net proceeds from this offering, cash from operations and
borrowings under our credit facility to be sufficient to meet our working
capital and capital expenditure needs for at least twelve months. After that, we
may need to raise additional funds, and additional financing may not be
available on favorable terms, if at all. Further, if we issue additional equity
securities, stockholders may experience dilution, and the new equity securities
could have rights, preferences or privileges senior to those of existing holders
of our common stock. If we cannot raise funds, if needed, on acceptable terms,
we may not be able to develop or enhance our products, take advantage of future
opportunities or respond to competitive pressures or unanticipated requirements.
This could seriously harm our business and results
14
<PAGE> 17
of operations. See "Use of Proceeds," "Dilution" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
WE ARE CONTROLLED BY EXISTING STOCKHOLDERS
On completion of this offering, executive officers and directors and their
affiliates will beneficially own, in the aggregate, approximately % of our
outstanding common stock. As a result, these stockholders will be able to
exercise control over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions, which
could have the effect of delaying or preventing a third party from acquiring
control over us. See "Principal and Selling Stockholders."
WE HAVE IMPLEMENTED CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of our 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. See
"Description of Capital Stock."
RISKS RELATED TO OUR INDUSTRY
WE FACE CHALLENGES STEMMING FROM OUR EMERGING MARKETS
The market for Internet services management software has only recently
begun to develop, is rapidly evolving and will likely have an increasing number
of competitors. This market may not continue to develop and may not
substantially grow. Because this market is new, it is difficult to predict the
competitive environment, the potential size of this market and its rate of
growth. If the Internet services management market fails to develop, or develops
more slowly than expected, or if our products and services do not achieve
widespread market acceptance, our business and results of operations would be
seriously harmed. Furthermore, in order to be successful in this emerging
market, we must be able to differentiate ourself from competition through our
product and service offerings and brand name recognition. We may not be
successful in differentiating ourself or achieving widespread market acceptance
of our products and services, and we could experience difficulties that could
delay or prevent the successful development, introduction or marketing of our
products and services. Expanding our product and service offerings and
stimulating brand name recognition will also require significant additional
expenses and development, operations and management resources. Our failure to
successfully deploy new products and services, to stimulate brand name
recognition or to generate satisfactory revenues from such expanded products or
services to offset related increased costs could seriously harm our business and
results of operations. We expect to continue expending significant marketing and
sales resources to educate prospective customers about the uses and benefits of
our products and services specifically, and the benefits of e-business
generally. Enterprises that have already invested substantial resources in other
methods of deploying and managing their applications and services may be
reluctant or slow to adopt a new approach that may replace, limit or compete
with their existing systems.
Any of these factors could inhibit the growth of our business generally and
the market's acceptance of our products and services in particular. Accordingly,
we cannot be certain that a viable market for our products will emerge or be
sustainable. See "-- Our Success Depends on Our Castanet Product Family and New
Product Development."
WE DEPEND ON CONTINUED USE OF THE INTERNET AND GROWTH OF ELECTRONIC
BUSINESS
Our future revenues and profits, if any, substantially depend upon the
widespread acceptance and use of the Internet as an effective medium of business
and communication by our target customers. Rapid growth in the use of and
interest in the Internet has occurred only recently. As a result, acceptance and
use may not continue to develop at historical rates, and a sufficiently broad
base of consumers may not adopt, and continue to use, the Internet and other
online services as a medium of commerce.
15
<PAGE> 18
Demand and market acceptance for recently introduced services and products over
the Internet are subject to a high level of uncertainty, and there exist few
proven services and products.
In addition, the Internet may not be accepted as a viable long-term
commercial marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and performance improvements. Our success will depend, in
large part, upon third parties maintaining the Internet infrastructure to
provide a reliable network backbone with the necessary speed, data capacity,
security and hardware necessary for reliable Internet access and services. To
the extent that the Internet continues to experience increased numbers of users,
frequency of use or increased bandwidth requirements of users, the Internet
infrastructure may not be able to support the demands placed on it and the
performance or reliability of the Internet could be adversely affected. In
addition, the Internet could lose its viability due to delays in the development
or adoption of new standards and protocols required to handle increased levels
of Internet activity, or due to increased governmental regulation. Further,
critical issues concerning the Internet, including security, reliability, data
corruption, cost, ease of use, accessibility, quality and speed of service,
remain unresolved and could adversely affect the use of the Internet for
business applications. Changes in or insufficient availability of
telecommunications services that support the Internet also could result in
slower response times and adversely affect usage of the Internet generally.
WE MUST RESPOND TO RAPID TECHNOLOGICAL CHANGE AND EVOLVING INDUSTRY
STANDARDS
The markets for our Internet services management solutions are marked by
rapid technological change, frequent new product introductions and enhancements,
uncertain product life cycles, changes in customer demands and evolving industry
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 products and develop new products on a timely basis to keep
pace with technological developments and to satisfy increasingly sophisticated
requirements of our customers. Our 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 seriously harm
our business and results of operations.
Although we currently intend to support emerging standards, we may not be
able to conform to these new standards in a timely fashion. We also may not be
successful in developing and marketing new products or product enhancements that
respond to technological change, evolving industry standards or customer
requirements. Our failure to conform to prevailing standards could have a
negative effect on our business and results of operations.
RISKS RELATED TO THIS OFFERING
NO PUBLIC MARKET FOR OUR COMMON STOCK CURRENTLY EXISTS AND OUR STOCK PRICE
MAY FLUCTUATE AFTER THIS OFFERING
Prior to this offering, you could not buy or sell our common stock on a
public market. An active public market for our common stock may not develop or
be sustained after the offering. Although the initial public offering price will
be determined based on several factors, the market price for our common stock
will vary from the initial offering price after this offering. See
"Underwriters." The market price of our common stock may fluctuate significantly
in response to a number of factors, some of which are beyond our control,
including:
- Quarterly variations in operating results;
- Changes in financial estimates by securities analysts;
- Announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
- Additions or departures of key personnel;
16
<PAGE> 19
- Any future sales by us of common stock or other securities; and
- Stock market price and volume fluctuations, which are particularly common
among securities of Internet-related companies.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. 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, which could seriously harm our business and results of
operations.
FUTURE SALES OF SHARES COULD AFFECT OUR STOCK PRICE
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. Based on shares outstanding as of December 31, 1998, upon completion
of this offering, we will have outstanding shares of common stock.
Other than the shares of common stock sold in this offering, no shares will be
eligible for sale in the public market immediately. After the lock-up agreements
with the underwriters or Marimba expire 180 days from the date of this
prospectus, an additional shares will be eligible for sale in the
public market. See "Shares Eligible for Future Sale."
OUR STOCKHOLDERS WILL INCUR SUBSTANTIAL DILUTION AS A RESULT OF THIS
OFFERING
The initial public offering price is expected to be substantially higher
than the book value per share of our outstanding common stock. As a result,
investors purchasing common stock in this offering will incur immediate
substantial dilution. In addition, we have issued options to acquire common
stock at prices significantly below the initial public offering price. To the
extent such outstanding options are ultimately exercised, there will be further
dilution to investors in this offering. See "Dilution."
WE HAVE BROAD DISCRETION TO USE THE PROCEEDS FROM THIS OFFERING
We plan to use the proceeds from this offering for general corporate
purposes. Therefore, we will have broad discretion as to how we will spend the
proceeds, and stockholders may not agree with the ways in which we use the
proceeds. We may not be successful in investing the proceeds from this offering,
in our operations or otherwise, to yield a favorable return. See "Use of
Proceeds."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "expect," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue," the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. In evaluating these statements, you should specifically
consider various factors, including the risks outlined under "Risk Factors."
These factors may cause our actual results to differ materially from any
forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of the forward-looking
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform such statements to actual results
or to changes in our expectations.
17
<PAGE> 20
USE OF PROCEEDS
Our net proceeds from the sale of the shares of common stock we
offer hereby are estimated to be $ , assuming an 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 estimate that our net proceeds
will be approximately $ million. We will not receive any of the proceeds
from the sale of shares of common stock by the selling stockholders. We expect
to use $811,000 of the net proceeds to repay equipment advances outstanding
under our credit facility which currently bears interest at 7.75% per year and
the balance for general corporate purposes, including working capital. A portion
of the net proceeds may also be used for the acquisition of businesses, products
and technologies that are complementary to ours. We have no current plans,
agreements or commitments for such acquisitions and are not currently engaged in
any negotiations with respect to any such transaction. Pending such uses, we
will invest the net proceeds of this offering in investment grade,
interest-bearing securities.
DIVIDEND POLICY
We have not paid any cash dividends since inception and do not intend to
pay any cash dividends in the foreseeable future. In addition, the terms of our
credit agreement prohibit the payment of dividends on our capital stock.
18
<PAGE> 21
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998
(1) on an actual basis (2) on a pro forma basis, after giving effect to the
conversion of all outstanding shares of preferred stock into common stock and
(3) as adjusted to reflect our receipt of the estimated net proceeds from our
sale of shares of common stock in this offering at an assumed
initial offering price of $ per share (after deducting the estimated
underwriting discounts and commissions and estimated offering expenses), the
filing of a new certificate of incorporation after the closing of this offering
and the application of our proceeds from this offering:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term liabilities, less current portion(1).......... $ 747 $ 747 $ 95
-------- -------- --------
Redeemable convertible preferred stock, $.0001 par
value, 15,000,000 shares authorized, 5,753,566 shares
outstanding actual; 15,000,000 shares authorized, no
shares outstanding pro forma; 10,000,000 shares
authorized, no shares outstanding as adjusted......... 18,953 --
-------- -------- --------
Stockholders' equity (net capital deficiency):
Common Stock, $.0001 par value, 30,000,000 shares
authorized, 13,052,262 shares outstanding actual;
30,000,000 shares authorized, 18,805,828 shares
outstanding pro forma; 80,000,000 shares
authorized, shares outstanding as
adjusted(2)........................................ 2,183 21,136
Note receivable from officer............................ (160) (160) (160)
Deferred compensation................................... (1,116) (1,116) (1,116)
Translation adjustment.................................. (6) (6) (6)
Accumulated deficit..................................... (14,644) (14,644) (14,644)
-------- -------- --------
Total stockholders' equity (net capital
deficiency)...................................... (13,743) 5,210
-------- -------- --------
Total capitalization.......................... $ 5,957 $ 5,957 $
======== ======== ========
</TABLE>
- -------------------------
(1) See Notes 3 and 4 of Notes to Consolidated Financial Statements.
(2) The share numbers exclude:
- 2,192,568 shares of common stock issuable upon exercise of stock options
outstanding as of December 31, 1998 at a weighted average exercise price of
$3.16 per share;
- 1,229,773 shares of common stock available for issuance under our 1996
Stock Plan;
- 16,865 shares of common stock issuable upon the exercise of a warrant
outstanding as of December 31, 1998 at an exercise price of $1.48 per
share;
- 2,000,000 shares of common stock available for issuance under our 1999
Omnibus Equity Incentive Plan;
- 500,000 shares of common stock available for issuance under our Employee
Stock Purchase Plan; and
- 150,000 shares of common stock available for issuance under our 1999
Non-Employee Directors Option Plan.
See "Management -- Employee Benefit Plans," and Notes 6 and 9 of "Notes to
Consolidated Financial Statements."
19
<PAGE> 22
DILUTION
The pro forma net tangible book value of our common stock as of December
31, 1998 was $5.2 million, or approximately $.28 per share. Net tangible book
value per share represents the amount of stockholders' equity, less intangible
assets, divided by 18,805,828 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.
Net tangible book value dilution per share to new investors represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering made hereby and the net tangible book value per share of
common stock immediately after completion of this offering. After giving effect
to our sale of shares of common stock in this offering at an assumed
initial offering price of $ per share and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses, our net
tangible book value as of December 31, 1998 would have been $ or $ per
share. This represents an immediate increase in net tangible book value of
$ per share to existing stockholders and an immediate dilution in net
tangible book value of $ per share to purchasers of common stock in the
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 December
31, 1998................................................ $ .28
Increase per share attributable to new investors..........
--------
Pro forma net tangible book value per share after the
offering................................................
--------
Dilution per share to new investors....................... $
========
</TABLE>
The following table sets forth on a pro forma basis as of December 31,
1998, after giving effect to the conversion of all outstanding shares of
preferred stock into common stock upon completion of this offering, the
differences between the existing stockholders and the purchasers of shares in
the offering (at the assumed initial offering price of $ per share) with
respect to the number of shares purchased from us, the total consideration paid
and the average price paid per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................. 18,805,828 % $19,727,000 % $1.05
New stockholders
---------- ----- ----------- -----
Totals...................... 100.0% $ 100.0%
========== ===== =========== =====
</TABLE>
Sales by the selling stockholders in this offering will reduce the number
of shares held by existing stockholders to , which
represent % of the total number of shares of common stock outstanding after
this offering (or shares, representing % of the total, if
the underwriters' over-allotment option is exercised in full) and will increase
the number of shares held by new investors to shares, which represent
% of the total number of shares of common stock outstanding after this
offering (or shares, representing % of the total, if the
underwriters' over-allotment option is exercised in full). See "Principal and
Selling Stockholders."
As of December 31, 1998, there were options outstanding to purchase a total
of 2,192,568 shares of common stock at a weighted average exercise price of
$3.16 per share. In addition, as of December 31, 1998, there was a warrant
outstanding to purchase 16,865 shares of common stock at an exercise price of
$1.48 per share. To the extent outstanding options or warrants are exercised,
there will be further dilution to new investors. See "Management -- Employee
Benefit Plans" and Note 6 of Notes to Consolidated Financial Statements.
20
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with our Consolidated Financial Statements and related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The consolidated statement of
operations data for the inception period ended December 31, 1996 and the fiscal
years ended 1997 and 1998, and the consolidated balance sheet data at December
31, 1997 and 1998 are derived from audited consolidated financial statements
included elsewhere in this prospectus that have been audited by Ernst & Young
LLP, independent auditors. The consolidated balance sheet data at December 31,
1996 are derived from audited consolidated financial statements not included
herein. Historical results are not necessarily indicative of future results.
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 21, 1996
(INCEPTION) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------
1996 1997 1998
----------------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License............................................... $ -- $ 5,011 $13,901
Service............................................... -- 552 3,184
------- ------- -------
Total revenues................................ -- 5,563 17,085
Cost of revenues:
License............................................... -- 13 75
Service............................................... -- 621 1,964
------- ------- -------
Total cost of revenues........................ -- 634 2,039
------- ------- -------
Gross profit............................................ -- 4,929 15,046
------- ------- -------
Operating expenses:
Research and development.............................. 515 2,410 5,773
Sales and marketing................................... 473 8,054 12,371
General and administrative............................ 322 2,367 2,779
Amortization of deferred compensation................. -- -- 251
------- ------- -------
Total operating expenses...................... 1,310 12,831 21,174
------- ------- -------
Loss from operations.................................... (1,310) (7,902) (6,128)
Interest income, net.................................... 65 338 488
------- ------- -------
Loss before income taxes................................ (1,245) (7,564) (5,640)
Provision for income taxes.............................. -- 154 41
------- ------- -------
Net loss................................................ $(1,245) $(7,718) $(5,681)
======= ======= =======
Basic and diluted net loss per share.................... $ (.81) $ (1.57) $ (.59)
======= ======= =======
Weighted-average shares of common stock outstanding used
in computing basic and diluted net loss per
share(1).............................................. 1,528 4,912 9,606
======= ======= =======
Pro forma basic and diluted net loss per share
(unaudited)........................................... $ (.37)
=======
Shares used in computing pro forma basic and diluted net
loss per share (unaudited)(1)......................... 15,359
=======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1996 1997 1998
----------------- ------- -------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments....... $ 2,811 $14,402 $ 7,825
Working capital......................................... 2,464 8,036 2,912
Total assets............................................ 3,156 21,898 14,862
Long-term portion of capital lease obligations and
equipment advances, and other long-term liabilities... -- 211 747
Redeemable convertible preferred stock.................. 3,963 18,953 18,953
Accumulated deficit..................................... (1,245) (8,963) (14,644)
Total stockholders' equity (net capital deficiency)..... (1,235) (8,471) (13,743)
</TABLE>
- -------------------------
(1) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of the number of shares used in per share computations.
21
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
prospectus. The following discussion contains forward-looking statements. Our
actual results may differ significantly from those projected in the forward-
looking statements. Factors that might cause future results to differ materially
from those projected in the forward-looking statements include, but are not
limited to, those discussed below and elsewhere is this prospectus, particularly
in "Risk Factors."
OVERVIEW
Marimba is a leading provider of Internet-based software management
solutions that enable companies to expand their market reach, streamline
business processes and strengthen relationships with customers, business
partners and employees. Our Castanet product family provides an efficient and
reliable way for enterprises to distribute, update and manage applications and
related data over corporate intranets, extranets and the Internet.
We were incorporated in February 1996 and began operations in August 1996.
During the period from February 1996 through December 31, 1996 (the "1996
Inception Period"), we were a development stage enterprise and had no revenues.
Our operating activities during this period related primarily to developing our
products, building our corporate infrastructure and raising capital.
In January 1997, we released our first version of Castanet and, to date,
have derived substantially all our revenues from the license of Castanet and
related services. We licensed Castanet in early 1997 to enterprises primarily
for pilot programs that involved limited deployments. In 1997, we grew our
organization by hiring personnel in key areas, particularly sales, research and
development and marketing. During 1998, we continued to develop and market our
Castanet products and enhanced the core Castanet infrastructure with products
that provided greater centralized management control and the ability to
distribute applications written in leading programming languages. Also in 1998,
we sold several licenses of Castanet to repeat customers for larger scale
production deployments. During this time period, we continued to make
substantial investments in our internal infrastructure by hiring employees
throughout the organization.
Revenues to date have been derived primarily from the license of our
Castanet products and to a lesser extent from maintenance and support,
consulting and training services. Customers who license Castanet generally
purchase maintenance contracts, typically covering a 12-month period.
Additionally, customers may purchase consulting, which is customarily billed by
us at a fixed daily rate plus out-of-pocket expenses. We also offer training
services that are billed on a per student or per class session basis.
We recognize software license revenue in accordance with Statement of
Position 97-2 ("SOP 97-2") "Software Revenue Recognition," as amended by
Statement of Position 98-4. These statements provide guidance on applying
generally accepted accounting principles in recognizing revenue on software
transactions and are effective for our transactions entered into after January
1, 1998. The application of SOP 97-2 has not had a material impact on our
results of operations. License revenues are comprised of perpetual or multiyear
license fees which are primarily derived from contracts with corporate customers
and resellers. We recognize license revenues after execution of a license
agreement or receipt of a definitive purchase order and delivery of the product
to end-user customers, provided that there are no uncertainties surrounding
product acceptance, the license fees are fixed and determinable, collectibility
is probable and we have no remaining obligations. Revenues on arrangements with
customers who are not the ultimate users (primarily resellers) are not
recognized until the software is sold through to the end user. If the fee due
from the customer is not fixed or determinable, revenues are recognized as
payments become due from the customer. If collectibility is not considered
probable,
22
<PAGE> 25
revenues are recognized when the fee is collected. Advance payments are recorded
as deferred revenue until the products are delivered, services are provided, or
obligations are met. Service revenues are comprised of revenues from maintenance
agreements, consulting and training fees. Revenues from maintenance agreements
are recognized on a straight-line basis over the life of the related agreement,
which is typically one year. We recognize service revenues from training and
consulting upon completion of the work to be performed.
We market our products worldwide through a combination of a direct sales
force, resellers, system integrators and distributors. Tivoli has been a
reseller of our products since 1997. Tivoli accounted for $3.1 million, or
approximately 18% of our revenues in 1998. This includes $1.9 million, or
approximately 40% of our revenues in the third quarter of 1998 and $1.1 million,
or approximately 19% of our revenues in the fourth quarter of 1998. Our reseller
agreement with Tivoli provides for the resale of our products at substantial
discounts from list price. Consequently, the gross margin on such sales is
generally lower than the gross margin on our direct sales.
In March 1998, we entered into an original equipment manufacturer agreement
with Tivoli pursuant to which Tivoli is building upon the Castanet
infrastructure to develop a product called Cross-Site. Any revenues from Tivoli
under this original equipment manufacturer agreement will be from per seat
royalty payments on sales of Cross-Site that contain the Castanet
infrastructure. The per seat payments under the original equipment manufacturer
agreement will be less than the per seat payments we currently have under our
reseller agreement with Tivoli. Tivoli has announced that it expects to release
Cross-Site in the first quarter of 1999. Consequently, we expect to generate
revenues from royalties on sales of Cross-Site beginning in 1999 and expect that
revenues from the resale of Castanet pursuant to the Tivoli reseller agreement
will rapidly decrease and become immaterial as Tivoli transitions its efforts to
the release and sale of Cross-Site. However, Tivoli might be unable to introduce
Cross-Site by its expected release date. Furthermore, because Cross-Site is a
new product, Tivoli might not be able to successfully market and sell
Cross-Site, and the level of demand for Cross-Site is uncertain. Any failure of
Cross-Site to achieve widespread market acceptance could significantly harm our
business and results of operations. Because a significant amount of our revenues
have been, and are expected to continue to be, derived from Tivoli, we are
dependent on our relationship with Tivoli. Any disruption of our relationship
with Tivoli would seriously harm our business and results of operations. Our
reseller agreement with Tivoli expires upon the earlier of May 1, 1999 or
written notice provided to us by Tivoli. If the release of Cross-Site is delayed
beyond May 1, 1999, Tivoli would no longer resell our Castanet product unless we
and Tivoli extend the term of the reseller agreement. Furthermore, it is
possible for Tivoli to terminate the reseller agreement prior to the release of
Cross-Site. Because Cross-Site is built upon the Castanet infrastructure, we
expect Cross-Site to compete with our Castanet products. See "Risk Factors -- We
Depend on Our Relationship with Tivoli" and "-- Our Market Is Highly
Competitive."
We entered into a reseller agreement with Netscape in July 1997. Sales by
Netscape accounted for $1.0 million, or approximately 18% of our revenues in
1997, and $3.8 million, or approximately 22% of our revenues in 1998. A majority
of the $3.8 million of 1998 revenues was recognized in the first half of 1998,
with only $1.3 million in revenue recognized in the second half of 1998.
Netscape is no longer an active reseller and we do not expect any material
revenues from Netscape in the future.
In 1997 and 1998, revenues attributable to customers outside of North
America accounted for approximately 22% and 7% of our total revenues. We plan to
expand our international operations significantly, particularly in Europe,
because we believe international markets represent a significant growth
opportunity. The expansion of our international operations will be subject to a
variety of risks that could significantly harm our business and results of
operations. See "Risk Factors -- Expanding Internationally Is Expensive, We May
Receive No Benefit from Our Expansion and Our International Operations Are
Subject to Government Regulation."
23
<PAGE> 26
Despite our revenue growth, we have incurred significant losses since
inception and, as of December 31, 1998, we had an accumulated deficit of
approximately $14.6 million. We believe our success depends on further
increasing our customer base and on growth in the emerging Internet services
management market. Accordingly, we intend to continue to invest heavily in
sales, marketing and research and development. Furthermore, we expect to
continue to incur substantial operating losses at least through 1999, and our
expected increase in operating expenses will require significant increases in
revenues before we become profitable. See "Risk Factors -- We Have Incurred
Losses and We Expect Future Losses" and "-- We Expect Significant Increases in
Our Operating Expenses."
In view of the rapidly changing nature of our business and our limited
operating history, we believe that period-to-period comparisons of revenues and
operating results are not necessarily meaningful and should not be relied upon
as indications of future performance. Additionally, despite our sequential
quarterly revenue growth during 1998, we do not believe that historical growth
rates are necessarily sustainable or indicative of future growth. See "Risk
Factors -- Our Quarterly Operating Results Are Volatile and Future Operating
Results Remain Uncertain."
RESULTS OF OPERATIONS
The following table sets forth certain financial data for the periods
indicated as a percentage of total revenues. Data for the 1996 Inception Period
is not presented because we had no revenues during that period.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1997 1998
------ -----
<S> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License................................................... 90.1% 81.4%
Service................................................... 9.9 18.6
------ -----
Total revenues.............................................. 100.0 100.0
Cost of revenues:
License................................................... 0.2 0.4
Service................................................... 11.2 11.5
------ -----
Total cost of revenues...................................... 11.4 11.9
------ -----
Gross profit................................................ 88.6 88.1
Operating expenses:
Research and development.................................. 43.3 33.8
Sales and marketing....................................... 144.8 72.4
General and administrative................................ 42.5 16.3
Amortization of deferred compensation..................... -- 1.5
------ -----
Total operating expenses.................................... 230.6 124.0
------ -----
Loss from operations........................................ (142.0) (35.9)
Interest income, net........................................ 6.1 2.8
------ -----
Loss before income taxes.................................... (135.9) (33.1)
Provision for income taxes.................................. (2.8) (0.2)
------ -----
Net loss.................................................... (138.7)% (33.3)%
====== =====
</TABLE>
24
<PAGE> 27
1996 INCEPTION PERIOD AND YEARS ENDED DECEMBER 31, 1997 AND 1998
REVENUES
Total revenues increased $11.5 million, or 207%, from $5.6 million in 1997
to $17.1 million in 1998. We had no revenues during the 1996 Inception Period.
License Revenues. License revenues increased $8.9 million, or 177%, from
$5.0 million in 1997 to $13.9 million in 1998. We attribute the increase in
license revenues from 1997 to 1998 to:
- growth in our customer base;
- additional sales to existing customers; and
- an increase in the average contract amount of executed license
agreements.
Service Revenues. Service revenues include maintenance and support,
consulting and training. Service revenues increased $2.6 million, or 477%, from
$552,000 in 1997 to $3.2 million in 1998. As a percentage of total revenues,
service revenues increased from 10% of total revenues in 1997 to 19% of total
revenues in 1998. The increase in service revenues was due primarily to
increased revenues from customer maintenance contracts. Also, we increased our
consulting service revenues as customers elected to utilize our consulting
organization. During 1999, we expect service revenues to increase in absolute
amount and as a percentage of total revenues. An increased shift in our revenue
mix toward services would negatively impact our gross margins because service
revenues have higher costs and therefore lower margins than license revenues.
COSTS OF REVENUES
Cost of License Revenues. Cost of license revenues consists primarily of
the fees for third-party software products integrated into our products. Cost of
license revenues increased from $13,000 in 1997 to $75,000 in 1998. We had no
cost of license revenues in 1996. The increase from 1997 to 1998 was due to a
third-party software product that we licensed on September 30, 1997 and embedded
in Castanet. Therefore, in 1997, cost of license revenues includes costs
associated with this license only for the fourth quarter, whereas 1998 includes
a full year of such costs. We expect cost of license revenues to increase in
absolute amount during 1999, but to remain a relatively small percentage of
total revenues.
Cost of Service Revenues. Cost of service revenues includes:
- salaries and related expenses of our customer support organization;
- salaries and related expenses of our consultants for billable consulting
engagements;
- cost of third parties contracted to provide consulting services to our
customers; and
- an allocation of our facilities and depreciation expenses.
Cost of service revenues increased from $621,000 in 1997 to $2.0 million in
1998, representing 113% and 62% of service revenue. The increase in absolute
dollars of cost of service revenues from 1997 to 1998 was due primarily to
growth in our customer support organization and an increase in consulting costs
commensurate with the increase in consulting revenues. We had no cost of service
revenues in 1996. We expect our cost of service revenues to increase as we
continue to expand our customer support and consulting organizations. Since
service revenues provide lower gross margins than license revenues, this
expansion would negatively impact our gross margins if our license revenues do
not significantly increase. See "Risk Factors -- We Need to Expand Our
Professional Services."
25
<PAGE> 28
OPERATING EXPENSES
Research and Development. Research and development expenses, which are
expensed as incurred, consist primarily of:
- salaries and related costs of our engineering organization;
- fees paid to third-party consultants; and
- an allocation of our facilities and depreciation expenses.
We believe that our success is dependent in large part on continued
enhancement of our current products and the ability to develop new,
technologically advanced products that meet the sophisticated requirements of
our customers. Accordingly, we have increased our investment in research and
development in each of the periods since inception. Research and development
expenses increased from $515,000 in the 1996 Inception Period to $2.4 million in
1997 and $5.8 million in 1998. The increases in research and development
expenses were due to significant increases in engineering personnel and related
costs, as well as increases in third-party consulting costs. We expect research
and development expenses to increase in absolute amount in 1999.
Sales and Marketing. Sales and marketing expenses consist primarily of:
- salaries and related costs of our sales and marketing organizations;
- sales commissions;
- costs of our marketing programs, including public relations, advertising,
trade shows, collateral sales materials, our customer advisory council
and seminars;
- rent and facilities costs associated with our regional and international
sales offices; and
- an allocation of our facilities and depreciation expenses.
We have significantly increased our sales and marketing expenses since the
1996 Inception Period. Sales and marketing expenses increased from $473,000 in
the 1996 Inception Period to $8.1 million in 1997 and $12.4 million in 1998. The
increases in sales and marketing expenses are due primarily to significant
growth in our sales and marketing organizations, an increase in sales
commissions as sales have increased, an increase in the number of regional and
international sales offices and expansion of our marketing programs. We expect
to continue to invest heavily in sales and marketing in order to grow revenues
and expand our brand awareness. Consequently, we expect to increase the absolute
dollar amount of sales and marketing expenses in 1999.
General and Administrative. General and administrative expenses consist
primarily of:
- costs of our finance, human resources and legal services organizations;
- third-party legal and other professional services fees; and
- an allocation of our facilities and depreciation expenses.
General and administrative expenses increased from $322,000 in the 1996
Inception Period to $2.4 million in 1997 and $2.8 million in 1998. We attribute
the increases in general and administrative expenses to growth of our
administrative organizations in support of overall growth. We expect the
absolute dollar amount of general and administrative expenses to increase in
1999.
Additionally, we have incurred significant outside legal costs in defense
of Novadigm's complaint against us alleging patent infringement filed in March
1997. We expect to incur significant additional costs related to this complaint
in the future, and these costs will increase substantially if we go to trial. A
trial is currently scheduled for September 1999. See "Risk Factors -- Novadigm
Has Claimed that We
26
<PAGE> 29
Infringe Its Intellectual Property," "Business -- Legal Proceedings" and Note 8
to Notes to Consolidated Financial Statements.
Deferred Compensation. We recorded deferred compensation of approximately
$1.4 million in 1998, representing the difference between the exercise prices of
options granted to acquire 940,500 shares of common stock during 1998 and the
deemed fair value for financial reporting purposes of our common stock on the
grant dates. We amortized deferred compensation expense of $251,000 during
fiscal 1998. This compensation expense relates to options awarded to individuals
in all operating expense categories. Total deferred compensation at December 31,
1998 of $1.1 million is being amortized over the vesting periods of the options
on a graded vesting method. The amortization of deferred compensation recorded
will approximate $592,000, $310,000, $159,000 and $55,000 for the fiscal years
ending December 31, 1999, 2000, 2001 and 2002, respectively.
INTEREST INCOME, NET
Interest income, net consists primarily of interest earned on our cash,
cash equivalents and short term investments offset by interest expenses
associated with our capital leases and equipment advances. Interest income, net
increased from $65,000 in the 1996 Inception Period to $338,000 in 1997 and
$488,000 in 1998. The increases in interest income, net relate primarily to
increased invested cash balances from our equity financings in August 1996 and
August 1997.
PROVISION FOR INCOME TAXES
Our provision for income taxes for the years ended December 31, 1997 and
1998 consists entirely of foreign withholding taxes. No provision for federal or
state income taxes has been recorded because we experienced net losses from
inception through 1998.
As of December 31, 1998, we had federal net operating loss carryforwards of
approximately $11.1 million. We also had a federal research and development tax
credit carryforward of approximately $400,000 at that date. The net operating
loss and credit carryforwards will expire at various dates beginning in 2011
through 2018, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the ownership change limitations contained
in the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of the net operating loss and credits
before utilization. See Note 7 of Notes to Consolidated Financial Statements.
27
<PAGE> 30
QUARTERLY RESULTS OF OPERATIONS
The following table presents our unaudited quarterly results of operations
for the four quarters of 1998. You should read the following table in
conjunction with our Consolidated Financial Statements and related Notes thereto
in this prospectus. We have prepared this unaudited information on the same
basis as the audited Consolidated Financial Statements. This table includes all
adjustments, consisting only of normal recurring adjustments, that we consider
necessary for a fair presentation of our financial position and operating
results for the quarters presented. You should not draw any conclusions about
our future results from the results of operations for any quarter.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998
--------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
License..................................... $ 2,491 $ 3,155 $ 3,804 $ 4,451
Service..................................... 519 526 929 1,210
------- ------- ------- -------
Total revenues................................ 3,010 3,681 4,733 5,661
Cost of revenues:
License..................................... 17 16 16 26
Service..................................... 488 396 482 598
------- ------- ------- -------
Total cost of revenues........................ 505 412 498 624
------- ------- ------- -------
Gross profit.................................. 2,505 3,269 4,235 5,037
Operating expenses:
Research and development.................... 1,211 1,311 1,545 1,706
Sales and marketing......................... 2,082 2,715 3,638 3,936
General and administrative.................. 750 527 596 906
Amortization of deferred
compensation............................. -- -- 73 178
------- ------- ------- -------
Total operating expenses...................... 4,043 4,553 5,852 6,726
------- ------- ------- -------
Loss from operations.......................... (1,538) (1,284) (1,617) (1,689)
Interest income, net.......................... 149 128 125 86
------- ------- ------- -------
Loss before income taxes...................... (1,389) (1,156) (1,492) (1,603)
Provision for income taxes.................... -- -- (4) (37)
------- ------- ------- -------
Net loss...................................... $(1,389) $(1,156) $(1,496) $(1,640)
======= ======= ======= =======
</TABLE>
Revenues grew in each quarter of 1998 as demand for our products and
services increased. Commensurate with revenue growth, cost of license revenues
and cost of service revenues have generally increased from quarter to quarter.
Cost of service revenues was higher in the quarter ended March 31, 1998 relative
to the following two quarters due to travel, facilities rental and equipment
costs associated with providing an off-site training course.
From inception, we have increased the level of spending throughout the
organization. We intend to increase our sales and marketing, research and
development and general and administrative expenses. We anticipate that these
expenses could significantly precede any revenues generated by such increased
spending. If we do not experience significantly increased revenues from these
efforts, our business and results of operations would be seriously harmed. See
"Risk Factors -- We Expect Significant Increases in Our Operating Expenses."
General and administrative expenses were higher in the first and fourth
quarters of 1998 than in the second and third quarters of 1998 primarily due to
higher legal expenses incurred in defense of
28
<PAGE> 31
Novadigm's complaint against us alleging patent infringement. We expect to incur
significant additional costs related to this complaint in the future, and these
costs will substantially increase if we go to trial. See "Risk
Factors -- Novadigm Has Claimed that We Infringe Its Intellectual Property,"
"Business -- Legal Proceedings" and Note 8 to Notes to Consolidated Financial
Statements.
Our quarterly operating results have fluctuated significantly and we expect
that future operating results will be subject to similar fluctuations. In the
past a significant portion of our sales have been realized near the end of the
quarter. Accordingly, a delay in an anticipated sale past the end of a
particular quarter could negatively impact our results of operations for that
quarter. In addition, we expect that revenues in the first quarter of each year
will be lower than the fourth quarter of the preceding year. We believe this
trend will be primarily due to the annual nature of budgetary, purchasing and
sales cycles. For example, we expect our license revenues to decrease for the
quarter ending March 31, 1999 and our net loss for that quarter to increase
compared to our license revenues and net loss for the quarter ended December 31,
1998. See "Risk Factors -- We Have Incurred Losses and We Expect Future Losses"
and "-- Our Quarterly Operating Results Are Volatile and Future Operating
Results Remain Uncertain."
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations primarily through the private placement of
our equity securities through which we have raised net proceeds of approximately
$19.0 million. We have also financed our operations through equipment lease
financing and bank borrowings. At December 31, 1998, our principal sources of
liquidity included approximately $7.8 million of cash, cash equivalents and
short term investments and a credit facility with a bank. This credit facility
provides us up to $6.5 million in total borrowings, of which $4.0 million of
borrowings are available for loans of up to 80% of our eligible accounts
receivable, $1.0 million is available under a non-formula based advance and $1.5
million is available for equipment advances. As of December 31, 1998, we had
$811,000 in outstanding borrowings for equipment advances. Borrowings under this
credit facility are provided at the bank's prime rate and are secured by
substantially all of our assets. The credit facility includes certain financial
and reporting covenants and expires on May 26, 1999. We intend to repay this
credit facility using a portion of the net proceeds from this offering.
Cash used in operations increased from $877,000 in the 1996 Inception
Period to $1.5 million in 1997 and $6.1 million in 1998 primarily due to our net
losses which were partially offset by increases in deferred revenues and
accounts receivable in 1997 and decreases in deferred revenues and accounts
receivable in 1998.
Cash used in investing activities increased from $285,000 in the 1996
Inception Period to $2.7 million in 1997 and $5.4 million in 1998. We have made
substantial investments in computer equipment, computer software, office
furniture and leasehold improvements. In addition, cash used in investing
activities during 1998 included net purchases of short-term investments of $4.1
million.
Net cash provided by financing activities was $4.0 million in the 1996
Inception Period, $15.8 million in 1997 and $861,000 in 1998. Net cash from
financing activities during the 1996 Inception Period resulted primarily from
the sale of preferred stock. Net cash from financing activities during 1997
resulted primarily from the sale of preferred stock and from the sale of common
stock issued upon exercise of stock options. During 1998, net cash from
financing activities resulted primarily from the sale of common stock issued
upon exercise of stock options and proceeds from equipment advances. We expect
to fund future operating expenses from revenues received from the sale of our
products and services and the proceeds of this offering.
We currently anticipate that the net proceeds from this offering, together
with our current cash, cash equivalents, short-term investments and credit
facility, will be sufficient to meet our anticipated cash
29
<PAGE> 32
needs for working capital and capital expenditures for at least the next 12
months. However, we may need to raise additional funds in future periods through
public or private financings, or other arrangements. Any such additional
financings, if needed, might not be available on reasonable terms or at all.
Failure to raise capital when needed could seriously harm our business and
results of operations. If additional funds are raised through the issuance of
equity securities, the percentage of ownership of our stockholders would be
reduced. Furthermore, such equity securities might have rights, preferences or
privileges senior to our common stock.
YEAR 2000 COMPLIANCE
BACKGROUND OF YEAR 2000 ISSUES
Many currently installed computer and communications systems and software
products are unable to distinguish 21st century dates from 20th century dates.
This situation could result in system failures or miscalculations causing
disruptions in the operations of any business. As a result, many companies'
software and computer and communications systems may need to be upgraded or
replaced to comply with such Year 2000 requirements.
CUSTOMER REPRESENTATIONS AND WARRANTIES
We generally represent and warrant to our customers that the occurrence of
the date January 1, 2000 and any related leap-year issues will not cause our
products to fail to operate properly. In certain cases, this warranty includes
representations regarding the ability of our product to store, display,
calculate, compute and otherwise process date-related data. Our warranty
generally applies only to our products and excludes failures resulting from the
combination of our products with other software or hardware or from the use of
our software in a manner not in accordance with the related documentation.
In the event we breach this warranty, remedies in most cases include
commercially reasonable efforts to replace the software and to advise the
customer how to achieve substantially the same functionality through different
procedures, as well as payment of money damages, subject to certain limitations.
OUR PRODUCT TESTING AND LICENSING
We have tested all of our products for Year 2000 compliance. We derived our
testing method from our review and analysis of the Year 2000 testing practices
of other software vendors, relevant industry Year 2000 compliance standards and
the specific functionality and operating environment of our products. The tests
are run on all supported platforms for each release and include testing for date
calculation and internal storage of date information with test numbers starting
in 1999 and going over the Year 2000 boundary. Based on these tests, we believe
our products to be Year 2000 compliant with respect to date calculations and
internal storage of date information.
We have identified one Year 2000 date-related limitation in earlier
versions of Castanet. Versions of Castanet prior to version 3.2 display certain
data to the user in a manner that uses only two digits to represent a year. A
two-digit display of the Year 2000 could cause a user to believe the year
represented was the Year 1900 instead of the Year 2000. This limitation does not
affect either computation of data in our products or operation of the products.
All versions of Castanet currently being shipped use four digits for the display
of date data.
INTERACTION OF OUR PRODUCTS WITH THIRD-PARTY SOFTWARE
Our products contain, operate with and depend on third-party code that we
may not be able to independently verify is Year 2000 compliant. Substantially
all of our products interface with and depend on Sun's JVM (Java Virtual
Machine). Sun has indicated that the version of the JVM on which
30
<PAGE> 33
Castanet 3.0, and all later versions depend, is Year 2000 compliant, but Sun has
made no such statement regarding earlier versions of the JVM. Our products also
contain and depend on software licensed to us from RSA Data Security, Inc.,
Netscape, VeriSign, Inc. and Phaos Technology Corporation. Although each of
those companies has made representations that the licensed code is Year 2000
compliant, we may not be able to verify this by independent testing. Finally,
our products also interact with external sources such as other software programs
and operating systems which may not be Year 2000 compliant or which may not
provide date data to our products in a manner that is Year 2000 compliant. Any
interaction with third-party software which is not Year 2000 compliant could
cause our products to fail to properly operate or to properly process date
information.
OUR INTERNAL SYSTEMS
Although we do not have a formal contingency plan to address Year 2000
issues, we are in the preliminary stages of assessing our internal risks
associated with the Year 2000 issue. We are working internally and with
third-party vendors to assure that we are prepared for the Year 2000. We have
inventoried our internal software and hardware systems, as well as products and
services provided by third-party vendors. These systems include those related to
product delivery, customer service, internal and external communications,
accounting and payroll, which we consider critical areas of our business. We are
seeking vendor certification for all third-party systems and plan to develop a
detailed risk assessment and action plan that will include testing of both
critical systems and systems for which no certification has been obtained. The
identification, certification and risk assessment phases of our Year 2000
project are expected to be completed by the end of April 1999. Subsequent phases
will include our own tests, tests conducted by third-party consultants and the
development of contingency plans and/or workarounds for systems which have been
identified to be noncompliant. We expect these phases will continue through the
first half of 1999.
COSTS OF ADDRESSING YEAR 2000 COMPLIANCE
To date, our costs to address Year 2000 compliance have not been
significant. Based on our preliminary evaluations, we do not believe we will
incur significant operating expenses or be required to invest heavily in
computer system improvements to be Year 2000 compliant, although we have not yet
developed an estimate of such costs. However, significant uncertainty exists
concerning the potential costs and effects associated with Year 2000 compliance.
Any Year 2000 compliance problem experienced by us or our customers could
decrease demand for our products which could seriously harm our business,
results of operations and financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the AICPA issued SOP No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP No. 98-1 requires
entities to capitalize certain costs related to internal-use software once
certain criteria have been met. We expect that the adoption of SOP No. 98-1 will
not have a material impact on our financial position or results of operations.
We will be required to implement SOP No. 98-1 for the year ending December 31,
1999.
In April 1998, the AICPA issued SOP No. 98-5, Reporting on the Costs of
Start-Up Activities. SOP No. 98-5 requires that all start-up costs related to
new operations must be expensed as incurred. In addition, all start-up costs
that were capitalized in the past must be written off when SOP No. 98-5 is
adopted. We expect that the adoption of SOP No. 98-5 will not have a material
impact on our financial position or results of operations. We will be required
to implement SOP No. 98-5 for the year ending December 31, 1999.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes methods for derivative
31
<PAGE> 34
financial instruments and hedging activities related to those instruments, as
well as other hedging activities. Because we do not currently hold any
derivative instruments and do not engage in hedging activities, we expect that
the adoption of SFAS No. 133 will not have a material impact on our financial
position or results of operations. We will be required to implement SFAS No. 133
for the year ending December 31, 2000.
In December 1998, the AICPA issued SOP 98-9, Modification of SOP 97-2,
Software Revenue Recognition, with respect to Certain Transactions. SOP 98-9
amends SOP 97-2 and SOP 98-4 extending the deferral of the application of
certain provisions of SOP 97-2 amended by SOP 98-4 through fiscal years
beginning on or before March 15, 1999. All other provisions of SOP 98-9 are
effective for transactions entered into in fiscal years beginning after March
15, 1999. We have not yet determined the effect of the final adoption of SOP
98-9 on our financial condition or results of operations.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We develop products in the United States and sell in North America, Asia
and Europe. As a result, our financial results could be affected by factors such
as changes in foreign currency exchange rates or weak economic conditions in
foreign markets. As all sales are currently made in U.S. dollars, a
strengthening of the dollar could make our products less competitive in foreign
markets. Our interest income is sensitive to changes in the general level of
U.S. interest rates, particularly since the majority of our investments are in
short-term instruments. Due to the nature of our short-term investments, we have
concluded that there is no material market risk exposure. Therefore, no
quantitative tabular disclosures are required.
32
<PAGE> 35
BUSINESS
OVERVIEW
Marimba is a leading provider of Internet-based software management
solutions that enable companies to expand their market reach, streamline
business processes and strengthen relationships with customers, business
partners and employees. Our Castanet product family provides an efficient and
reliable way for enterprises to distribute, update and manage applications and
related data over corporate intranets, extranets and the Internet. Our strategy
is to extend the Castanet foundation to manage the array of infrastructure,
systems and components upon which business applications and services depend. We
believe that, by using Castanet, companies are able to leverage the Internet
more efficiently by reducing software management costs, delivering greater
functionality and improving customer loyalty. Our global customer base spans
multiple industry segments including financial services, insurance, retail,
manufacturing and telecommunications. Castanet customers include such industry
leaders as Bear Stearns, Charles Schwab, EarthLink, Home Depot, Intuit, Ingram
Micro, Nortel Networks, Seagate Technology and Sun Microsystems. Since January
1997, over 200 organizations have purchased our Castanet product. We market our
Castanet products worldwide through a combination of a direct sales force,
resellers and distributors.
INDUSTRY BACKGROUND
In today's intensely competitive business environment, companies
aggressively seek new ways to leverage information technology for competitive
advantage. The Internet has emerged as a crucial business tool, offering the
prospect of ubiquitous, easy-to-use and cost-effective connectivity to anyone,
anywhere, internal or external to the corporate network. As the commercial use
of the Internet grows, companies are delivering increasingly sophisticated
services to a rapidly expanding audience. As a result, demands on the Internet
infrastructure have grown and the enterprise computing environment is evolving
and becoming increasingly complex. Today, companies are extending their
enterprises and starting to use the Internet to connect to their business
partners and customers in fundamentally new ways. Organizations are leveraging
the Internet to deliver services that extend their business processes to
networked, mobile and remote employees, customers, suppliers, vendors,
distributors and other partners.
This emerging use of the Internet by businesses, which is often referred to
as "e-business," encompasses business-to-business, business-to-employee and
business-to-consumer communications and transactions. As they adopt e-business,
companies are integrating, co-locating and redistributing their business
processes with those of their strategic partners and customers. By linking these
business processes across the extended enterprise, companies are creating a new
type of service offering for their strategic partners and customers that
requires the ability to deliver business applications and information
dynamically. For example, by directly sharing the information and analysis of an
inventory management application, companies and their suppliers and distributors
can manage supply chain issues in real-time. Alternatively, by providing online
applications such as financial portfolio management, companies can offer
personalized, up-to-date account information that creates immediate value for
their customers. When companies are able to offer easy-to-access, compelling,
up-to-date applications and information as services, they create closer business
relationships, new efficiencies and significant strategic advantages. As a
result of these benefits, the e-business market is large and growing rapidly.
International Data Corporation, an independent research firm, estimates that
e-commerce, a subset of e-business, will grow from $32 billion in 1998 to $426
billion in 2002.
In embracing e-business, companies are extending their IT infrastructure
beyond the organization and moving their core business applications and
processes to the Internet. Prior to the commercial adoption of the Internet as a
business platform, corporations primarily focused on connecting the physical
computing network infrastructure within their own organizations and deploying
application software to
33
<PAGE> 36
automate internal business processes. As companies now extend their enterprise
IT infrastructure, they face significant new challenges. In an e-business
environment where corporate IT domains are being extended, application
availability, security and performance are dependent on the management of a
complex, heterogeneous array of systems and services. In addition, the dynamic
nature of e-business requires companies to ensure that applications and
information are up to date. As companies' e-business services grow, they must be
able to rapidly scale their services to thousands, or even millions, of users.
These users are often only intermittently connected to the network and may be
outside the corporation's control. The public nature of the Internet also
exposes the enterprise to heightened security risks. Finally, as e-business
applications are increasingly being advertised and delivered as services,
organizations and their customers are demanding the same high levels of
availability, ease of use and quality of service that they expect from common
utilities such as electricity and telephone systems.
The evolution of enterprise computing to an Internet-based infrastructure
is creating enormous complexity for organizations and producing significant
challenges, similar to those faced by companies as they moved from mainframe
computing to client-server environments. At that time, the need to manage
complex client-server environments gave rise to a large market for network and
systems management solutions. However, these solutions were not designed for an
Internet-based infrastructure. As a result, they do not adequately address
challenges such as connectivity, management of endpoints outside of the firewall
and security requirements of a public network, and massive scalability, all of
which are critically important when delivering services across the Internet.
These challenges have created the need for a new Internet services
management solution that supports e-business services across the extended
enterprise. A complete Internet services management solution would provide not
only the management of e-business applications on an ongoing basis, but also
management of the infrastructure upon which those applications depend. For
example, an e-business platform would typically be comprised of a set of
business applications, plus components such as web servers, database management
systems, application servers and software security systems. A complete Internet
services management solution will ultimately enable an IT department to first
deploy and then manage, maintain and monitor this e-business infrastructure
across companies, domains and geographies.
THE MARIMBA SOLUTION
Marimba is a leading provider of Internet-based software management
solutions that enable companies to expand their market reach, streamline
business processes and strengthen relationships with customers, business
partners and employees. Our Internet services management solutions help solve
complex deployment and management problems not adequately addressed by existing
client-server based distribution and management products. An essential
foundation of a complete Internet services management solution is the ability to
effectively deliver and manage applications and information throughout the
extended enterprise. Built from the ground up to provide a robust Internet-based
infrastructure, our Castanet software product family provides automated
distribution, transparent updates and ongoing management of e-business
applications, application-related data, business rules, documents and services
throughout the extended enterprise. Our Castanet product family is modular,
allowing organizations to plug-in functionality as their e-business requirements
expand and is designed to provide the reliability, performance and security that
organizations require for their mission-critical e-business applications and
services. As a result, we believe our customers are able to leverage their
networks more efficiently and obtain greater functionality from their business
applications.
We believe that the benefits of our Castanet solution will address the
Internet services management needs of leading corporations and service
providers. Key benefits of this solution include:
Reduces Total Cost of Managing the Extended Enterprise. Castanet
facilitates the centralized management of the extended enterprise by enabling
automated, electronic distribution, installation and updates of applications and
related data. In so doing, Castanet lowers IT costs by reducing resources
34
<PAGE> 37
previously required to manually distribute and customize software. Castanet can
further reduce support costs by removing the burden of software installation and
management from the end-user and by automatically synchronizing application
versions across multiple users. In addition, by replacing only the applications
or data that have changed, Castanet enables rapid and efficient updates, thereby
reducing network connection charges and enabling corporations to realize
increased benefits from their network bandwidth investment.
Increases Efficiency of the Extended Enterprise. Castanet provides
organizations with a simple and rapid way to distribute new or updated
applications and information across a complex, distributed and heterogeneous
computing environment. Through access control and policy management, Castanet
enables the collaborative exchange of applications and data among users and
across companies. By enabling organizations to extend access to their data and
applications across the extended enterprise, Castanet can increase the
efficiency and usefulness of an organization's information and technology
assets. Employees, customers, suppliers, vendors and other partners can receive
the most recent and relevant data directly, reducing an organization's support
requirements. Mobile users can work off-line and receive the latest updates when
they connect to the network. By enabling rapid, transparent updates, Castanet
can reduce the time and frustration often associated with obtaining software and
data updates remotely. In addition, because users automatically receive the most
current information, organizations can reduce the inefficiency caused by
outdated information and applications.
Provides Robust Infrastructure for Mission-Critical Applications. Castanet
enables companies to distribute and update mission-critical applications
throughout the extended enterprise in a reliable and efficient manner. When
corporations transmit sensitive e-business applications and data across public
or private networks, precautions must be taken to authenticate user identity,
verify application and data integrity, and protect data confidentiality.
Castanet provides comprehensive security functionality, including digital
certificates, encryption and end-user access control. Castanet can rapidly scale
to allow organizations to distribute applications and upgrades to large numbers
of users in geographically dispersed locations. This architecture helps
organizations improve application performance and reduce network traffic. If a
download is interrupted, Castanet can automatically restart at the point of
interruption when it reconnects without corrupting the original application or
file.
Enhances Customer Relationships. As corporations extend their enterprise to
customers, business partners and employees worldwide, it is becoming
increasingly important to deliver personalized services, content and user
interfaces to individual customers or target groups. Castanet enables the
tailoring of services through automatic identification of target user groups, or
through server extensions which allow the automated selection of code and
content. In addition, Castanet provides the ability to create and package custom
user interfaces. Using the customization and branding functions available with
Castanet, IT and operational managers can define and enforce consistent
application configurations and branding across the extended enterprise. We
believe that each of these capabilities allows companies to strengthen their
brand and offer more compelling Internet-based services, thereby increasing
their customer loyalty.
STRATEGY
Our objective is to become the leading provider of Internet services
management solutions. We are pioneering this new and emerging market and have
established a foundation upon which we can build to address the growing needs of
the extended enterprise. The key elements of our strategy to achieve our
objective are:
Extend Technological Leadership Position. We are the first company to
provide an integrated product suite that has been designed from the ground up to
provide e-business application distribution and management solutions across the
extended enterprise. We believe that our application distribution and management
solutions provide us with a first mover advantage and an essential foundation
for a comprehensive Internet services management solution. We intend to advance
our technological leader-
35
<PAGE> 38
ship by investing significant resources in research and development. In
addition, by implementing and actively promoting new industry standards, we
intend to facilitate widespread adoption of Castanet by enterprises conducting
e-business.
Target Companies and Service Providers Conducting E-business. We intend to
expand adoption of Castanet by focusing our efforts on selling to large
companies in industry sectors where the deployment of e-business solutions
provides a key competitive advantage. While many large companies are now
engaging in some form of e-business, we believe that Castanet is particularly
attractive to companies in industry sectors such as financial services,
insurance, health care, manufacturing, retail, technology and telecommunications
given their sophisticated technological needs. We believe that our experience in
successfully providing Castanet solutions to industry-leading companies provides
us a competitive advantage in selling Castanet to potential customers. Castanet
provides an enabling infrastructure for application service providers and
Internet service providers to distribute and remotely manage applications
services simply, efficiently and at a low cost.
Expand Worldwide Sales. We believe that international markets represent a
significant growth opportunity as organizations seek global e-business
solutions. We currently have a direct sales presence in North America and
Europe. In the Asia/Pacific region, we sell our Castanet products through third-
party distributors. We intend to expand our direct sales force and to establish
additional sales offices domestically and internationally. In addition, we plan
to complement our current distribution channels with selected resellers, system
integrators and joint marketing partners to expand our market reach.
Expand Professional Services. We believe that our experienced team of
consultants, support engineers and training staff provide a key competitive
advantage in the sale of the Castanet solution. We intend to expand this team
and continue to invest in the advanced level of training required to provide
superior service to our customer base. In addition, the complex and strategic
nature of Internet services management software provides us with a significant
opportunity to provide consulting services to customers to help them
successfully develop, deploy and maintain their e-business applications.
36
<PAGE> 39
CASTANET PRODUCT FAMILY
The Castanet product family provides a robust framework to distribute,
update and manage applications and related data over corporate intranets,
extranets and the Internet to multiple endpoints, including servers, desktops
and mobile systems. Designed upon an open, extensible architecture, our Castanet
products are fault tolerant, provide a variety of security features, are
bandwidth efficient, allow personalization and are rapidly scalable to a large
number of users in geographically dispersed locations. The Castanet product
family is modular, allowing organizations to add functionality as their
e-business management requirements expand. The Castanet product family is
summarized below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
CASTANET PRODUCT FAMILY BENEFITS
<S> <C>
- --------------------------------------------------------------------------------------------------------
CASTANET INFRASTRUCTURE SUITE: - Supports multiple applications across
heterogeneous computing environments, in one
The Infrastructure Suite provides the foundation integrated solution
upon which all other Castanet product suites are
built. It provides the components necessary to - Provides security features to authenticate users
distribute, manage and maintain applications and help protect data integrity and
across intranets, extranets and the Internet. confidentiality
- Provides bandwidth efficiency, lowering network
connection costs
- Supports mobile and remote users, who may be
only intermittently connected to the network
- Supports personalization, making it easy to
install and manage appropriate application
versions for each user
- Rapidly scales to a large number of users in
geographically dispersed locations
- Utilizes open standards and extends to meet
changing user requirements
- --------------------------------------------------------------------------------------------------------
CASTANET PRODUCTION SUITE: - Automates the application publishing process
The Production Suite provides the ability to - Provides easy-to-use wizard-driven interfaces
package and publish custom or off-the-shelf for defining configuration parameters
applications, files and documents for
distribution by the Castanet Infrastructure - Reduces software and platform dependencies
Suite.
- Provides the ability to customize the
application installation process to shield end
users from software installation complexities
- --------------------------------------------------------------------------------------------------------
CASTANET MANAGEMENT SUITE: - Helps trouble-shoot and test Castanet
deployments
The Management Suite provides comprehensive
solutions for the management, deployment and - Streamlines application rollouts across multiple
maintenance of enterprise-wide Castanet domains of control
installations. The suite permits centralized
monitoring and control of local and remote - Provides usage reports and log files
Castanet servers and clients. Optional extensions
to the Management Suite also provide extensive - Strengthens brand awareness by allowing IT
client customization and branding capabilities. managers and business organizations to customize
user interfaces
- --------------------------------------------------------------------------------------------------------
</TABLE>
We generally license the Castanet Infrastructure Suite on a per user basis
with the total fee determined, in part, by the number of end-users who can
obtain updates using Castanet. The license terms also vary depending on the
number of applications to be deployed with Castanet and whether the computer
receiving updates is a server or client computer. Separate licenses are
available for the right to customize the user interface of the client component
of Castanet and to distribute the client and/or server components of the system
to customers, partners or others outside of the customer's own organization. The
Castanet Management and the Production Suites are generally licensed on a per
user basis, based on the number of individual systems administrators who will
use the components of the suites.
37
<PAGE> 40
ARCHITECTURE
The Castanet infrastructure is designed to distribute software and data
efficiently over TCP/IP (Transmission Control Protocol/Internet Protocol)
enabled networks. Castanet packages an application as a channel and publishes
the application to a Transmitter, which then distributes the channel and
subsequent updates across a network to Tuners on client computers. The
fundamental components of the architecture are illustrated below:
GRAPHIC
Channel. A channel is the application and/or related data that is
distributed using Castanet. For example, a channel could consist of a
stock-trading application written in Java or a shrink-wrapped application, such
as Microsoft Word and related documents. Each channel has an associated list of
properties that describes its features, such as application type, author,
copyright notice, update schedule and entry point. Castanet's application
packager prepares the channel for distribution and inserts a channel adapter
that installs and launches the application in a platform and application
specific manner. The application packager is designed to accommodate a range of
application types, including Java applets, Java Beans, Visual Basic, C, C++ and
shrink-wrapped applications. The application packager uses an installation
capture technology to create an installation script using OSD (Open Software
Description format), which is based on XML (eXtensible Markup Language). Using
this technology, both shrink-wrapped and custom applications can be installed,
updated and repaired without requiring changes to the original application and
without relying on the original application installer. After the application is
packaged as a channel, it is published to the Transmitter for distribution over
the network.
Transmitter. The Transmitter is the server component of Castanet. It
distributes channels and subsequent updates to the Tuner, the Castanet client.
The Tuner and Transmitter communicate using the Castanet protocol which is
designed to minimize bandwidth requirements for updates using compression
technology and differential updating over HTTP (Hyper-Text Transfer Protocol).
See "-- Technology." All updates are transactional, interruptible and atomic,
which means that channels on the Tuner are always in a functional state even if
the most recent update failed or was interrupted. In addition, interrupted
downloads can be restarted automatically at the point of interruption. Castanet
provides functionality to identify and verify each channel resource and
installed applications. Additional Transmitter features include replication,
personalization, client feedback, bandwidth management and policy
administration. Castanet implements user authentication and access control using
passwords or client-side certificates and by leveraging directory services, such
as LDAP (Lightweight Directory Access Protocol) or Microsoft's Active Directory.
38
<PAGE> 41
Tuner. The Tuner is the client component of Castanet. The Tuner subscribes
to channels located on the Transmitter and downloads, installs and receives
updates of each channel. Once received from a Transmitter, channels are stored
locally on the Tuner, making the downloaded channel resources instantly
accessible regardless of whether the user is connected to the network. The Tuner
is typically configured to run in the background and can manage multiple
channels simultaneously without end-user interaction, updating them as necessary
to present the user with the most recent version. In addition, the Tuner's user
interface can be customized to include the brand, logo and other look and feel
elements desired by the customer. The Tuner provides a comprehensive set of
features for modem support, bandwidth management, security controls, certificate
management, update scheduling and firewall support.
The Castanet distribution architecture can be scaled rapidly to a large
number of end users using replication and caching technology. The illustration
below describes an example of how applications can be deployed globally to
multiple end users:
GRAPHIC
Using the Castanet protocol, Tuners can be redirected automatically to
additional Transmitters, serving as repeaters, in order to reduce the load on
the main Transmitter and to make more efficient use of available bandwidth. By
adding repeaters, it is possible to provide faster download times and to service
thousands of simultaneous downloads. Repeaters can be added and removed
dynamically without disrupting the overall service, allowing for a high level of
scalability, improved service quality and availability. In addition, the use of
a caching proxy server can improve the efficiency of downloads through corporate
firewalls.
In addition to the basic Castanet components, a variety of Castanet
features are available for reporting downloads, staging updates, application
signing, resource planning, certificate management, license installation,
Transmitter administration, Tuner administration and deploying Tuner updates.
All of these features are distributed as Castanet channels, and together with
the basic infrastructure components, provide all the necessary functionality to
distribute, manage and maintain mission critical applications and services.
Where appropriate, we provide programming interfaces and software development
kits for customized extensions, allowing customers to tailor the Castanet
solution to their specific needs, or to embed the Castanet technology into
existing applications.
39
<PAGE> 42
TECHNOLOGY
We believe that our investment in engineering has resulted in technology
that provides us with a strategic advantage. Castanet has been built from the
ground up to provide a robust Internet-based solution. Castanet provides a
lightweight, cross-platform and easy-to-deploy solution that helps solve complex
application deployment and management problems which we believe are not
addressed adequately by existing client-server distribution and management
tools.
Castanet makes extensive use of a broad range of technologies, including
Java, TCP/IP, HTTP, LDAP, XML, SSL (Secure Socket Layer) and various digital
security technologies. In addition, we have worked with partners to submit
several standards proposals to the World Wide Web Consortium, including the OSD
format jointly developed with Microsoft and the DRP protocol (HTTP Distribution
and Replication Protocol) jointly developed with Netscape, Sun Microsystems,
Novell, Inc. and @Home Network.
The Castanet protocol is designed to distribute applications and data to
multiple intermittently connected endpoints. The protocol is layered on HTTP so
that it can be used from within most corporate firewalls by tunneling through an
HTTP proxy server. When the user is on line, the Tuner initiates update requests
either when requested by the user or automatically using a predefined update
schedule. When an update request is received, the Transmitter quickly determines
which files in the channel have changed, and if a change has occurred, Castanet
determines exactly which bytes within those files have changed. The Tuner then
downloads the resulting changes, and compression algorithms are used to further
reduce the total download overhead. The efficiency of the Castanet protocol
makes it possible to distribute frequent updates to large applications and
application files with relatively low bandwidth utilization. The protocol also
provides features for user authentication, personalization of content, the
distribution of events and data from the Tuner to the Transmitter and the
automatic redirection of requests to repeaters.
Our OSD-based software installation technology provides a cross-platform
framework for installing, updating, and verifying applications in an operating
system specific manner. Applications are delivered with an OSD file that defines
the platforms on which the software runs, as well as the libraries and resources
it requires. In addition, the OSD file contains platform specific extensions
that define the exact installation requirements in a declarative manner. For
example, on the Microsoft Windows platform, the OSD file describes exactly which
files need to be installed, which DLLs (Dynamically Loaded Libraries) need to be
updated, which registry entries need to be set and which system scripts need to
be updated. Once an application is installed, the OSD file can be used to
upgrade, verify and uninstall the application. OSD files are generated
automatically using an installation capture technology, which eliminates the use
of the original application installer. IT managers can customize the OSD script
to control the level of user involvement in the resulting installation.
We have invested significant resources in developing Castanet's security
implementation. Castanet's security features currently include end user
authentication, digital certificates to verify application authenticity and SSL
communications to help protect the integrity and confidentiality of data
transmitted via Castanet. We offer a standard 40-bit encryption implementation
for international use and a 128-bit encryption implementation for domestic use
only. Our security implementation represents a combination of software written
by us and security code licensed to us by various vendors, including encryption
modules licensed from RSA Data Security and an SSL implementation from Netscape.
To further enhance the breadth of our security offerings, we also recently
licensed a Java-based security implementation. We also have an arrangement with
VeriSign for the provision of digital certificates specifically for Castanet
products. See "Risk Factors -- We Rely on Third-Party Software and
Applications."
40
<PAGE> 43
Most of our products are implemented using Sun Microsystems' Java
programming language. As a result, our products are extremely portable, easy to
internationalize, easily reconfigured and efficient. The use of Java has proven
to be a major advantage in developing portable components without significantly
increasing the engineering overhead as additional platform support is required.
We believe that our use of and expertise in Java provides us a competitive
advantage. See "Risk Factors -- We Rely on Third-Party Software and
Applications."
CUSTOMERS
Our customer base spans multiple industry segments including financial
services, government, insurance, retail, manufacturing and telecommunications.
The following is a representative list of companies that have purchased over
$100,000 of Castanet products and services:
American Management
Systems
Arthur Andersen
Bear Stearns & Co.
Caterpillar
Charles Schwab
Cisco Systems
CSX
Cytec Industries
Daimler Chrysler
EarthLink Network
Eddie Bauer
Edward Jones
Encanto Networks
Fireman's Fund
Ford Motor Company
Fujitsu
GE Medical Systems
Guardian Life Insurance
H&R Block
Hitachi IT
The Home Depot
Ingram Micro
Instinet
Intuit
Itochu
MECA Software
Merck & Co.
Mitchell International
Morgan Stanley Dean
Witter & Co.
Samsung SDS
Seagate Technology
SegaSoft Networks
Sony Marketing
Sun Microsystems
SBC Warburg
Dillon Read
The Thompson Financial
Company
Toshiba
US WEST
Wausau Insurance
The following examples span intranet, extranet and Internet e-business
applications, and illustrate how organizations are relying on Castanet to
provide a management infrastructure for business-to-employee,
business-to-business, and business-to-customer networked communications.
Business-to-Employee (Intranet Applications). The Home Depot and Cytec
sought to lower cost of operations, automate application installation and
maintenance and improve controlled access to information within their intranet
environments. These organizations are utilizing Castanet to distribute, manage
and maintain critical line-of-business applications to their employees, whether
they reside in headquarter locations, remote offices or field locations. The
Home Depot selected Castanet to automate deployment of its custom design
applications to 760 stores worldwide. Cytec relies on Castanet to manage its
supply chain application accessed daily by hundreds of employees in North
America.
Business-to-Business (Extranet Applications). Seagate Technology and Ingram
Micro rely on Castanet's built-in security, bandwidth efficiency,
personalization features and support for disconnected use for combined intranet
and extranet applications. Seagate Technology is utilizing Castanet to deliver
and update business applications such as sales forecasting and pricing
information to its internal sales management, mobile sales force and external
OEM and distributor partners. Ingram Micro is utilizing Castanet to deploy and
maintain electronic commerce services to its network of resellers.
Business-to-Customer (Internet Applications). Intuit and OnSale were
challenged with providing Internet applications to a large number of end users
where bandwidth efficiency, cross platform support and incremental,
transactional updates are key. Intuit embedded Castanet into its Quicken 99
personal finance software to enable its installed base of 10.5 million online
users to receive software and information updates transparently. OnSale, a
leading Internet auction retailer with over one million registered users, built
its BidWatch application on Castanet's infrastructure in order to collect and
display real-time bid information for up to 1,000 simultaneously active users.
41
<PAGE> 44
Many of our customers have gained measurable cost saving benefits through
their deployment of Castanet. We engaged the Hurwitz Group, an industry analyst
and research firm, to work with us to assess the amount of time required for
Castanet to "pay for itself," or achieve a break-even return on investment for
selected customers. The following examples demonstrate the expected payback
period for Castanet in three diverse customer deployments.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
USE OF INITIAL ESTIMATED MONTHLY NET PAYBACK
CUSTOMER CASTANET INVESTMENT COST SAVINGS(1) PERIOD(2)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Major Distribute and manage sales $ 200,000 People savings: $ 21,000 2 months
Manufacturer productivity applications Hardware savings: $5,000
to its remote/mobile sales Network bandwidth
force and channel partners. utilization
savings: $121,800
Total: $147,800
- ------------------------------------------------------------------------------------------------------------
Computer Equipment Distribute all internal $1,000,000 People savings: $165,000 4 months
Manufacturer business applications to Hardware savings: $122,000
employees connected to Total: $287,000
worldwide corporate
network.
- ------------------------------------------------------------------------------------------------------------
Major Retail Distribute, update and $2,000,000 People savings: $ 86,000 12 months
Corporation manage Windows applications Hardware savings: $ 25,000
over T1 lines to global Support call
retail network. savings: $ 60,000
Total: $171,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Cost savings include both reductions in costs that the customer has achieved
or expects to achieve, as well as anticipated costs that the customer
expects to avoid, by deploying Castanet. These cost saving data are based on
data provided by the customers, and have not been independently verified.
(2) Represents the total amount of anticipated time needed for the organization
to recoup initial investment in terms of monthly cost savings.
SALES, MARKETING AND DISTRIBUTION
We market our Castanet products worldwide through a combination of a direct
sales force, resellers and distributors. Our worldwide direct sales, marketing
and business development organizations consisted of 65 individuals as of
December 31, 1998, 42 of whom were located at our Mountain View, California
headquarters, 17 in regional offices located in California, Georgia, Illinois,
Michigan, New York and Virginia and six in our European office in the United
Kingdom.
Our sales, marketing and distribution approaches are designed to help
customers understand both the business and technical benefits of the products.
We have built an experienced consulting services organization to facilitate the
successful deployment of our products. We intend to expand our consulting
services organization and direct sales force and to establish additional sales
offices domestically and internationally. Competition for sales personnel is
intense, and we may not be able to attract, assimilate or retain additional
qualified personnel in the future. See "Risk Factors -- We Need to Develop and
Expand Our Sales, Marketing and Distribution Capabilities."
We conduct a variety of marketing programs worldwide to educate our target
market, create awareness and generate leads for our Castanet solutions. To
achieve these goals, we have engaged in marketing activities such as e-business
seminars, direct mailings, print and online advertising campaigns and trade
shows. These programs are targeted at key IT executives as well as vice
presidents of marketing and general managers of business units. In addition, we
conduct comprehensive public relations programs that include establishing and
maintaining relationships with key trade press, business press and industry
analysts as well as an active executive speakers' bureau. We have established
and enforced consistent branding guidelines for all of our channel partners in
order to solidify our market position. We have also initiated a customer
advisory council which provides a communication channel for regular feedback
from key customers to facilitate the design of products that meet the expanding
requirements of our target market.
42
<PAGE> 45
Our sales strategy is to supplement the efforts of our direct sales force
by establishing multiple indirect distribution channels in the United States and
internationally through original equipment manufacturers, resellers and systems
integrators. Tivoli has been a reseller of our products since 1997. Tivoli
accounted for $3.1 million, or approximately 18% of our revenues in 1998. This
includes $1.9 million, or approximately 19% of our revenues in the fourth
quarter of 1998. Our reseller agreement with Tivoli provides for the resale of
our products at substantial discounts from list price. Consequently, the gross
margin on such sales is generally lower than the gross margin our direct sales.
In March 1998, we entered into an original equipment manufacturer agreement
with Tivoli pursuant to which Tivoli is building upon the Castanet
infrastructure to develop a product called Cross-Site. Any revenues from Tivoli
under this original equipment manufacturer agreement will be from per seat
royalty payments on sales of Cross-Site that contain the Castanet
infrastructure. The per seat payments under the original equipment manufacturer
agreement will be less than the per seat payments we currently have under our
reseller agreement with Tivoli. Tivoli has announced that it expects to release
Cross-Site in the first quarter of 1999. Consequently, we expect to generate
revenues from royalties on sales of Cross-Site beginning in 1999 and expect that
revenues from the resale of Castanet pursuant to the Tivoli reseller agreement
will rapidly decrease and become immaterial as Tivoli transitions its efforts to
the release and sale of Cross-Site. However, Tivoli might be unable to introduce
Cross-Site by its expected release date. Furthermore, because Cross-Site is a
new product, Tivoli might not be able to successfully market and sell
Cross-Site, and the level of demand for Cross-Site is uncertain. Any failure of
Cross-Site to achieve widespread market acceptance could significantly harm our
business and results of operations. Because a significant amount of our revenues
have been, and are expected to continue to be, derived from Tivoli, we are
dependent on our relationship with Tivoli. Any disruption of our relationship
with Tivoli would seriously harm our business and results of operations. Our
reseller agreement with Tivoli expires upon the earlier of May 1, 1999 or
written notice provided to us by Tivoli. If the release of Cross-Site is delayed
beyond May 1, 1999, Tivoli would no longer resell our Castanet product unless we
and Tivoli extended the term of the reseller agreement. Furthermore, it is
possible for Tivoli to terminate the reseller agreement prior to the release of
Cross-Site. See "Risk Factors -- We Depend on Our Relationship with Tivoli" and
"-- Our Market Is Highly Competitive."
Netscape, a reseller of our products, accounted for $1.0 million, or
approximately 18%, of our revenues in 1997, and $3.8 million, or approximately
22% of our revenues in 1998. A majority of the $3.8 million of 1998 revenues was
recognized in the first half of 1998, with only $1.3 million in revenues
recognized in the second half of 1998. Netscape is no longer an active reseller,
and we do not expect material revenues from Netscape in the future.
Markets outside the United States are currently served by our direct sales
office in the United Kingdom as well as independent distributors and resellers
covering certain countries in Europe and Asia. Our distributors purchase our
Castanet products at discounts from end-user list prices. Sales under the
agreements are denominated in U.S. dollars. Foreign sales are subject to certain
risks, including exchange rate fluctuations, internal monetary conditions,
tariffs, import licenses, trade policies and domestic and foreign tax policies.
See "Risk Factors -- Expanding Internationally Is Expensive, We May Receive No
Benefit from Our Expansion and Our International Operations are Subject to
Governmental Regulation."
We may not be able to enter into agreements or establish relationships with
desired distribution partners on a timely basis, or at all, and our distribution
partners may not devote adequate resources to selling our products. See "Risk
Factors -- We Need to Develop and Expand Our Sales, Marketing and Distribution
Capabilities" and "-- We Depend Upon Third-Party Distribution Relationships and
Need to Develop New Relationships."
43
<PAGE> 46
CUSTOMER SUPPORT AND TRAINING
Our customer support and training organization consisted of 12 employees as
of December 31, 1998. We offer a variety of customer support services to meet
specific needs including an option to purchase support on a per-question basis
or an annual subscription service that provides customers with the latest
product updates as they become available. In addition, we also offer the
following annual service packages:
Bronze Service. This service provides customers with technical assistance
on installation and basic product questions via e-mail and/or telephone, as well
as access to our customer support engineers. With this service, customers also
receive the latest product updates as they become available.
Silver Service. This program includes all the features of the Bronze
Service offering with the addition of coverage 24 hours a day, every day of the
week.
Gold Service. Designed for mission-critical applications, the Gold Service
program provides customers with all the features of the Silver Service plus
early access to product beta releases and proactive support from designated
technical account managers.
Customers that license our products typically engage our professional
services organization to assist with support, training and consulting. We
believe that growth in our product sales depends on our ability to provide our
customers with these services and to educate third-party resellers and
consultants on how to provide similar services. As a result, we plan to increase
the number of our service personnel to meet these needs. See "Risk Factors -- We
Need to Expand Our Professional Services."
RESEARCH AND DEVELOPMENT
As of December 31, 1998, our engineering organization was comprised of 47
employees responsible for product development, quality assurance, documentation,
localization and porting. Our development organization is divided into four
groups: infrastructure and production tools, management tools, applications and
advanced development. The infrastructure and production tools group is focused
on enhancing the functionality, reliability, performance and flexibility of our
products and expanding the ability of Castanet to operate with leading operating
systems. Our management tools group is focused on developing enterprise-level
products that address additional Internet services management functions to
complement our current product family, and to expand our coverage of the
Internet services management market. These products are being developed to add
functionality to our existing product family by allowing customers to collect
system and application inventory information, control subscription and
configuration and monitor the status of endpoints. The applications group
focuses on developing solutions such as document management to end users and
bi-directional data management between remote offices and stores, to address
specific enterprise problems that will directly benefit and leverage our product
line. Our advanced development group defines architecture and engages in
speculative and forward-looking engineering with the intention that the results
may become products in the future.
These four development groups are supported by the quality assurance,
documentation, localization and porting groups. The quality assurance group
implements a process designed to identify software defects through the entire
development cycle. The documentation group is responsible for end user,
administrator and developer documentation for our products. The localization
group is responsible for internationalizing our products while in development as
well as performing the language-specific localization after the English version
is produced. The porting group is responsible for any changes to the source code
required to allow a product to run on platforms other than the two core
development platforms of Solaris and Windows.
We believe that our software development team and core technologies
represent a significant competitive advantage. The software development team
includes a number of key members from the
44
<PAGE> 47
engineering team that developed the Java programming language and runtime
environment at Sun Microsystems.
A technically skilled, quality oriented and highly productive development
organization will be a key component of the success of new product offerings. We
must attract and retain highly qualified employees to further our research and
development efforts. Our business and results of operations could be seriously
harmed if we are not able to hire and retain the required number of such
individuals. See "Risk Factors -- We Must Retain and Attract Key Personnel."
Research and development expenses were $2.4 million in 1997 and $5.8
million in 1998. To date, substantially all software development costs have been
expensed as incurred and developed by our employees. We believe that significant
investments in research and development are required to remain competitive. As a
consequence, we intend to continue to increase the absolute amount of our
research and development expenditures in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
We cannot be sure that existing and future development efforts will be
completed within our anticipated schedules or that, if completed, they will have
the features necessary to make them successful in the marketplace. Future delays
or problems in the development or marketing of product enhancements or new
products could seriously harm our business and results of operations. Further
there can be no assurance that, despite testing by us and by current and
potential customers, errors will not be found in our products, or, if
discovered, successfully corrected in a timely and cost-effective manner. If we
are not able to develop new products, enhancements to existing products or error
corrections on a timely and cost-effective basis, or if such new products or
enhancements do not have the features necessary to make them successful in the
marketplace, our business and results of operations will be seriously harmed. We
expect that most of our enhancements to existing products and new products will
be developed internally. However, we currently license certain externally
developed technology and will continue to evaluate externally developed
technologies for integration into our product lines. See "Risk Factors -- Our
Success Depends on Our Castanet Product Family and New Product Development,"
"-- Software Defects in Castanet Would Harm Our Business" and "-- We Must
Respond to Rapid Technological Change and Evolving Industry Standards."
COMPETITION
Our markets are new, rapidly evolving and highly competitive and we expect
such competition to persist and intensify in the future. We encounter current or
potential competition from a number of different sources, including:
- Sellers of enterprise-wide management systems which include electronic
software distribution such as Tivoli, Computer Associates and BMC
Software;
- Companies such as BackWeb, Novadigm, and Sterling Commerce, through its
subsidiary XcelleNet, which address certain portions of our market; and
- Desktop software management suites, such as Microsoft's SMS and Intel's
LanDesk.
In addition, we compete with various methods of application distribution
and management, including the web browser, and with application server vendors
and others which have introduced software distribution capabilities into their
products.
As new participants enter the Internet services management market, we face,
and expect to continue to face, additional competitors. In addition, potential
competitors may bundle their products or incorporate an Internet services
management component into existing products, in a manner that discourages users
from purchasing our products. For example, future releases of Microsoft's
Windows and NT operating systems are expected to include components addressing
certain Internet services
45
<PAGE> 48
management functions. Furthermore, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share. Our competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements than us.
Some of our competitors have longer operating histories and significantly
greater financial, technical, marketing and other resources than we do. Many of
these companies have more extensive customer bases and broader customer
relationships that could be leveraged, including relationships with many of our
current and potential customers. These companies also have significantly more
established customer support and professional services organizations than we do.
In addition, these companies may adopt aggressive pricing policies to gain
market share. As a result, we may not be able to maintain a competitive position
against current or future competitors. Our failure to maintain and enhance our
competitive position within the market could seriously harm our business and
results of operations. See "Risk Factors -- We Depend on Our Relationship with
Tivoli."
PROPRIETARY RIGHTS AND LICENSING
Our success and ability to compete are dependent on our ability to develop
and maintain the proprietary aspects of our technology. We rely on a combination
of patent, trademark, trade secret, and copyright law and contractual
restrictions to protect the proprietary aspects of our technology. These legal
protections afford only limited protection for our technology. We presently have
three U.S. patent applications, and several trademark registrations and
applications in the United States and certain foreign countries. Our patent and
trademark applications might not result in the issuance of any patents or
trademarks. If any patent or trademark is issued, it might be invalidated or
circumvented or otherwise fail to provide us any meaningful protection. We seek
to protect our source code for our software, documentation and other written
materials under trade secret and copyright laws. We license our software
pursuant to signed license agreements, which impose certain restrictions on the
licensee's ability to utilize the software. Finally, we seek to avoid disclosure
of our intellectual property by requiring employees and consultants with access
to our proprietary information to execute confidentiality agreements with us and
by restricting access to our source code. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our
products or to obtain and use information that we regard as proprietary.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets, and to determine the validity and scope of
the proprietary rights of others. Any such resulting litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on our business operating results. In addition, we sell our products
internationally and the laws of many countries do not protect our proprietary
rights to as great an extent as do the laws of the United States. Our means of
protecting our proprietary rights may not be adequate and our competitors could
independently develop similar technology. Our failure to adequately protect our
intellectual property could have a material adverse effect on our business and
operating results. See "Risk Factors -- Protection of Our Intellectual Property
is Limited."
Our success and ability to compete are dependent on our ability to operate
without infringing upon the proprietary rights of others. Any parties asserting
rights against us would force us to defend ourselves or our customers against
alleged infringement of intellectual property rights. We could incur substantial
costs to prosecute or defend any such litigation and intellectual property
litigation could force us to do one or more of the following:
- Cease selling, incorporating or using products or services that
incorporate the challenged intellectual property;
- Obtain from the holder of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not be
available on reasonable terms; and
- Redesign those products or services that incorporate such technology.
46
<PAGE> 49
In the event of a successful claim of infringement against us and our
failure or inability to license the infringed technology, our business and
operating results would be significantly harmed. Currently, we are engaged in
litigation with Novadigm concerning the alleged infringement by us of a patent
held by Novadigm. See "Risk Factors -- Novadigm Has Claimed That We Infringe Its
Intellectual Property."
LEGAL PROCEEDINGS
On March 3, 1997, Novadigm filed a complaint against us in the United
States District Court for the Northern District of California, alleging
infringement by us of a patent held by Novadigm (U.S. Patent No. 5,581,764, the
"Novadigm Patent"). Novadigm alleges that our infringement relates to certain
methods for updating data and software over a computer network that we use in
our Castanet products. Novadigm later identified claims 1, 4, 5, 23, 24, 25, 31,
33 and 34 of the Novadigm Patent as being infringed. In its complaint, Novadigm
requests preliminary and permanent injunctions prohibiting us and other
specified persons from making, using or selling any infringing products, and
claims damages, costs and attorneys' fees. The complaint also alleges that we
have willfully infringed the Novadigm Patent and seeks up to triple damages
pursuant to the United States Patent Act.
On May 2, 1997, we filed our answer to Novadigm's complaint and filed a
counterclaim against Novadigm. Our answer denies Novadigm's allegations and
asserts defenses to Novadigm's claim. Our counterclaim seeks a declaratory
judgment that we do not infringe the Novadigm Patent and that the Novadigm
Patent is invalid and unenforceable. On October 3, 1997, we received an opinion
from outside patent counsel that Castanet did not infringe the Novadigm Patent.
Since then, we have released two new major versions of Castanet. However, we do
not believe that any changes to Castanet made in the newer versions cause
Castanet to infringe any claim of the Novadigm Patent.
On August 25, 1997 and January 26, 1998, we filed motions for summary
adjudication asking the court to rule that one of the relevant claims of the
Novadigm Patent is invalid because it was anticipated by two prior art
references. In response to each motion, Novadigm argued that the motion was
premature because it pre-dated certain claim construction proceedings, because
only limited discovery had been taken, and because our motion failed to
demonstrate that we were entitled to summary adjudication. The court denied our
motions in part because (1) discovery was ongoing, (2) the court had not had an
opportunity to construe the relevant language in the Novadigm Patent and (3) the
court found there were triable issues of fact as to the disclosures in those
references. The court stated that we could re-file our motions once discovery
has been substantially completed and after it had held a claims construction
hearing.
On December 17, 1998, the court held a claims construction hearing on the
appropriate interpretation of certain terms in the Novadigm Patent, and on
December 28, 1998, the court issued an order setting forth its ruling on the
interpretation of those terms.
On January 19, 1999, Novadigm detailed its position as to why Castanet
Version 1.1 infringes the asserted claims of the Novadigm Patent and contended
that the alleged comparison of file level and channel level checksums in
non-optimized updating and the comparison of channel level checksums and their
associated update commands in optimized updating infringes the claims of the
Novadigm Patent. Novadigm's claim is not limited to Version 1.1, and Novadigm
has also stated that it believes that all or some code from subsequent versions
of Castanet work substantially the same way. We do not believe that Novadigm
accurately states the functionality of Castanet Version 1.1 or establishes that
Castanet Version 1.1 infringes the Novadigm Patent. We also do not believe that
the relevant portions of other versions of Castanet work in substantially the
same way or infringe on any claim of the Novadigm Patent. However, it is
possible that Novadigm may allege additional ways in which Castanet infringes
claims of the Novadigm Patent in the future.
47
<PAGE> 50
To date, both parties have conducted substantial discovery. We expect that
in the first half of 1999, the parties will complete discovery, including the
exchange of expert reports. If the court does not enter judgment based on any
dispositive motions, a jury trial of this action is currently scheduled to begin
in September 1999.
We believe, and have been advised by our outside patent counsel, that we
have strong defenses against Novadigm's lawsuit. Accordingly, we intend to
defend this suit vigorously. However, we may not prevail in this litigation.
Litigation is subject to inherent uncertainties, especially in cases such as
this where sophisticated factual issues must be assessed and complex technical
issues must be decided. In addition, cases such as this are likely to involve
issues of law that are evolving, presenting further uncertainty. Our defense of
this litigation, regardless of the merits of the complaint, has been, and will
likely continue to be, time-consuming, costly and a diversion for our technical
and management personnel. In addition, publicity related to this litigation has
in the past, and will likely in the future, have a negative impact on the sale
of our Castanet products.
A failure to prevail could result in:
- our paying monetary damages (which could be tripled if the infringement
is found to have been willful) and which may include paying an ongoing
royalty to Novadigm for the sales of Castanet products or paying lost
profits to Novadigm for particular sales in which we competed with
Novadigm and closed a sale;
- the issuance of a preliminary or permanent injunction requiring us to
stop selling Castanet in its current form;
- our having to redesign Castanet, which could be costly and time consuming
and could substantially delay Castanet shipments (assuming that such a
redesign is feasible);
- our having to reimburse Novadigm for some or all of its attorneys' fees;
- our having to obtain from Novadigm a license to its patent, which license
might not be made available to us on reasonable terms, particularly
because Novadigm is a competitor; or
- our having to indemnify our customers against any losses they may incur
due to the alleged infringement.
Any of these results would seriously harm our business, results of
operations and financial condition. Furthermore, we expect to continue to incur
substantial costs in defending against this litigation and these costs could
increase significantly if our dispute goes to trial. It is possible that these
costs could substantially exceed our expectations in future periods.
EMPLOYEES
At December 31, 1998, we had a total of 145 employees, 139 of whom were
based in the United States and 6 of whom were based in the United Kingdom. Of
the total, 47 were in research and development, 65 were engaged in sales,
marketing and business development, 12 were engaged in customer support and
training, and 21 were in administration and finance. None of our employees is
subject to a collective bargaining agreement and we believe that our relations
with our employees are good.
FACILITIES
Our principal administrative, sales, marketing, and research and
development facility occupies approximately 47,500 square feet in Mountain View,
California pursuant to a lease which expires in April 2000. We also have
regional offices located in California, Georgia, Illinois, Michigan, New York
and Virginia and a European office in the United Kingdom. We believe that our
existing facilities are adequate for our current needs and that suitable
additional or alternative space will be available in the future on commercially
reasonable terms as needed.
48
<PAGE> 51
MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
Our executive officers, key employees and directors, and their ages as of
February 5, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Kim K. Polese............... 37 President, Chief Executive Officer and Director
Arthur A. van Hoff.......... 35 Chief Technology Officer and Director
Fred M. Gerson.............. 48 Vice President, Finance and Chief Financial Officer
Thomas E. Banahan........... 40 Vice President, Business Development
Robert E. Currie............ 31 Vice President, Engineering
Jacqueline Ross............. 41 Vice President, Marketing
Steven P. Williams.......... 35 Vice President, Worldwide Sales
Jonathan Payne.............. 34 Senior Engineer
Sami Shaio.................. 35 Senior Engineer
Aneel Bhusri(2)............. 32 Director
Raymond J. Lane(1).......... 52 Director
Douglas J. 39 Director
Mackenzie(1)(2)...........
Stratton D. Sclavos(2)...... 37 Director
</TABLE>
- ---------------
(1) Member of compensation committee
(2) Member of audit committee
Kim K. Polese, a founder of Marimba, has served as President, Chief
Executive Officer and a director of Marimba since our inception. Prior to
co-founding Marimba, Ms. Polese served in several marketing positions at Sun
Microsystems, an enterprise networking company, from January 1989 until January
1996, most recently as Senior Product Manager. From January 1986 to December
1998, Ms. Polese was a Technical Support Engineer for Intellicorp, Inc., an
expert systems software company. Ms. Polese received her B.A. in Biophysics from
the University of California at Berkeley.
Arthur A. van Hoff, a founder of Marimba, has served as Chief Technology
Officer and a director of Marimba since our inception. Prior to co-founding
Marimba, from February 1993 until February 1996, Mr. van Hoff held various
engineering positions at Sun Microsystems, most recently as Senior Staff
Engineer. Mr. van Hoff received his M. Phil. in Computer Science from
Strathclyde University in Glasgow, Scotland and a postgraduate degree in
Computer Science from Hogere Informatica Opleiding in Enschede, Holland.
Fred M. Gerson has served as Marimba's Vice President, Finance and Chief
Financial Officer since October 1997. Prior to joining Marimba, Mr. Gerson
served as Vice President and Chief Financial Officer for Maxis, Inc., a consumer
entertainment software company, from November 1994 to October 1997, and from
November 1992 to November 1994, he served as Vice President and Chief Financial
Officer of Farallon Computing, Inc. (currently Netopia, Inc.), a communications
software and hardware company. Mr. Gerson received his B.A. in Economics from
City University of New York-Brooklyn College and his M.B.A. from New York
University.
Thomas E. Banahan has served as Marimba's Vice President, Business
Development since December 1996. Mr. Banahan was Vice President, Worldwide Sales
of Spyglass, Inc., an Internet software and service provider, from August 1994
to November 1996, and from March 1988 to July 1994, he was a Vice President of
Sales of Comdisco, Inc., a technology services company. Mr. Banahan received his
B.A. in Business Economics from the University of California, Santa Barbara.
49
<PAGE> 52
Robert E. Currie has served as Marimba's Vice President, Engineering since
August 1996. From December 1988 to January 1995, Mr. Currie held various
engineering positions at Digidesign, Inc., a digital audio technology company
(currently a division of Avid Technology), most recently as Vice President,
Software Engineering. Mr. Currie received his B.S. in Electrical Engineering and
Computer Science from the University of California at Berkeley.
Jacqueline Ross has served as Marimba's Vice President, Marketing since
August 1998. From June 1996 to July 1998, Ms. Ross served as Vice President,
Marketing for Check Point Software Technologies, Ltd., a provider of secure
enterprise networking solutions. From January 1995 to May 1996, Ms. Ross was
Vice President, Marketing of Cambio Networks Inc., an enterprise management
software company, and prior to that served as the Director of Field Marketing at
Hughes LAN Systems, a hardware vendor, from July 1991 to December 1994. Ms. Ross
received her B.A. and B.B.A. from Kent State University and her M.B.A. from
Stanford University.
Steven P. Williams has served as Marimba's Vice President, Worldwide Sales
since November 1996. Prior to joining Marimba, Mr. Williams served as Vice
President, Western Sales from March 1996 to November 1996 and before that as
Director, Western Sales from March 1992 to March 1996, for Tivoli, a systems
management software company. Mr. Williams received his B.S. in Electrical
Engineering from California Polytechnic State University, San Luis Obispo.
Jonathan Payne, a founder of Marimba, has served as a Senior Engineer for
Marimba since our inception. Prior to co-founding Marimba, Mr. Payne was a
Senior Engineer at Starwave Corporation, an Internet services company, from
February 1995 to February 1996. From June 1988 until February 1995, Mr. Payne
served in various engineering positions at Sun Microsystems. Mr. Payne received
his B.A. in Cognitive Science from the University of Rochester.
Sami Shaio, a founder of Marimba, has served as a Senior Engineer of
Marimba since our inception. Prior to co-founding Marimba, from May 1989 until
February 1996, Mr. Shaio held various engineering positions at Sun Microsystems,
most recently as Senior Staff Engineer. Mr. Shaio received his A.B. and A.M. in
Linguistics, as well as his B.S. in Computer Science, from Stanford University.
Mr. Shaio received his M.S. in Computer Science from the University of Michigan.
Aneel Bhusri has served as a director of Marimba since February 1999. Mr.
Bhusri has served as the Senior Vice President of Product Strategy, Business
Development and Marketing for PeopleSoft, an enterprise software company, since
April 1997. Prior to his current position at PeopleSoft, Mr. Bhusri served as
Senior Vice President of Product Strategy from November 1995 to April 1997. From
April 1995 to November 1995, Mr. Bhusri served as Vice President of Product
Strategy and from August 1993 to April 1995 as Director of Product Strategy.
Prior to joining PeopleSoft, Mr. Bhusri was an associate at Norwest Venture
Capital from June 1992 to March 1993. From 1988 to 1991, he was a financial
analyst in Morgan Stanley's Corporate Finance Department. Mr. Bhusri received
his B.S. in Electrical Engineering and his B.A. in Economics from Brown
University, and his M.B.A. from Stanford University.
Raymond J. Lane has served as a director of Marimba since October 1997. Mr.
Lane has been the President and Chief Operating Officer of Oracle Corporation, a
database software company, since January 1997. Prior to his position as
President and Chief Operating Officer, Mr. Lane served as the Executive Vice
President of Worldwide Operations for Oracle from October 1993 to January 1997,
and has been a Director of Oracle since June 1995. Mr. Lane served as a Senior
Vice President of Oracle USA from June 1992 to October 1993. Before joining
Oracle, Mr. Lane served as Senior Vice President and Managing Partner of the
Worldwide Information Technology Group at Booz, Allen & Hamilton, a management
consulting firm, from July 1986 to May 1992. He served on the Booz, Allen &
Hamilton Executive Committee and its Board of Directors from April 1987 to May
1992. Mr. Lane is also a
50
<PAGE> 53
member of the Board of Trustees of Carnegie Mellon University. Mr. Lane received
his B.S. in Math from West Virginia University.
Douglas J. Mackenzie has served as a director of Marimba since August 1996.
Since June 1989, Mr. Mackenzie has been employed with Kleiner Perkins Caufield &
Byers, a venture capital firm, of which he has been a General Partner since
1994. Prior to joining Kleiner Perkins, Mr. Mackenzie held senior level sales,
marketing, and operations positions in Eczel Corporation, a reseller of
microcomputer products, from October 1983 to August 1987. From March 1982 to
October 1983, Mr. Mackenzie served as a management consultant at Booz, Allen &
Hamilton. Mr. Mackenzie serves as a director of Visio Corporation, a business
drawing and diagramming software company, as well as several private
technology-based companies. Mr. Mackenzie received his A.B. in Economics and his
M.S. in Industrial Engineering from Stanford University and his M.B.A. from
Harvard University.
Stratton D. Sclavos has served as a director of Marimba since February
1999. Mr. Sclavos has been the President, Chief Executive Officer and a director
of VeriSign since he joined VeriSign in July 1995. From October 1993 to June
1995, Mr. Sclavos was Vice President, Worldwide Marketing and Sales of Taligent,
Inc., a software development company that was a joint venture among Apple
Computer, Inc., IBM and Hewlett-Packard. From May 1992 to September 1993, Mr.
Sclavos was Vice President of Worldwide Sales and Business Development of GO
Corporation, a pen-based computer company. Mr. Sclavos is also a director and a
member of the compensation committee of Network Solutions, Inc. Mr. Sclavos
received his B.S. degree in Electrical and Computer Engineering from the
University of California, Davis.
BOARD COMMITTEES
The board of directors has a compensation committee and an audit committee.
Compensation Committee. The compensation committee of the board of
directors reviews and makes recommendations to the board regarding all forms of
compensation provided to the executive officers and directors of Marimba and our
subsidiary including stock compensation and loans. In addition, the compensation
committee reviews and makes recommendations on bonus and stock compensation
arrangements for all of our employees. As part of these responsibilities the
compensation committee also administers our 1996 Stock Plan, 1999 Omnibus Equity
Incentive Plan and 1999 Employee Stock Purchase Plan. The current members of the
compensation committee are Messrs. Lane and Mackenzie.
Audit Committee. The audit committee of the board of directors reviews and
monitors our corporate financial reporting and our internal and external audits,
including, among other things, our internal audit and control functions, the
results and scope of the annual audit and other services provided by our
independent auditors and our compliance with legal matters that have a
significant impact on our financial reports. The audit committee also consults
with management and our independent auditors prior to the presentation of
financial statements to stockholders and, as appropriate, initiates inquiries
into aspects of our financial affairs. In addition, the audit committee has the
responsibility to consider and recommend the appointment of, and to review fee
arrangements with, our independent auditors. The current members of the audit
committee are Messrs. Bhusri, Mackenzie and Sclavos.
DIRECTOR COMPENSATION
Certain directors who are not our employees have received grants of options
to purchase shares of our common stock. Upon and following this offering,
non-employee directors will receive automatic option grants under our 1999
Non-Employee Directors Option Plan. See "-- Employee Benefit Plans -- 1999
Non-Employee Directors Option Plan."
51
<PAGE> 54
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of the board of directors currently consists of
Messrs. Lane and Mackenzie. No interlocking relationship exists between any
member of our board of directors or our compensation committee and any member of
the board of directors or compensation committee of any other company, and no
such interlocking relationship has existed in the past.
INDEMNIFICATION
Our Third Amended and Restated Certificate of Incorporation, to be
effective after the closing of this offering, includes a provision that
eliminates the personal liability of our directors and officers for monetary
damages for breach of fiduciary duty as a director or officer, except for
liability:
- for any breach of the director's or officer'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 the Section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
- for any transaction from which the director or officer derived an
improper personal benefit.
These provisions are permitted under Delaware law.
Our Bylaws provide that:
- we must indemnify our directors and officers to the fullest extent
permitted by Delaware law, subject to certain very limited exceptions;
- we may indemnify our other employees and agents to the same extent that
we indemnified our officers and directors; and
- we must advance expenses, as incurred, to our directors and officers in
connection with a legal proceeding to the fullest extent permitted by
Delaware Law, subject to certain very limited exceptions.
We have also entered into indemnification agreements with our officers and
directors containing provisions that may require us, among other things, to
indemnify such officers and directors against certain liabilities that may arise
by reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' and officers' insurance if
available on reasonable terms.
52
<PAGE> 55
EXECUTIVE COMPENSATION
The following table sets forth compensation information for 1998 paid by us
for services by our Chief Executive Officer and our four other highest-paid
executive officers whose total salary and bonus for such fiscal year exceeded
$100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
--------------------------- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Kim K. Polese............................ $130,000 -- -- $930(1)
President and Chief Executive Officer
Thomas E. Banahan........................ 125,000 $100,000 -- --
Vice President, Business Development
Robert E. Currie......................... 137,000 -- 70,000 --
Vice President, Engineering
Fred M. Gerson........................... 165,000 -- -- --
Vice President, Finance and
Chief Financial Officer
Steven P. Williams....................... 125,000 125,000 50,000 --
Vice President, Worldwide Sales
</TABLE>
- -------------------------
(1) Represents premiums paid by us for term life insurance.
53
<PAGE> 56
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options during 1998 to
our Chief Executive Officer and our four other highest-paid executive officers.
No stock appreciation rights were granted to these individuals during 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES STOCK PRICE
UNDERLYING PERCENT OF TOTAL APPRECIATION FOR
OPTIONS OPTIONS GRANTED EXERCISE OPTION TERM(4)
GRANTED TO EMPLOYEES PRICE EXPIRATION ---------------------
NAME (#)(1) IN 1998(2) ($/SH)(3) DATE 5% 10%
---- ---------- ---------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Kim K. Polese............... -- -- -- -- -- --
Thomas E. Banahan........... -- -- -- -- -- --
Robert E. Currie............ 50,000 2.5% $3.00 08/27/08 $ 94,334 $239,061
20,000 1.0 1.00 01/06/08 12,578 31,875
Fred M. Gerson.............. -- -- -- -- -- --
Steven P. Williams.......... 50,000 2.5 8.50 12/17/08 267,280 677,341
</TABLE>
- -------------------------
(1) Each of the options listed in the table is immediately exercisable. The
shares purchased under the options may be repurchased by us at the original
exercise price paid per share if the optionee ceases service with us before
vesting in such shares. For Mr. Currie's option covering 50,000 shares and
Mr. Williams' option covering 50,000 shares, the repurchase right lapses and
the optionee vests as to 25% of the option shares upon completion of 12
months of service from the vesting start date, and the balance of the option
shares vests in a series of equal monthly installments over the next three
years of service thereafter. For Mr. Currie's option covering 20,000 shares,
the repurchase right lapses and he vests as to 33 1/3% of the option shares
upon completion of 12 months of service from the vesting start date, and the
balance of the option shares vests in a series of equal monthly installments
over the next two years of service thereafter. The option shares will fully
vest if Marimba is acquired in a merger or asset sale, unless our repurchase
right with respect to the unvested option shares is transferred to the
acquiring entity. Each of the options has a ten-year term, but the term may
end earlier if the optionee ceases service with Marimba.
(2) Based on a total of 2,017,800 option shares granted to our employees under
our 1996 Stock Plan during 1998.
(3) The exercise price is equal to the fair market value of our common stock as
valued by our board of directors on the date of grant. The exercise price
may be paid in cash, in shares of our common stock valued at fair market
value on the exercise date or through a cashless exercise procedure
involving a same-day sale of the purchased shares. We may also finance the
option exercise by lending the optionee sufficient funds to pay the exercise
price for the purchased shares.
(4) The potential realizable value is calculated based on the ten-year term of
the option 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 value at 5% and 10% appreciation is
calculated by assuming that the exercise price on the date of grant
appreciates at the indicated rate for the entire term of the option and that
the option is exercised at the exercise price and sold on the last day of
its term at the appreciated price.
FISCAL YEAR-END OPTION VALUES
The following table sets forth for our Chief Executive Officer and our four
other highest-paid executive officers the number and value of securities
underlying unexercised options that are held by such
54
<PAGE> 57
executive officers as of December 31, 1998. No options or stock appreciation
rights were exercised by such executive officers in 1998, and no stock
appreciation rights were outstanding at the end of that year.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, AT DECEMBER 31,
1998(#)(1) 1998($)(2)
---------------------- --------------------
NAME VESTED UNVESTED VESTED UNVESTED
---- -------- ---------- -------- --------
<S> <C> <C> <C> <C>
Kim K. Polese................................. -- -- -- --
Thomas E. Banahan............................. -- -- -- --
Robert E. Currie.............................. 6,667 63,333 $ 50,003 $374,998
Fred M. Gerson................................ -- -- -- --
Steven P. Williams............................ 19,444 80,556 155,552 244,448
</TABLE>
- -------------------------
(1) Each of the options listed in the table is immediately exercisable. The
shares purchased under the options may be repurchased by us at the original
exercise price paid per share if the optionee ceases service with us before
vesting in such shares. The heading "Vested" refers to shares that are no
longer subject to our repurchase right; the heading "Unvested" refers to
shares subject to our repurchase right as of December 31, 1998.
(2) Based on the fair market value of our common stock at the end of 1998 of
$8.50 per share, less the exercise price payable for such shares.
EMPLOYEE BENEFIT PLANS
1999 OMNIBUS EQUITY INCENTIVE PLAN
Our 1999 Omnibus Equity Incentive Plan was adopted by our board of
directors on February 2, 1999. We will also seek stockholder approval of this
plan. We have reserved 2,000,000 shares of our common stock for issuance under
the 1999 Omnibus Equity Incentive Plan. No options have yet been granted under
the 1999 Omnibus Equity Incentive Plan.
Under the 1999 Omnibus Equity Incentive Plan, the individuals eligible to
receive awards are:
- employees;
- non-employee members of the board of directors; and
- consultants.
The types of awards that may be made under the 1999 Omnibus Equity
Incentive Plan are:
- options to purchase shares of common stock;
- stock appreciation rights;
- restricted shares; and
- stock units.
Options may be incentive stock options that qualify for favorable tax
treatment for the optionee under Section 422 of the Internal Revenue Code of
1986 or nonstatutory stock options not designed to qualify for such favorable
tax treatment. With limited restrictions, if shares awarded under the 1999
Omnibus Equity Incentive Plan are forfeited, those shares will again become
available for new awards under the 1999 Omnibus Equity Incentive Plan.
The compensation committee of our board of directors administers the 1999
Omnibus Equity Incentive Plan. The committee has complete discretion to make all
decisions relating to the interpretation and operation of our 1999 Omnibus
Equity Incentive Plan. The committee has the discretion to
55
<PAGE> 58
determine which eligible individuals are to receive any award, and to determine
the type, number, vesting requirements and other features and conditions of each
award.
The exercise price for incentive stock options granted under the 1999
Omnibus Equity Incentive Plan may not be less than 100% of the fair market value
of our common stock on the option grant date. The exercise price for
non-statutory options granted under the 1999 Omnibus Equity Incentive Plan may
not be less than 85% of the fair market value of our common stock on the option
grant date.
The exercise price may be paid with:
- cash;
- outstanding shares of common stock;
- the cashless exercise method through a designated broker;
- a pledge of shares to a broker; or
- a promissory note.
The purchase price for newly issued restricted shares awarded under the
1999 Omnibus Equity Incentive Plan may be paid with:
- cash;
- a promissory note; or
- the rendering of past services.
The committee may reprice options and may modify, extend or assume
outstanding options and stock appreciation rights. The committee may accept the
cancellation of outstanding options or stock appreciation rights in return for
the grant of new options or stock appreciation rights. The new option or right
may have the same or a different number of shares and the same or a different
exercise price.
If a change in control of Marimba occurs, an option or other award under
the 1999 Omnibus Equity Incentive Plan will become fully exercisable and fully
vested if the option or award is not assumed by the surviving corporation or its
parent or if the surviving corporation or its parent does not substitute
comparable awards for the awards granted under the 1999 Omnibus Equity Incentive
Plan.
A change in control includes:
- a merger or consolidation of Marimba after which our then-current
stockholders own less than 50% of the surviving corporation;
- a sale of all or substantially all of our assets;
- a proxy contest that results in replacement of more than one-half of our
directors over a 24-month period; or
- an acquisition of 50% or more of our outstanding stock by a person other
than a person related to Marimba, such as a corporation owned by our
stockholders.
If a merger or other reorganization occurs, the agreement of merger or
reorganization may provide that outstanding options and other awards under the
1999 Omnibus Equity Incentive Plan shall be assumed by the surviving corporation
or its parent, shall be continued by Marimba if it is the surviving corporation,
shall have accelerated vesting and then expire early, or shall be cancelled for
a cash payment.
Our board of directors may amend or terminate the 1999 Omnibus Equity
Incentive Plan at any time. If our board amends the plan, stockholder approval
of the amendment will be sought only if required by an applicable law. The 1999
Omnibus Equity Incentive Plan will continue in effect indefinitely unless the
board decides to terminate the plan earlier.
56
<PAGE> 59
1999 EMPLOYEE STOCK PURCHASE PLAN
Our board of directors adopted our Employee Stock Purchase Plan on February
2, 1999. We will also seek stockholder approval of this plan. We have reserved
500,000 shares of our common stock for issuance under our 1999 Employee Stock
Purchase Plan. As of January 1 each year, starting in 2000, the number of shares
reserved for issuance under our 1999 Employee Stock Purchase Plan will be
increased automatically by 2% of the total number of shares of common stock then
outstanding or, if less, 500,000 shares. Our 1999 Employee Stock Purchase Plan
is intended to qualify under Section 423 of the Internal Revenue Code.
Eligible employees may begin participating in the 1999 Employee Stock
Purchase Plan at the start of an offering period. Each offering period lasts 24
months. Two overlapping offering periods will start on May 1 and November 1 of
each calendar year. However, the first offering period will start on the
effective date of this offering and end on April 30, 2001. Purchases of our
common stock will occur on April 30 and October 31 of each calendar year during
an offering period.
Our 1999 Employee Stock Purchase Plan will be administered by the
compensation committee of our board of directors. Each of our employees is
eligible to participate if he or she is employed by us for more than 20 hours
per week and for more than five months per year.
Our 1999 Employee Stock Purchase Plan permits each eligible employee to
purchase common stock through payroll deductions. Each employee's payroll
deductions may not exceed 10% of the employee's cash compensation. The initial
period during which payroll deductions may be contributed will begin on the
effective date of this offering and end on October 31, 1999. Each participant
may purchase up to 500 shares on any purchase date.
The price of each share of common stock purchased under our 1999 Employee
Stock Purchase Plan will be 85% of the lower of:
- the fair market value per share of our common stock on the date
immediately before the first date of the applicable offering period; or
- the fair market value per share of our common stock on the purchase date.
In the case of the first offering period, the price per share under the
plan will be 85% of the lower of:
- the price offered to the public in this offering; or
- the fair market value per share of our common stock on the purchase date.
Employees may end their participation in the 1999 Employee Stock Purchase
Plan at any time. Participation ends automatically upon termination of
employment with Marimba.
If a change in control of Marimba occurs, our 1999 Employee Stock Purchase
Plan will end, and shares will be purchased with the payroll deductions
accumulated to date by participating employees, unless this plan is assumed by
the surviving corporation or its parent. Our board of directors may amend or
terminate the 1999 Employee Stock Purchase Plan at any time. If our board of
directors increases the number of shares of common stock reserved for issuance
under the 1999 Employee Stock Purchase Plan, it must seek the approval of our
stockholders.
1999 NON-EMPLOYEE DIRECTORS OPTION PLAN
Our board of directors adopted our 1999 Non-Employee Directors Option Plan
on February 2, 1999. We will also seek stockholder approval of this plan. Only
the non-employee members of our board of directors will be eligible for
automatic option grants under this plan.
We have reserved 150,000 shares of our common stock for issuance under our
1999 Non-Employee Directors Option Plan. As of January 1 each year, starting in
2000, the number of shares reserved for issuance under our 1999 Non-Employee
Directors Option Plan will be increased automatically to restore
57
<PAGE> 60
the total number of shares available under this plan to 150,000 shares. No
shares have yet been issued under our 1999 Non-Employee Directors Option Plan.
The compensation committee of our board of directors will make any
administrative determinations under our 1999 Non-Employee Directors Option Plan.
No discretionary decisions will be made by the compensation committee under this
plan.
The exercise price for options granted under our 1999 Non-Employee
Directors Option Plan may be paid in cash or in outstanding shares of our common
stock. Options may also be exercised on a cashless basis through the same-day
sale of the purchased shares.
Each individual who became a member of our board of directors as a
non-employee director before 1999 will receive a fully vested option for 7,500
shares of our common stock on the effective date of this offering. The exercise
price of this option will be the initial price offered to the public in this
offering.
Each individual who first joins our board of directors as a non-employee
director after the effective date of this offering will receive at that time a
fully vested option for 15,000 shares of our common stock. In addition, at each
of our annual stockholders meetings, beginning in 2000, each non-employee
director who will continue to be a director after that meeting will
automatically be granted at that meeting a fully vested option for 7,500 shares
of our common stock. However, any non-employee director who receives an option
for 15,000 shares under this plan will first become eligible to receive the
annual option for 7,500 shares at the annual meeting that occurs at any time
during the year that is two calendar years after the year in which he or she
received the option for 15,000 shares. For example, if a director received the
option for 15,000 shares at any time in 1999, the director will first become
eligible to receive the option for 7,500 shares at the annual stockholders
meeting occurring in 2001. The exercise price of each option will be equal to
the fair market value of our common stock on the option grant date.
Our board of directors may amend or modify the 1999 Non-Employee Directors
Option Plan at any time. The 1999 Non-Employee Directors Option Plan will
terminate on February 1, 2009, unless our board of directors decides to
terminate the plan sooner.
CHANGE OF CONTROL ARRANGEMENTS
We granted to Mr. Gerson options to purchase an aggregate of 300,000 shares
of our common stock at an exercise price of $.50 per share. The first option for
250,000 shares vested as to one-third of the shares subject to the option on the
first anniversary of Mr. Gerson's employment start date and the remainder vests
in equal monthly installments for twenty-four months thereafter. The second
option for 50,000 shares vests in equal monthly installments for thirty-six
months commencing November 3, 1998.
If there is a merger or asset sale of Marimba after the first twelve months
of Mr. Gerson's employment and Mr. Gerson is constructively terminated within
twelve months of the merger or asset sale, Mr. Gerson will vest in 50% of the
remaining unvested shares subject to both options. Following the acceleration of
both options, the remaining unvested shares subject to such options will vest in
accordance with the original vesting schedules, as if the remaining shares were
the only shares subject to the options.
All options and other awards granted under our 1996 Stock Plan and our 1999
Omnibus Equity Incentive Plan, including options granted to our executive
officers, will become fully vested if a change in control of Marimba occurs,
unless the options or awards are assumed by the surviving corporation or its
parent or if the surviving corporation or its parent substitutes comparable
options or awards for options or awards granted under our plans.
58
<PAGE> 61
CERTAIN TRANSACTIONS
Since our incorporation in February 1996, we have issued and sold
securities to the following persons who are our executive officers, directors or
principal stockholders.
<TABLE>
<CAPTION>
SERIES A SERIES B
PREFERRED PREFERRED COMMON
INVESTOR(1) STOCK(2) STOCK(3) STOCK
----------- --------- --------- ---------
<S> <C> <C> <C>
Kim K. Polese(4)........................................... -- -- 2,500,000
Arthur A. van Hoff(4)...................................... -- -- 2,500,000
Thomas E. Banahan.......................................... -- -- 316,000
Robert E. Currie........................................... -- -- 300,000
Fred M. Gerson............................................. -- -- 300,000
Jonathan Payne(4).......................................... -- -- 2,500,000
Sami Shaio(4).............................................. -- -- 2,500,000
Raymond J. Lane............................................ -- 19,971 --
Steven P. Williams......................................... 67,458 -- 316,000
Kleiner Perkins Caufield & Byers(5)........................ 2,698,412 199,712 --
</TABLE>
- -------------------------
(1) See "Principal and Selling Stockholders" for more detail on shares held by
these purchasers.
(2) The per share purchase price for our Series A preferred stock was $1.4824.
(3) The per share purchase price for our Series B preferred stock was $5.0072.
(4) Each of Kim K. Polese, Arthur A. van Hoff, Jonathan Payne and Sami Shaio,
our founders, entered into a Restricted Common Stock Purchase Agreement,
dated February 21, 1996, with us. The per share purchase price for these
shares of common stock was $.0025.
(5) Kleiner Perkins Caufield & Byers includes the following entities managed by
Kleiner Perkins: KPCB Java Fund, L.P., KPCB Information Sciences Zaibatsu
Fund II, L.P., Kleiner Perkins Caufield & Byers VIII, L.P and KPCB VIII
Founders Fund, L.P. Douglas J. Mackenzie, a director of Marimba, is a
general partner of Kleiner Perkins.
In addition, we have granted options to certain of our executive officers.
See "Management -- Executive Compensation."
SERIES A FINANCING
On August 8, 1996, we issued an aggregate of 2,698,412 shares of Series A
Preferred Stock at a per share purchase price of $1.4824 to three investors,
each of which is an entity affiliated with Kleiner Perkins, one of our principal
stockholders. Douglas J. Mackenzie, a member of our board of directors, is a
general partner of Kleiner Perkins. On January 28, 1997, we issued 67,458 shares
of Series A Preferred Stock at a per share purchase price of $1.4824 to Steven
P. Williams, our Vice President, Worldwide Sales.
SERIES B FINANCING
On August 25 and 28, 1997, we issued an aggregate of 2,895,829 shares of
Series B preferred stock at a per share purchase price of $5.0072 to ten
investors, including entities affiliated with Kleiner Perkins. On September 23,
October 23 and November 21, 1997, we issued an aggregate of 71,896 shares of
Series B preferred stock at a per share purchase price of $5.0072 to four
investors. On October 7, 1997, we issued 19,971 shares of Series B preferred
stock at a per share purchase price of $5.0072 to Raymond J. Lane, a member of
our board of directors.
59
<PAGE> 62
LOANS FROM CERTAIN DIRECTORS AND EXECUTIVE OFFICERS
Each of our founders, Kim K. Polese, Arthur A. van Hoff, Jonathan Payne,
and Sami Shaio, provided a short-term loan to us in return for a promissory
note, dated March 7, 1996, issued to each founder. Each such note was in the
principal sum of $12,500 and accrued simple interest at the rate of 5.32% per
annum. In addition, Mr. Shaio loaned an additional $14,000 to us in return for a
promissory note, dated July 17, 1996, which accrued simple interest at the rate
of 5.32% per annum. We repaid each of these loans in August 1996.
LOAN TO CERTAIN EXECUTIVE OFFICER
On November 11, 1997, we loaned $149,970 to Fred M. Gerson, secured by a
Stock Pledge Agreement, in connection with his purchase of 300,000 shares of our
common stock. This note accrued interest at the rate of 5.69% per annum. The
principal balance of this note and accrued interest was paid in full in January
1999. See "Executive Compensation -- Change of Control Arrangements."
STOCK OPTION GRANTS TO CERTAIN DIRECTORS
On September 18, 1997, we granted to Raymond J. Lane an option to purchase
75,000 shares of common stock at a per share exercise price of $.50 pursuant to
our 1996 Stock Plan. Mr. Lane's option is subject to three-year vesting, in
which he becomes vested in 33 1/3% of the option shares upon completion of 12
months of service and in the balance of the option shares in a series of equal
monthly installments upon the completion of each of the next 24 months of
service. On February 2, 1999, we granted to each of Aneel Bhusri and Stratton D.
Sclavos an option to purchase 20,000 shares of common stock at a per share
exercise price of $10.00 pursuant to our 1996 Stock Plan. Messrs. Bhusri's and
Sclavos' options were fully vested upon grant.
INDEMNIFICATION
We have entered into an Indemnification Agreement with each of our officers
and directors. See "Management -- Indemnification."
------------------------
We believe that the transactions set forth above were made on terms no less
favorable to us than could have been obtained from unaffiliated third parties.
All future transactions, including loans between us and our officers, directors,
principal stockholders and their affiliates will be approved by a majority of
the board of directors, including a majority of the independent and
disinterested outside directors on the board of directors, and will continue to
be on terms no less favorable to us than could be obtained from unaffiliated
third parties.
60
<PAGE> 63
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our outstanding common stock as of February 5, 1999 and as adjusted
to reflect the sale of the common stock offered hereby for: (i) each of our
directors, our chief executive officer and our four other highest-paid executive
officers; (ii) all of our directors and executive officers as a group; and (iii)
each other person known by us to own beneficially more than 5% of our common
stock. Except as otherwise indicated, we believe that the beneficial owners of
the common stock listed below, based on information furnished by such owners,
have sole voting and investment power with respect to such shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED OWNED
PRIOR TO THE OFFERING SHARES AFTER THE OFFERING
NAME AND ADDRESS OF ------------------------- BEING -----------------------
BENEFICIAL OWNER(1) NUMBER PERCENT(1)(2) OFFERED NUMBER PERCENT(1)(2)
------------------- --------- ------------- ------- ------- -------------
<S> <C> <C> <C> <C> <C>
Kim K. Polese...................... 2,488,072 13.0%
Thomas E. Banahan.................. 316,000 1.6
Robert E. Currie(3)................ 370,000 1.9
Fred M. Gerson(4).................. 300,000 1.6
Arthur A. van Hoff................. 2,480,000 12.9
Steven P. Williams(5).............. 483,458 2.5
Aneel Bhusri(6).................... 20,000 *
Raymond J. Lane(7)................. 94,971 *
Douglas J. Mackenzie(8)............ 2,898,124 15.1
c/o Kleiner Perkins Caufield &
Byers 2750 Sand Hill Road Menlo
Park, CA 94025
Stratton D. Sclavos(6)............. 20,000 *
OTHER 5% STOCKHOLDERS
Jonathan Payne..................... 2,476,000 12.9
Sami Shaio......................... 2,497,200 13.0
Entities Affiliated with Kleiner
Perkins Caufield & Byers......... 2,898,124 15.1
2750 Sand Hill Road Menlo Park,
CA 94025
All directors and executive
officers as a group (11
persons)(9)...................... 9,770,625 49.5
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1%.
(1) Assumes no exercise of the underwriters' over-allotment option. In the event
that the underwriters' over-allotment option is exercised, up to an
additional shares may be sold by certain selling
stockholders as follows:
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Common stock subject to options
exercisable within 60 days of February 5, 1999 are deemed outstanding for
purposes of computing the percentage ownership of the person holding such
option but are not deemed outstanding for purposes of computing the
percentage ownership of any other person. Except where indicated, and
subject to community property laws where applicable, the persons in the
table above have sole voting and investment power with respect to all common
stock shown as beneficially owned by them. Unless otherwise indicated, the
address of each holder of more than 5% of our common stock listed in the
table is c/o Marimba, Inc., 440 Clyde Ave., Mountain View, CA 94043.
(3) Includes 70,000 shares subject to options which are exercisable within 60
days of February 5, 1999.
61
<PAGE> 64
(4) Includes 5,000 shares held as custodian for Stacey B. Gerson and 5,000
shares held as custodian for Hilary I. Gerson. Mr. Gerson disclaims
beneficial ownership of such shares.
(5) Includes 100,000 shares subject to options which are exercisable within 60
days of February 5, 1999.
(6) Includes 20,000 shares subject to options which are exercisable within 60
days of February 5, 1999.
(7) Includes 75,000 shares subject to options which are exercisable within 60
days of February 5, 1999.
(8) Represents 1,988,745, 72,453, 76,131 and 760,795 shares of common stock
held of record by KPCB Java Fund, L.P., KPCB Information Sciences Zaibatsu
Fund II, L.P., KPCB VIII Founders Fund, L.P., and Kleiner Perkins Caufield
& Byers VIII, L.P., respectively. Mr. Mackenzie, a director of Marimba, is
a general partner of Kleiner Perkins. Mr. Mackenzie disclaims beneficial
ownership of shares held by Kleiner Perkins except to the extent of his
pecuniary interest therein arising from his interest in Kleiner Perkins.
(9) Includes 585,000 shares subject to options which are exercisable within 60
days of February 5, 1999, 5,000 shares held by Mr. Gerson as custodian for
Stacey B. Gerson and 5,000 shares held as custodian for Hilary I. Gerson.
62
<PAGE> 65
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 80,000,000 shares of common stock,
$.0001 par value, and 10,000,000 shares of undesignated preferred stock, $.0001
par value, after giving effect to the amendment of our Second Amended and
Restated Certificate of Incorporation to delete references to Series A preferred
stock and Series B preferred stock following conversion of such preferred stock
into common stock upon the closing of this offering.
The following description of our capital stock does not purport to be
complete and is subject to and qualified in its entirety by our Third Amended
and Restated Certificate of Incorporation to be effective after the closing of
this offering, our Bylaws and by the provisions of applicable Delaware law.
COMMON STOCK
As of December 31, 1998, there were 18,805,828 shares of common stock
outstanding that were held of record by approximately 143 stockholders. There
will be shares of common stock outstanding (assuming no exercise of
the underwriters' over-allotment option and assuming no exercise after December
31, 1998 of outstanding options) after giving effect to the sale of the shares
of common stock to the public offered hereby and the conversion of our preferred
stock into common stock at a one-to-one ratio.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Holders of common stock do not
have cumulative voting rights, and, therefore, holders of the remaining shares
voting for the election of directors can elect all of the directors. Subject to
preferences that may be applicable to any outstanding preferred stock, the
holders of common stock are entitled to receive ratably such dividends, if any,
as may be declared from time to time by the Board of Directors out of funds
legally available therefor. See "Dividend Policy." In the event of the
liquidation, dissolution or winding up of Marimba, the holders of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights of preferred stock, if any,
then outstanding. The common stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are fully
paid and nonassessable, and the shares of common stock to be issued upon
completion of this offering will be fully paid and nonassessable.
PREFERRED STOCK
Upon filing our Third Amended and Restated Certificate of Incorporation
after the closing of this offering, we will authorize 10,000,000 shares of
preferred stock. The Board of Directors has the authority to issue the preferred
stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series, without further vote or action by the stockholders. The issuance
of preferred stock may have the effect of delaying, deferring or preventing a
change in control of us without further action by the stockholders and may
adversely affect the voting and other rights of the holders of common stock. The
issuance of preferred stock with voting and conversion rights may adversely
affect the voting power of the holders of common stock, including the loss of
voting control to others. At present, we have no plans to issue any of our
preferred stock.
WARRANTS
Immediately following the closing of this offering, there will be an
outstanding warrant to purchase a total of 16,865 shares of common stock at
$1.48 per share. This warrant expires on January 31, 2004.
63
<PAGE> 66
ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
CERTIFICATE OF INCORPORATION AND BYLAWS
Upon filing after the closing of this offering, our Third Amended and
Restated Certificate of Incorporation will provide that, all stockholder actions
must be effected at a duly called meeting and not by a consent in writing. The
Bylaws provide that, except as otherwise required by law or by our Third Amended
and Restated Certificate of Incorporation, special meetings of the stockholders
can only be called pursuant to a resolution adopted by a majority of the board
of directors, or by the president or at the request of stockholders holding at
least 30% of our capital stock. These provisions of our Third Amended and
Restated Certificate of Incorporation and Bylaws could discourage potential
acquisition proposals and could delay or prevent a change in control. These
provisions are intended to enhance the likelihood of continuity and stability in
the composition of the board of directors and in the policies formulated by the
board of directors and to discourage certain types of transactions that may
involve an actual or threatened change of control. These provisions are designed
to reduce our vulnerability to an unsolicited acquisition proposal. The
provisions also are intended to discourage certain tactics that may be used in
proxy fights. However, such provisions could have the effect of discouraging
others from making tender offers for our shares and, as a consequence, they also
may inhibit fluctuations in the market price of our shares that could result
from actual or rumored takeover attempts. Such provisions also may have the
effect of preventing changes in our management.
DELAWARE TAKEOVER STATUTE
We are subject to Section 203 of the Delaware General Corporation Law,
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder, unless:
- prior to such date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the stockholder
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, excluding for purposes of determining the
number of shares outstanding those shares owned by persons who are
directors and officers and by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; 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, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines business combination to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;
- subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;
64
<PAGE> 67
- any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
REGISTRATION RIGHTS
After this offering, the holders of shares of common stock will
be entitled to certain rights with respect to the registration of such shares
under the Securities Act. Under the terms of the agreement between us and the
holders of such registrable securities, if we propose to register any of our
securities under the Securities Act, either for our own account or for the
account of other security holders exercising registration rights, such holders
are entitled to notice of such registration and are entitled to include their
shares of such common stock therein. Additionally, holders of shares
of the registrable securities are also entitled to certain demand registration
rights pursuant to which they may require us to file a registration statement
under the Securities Act at our expense with respect to our shares of common
stock, and we are required to use our best efforts to effect such registration.
Further, the holders of such demand rights may require us to file additional
registration statements on Form S-3. All of these registration rights are
subject to certain conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares included in such
registration and our right not to effect a requested registration within six
months following the initial offering of our securities, including this
offering.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is U.S. Stock
Transfer Corporation.
65
<PAGE> 68
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have shares of common
stock outstanding, assuming no exercise of options after December 31, 1998. Of
these shares, the shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, except
that any shares held by our affiliates, as that term is defined under the
Securities Act, may generally only be sold in compliance with the limitations of
Rule 144 described below.
SALES OF RESTRICTED SHARES
The remaining shares of common stock are deemed restricted shares
under Rule 144. The number of shares of common stock available for sale in the
public market is limited by restrictions under the Securities Act and lock-up
agreements under which the holders of such shares have agreed not to sell or
otherwise dispose of any of their shares for a period of 180 days after the date
of this prospectus without the prior written consent of Morgan Stanley & Co.
Incorporated. On the date of this prospectus, no shares other than the
shares offered hereby will be eligible for sale. Beginning 180 days after the
date of this prospectus, or earlier with the consent of Morgan Stanley & Co.
Incorporated, restricted shares will become available for sale in the
public market subject to certain limitations of Rule 144 of the Securities Act.
In general, under Rule 144 of the Securities Act as currently in effect,
beginning 90 days after this offering, a person (or persons whose shares are
aggregated) who has beneficially owned restricted shares for at least one year,
including a person who may be deemed an affiliate, is entitled to sell within
any three-month period a number of shares of common stock that does not exceed
the greater of 1% of the then-outstanding shares of our common stock
(approximately shares after giving effect to this offering)
and the average weekly trading volume of our common stock on the Nasdaq National
Market during the four calendar weeks preceding such sale. Sales under Rule 144
of the Securities Act are subject to certain restrictions relating to manner of
sale, notice and the availability of current public information about us. A
person who is not our affiliate at any time during the 90 days preceding a sale,
and who has beneficially owned shares for at least two years, would be entitled
to sell such shares immediately following this offering without regard to the
volume limitations, manner of sale provisions or notice or other requirements of
Rule 144 of the Securities Act. However, the transfer agent may require an
opinion of counsel that a proposed sale of shares comes within the terms of Rule
144 of the Securities Act prior to effecting a transfer of such shares.
Prior to this offering, there has been no public market for our common
stock and no predictions can be made of the effect, if any, that the sale or
availability for sale of shares of additional common stock will have on the
market price of our common stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could adversely affect the market price of the common stock and could impair our
future ability to raise capital through an offering of our equity securities.
OPTIONS
As of December 31, 1998, options to purchase a total of 2,192,568 shares of
common stock pursuant to the 1996 Stock Plan were outstanding and exercisable.
All of the shares subject to options are subject to lock-up agreements. See
"Lock-up Agreements." An additional 1,229,773 shares of common stock were
available as of December 31, 1998 for future option grants or direct issuances
under the 1996 Stock Plan. However, as of the date of this offering, our 1996
Stock Plan terminates and no future options will be granted under this plan. In
addition, in February, 1999, 2,000,000 shares were reserved for issuance under
our 1999 Omnibus Equity Incentive Plan, 500,000 shares were reserved for
issuance under our 1999 Employee Stock Purchase Plan and 150,000 shares were
reserved for issuance under our 1999 Non-Employee Directors Option Plan. See
"Management -- Employee Benefit Plans -- 1999 Omnibus
66
<PAGE> 69
Equity Incentive Plan," "-- 1999 Employee Stock Purchase Plan," and "-- 1999
Non-Employee Directors Option Plan" and Notes 6 and 9 of Notes to Consolidated
Financial Statements.
Rule 701 under the Securities Act provides that shares of common stock
acquired on the exercise of outstanding options may be resold by persons other
than our affiliates, beginning 90 days after the date of this prospectus,
subject only to the manner of sale provisions of Rule 144, and by affiliates,
beginning 90 days after the date of this prospectus, subject to all provisions
of Rule 144 except its one-year minimum holding period. We intend to file one or
more registration statements on Form S-8 under the Securities Act to register
all shares of common stock subject to outstanding stock options and common stock
issued or issuable pursuant to our 1996 Stock Plan. We expect to file the
registration statement covering shares offered pursuant to the 1996 Stock Plan
and the 1999 Employee Stock Purchase Plan and 1999 Omnibus Equity Incentive Plan
approximately 30 days after the closing of this offering. Such registration
statements are expected to become effective upon filing. Shares covered by these
registration statements will thereupon be eligible for sale in the public
markets, subject to the lock-up agreements, if applicable.
LOCK-UP AGREEMENTS
Marimba, our selling stockholders, directors, executive officers, and
certain other stockholders and optionholders have each agreed that, without the
prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters, he, she or it will not, during the period ending 180 days after
the date of this prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock; or any securities
convertible into or exercisable or exchangeable for common stock; or
- enter into any swap or similar arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock;
whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise.
67
<PAGE> 70
UNDERWRITERS
Under the terms and subject to conditions contained in an Underwriting
Agreement, the underwriters named below, for whom Morgan Stanley & Co.
Incorporated, Credit Suisse First Boston Corporation, BT Alex. Brown
Incorporated and Hambrecht & Quist LLC are acting as representatives, have
severally agreed to purchase, and Marimba and the selling stockholders have
agreed to sell to the underwriters, severally, the respective number of shares
of our common stock set forth opposite the names of such underwriters below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Credit Suisse First Boston Corporation......................
BT Alex. Brown Incorporated.................................
Hambrecht & Quist LLC.......................................
--------
Total.............................................
========
</TABLE>
The underwriters and the representatives are collectively referred to as
the "underwriters" and the "representatives," respectively. The underwriters are
offering the shares of common stock subject to their acceptance of the shares
from Marimba and the selling stockholders and subject to prior sale. The
Underwriting Agreement provides that the obligations of the several underwriters
to pay for and accept delivery of the shares of our common stock offered hereby
are subject to the approval of certain legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take and pay for all
of the shares of common stock offered hereby, other than those covered by the
over-allotment option described below, if any such shares are taken.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $ per share under the public offering price. Any
underwriter may allow, and such dealers may reallow, a concession not in excess
of $ per share to other underwriters or to certain dealers. After the
initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representatives.
Marimba has granted to the underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to an aggregate
of additional shares of common stock at the public offering price set
forth on the cover page hereof, less underwriting discounts and commissions. The
underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of
common stock offered hereby. To the extent such option is exercised, each
underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of common stock as
the number set forth next to such underwriter's name in the preceding table
bears to the total number of shares of common stock set forth next to the names
of all underwriters in the preceding table. If the underwriters' option is
exercised in full, the total price to the public for this offering would be
$ , the total underwriters' discounts and commissions would be
$ , the total proceeds to Marimba would be $ and the total
proceeds to the selling stockholders would be $ .
The underwriters have informed Marimba that each principal underwriter in
this offering may, subject to the approval of Morgan Stanley & Co. Incorporated,
sell to discretionary accounts over which such principal underwriter exercises
discretionary authority. The underwriters have further informed
68
<PAGE> 71
Marimba that they estimate that such sales will not exceed in the aggregate five
percent of the total number of shares of common stock offered by them.
Marimba has applied to list the common stock on the Nasdaq National Market
under the symbol "MRBA."
At the request of Marimba, the underwriters will reserve up to
shares of common stock to be issued by Marimba and offered hereby for sale, at
the initial public offering price, to directors, officers, employees, business
associates and related persons of Marimba. The number of shares of common stock
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares which are not so
purchased will be offered by the underwriters to the general public on the same
basis as the other shares offered hereby.
Marimba, our selling stockholders, directors, executive officers, and
certain other stockholders and optionholders have each agreed that, without the
prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters, he, she or it will not, during the period ending 180 days after
the date of this prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock; or any securities
convertible into or exercisable or exchangeable for common stock; or
- enter into any swap or similar arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock;
whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise.
The restrictions described in the previous paragraph do not apply to:
- the sale of shares to the underwriters;
- the issuance by Marimba of shares of common stock upon the exercise of an
option or a warrant or the conversion of a security outstanding on the
date of this prospectus of which the underwriters have been advised in
writing;
- transactions by any person other than Marimba relating to shares of
common stock or other securities acquired in open market transactions
after the completion of the offering of the shares;
- the granting of stock options pursuant to existing Marimba employee
benefit plans, provided that such options do not become exercisable and
such options do not vest during such 180-day period; or
- certain gifts, distributions or transfers to trusts, provided that
transferees in transactions described in this clause enter into lock-up
agreements similar to those described in the previous paragraph.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may agree to sell or
allot more shares than the shares of common stock Marimba and the
selling stockholders have agreed to sell them. This over-allotment would create
a short position in the common stock for the underwriters' account. To cover any
over-allotments or to stabilize the price of the common stock, the underwriters
may bid for, and purchase, shares of common stock in the open market. Finally,
the underwriting syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the common stock in the offering, if
the syndicate repurchases previously distributed common stock in transactions to
cover syndicate short positions, in stabilization transactions or otherwise. Any
of these activities may stabilize or maintain the market price of the common
stock above
69
<PAGE> 72
independent market levels. The underwriters are not required to engage in these
activities, and may end any of these activities at any time.
Marimba, the selling stockholders and the underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
In October 1997, Marimba sold 2,987,696 shares of Series B preferred stock.
An affiliate of Hambrecht & Quist LLC, one of the underwriters in this offering,
purchased 39,943 shares of Series B preferred stock, which are convertible into
39,943 shares of common stock, on the same terms as the other purchasers of
Series B preferred stock.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the shares of
common stock. The initial public offering price will be determined by
negotiations between Marimba and the representatives. Among the factors to be
considered in determining the initial public offering price will be:
- the future prospects of Marimba and its industry in general;
- sales, earnings and certain other financial operating information of
Marimba in recent periods; and
- the price-earnings ratios, price-sales ratios, market prices of
securities and certain financial and operating information of companies
engaged in activities similar to those of Marimba.
The estimated public offering price range set forth on the cover page of
this prospectus is subject to change as a result of market conditions and other
factors.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Marimba by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Menlo
Park, California. Certain legal matters in connection with the offering will be
passed upon for the underwriters by Fenwick & West LLP, Palo Alto, California.
As of the date of this prospectus, certain members and employees of Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP, beneficially owned an
aggregate of 23,610 shares of our common stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1997 and 1998, for the period from February
21, 1996 (inception) to December 31, 1996, and for each of the years in the
two-year period ended December 31, 1998 as set forth in their report. We have
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given upon the
authority of such firm as experts in accounting and auditing.
ADDITIONAL 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
offered hereby. This prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits to the Registration
Statement. For further information with respect to Marimba and our common stock
we offer hereby, reference is made to the Registration Statement and the
exhibits filed as a part of the Registration Statement. Statements contained in
this prospectus concerning the contents of any contract or any other
70
<PAGE> 73
document referred to are not necessarily complete; reference is made in each
instance to the copy of such contract or document filed as an exhibit to the
Registration Statement. Each such statement is qualified in all respects by such
reference to such exhibit. The Registration Statement, including the exhibits
thereto, may be inspected without charge at the public reference facilities
maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and copies of all or any part thereof may be obtained from such
office after payment of fees prescribed by the Commission. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants, including us, that file
electronically with the Commission. The address of the site is
http://www.sec.gov.
71
<PAGE> 74
MARIMBA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Financial Statements
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations and Comprehensive
Loss................................................... F-4
Consolidated Statements of Redeemable Convertible
Preferred Stock and Stockholders' Equity (Net Capital
Deficiency)............................................ F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 75
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Marimba, Inc.
We have audited the accompanying consolidated balance sheets of Marimba,
Inc. as of December 31, 1997 and 1998, and the related consolidated statements
of operations and comprehensive loss, redeemable convertible preferred stock and
stockholders' equity (net capital deficiency), and cash flows for the period
from inception (February 21, 1996) to December 31, 1996 and for the years ended
December 31, 1997 and 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Marimba, Inc.
at December 31, 1997 and 1998, and the consolidated results of its operations
and its cash flows for the period from inception (February 21, 1996) to December
31, 1996 and for the years ended December 31, 1997 and 1998, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Palo Alto, California
January 13, 1999
F-2
<PAGE> 76
MARIMBA, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------- DECEMBER 31,
1997 1998 1998
------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $14,402 $ 3,700
Short-term investments................................. -- 4,125
Accounts receivable, net of allowances of $49 and $70
at December 31, 1997 and 1998........................ 4,591 2,585
Unbilled receivables................................... -- 1,036
Prepaid expenses and other current assets.............. 248 371
------- --------
Total current assets.............................. 19,241 11,817
Property and equipment, net................................. 2,401 2,747
Other assets................................................ 256 298
------- --------
$21,898 $ 14,862
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable and accrued liabilities............... $ 1,940 $ 1,396
Accrued compensation................................... 1,535 1,704
Current portion of capital lease obligations and
equipment advances................................... 133 286
Deferred revenue....................................... 7,597 5,519
------- --------
Total current liabilities......................... 11,205 8,905
Long-term portion of capital lease obligations and equipment
advances, and other long-term liabilities................. 211 747
Commitments and contingencies
Redeemable convertible preferred stock, 15,000 shares
authorized at December 31, 1997 and 1998, $.0001 par
value, issuable in series:
Series A redeemable convertible preferred stock, 2,800
shares designated; 2,766 shares issued and
outstanding at December 31, 1997 and 1998 and none
pro forma (liquidation preference at December 31,
1998 of $4,100)...................................... 4,055 4,055 $ --
Series B redeemable convertible preferred stock, 3,050
shares designated; 2,987 shares issued and
outstanding at December 31, 1997 and 1998 and none
pro forma (liquidation preference at December 31,
1998 of $14,960)..................................... 14,898 14,898 --
Stockholders' equity (net capital deficiency):
Common stock, 30,000 shares authorized, $.0001 par
value; 13,067 and 13,053 shares issued and
outstanding at December 31, 1997 and 1998, and 18,806
shares issued and outstanding pro forma.............. 642 2,183 21,136
Note receivable from officer........................... (150) (160) (160)
Deferred compensation.................................. -- (1,116) (1,116)
Cumulative translation adjustment...................... -- (6) (6)
Accumulated deficit.................................... (8,963) (14,644) (14,644)
------- -------- --------
Stockholders' equity (net capital deficiency)..... (8,471) (13,743) $ 5,210
------- -------- ========
$21,898 $ 14,862
======= ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 77
MARIMBA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(FEBRUARY 21, YEAR ENDED
1996) TO DECEMBER 31,
DECEMBER 31, ------------------
1996 1997 1998
------------- ------- -------
<S> <C> <C> <C>
Revenues:
License.............................................. $ -- $ 5,011 $13,901
Service.............................................. -- 552 3,184
------- ------- -------
Total revenues............................................ -- 5,563 17,085
Cost of revenues:
License.............................................. -- 13 75
Service.............................................. -- 621 1,964
------- ------- -------
Total cost of revenues.................................... -- 634 2,039
------- ------- -------
Gross profit.............................................. -- 4,929 15,046
Operating expenses:
Research and development............................. 515 2,410 5,773
Sales and marketing.................................. 473 8,054 12,371
General and administrative........................... 322 2,367 2,779
Amortization of deferred compensation................ -- -- 251
------- ------- -------
Total operating expenses.................................. 1,310 12,831 21,174
------- ------- -------
Loss from operations...................................... (1,310) (7,902) (6,128)
Interest income........................................... 66 350 518
Interest expense.......................................... (1) (12) (30)
------- ------- -------
Loss before income taxes.................................. (1,245) (7,564) (5,640)
Provision for income taxes................................ -- 154 41
------- ------- -------
Net loss.................................................. (1,245) (7,718) (5,681)
Other comprehensive loss:
Translation adjustment............................... -- -- (6)
------- ------- -------
Comprehensive loss........................................ $(1,245) $(7,718) $(5,687)
======= ======= =======
Basic and diluted net loss per share...................... $ (.81) $ (1.57) $ (.59)
======= ======= =======
Weighted-average shares of common stock outstanding used
in computing basic and diluted net loss per share....... 1,528 4,912 9,606
======= ======= =======
Pro forma basic and diluted net loss per share
(unaudited)............................................. $ (.37)
=======
Shares used in computing pro forma basic and diluted net
loss per share (unaudited).............................. 15,359
=======
</TABLE>
See accompanying notes.
F-4
<PAGE> 78
MARIMBA, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
(IN THOUSANDS)
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
-------------------------------------------
REDEEMABLE
CONVERTIBLE NOTE
PREFERRED STOCK COMMON STOCK RECEIVABLE
---------------- --------------- FROM DEFERRED
SHARES AMOUNT SHARES AMOUNT OFFICER COMPENSATION
------ ------- ------ ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock to
founders..................... -- $ -- 10,000 $ 10 $ -- $ --
Issuance of Series A redeemable
convertible preferred stock
to investors, net of issuance
costs of $38................. 2,699 3,963 -- -- -- --
Net loss....................... -- -- -- -- -- --
----- ------- ------ ------ ----- -------
Balances at December 31,
1996......................... 2,699 3,963 10,000 10 -- --
Issuance of Series A redeemable
convertible preferred stock
to officer, net of issuance
costs of $8.................. 67 92 -- -- -- --
Issuance of Series B redeemable
convertible preferred stock
to investors, net of issuance
costs of $62................. 2,987 14,898 -- -- -- --
Issuance of common stock upon
exercise of stock options.... -- -- 2,850 495 -- --
Issuance of common stock for
services..................... -- -- 67 10 -- --
Issuance of common stock upon
exercise of stock options by
an officer in exchange for a
note receivable.............. -- -- 300 150 (150) --
Repurchases of common stock.... -- -- (150) (23) -- --
Net loss....................... -- -- -- -- -- --
----- ------- ------ ------ ----- -------
Balances at December 31,
1997......................... 5,753 18,953 13,067 642 (150) --
Issuance of common stock upon
exercise of stock options.... -- -- 239 230 -- --
Repurchases of common stock.... -- -- (253) (56) -- --
Translation adjustment......... -- -- -- -- -- --
Interest on note receivable
from an officer.............. -- -- -- -- (10) --
Deferred compensation.......... -- -- -- 1,367 -- (1,367)
Amortization of deferred
compensation................. -- -- -- -- -- 251
Net loss....................... -- -- -- -- -- --
----- ------- ------ ------ ----- -------
Balances at December 31,
1998......................... 5,753 $18,953 13,053 $2,183 $(160) $(1,116)
===== ======= ====== ====== ===== =======
<CAPTION>
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
-----------------------------------------
TOTAL
STOCKHOLDERS'
CUMULATIVE EQUITY
TRANSLATION ACCUMULATED (NET CAPITAL
ADJUSTMENT DEFICIT DEFICIENCY)
----------- ----------- -------------
<S> <C> <C> <C>
Issuance of common stock to
founders..................... $-- $ -- $ 10
Issuance of Series A redeemable
convertible preferred stock
to investors, net of issuance
costs of $38................. -- -- --
Net loss....................... -- (1,245) (1,245)
--- -------- --------
Balances at December 31,
1996......................... -- (1,245) (1,235)
Issuance of Series A redeemable
convertible preferred stock
to officer, net of issuance
costs of $8.................. -- -- --
Issuance of Series B redeemable
convertible preferred stock
to investors, net of issuance
costs of $62................. -- -- --
Issuance of common stock upon
exercise of stock options.... -- -- 495
Issuance of common stock for
services..................... -- -- 10
Issuance of common stock upon
exercise of stock options by
an officer in exchange for a
note receivable.............. -- -- --
Repurchases of common stock.... -- -- (23)
Net loss....................... -- (7,718) (7,718)
--- -------- --------
Balances at December 31,
1997......................... -- (8,963) (8,471)
Issuance of common stock upon
exercise of stock options.... -- -- 230
Repurchases of common stock.... -- -- (56)
Translation adjustment......... (6) -- (6)
Interest on note receivable
from an officer.............. -- -- (10)
Deferred compensation.......... -- -- --
Amortization of deferred
compensation................. -- -- 251
Net loss....................... -- (5,681) (5,681)
--- -------- --------
Balances at December 31,
1998......................... $(6) $(14,644) $(13,743)
=== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 79
MARIMBA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(FEBRUARY 21, YEAR ENDED
1996) TO DECEMBER 31,
DECEMBER 31, ------------------
1996 1997 1998
------------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................... $(1,245) $(7,718) $(5,681)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization......................... 21 336 934
Amortization of deferred compensation................. -- -- 251
Other................................................. -- -- (16)
Changes in operating assets and liabilities:
Accounts receivable, net............................ (50) (4,541) 2,006
Unbilled receivables................................ -- -- (1,036)
Prepaid expenses and other current assets........... (31) (218) (123)
Accounts payable and accrued liabilities............ 228 1,712 (544)
Accrued compensation................................ -- 1,535 169
Deferred revenue.................................... 200 7,397 (2,078)
Other liabilities................................... -- 34 2
------- ------- -------
Net cash used in operating activities............ (877) (1,463) (6,116)
------- ------- -------
INVESTING ACTIVITIES
Capital expenditures....................................... (278) (2,479) (1,280)
Other assets............................................... (7) (250) (42)
Purchases of short-term investments........................ -- -- (7,125)
Sales of short-term investments............................ -- -- 3,000
------- ------- -------
Net cash used in investing activities............ (285) (2,729) (5,447)
------- ------- -------
FINANCING ACTIVITIES
Proceeds from issuance of redeemable convertible preferred
stock.................................................... 3,963 14,990 --
Proceeds from issuance of common stock, net of
repurchases.............................................. 10 482 174
Proceeds from sale and lease back and equipment advances... -- 378 811
Principal payments under capital lease obligations......... -- (67) (124)
------- ------- -------
Net cash from financing activities............... 3,973 15,783 861
------- ------- -------
Net increase (decrease) in cash and cash equivalents....... 2,811 11,591 (10,702)
Cash and cash equivalents at beginning of period........... -- 2,811 14,402
------- ------- -------
Cash and cash equivalents at end of period................. $ 2,811 $14,402 $ 3,700
======= ======= =======
Supplemental disclosure of cash flow information
Interest paid.............................................. $ 1 $ 12 $ 30
======= ======= =======
Income taxes paid.......................................... $ -- $ 154 $ 41
======= ======= =======
Supplemental disclosure of noncash financing activities
Common stock issued in exchange for note receivable from
officer.................................................. $ -- $ 150 $ --
======= ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE> 80
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Marimba was incorporated in Delaware on February 21, 1996. Marimba develops
and markets Internet-based software management solutions ("Castanet Products"),
that distribute, update, and manage applications and related data over corporate
intranets, extranets and the Internet. Marimba markets its products worldwide
through a combination of a direct sales force and OEM/distributor partners.
Substantially all of Marimba's license revenues are derived from sales of the
Castanet Products.
The consolidated financial statements include the accounts of Marimba and
its wholly owned subsidiary in the United Kingdom. Intercompany accounts and
transactions have been eliminated in consolidation.
Marimba has incurred operating losses to date and had an accumulated
deficit of $14,644,000 at December 31, 1998. Marimba's activities have been
primarily financed through private placements of equity securities. Marimba may
need to raise additional capital through the issuance of debt or equity
securities. Such financing may not be available on terms satisfactory to
Marimba, if at all.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ materially from those estimates.
Revenue Recognition
License revenues are comprised of perpetual or multiyear license fees which
are primarily derived from contracts with corporate customers and resellers.
Such revenues are recognized after execution of a license agreement or receipt
of a definitive purchase order, and delivery of the product to end-user
customers, provided that there are no uncertainties surrounding product
acceptance, the license fees are fixed and determinable, collectibility is
probable and Marimba has no remaining obligations. Revenue on arrangements with
customers who are not the ultimate users (primarily resellers) is not recognized
until the product is delivered to the end user. If the fee due from the customer
is not fixed or determinable, revenue is recognized as payments become due from
the customer. If collectibility is not considered probable, revenue is
recognized when the fee is collected. Advance payments are recorded as deferred
revenue until the products are shipped, services are provided, or obligations
are met. Marimba's products do not require significant customization.
Service revenues are comprised of revenue from maintenance agreements,
consulting and training fees. Software maintenance agreements provide technical
support and the right to unspecified upgrades on an if-and-when available basis.
Revenue from maintenance agreements is deferred and recognized on a
straight-line basis over the life of the related agreement, which is typically
one year. Service revenues from training and consulting are recognized upon
completion of the work to be performed.
In October 1997, the Accounting Standards Executive Committee issued
Statement of Position 97-2 ("SOP 97-2"), as amended by SOP 98-4 and SOP 98-9,
"Software Revenue Recognition." These statements provide guidance on applying
generally accepted accounting principles in recognizing revenue on software
transactions. SOP 97-2, as amended by SOP 98-4, is effective for Marimba's
transactions
F-7
<PAGE> 81
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (continued)
entered into subsequent to January 1, 1998. The application of SOP 97-2 and SOP
98-4 has not had a material impact on Marimba's results of operations.
SOP 98-9 amends SOP 97-2 and 98-4, extending the deferral of the
application of certain provisions of SOP 97-2 amended by SOP 98-4 through fiscal
years beginning on or before March 15, 1999. All other provisions of SOP 98-9
are effective for transactions entered into in fiscal years beginning after
March 15, 1999. Marimba has not yet determined the effect of the final adoption
of SOP 98-9 on its financial condition or results of operations.
Unbilled receivables consist of contractually obligated amounts not yet
billable by the Company.
Research and Development
Research and development expenditures are generally charged to operations
as incurred. Statement of Financial Accounting Standards No. 86, "Accounting for
the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed,"
requires the capitalization of certain software development costs subsequent to
the establishment of technological feasibility, which, for Marimba, is
established upon completion of a working model. Costs incurred by Marimba
between completion of the working model and the point at which the product is
ready for general release have been insignificant. Therefore, through December
31, 1998, all research and development costs have been expensed as incurred.
Cash, Cash Equivalents and Short-Term Investments
Cash equivalents consist of financial instruments which are readily
convertible to cash and have original maturities of three months or less at the
time of acquisition. The carrying value of cash and cash equivalents
approximates fair value at December 31, 1997 and 1998.
Marimba classifies, at the date of acquisition, its marketable securities
into available-for-sale categories in accordance with the provisions of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Currently, Marimba classifies its securities as available-for-sale
which are reported at fair market value with the related unrealized gains and
losses included in stockholders' equity. Unrealized gains and losses were not
material for all periods presented. Realized gains and losses and declines in
value of securities judged to be other than temporary are included in interest
income. Interest and dividends on all securities are included in interest
income.
Investments with maturities between three and twelve months are considered
short-term investments. Short-term investments consist of corporate notes and
market auction rate preferred stocks.
The cost (which approximates fair value) of Marimba's investments at
December 31, 1998 consisted of commercial paper ($500,000), corporate notes
($1,025,000) and market auction rate preferred stock ($3,100,000).
F-8
<PAGE> 82
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash, Cash Equivalents and Short-Term Investments (continued)
The following is a reconciliation of Marimba's cash, cash equivalents and
short-term investments to the balance sheet classifications:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1998
------- ------
(IN THOUSANDS)
<S> <C> <C>
Amounts included in cash and cash equivalents........ $ -- $ 500
Short-term investments............................... -- 4,125
------- ------
Total investments.......................... -- 4,625
Money market fund.................................... 14,402 2,689
Demand deposits...................................... -- 511
------- ------
Total cash, cash equivalents and short-term
investments............................. $14,402 $7,825
======= ======
</TABLE>
Property and Equipment
Marimba records property and equipment at cost and calculates depreciation
using the straight-line method over the estimated useful lives of the assets,
generally three to five years. Leasehold improvements are amortized over the
term of the lease.
Accounting for Stock-Based Compensation
Marimba has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB Opinion No. 25), and related
interpretations in accounting for its employee stock options because, as
discussed in Note 6, the alternative fair value accounting provided for under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB Opinion No. 25,
when the exercise price of Marimba's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized. See pro forma disclosures of applying FAS 123 included in Note 6.
Comprehensive Loss
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS
130"). FAS 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements and is effective for fiscal years beginning after December
15, 1997. Marimba adopted FAS 130 in the year ended December 31, 1998.
Concentrations of Credit Risk and Other Risks
Financial instruments that subject Marimba to credit risk consist primarily
of uninsured cash, cash equivalents and short-term investment balances held at
commercial banks and institutions primarily in the United States and trade
receivables from Marimba's customers. Marimba sells to customers in many
different industries. Marimba extends reasonably short credit terms in most
instances and performs
F-9
<PAGE> 83
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentrations of Credit Risk and Other Risks (continued)
ongoing credit evaluations but does not require collateral. Marimba provides
reserves for potential credit losses, and such losses have been within
management's expectations. To date, Marimba's write-offs of bad debts have not
been significant. During the years ended December 31, 1997 and 1998, Marimba
added approximately $50,000 and $75,000 to its bad debt reserves. Total
write-offs of uncollectible accounts were $1,000 and $54,000 in these periods.
Revenues from one customer represented 18% and 22% of total revenues for
the years ended December 31, 1997 and 1998. The same customer accounted for 57%
of accounts receivable at December 31, 1997. Sales to another customer
represented 18% of total revenues for the year ended December 31, 1998. Two
other customers accounted for 48% and 16% of the combined accounts receivable
and unbilled receivables accounts at December 31, 1998.
Segment Information
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("FAS 131"). FAS 131 changes the way
companies report selected segment information in annual financial statements and
requires companies to report selected segment information in interim financial
reports to stockholders. FAS 131 is effective beginning in Marimba's year ended
December 31, 1998. Marimba operates solely in one segment, the development and
marketing of network application software, and therefore there is no impact to
Marimba's financial statements of adopting FAS 131. For the years ended December
31, 1997 and 1998, sales to customers outside the United States were $1,199,000
and $1,265,000. The majority of these sales were to customers in Asia.
Net Loss Per Share
Basic and diluted net loss per common share are presented in conformity
with FAS No. 128, "Earnings Per Share" ("FAS 128"), for all periods presented.
Pursuant to the Securities and Exchange Commission Staff Accounting Bulletin No.
98, common stock and convertible preferred stock issued or granted for nominal
consideration prior to the anticipated effective date of Marimba's initial
public offering must be included in the calculation of basic and diluted net
loss per common share as if they had been outstanding for all periods presented.
To date, Marimba has not had any issuances or grants for nominal consideration.
In accordance with FAS 128, basic and diluted net loss per share has been
computed using the weighted-average number of shares of common stock outstanding
during the period, less shares subject to repurchase. Pro forma basic and
diluted net loss per share, as presented in the statements of operations, has
been computed as described above and also gives effect, under Securities and
Exchange Commission guidance, to the conversion of the redeemable convertible
preferred stock (using the if-converted method) from the original date of
issuance.
F-10
<PAGE> 84
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Net Loss Per Share (continued)
The following table presents the calculation of basic and diluted and pro
forma basic and diluted net loss per share:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEAR ENDED
(FEBRUARY 21, 1996) DECEMBER 31,
TO -----------------
DECEMBER 31, 1996 1997 1998
------------------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net loss........................................... $(1,245) $(7,718) $(5,681)
======= ======= =======
Basic and diluted:
Weighted-average shares of common stock
outstanding................................. 10,000 11,474 13,081
Less weighted-average shares subject to
repurchase.................................. (8,472) (6,562) (3,475)
------- ------- -------
Weighted-average shares used in computing
basic and diluted net loss per common
share....................................... 1,528 4,912 9,606
------- ------- -------
Basic and diluted net loss per common share... $ (.81) $ (1.57) $ (.59)
======= ======= =======
Pro forma:
Shares used above............................. 9,606
Pro forma adjustment to reflect
weighted-average effect of the assumed
conversion of redeemable convertible
preferred stock (unaudited)................. 5,753
-------
Shares used in computing pro forma basic and
diluted net loss per share (unaudited)...... 15,359
-------
Pro forma basic and diluted net loss per share
(unaudited)................................. $ (.37)
=======
</TABLE>
Marimba has excluded all redeemable convertible preferred stock, warrants,
outstanding stock options and shares subject to repurchase by Marimba from the
calculation of diluted loss per share because all such securities are
antidilutive for all periods presented. Weighted-average options and warrants
outstanding to purchase 375,000, 1,261,000, and 1,483,000 shares of common and
redeemable convertible preferred stock for the years ended December 31, 1996,
1997, and 1998, were not included in the computation of diluted net loss per
share because the effect would be antidilutive. Such securities, had they been
dilutive, would have been included in the computation of diluted net loss per
share using the treasury stock method.
Unaudited Pro Forma Stockholders' Equity
If the offering contemplated by this Prospectus is consummated, all of the
redeemable convertible preferred stock outstanding will automatically be
converted into common stock. Unaudited pro forma stockholders' equity at
December 31, 1998, as adjusted for the assumed conversion of redeemable
F-11
<PAGE> 85
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Unaudited Pro Forma Stockholders' Equity (continued)
convertible preferred stock based on the shares of redeemable convertible
preferred stock outstanding at December 31, 1998, is disclosed on the balance
sheet.
Recent Accounting Pronouncements
In June 1998, the FASB issued FAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). Marimba is required to adopt
FAS 133 for the year ending December 31, 2000. FAS 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. Because Marimba
currently holds no derivative financial instruments and does not currently
engage in hedging activities, adoption of FAS 133 is expected to have no
material impact on Marimba's financial condition or results of operations.
In March 1998, the American Institute of Certified Public Accountants
issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 requires that entities
capitalize certain costs related to internal use software once certain criteria
have been met. Marimba is required to implement SOP 98-1 for the year ending
December 31, 1999. Adoption of SOP 98-1 is expected to have no material impact
on Marimba's financial condition or results of operations.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1998
------ -------
(IN THOUSANDS)
<S> <C> <C>
Furniture and equipment...................... $1,191 $ 759
Computer equipment........................... 1,440 3,036
Leasehold improvements....................... 125 241
------ -------
2,756 4,036
Accumulated depreciation and amortization.... (355) (1,289)
------ -------
Property and equipment, net.................. $2,401 $ 2,747
====== =======
</TABLE>
Property and equipment at December 31, 1997 and 1998 includes assets under
capitalized leases of approximately $378,000. Accumulated amortization related
to leased assets was approximately $223,000 and $280,000 at December 31, 1997
and 1998.
3. LEASES AND COMMITMENTS
In January 1997, as part of a sale-leaseback transaction, Marimba entered
into a $500,000 capital lease line of credit for financing of equipment, which
expired on December 31, 1997. Marimba borrowed $378,000 under the line of
credit. This amount bears interest at a rate of 3.5% and is collateralized by
the equipment purchased. Under the terms of the master lease agreement, Marimba
will have the option to purchase the leased equipment at a negotiated price at
the end of the 36-month lease term. In connection
F-12
<PAGE> 86
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. LEASES AND COMMITMENTS (CONTINUED)
with the capital lease, Marimba issued a warrant that entitles the holder to
purchase 16,865 shares of Series A redeemable convertible preferred stock (see
Note 6).
Marimba leases its office facilities under various noncancelable operating
lease agreements. Marimba's primary facility lease expires in 2000.
As of December 31, 1998, future minimum lease payments under capital leases
and noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
Years ending December 31:
1999........................................................ $ 133 $1,370
2000........................................................ 60 517
2001........................................................ -- 140
2002........................................................ -- 148
2003 and thereafter......................................... -- 421
----- ------
Total minimum lease and principal payments........ 193 $2,596
======
Amount representing interest................................ (6)
-----
Present value of future payments............................ 187
Current portion of capital lease obligations................ (127)
-----
Noncurrent portion.......................................... $ 60
=====
</TABLE>
Rent expense under operating leases totaled approximately $61,000,
$375,000, and $1,245,000 for the years ended December 31, 1996, 1997, and 1998.
4. BANK ARRANGEMENTS
In May 1998, Marimba entered into a credit agreement with a bank which
provides for revolving credit loans, letters of credit, and nonformula and
equipment advance facilities aggregating up to $6,500,000. The loans and
advances are secured by substantially all of Marimba's assets. All of the credit
facilities bear interest at a rate equal to the prime rate (7.75% at December
31, 1998). The credit agreement contains certain financial and reporting
covenants, including a restriction on the payment of dividends. Marimba was in
compliance with these covenants at December 31, 1998.
The amount available under the revolving credit facility is limited to the
lower of $4,000,000 and an amount equal to 80% of eligible accounts receivable,
which available amount is reduced by the amount of outstanding letters of
credit. Under the agreement, letters of credit can be drawn up to an amount not
to exceed $500,000. As of December 31, 1998, no revolving credit loans had been
borrowed or letters of credit issued.
Marimba may borrow up to $1,000,000 under the nonformula-based advance. As
of December 31, 1998, no amounts have been borrowed under this facility.
The equipment advance facility provides Marimba with the ability to borrow
up to $1,500,000. Principal and interest are due in monthly installments
beginning in June 1999 and ending in May 2002. As of December 31, 1998, Marimba
had $811,000 of outstanding borrowings under the facility. The fair
F-13
<PAGE> 87
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. BANK ARRANGEMENTS (CONTINUED)
value of the equipment advance is estimated based on current interest rates
available to Marimba for debt instruments with similar terms, degrees of risk,
and remaining maturities. The carrying value of the equipment advance
approximates its fair value.
Principal payments under this equipment advance are as follows (in
thousands):
<TABLE>
<S> <C>
1999........................................................ $ 159
2000........................................................ 270
2001........................................................ 270
2002........................................................ 112
-----
Total payments.................................... 811
Less current portion........................................ (159)
-----
Long-term portion........................................... $ 652
=====
</TABLE>
5. PREFERRED STOCK
Marimba is authorized to issue up to 15,000,000 shares of preferred stock,
issuable in series, with the rights and preferences of each designated series to
be determined by Marimba's Board of Directors. To date, 2,800,000 and 3,050,000
shares have been designated as Series A and Series B redeemable convertible
preferred stock (the "Series A and Series B preferred stock").
Each share of Series A and Series B preferred stock is convertible, at the
option of the holder, into one share of common stock, subject to certain
adjustments for dilutive issuances. Outstanding shares of convertible preferred
stock automatically convert into common stock upon the closing of an
underwritten public offering of common stock under the Securities Act of 1933 in
which Marimba receives at least $12,500,000 in gross proceeds and the price per
share is at least $7.51.
Series A and Series B preferred stockholders are entitled to noncumulative
dividends of $.12 and $.40 per share. Dividends will be paid only when declared
by the Board of Directors out of legally available funds. No dividends have been
declared as of December 31, 1998.
Series A and Series B preferred stockholders are entitled to receive, upon
a liquidating event, an amount per share equal to the issuance price, plus all
declared but unpaid dividends. Thereafter, the remaining assets and funds, if
any, shall be distributed among the holders of Series A and Series B preferred
stock and common stock pro rata based on the number of shares of common stock
held by each (assuming conversion of all such Series A and Series B preferred
stock). If any assets remain after the holders of Series A and Series B
preferred stock have received an aggregate of $4.45 and $7.51 per share, the
remaining assets will be distributed to the holders of the common stock pro rata
based on the number of shares of common stock held by each.
On or at any time after August 15, 2003, Marimba shall, upon written
request from the holders of a majority of the then outstanding shares of Series
A and Series B preferred stock, redeem in whole or in part the Series A and
Series B preferred stock by paying in cash a sum equal to the original issuance
prices of $1.48 and $5.01 per share.
Series A and Series B preferred stockholders have voting rights equal to
the common shares issuable upon conversion of the Series A and Series B
preferred stock.
F-14
<PAGE> 88
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCKHOLDERS' EQUITY
Common Stock
In February 1996, Marimba issued and sold an aggregate of 10,000,000 shares
of its common stock to the founders of Marimba pursuant to Restricted Common
Stock Purchase Agreements. The stock vests ratably over a period of three years.
As of December 31, 1998, 556,000 shares are subject to repurchase.
At December 31, 1998, Marimba has reserved 5,770,000 shares of its common
stock for issuance upon conversion of its Series A and Series B preferred stock
and conversion of preferred shares issued upon exercise of outstanding warrants
and 3,422,341 shares of common stock for issuances upon exercise of options then
outstanding and available for grant under Marimba's 1996 Stock Option Plan.
In November 1997, Marimba granted 300,000 options to purchase common stock
under Marimba's 1996 Stock Option Plan to an officer of Marimba who immediately
exercised the options in exchange for a full recourse note receivable of
$150,000. This note, which bears interest at 5.69%, was collateralized by
certain personal assets of the officer and was paid in full on January 8, 1999.
These shares are subject to a right of repurchase that lapses over three years.
1996 Stock Option Plan
In November 1996, the Board of Directors adopted the 1996 Stock Option Plan
(the "1996 Plan") for issuance of common stock to eligible participants.
Incentive stock options and nonstatutory stock options may be granted under the
1996 Plan at prices not less than 100% and 85% of the fair value on the date of
grant. Options expire after 10 years. Options under the plan are immediately
exercisable; however, shares issued are subject to repurchase rights which lapse
in a series of installments measured from the vesting commencement date of the
option. As of December 31, 1998, 1,174,000 shares are subject to repurchase.
Options generally vest and the repurchase rights lapse ratably over a period of
three or four years from the date of grant.
Pro forma information regarding net loss and net loss per share is required
by FAS 123, and has been determined as if Marimba had accounted for its employee
stock options under the fair value method of that Statement. The fair value of
options was estimated at the date of grant using a minimum value option pricing
model with the following weighted-average assumptions: risk-free interest rate
of 6%, 6% and 5% in 1996, 1997 and 1998, and an expected life of four years and
no dividends for all years presented.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options using a
graded vesting method. The effects of applying FAS 123 for pro forma disclosures
are not likely to be representative of the effects on reported net loss for
future years.
F-15
<PAGE> 89
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
1996 Stock Option Plan (continued)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(FEBRUARY 21, YEARS ENDED
1996) TO DECEMBER 31,
DECEMBER 31, -------------------------
1996 1997 1998
------------- ------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net loss:
As reported.................................. $(1,245) $(7,718) $(5,681)
======= ======= =======
Pro forma.................................... $(1,249) $(7,771) $(6,123)
======= ======= =======
Pro forma basic and diluted net loss per share:
As reported.................................. $ (.37)
=======
Pro forma.................................... $ (.40)
=======
</TABLE>
Activity under the 1996 Stock Option Plan was as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------------------------
SHARES NUMBER PRICE WEIGHTED-
AVAILABLE OF PER AVERAGE
FOR GRANT SHARES SHARE EXERCISE PRICE
---------- ---------- ------------- --------------
<S> <C> <C> <C> <C>
Authorized........................ 3,174,603 -- -- --
Granted........................... (1,499,000) 1,499,000 $ .15 $ .15
---------- ----------
Balance at December 31, 1996...... 1,675,603 1,499,000 $ .15 $ .15
Authorized........................ 2,000,000 -- -- --
Granted........................... (2,529,610) 2,529,610 $ .15 - $ .75 $ .31
Exercised......................... -- (3,217,110) $ .15 - $ .50 $ .20
Repurchased....................... 150,000 -- -- --
Canceled.......................... 17,000 (17,000) $ .15 - $ .75 $ .68
---------- ----------
Balance at December 31, 1997...... 1,312,993 794,500 $ .15 - $ .75 $ .41
Authorized........................ 1,300,000 -- -- --
Granted........................... (2,017,800) 2,017,800 $1.00 - $8.50 $3.54
Exercised......................... -- (238,569) $ .50 - $2.00 $ .96
Repurchased....................... 253,417 -- -- --
Canceled.......................... 381,163 (381,163) $ .15 - $3.50 $ .84
---------- ----------
Balance at December 31, 1998...... 1,229,773 2,192,568 $ .15 - $8.50 $3.16
========== ==========
</TABLE>
F-16
<PAGE> 90
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
1996 Stock Option Plan (continued)
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AND EXERCISABLE
----------------------------------------
WEIGHTED-
AVERAGE
NUMBER WEIGHTED- REMAINING
OF AVERAGE CONTRACTUAL
EXERCISE PRICE RANGE SHARES EXERCISE PRICE LIFE
- -------------------- --------- -------------- -----------
(IN YEARS)
<S> <C> <C> <C>
$.15 72,000 $ .15 7.94
$ .50 - $ .75 341,500 $ .54 8.77
$1.00 - $1.50 255,818 $1.35 9.13
$1.75 - $2.00 132,000 $1.83 9.34
$3.00 - $3.50 1,042,000 $3.14 9.67
$7.00 - $8.50 349,250 $8.21 9.94
---------
2,192,568 $3.16 9.43
=========
</TABLE>
At December 31, 1997, options to purchase 14,249 shares of common stock
were vested at a weighted-average exercise price of $.18 per share. At December
31, 1998, outstanding options to purchase 188,289 outstanding shares of common
stock were vested at a weighted-average exercise price of $.57 per share.
The weighted-average fair value of options granted during 1996, 1997 and
1998 with an exercise price equal to the fair value of Marimba's common stock on
the date of grant was $.03, $.06 and $.73. The weighted-average fair value of
options granted during 1998 with an exercise price below the deemed fair value
of Marimba's common stock on the date of grant was $2.07.
In connection with the grant of certain share options to employees through
December 31, 1998, Marimba recorded deferred compensation of approximately
$1,367,000 for the aggregate differences between the exercise prices of options
at their dates of grant and the deemed fair value for accounting purposes of the
common shares subject to such options. Such amount is included as a reduction of
stockholders' equity and is being amortized on a graded vesting method. The
compensation expense of $251,000 in 1998 relates to options awarded to employees
in all operating expense categories. This amount has not been separately
allocated to these categories.
Warrants
In January 1997, in connection with the sale-leaseback transaction, Marimba
issued a warrant that entitles the holder to purchase 16,865 shares of Series A
redeemable convertible preferred stock at an exercise price of $1.48 per share.
This warrant is exercisable through the earlier of the effective date of a
merger of Marimba or January 31, 2004. Marimba determined that the value of the
warrant was immaterial.
7. INCOME TAXES
Marimba's provision for income taxes for the years ended December 31, 1997
and 1998 consists entirely of foreign withholding taxes.
F-17
<PAGE> 91
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES (CONTINUED)
As of December 31, 1998, Marimba had federal net operating loss
carryforwards of approximately $11,100,000. Marimba also had federal research
and development tax credit carryforwards of approximately $400,000. The net
operating loss and credit carryforwards will expire at various dates beginning
on 2011 through 2018, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the ownership change provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
Significant components of Marimba's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 3,300 $ 4,400
Research credit carryforwards............................. 200 600
Deferred revenue.......................................... 100 900
Other..................................................... -- 200
------- -------
Total deferred tax assets......................... 3,600 6,100
Valuation allowance......................................... (3,600) (6,100)
------- -------
Net deferred tax assets..................................... $ -- $ --
======= =======
</TABLE>
The valuation allowance for deferred tax assets increased by approximately
$3,100,000 in the year ended December 31, 1997.
8. LEGAL MATTERS
On March 3, 1997, Novadigm, Inc. filed a complaint against Marimba in the
United States District Court for the Northern District of California, alleging
infringement of a patent held by Novadigm. Novadigm alleges that Marimba's
infringement relates to certain methods for updating data and software over a
computer network used in the Castanet products. In its complaint, Novadigm
requests preliminary and permanent injunctions prohibiting Marimba and other
specified persons from making, using or selling any infringing products, as well
as damages, costs, and attorneys' fees. The complaint also alleges that Marimba
has willfully infringed Novadigm's Patent, and seeks up to triple damages
pursuant to the United States Patent Act. To date, both parties have conducted
substantial discovery. If the court does not enter judgment based on any
dispositive motions, a jury trial of this action is currently scheduled to begin
in September 1999.
Marimba believes that it has strong defenses against Novadigm's lawsuit.
Accordingly, Marimba intends to defend this suit vigorously. However, Marimba
may not prevail in this litigation. Litigation is subject to inherent
uncertainties, especially in cases such as this where sophisticated factual
issues must be assessed and complex technical issues must be decided. In
addition, cases such as this are likely to involve issues of law that are
evolving, presenting further uncertainty. Marimba's defense of this litigation,
regardless of the merits of the complaint, has been, and will likely continue to
be, time-consuming, costly and a diversion for Marimba's technical and
management personnel. However, the
F-18
<PAGE> 92
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. LEGAL MATTERS (CONTINUED)
failure of Marimba to prevail in this litigation could have a material adverse
effect on the Company's results of operations and financial condition.
9. EVENTS SUBSEQUENT TO DATE OF AUDITOR'S REPORT (UNAUDITED)
1999 Employee Stock Purchase Plan
On February 2, 1999, the Board of Directors approved the adoption of
Marimba's 1999 Employee Stock Purchase Plan (the "1999 Purchase Plan"), subject
to stockholder approval. A total of 500,000 shares of common stock has been
reserved for issuance under the 1999 Purchase Plan, plus, commencing on January
1, 2000, annual increases equal to the lesser of 500,000 shares, 2% of the
outstanding common shares on such date or a lesser amount determined by the
Board of Directors. The 1999 Purchase Plan permits eligible employees to acquire
shares of Marimba's common stock through
F-19
<PAGE> 93
MARIMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. EVENTS SUBSEQUENT TO DATE OF AUDITOR'S REPORT (UNAUDITED) (CONTINUED)
1999 Employee Stock Purchase Plan (continued)
periodic payroll deductions of up to 15% of base cash compensation. No more than
500 shares may be purchased by each employee on any purchase date. Each offering
period will have a maximum duration of 24 months. The price at which the common
stock may be purchased is 85% of the lesser of the fair market value of
Marimba's common stock on the first day of the applicable offering period or on
the last day of the respective purchase period. The initial offering period will
commence on the effectiveness of the initial public offering and will end on
April 30, 2001.
1999 Omnibus Equity Incentive Plan
On February 2, 1999, the Board of Directors approved the adoption of
Marimba's 1999 Omnibus Equity Incentive Plan (the "1999 Omnibus Plan"), subject
to stockholder approval. A total of 2,000,000 shares of common stock have been
reserved for issuance to eligible participants under the 1999 Omnibus Plan. The
types of awards that may be made under the 1999 Omnibus Plan are options to
purchase shares of common stock, stock appreciation rights, restricted shares
and stock units. Any shares not yet issued under Marimba's 1996 Stock Plan as of
the date of Marimba's initial public offering will be available for grant under
the 1999 Omnibus Plan. The exercise price for incentive stock options may not be
less than 100% of the fair market value of Marimba's common stock on the date of
grant (85% for nonstatutory options). In the event of a change in control of
Marimba, an option or award under the 1999 Omnibus Plan will become fully
exercisable and fully vested if the option or award is not assumed by the
surviving corporation or the surviving corporation does not substitute
comparable awards for the awards granted under the 1999 Omnibus Plan.
1999 Non-Employee Directors Option Plan
On February 2, 1999, the Board of Directors approved the adoption of
Marimba's Non-Employee Directors Option Plan (the "1999 Directors Plan"),
subject to stockholder approval. A total of 150,000 shares of common stock have
been reserved per issuance to non-employee members of the Board. Commencing
January 1, 2000, the number of shares reserved per issuance will be increased
automatically to restore the total number of shares available under this plan to
150,000 shares.
F-20
<PAGE> 94
DESCRIPTION OF GRAPHICS
Narrative Description of Inside Cover Gate Fold
Landscape Gate Fold, Inside Cover Page; Title Heading Left Justified [Marimba
logo]; caption to the right of logo--"Enabling a new generation of E-business
services as a leading supplier of Internet services management solutions."
Below the caption is a large disk with a cloud-like figure in the center.
Inside the cloud-like figure is the word "Internet". The disk is captioned
"Castanet Infrastructure."
From the Internet are six leader lines extending to the outer edges of the
disk. Each set of leader lines intersect a box or boxes representing packages
software applications.
One set of leader lines extends to a group of four persons standing on the
disk. The caption next to the persons reads "Customers-Gain instant access to
powerful, up-to-date and personalized e-business applications and services".
Another set of leader lines extends to a figure of a walking person. The caption
next to the person reads "Mobile Employees--Receive automatically synchronized
updates and enterprise applications quickly, even over low speed dial-up lines."
The next set of leader lines, in the center of the disk, extends to a group of
three buildings. The caption next to the buildings reads "Remote
Offices--Benefit from centralized management of corporate application and
services reducing the need for onsite IT support."
Continuing around the disk, the next set of leader lines extends to a single
building. The caption next to the building reads "Other Business
Partners--Strengthen relationships through collaborative exchange of
applications, data and services across multiple enterprises."
The next set of leader lines extends to a building and a factory. The caption
next to these two buildings reads "Suppliers and Distributors--Improve
operational efficiencies through shared access to dynamically updated
supply-chain management applications."
At the top of the disk is a large building followed by three small boxes leading
to the cloud-like figure in the middle of the disk. The caption next to this
building reads "Host Enterprise--Centralize management of e-business
applications and services, streamline business processes, reach new markets,
gain increased customer loyalty, deploy new applications and services instantly.
In the top right corner of the page is a square with five items in it. The five
items are a rectangle captioned "App Server," another rectangle captioned "Web
Server," a depiction of a lock and key captioned "Security Systems" and a
cylinder captioned "USERS". In the middle of the square is a cube captioned
"UPPS", the caption next to these items reads "Our strategy is to extend the
Castanet foundation to manage the complex array of infrastructure, systems and
components upon which e-business applications and services depend."
To the left of the disk is text reading "Castanet is a leading Internet services
management solution that enables companies to provide compelling and
cost-effective e-business applications and services to their employees,
customers and business partners."
Along the bottom of the page, below the illustrations is the following text:
Castanet provides --
-- automated deployment, updating and ongoing management of
e-business applications, data, documents and services
throughout the extended enterprise.
The Benefits of the Castanet Solution --
-- Supports multiple applications across heterogenous computing
environments
-- Provides high level of built-in security
-- Improves bandwidth efficiency
-- Supports mobile and remote users
-- Enables personalization
-- Scales efficiently to large numbers of users
-- Utilizes open standards and extends to meet changing user
requirements
-- Streamlines application rollouts across multiple domains of control
-- Strengthens brand awareness by allowing IT managers and business
organizations to customize user interfaces.
<PAGE> 95
Landscape Description of Picture in Section Entitled "Architecture"
At far left is a picture of software applications labeled "Application Code and
Data." Extending from the software applications is an arrow, labeled "package,"
pointing to a picture of software applications enclosed in a box labeled
"channel." Extending from the box is an arrow, labeled "Publish," pointing to a
picture of a computer labeled "Transmitter." Superimposed on the computer is the
box enclosing the software applications. Extending from the superimposed box is
an arrow pointing to a cloud-like figure. Inside the cloud-like figure are the
words "Internet," "Extranet" and "Intranet." Extending from the right side of
the cloud-like figure are two arrows. One arrow is pointing to a box enclosing
software applications which are superimposed on a personal computer. The other
arrow is pointing to a box enclosing software applications superimposed on a
lap-top computer. Underneath the personal computer and lap-top computer is the
caption "Tuners."
Landscape Description of Picture in Section Entitled "Technology"
At far left of page is an arrow pointing right to a computer captioned "San
Francisco Transmitter (Main)." Extending from the computer are two arrows
pointing to two separate computers stacked vertically to each other. The top
computer is captioned "London Transmitter (Repeater)." The bottom computer is
captioned "Tokyo Transmitter (Repeater)."
Extending from the top computer are three arrows, each pointing to three
separate personal computers.
Extending from the bottom of the computer is an arrow pointing to a cylinder
captioned "Tokyo Proxy." Extending from the cylinder are three arrows pointing
to two lap-top computers and a personal computer.
<PAGE> 96
[LOGO PAGE]
<PAGE> 97
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee and the NASD filing fees.
<TABLE>
<S> <C>
SEC Registration fee........................................ $ 15,666
NASD fee.................................................... 6,135
Nasdaq National Market listing fee.......................... 50,000
Printing and engraving expenses............................. 200,000
Legal fees and expenses..................................... 300,000
Accounting fees and expenses................................ 200,000
Blue sky fees and expenses.................................. 10,000
Custodian and transfer agent fees........................... 10,000
Miscellaneous fees and expenses............................. 208,199
----------
Total............................................. $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article VII, Section 6, of the Registrant's
Bylaws provides for mandatory indemnification of its directors and officers and
permissible indemnification of employees to the maximum extent permitted by the
Delaware General Corporation Law. The Registrant's Certificate of Incorporation
provides that, pursuant to Delaware law, its officers and directors shall not be
liable for monetary damages for breach of the officers' or directors' fiduciary
duty as officers or directors to the Company and its stockholders. This
provision in the Certificate of Incorporation does not eliminate the officers'
or directors' fiduciary duty, 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 officer or director will
continue to be subject to liability for breach of the officer's or director's
duty of loyalty to the Company for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for actions
leading to improper personal benefit to the officer or director, and for payment
of dividends or approval of stock repurchases or redemptions that are unlawful
under Delaware law. The provision also does not affect an officer's or
director's responsibilities under any other law, such as the federal securities
laws or state or federal environmental laws. The Registrant has entered into
Indemnification Agreements with its officers and directors, a form of which is
attached as Exhibit 10.1 hereto and incorporated herein by reference. The
Indemnification Agreements provide the Registrant's officers and directors with
further indemnification to the maximum extent permitted by the Delaware General
Corporation Law. Reference is made to Section 9 of the Underwriting Agreement
contained in Exhibit 1.1 hereto, indemnifying officers and directors of the
Registrant against certain liabilities.
II-1
<PAGE> 98
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since inception, we have issued and sold the following securities:
1. We granted direct issuances or stock options to purchase 6,200,410
shares of our common stock at exercise prices ranging from $.15 to $10.00
per share to employees, consultants, directors and other service providers
pursuant to our 1996 Stock Plan.
2. From inception through February 5, 1999, we issued and sold an
aggregate of 3,805,994 shares of our common stock to employees,
consultants, directors and other service providers for aggregate
consideration of approximately $1,508,119 pursuant to direct issuances or
exercises of options granted under our 1996 Stock Plan.
3. In February 1996, we issued and sold an aggregate of 10,000,000
shares of our common stock (which numbers reflect the one for two and
one-half stock split effected August 8, 1996) to each of Kim K. Polese,
Arthur A. van Hoff, Jonathan Payne and Sami Shaio, our founders, for
aggregate consideration of $10,000 pursuant to Restricted Common Stock
Purchase Agreements.
4. In August 1996 and January 1997, we issued and sold an aggregate of
2,765,870 shares of our Series A preferred stock for an aggregate purchase
price of approximately $4,100,125.
5. In February 1997, we issued a warrant to purchase 16,865 shares of
our Series A preferred stock at an exercise price of $1.4824 per share.
6. In August, September, October and November 1997, we issued and sold
2,987,696 shares of our Series B preferred stock for an aggregate purchase
price of approximately $14,959,991.
The sale of the above securities was deemed to be exempt from registration
under the Securities Act in reliance upon Section 4(2) of the Securities Act or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b)
of the Securities Act as transactions by an issuer not involving any public
offering or transactions pursuant to compensation benefit plans and contracts
relating to compensation as provided under Rule 701. The recipients of
securities in each such transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof, and appropriate legends were affixed to the share
certificates issued in such transactions. All recipients had adequate access,
through their relationships with the Registrant, to information about the
Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Certificate of Correction to Amended and Restated
Certificate of Incorporation.
3.3 Form of Third Amended and Restated Certificate of
Incorporation to be filed upon the closing of the offering
made pursuant to this Registration Statement.
3.4 Bylaws of the Registrant.
3.5 Amended and Restated Bylaws of the Registrant to be
effective upon the closing of the offering made pursuant to
this Registration Statement.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5.
</TABLE>
II-2
<PAGE> 99
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.2* Form of Registrant's Common Stock certificate.
4.3 Amended and Restated Investors' Rights Agreement dated
August 25, 1997.
4.4 Form of Amendment and Waiver of Registration Rights under
the Amended and Restated Investors' Rights Agreement.
4.5 Warrant to purchase shares of Series A Preferred Stock of
the Registrant issued to Lighthouse Capital Partners II,
L.P.
5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP.
10.1 Form of Indemnification Agreement entered into by the
Registrant with each of its directors and executive
officers.
10.2 1999 Omnibus Equity Incentive Plan and forms of agreements
thereunder.
10.3 Employee Stock Purchase Plan.
10.4 1999 Non-Employee Directors Option Plan.
10.5 Assignment and Assumption of Sublease between Quickturn
Design Systems, Inc. and ilicon, Inc. dated January 31,
1999.
10.6 Loan and Security Agreement between the Registrant and
Silicon Valley Bank dated May 27, 1998.
10.7+ Original Equipment Manufacturer Agreement between Tivoli
Systems Subsidiary, Inc. and the Registrant dated March 6,
1998.
10.8+ Amendment No. 1 to Original Equipment Manufacturer Agreement
between Tivoli Systems, Inc. and the Registrant dated
February 8, 1999.
10.9+ Reseller Agreement between Tivoli Systems Subsidiary, Inc.
and the Registrant dated August 14, 1997.
10.10+ Amendment No. 1 to Reseller Agreement between Tivoli
Systems, Inc. and the Registrant dated June 1, 1998.
10.11 Amendment No. 2 to Reseller Agreement between Tivoli
Systems, Inc. and the Registrant dated June 30, 1998.
10.12 Reseller License Guide to Reseller Agreement between Tivoli
Systems, Inc. and the Registrant dated November 23, 1998.
10.13+ Pricing Guide to Reseller Agreement between Tivoli Systems,
Inc. and the Registrant dated November 23, 1998.
10.14 Amendment No. 3 to Reseller Agreement between Tivoli
Systems, Inc. and the Registrant dated February 9, 1999.
23.1 Consent of Ernst & Young LLP, independent auditors (see page
II-6).
23.2* Consent of Counsel. Reference is made to Exhibit 5.1.
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
99.1 Order of the United States District Court for the Northern
District of California, San Jose Division dated December 28,
1998.
</TABLE>
- -------------------------
* To be filed by amendment.
+ Confidential treatment requested.
II-3
<PAGE> 100
(b) FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the consolidated financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation or the Bylaws of the Registrant, the Underwriting Agreement, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of 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 Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 101
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Mountain View, State of
California, on this 12th day of February, 1999.
MARIMBA, INC.
By: /s/ KIM K. POLESE
---------------------------------------
Kim K. Polese
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Kim K. Polese and Fred M. Gerson, and
each of them, his or her true and lawful attorneys-in-fact and agents with full
power of substitution, for him or her and in his or her name, place and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to sign any
registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933, and all post-effective amendments
thereto, and to file the same, with all exhibits thereto and all 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 and about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his, her or their 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 on behalf
of the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ KIM K. POLESE President, Chief Executive Officer (Principal February 12, 1999
- ------------------------------------------ Executive Officer) and Director
Kim K. Polese
/s/ FRED M. GERSON Vice President, Finance and Chief Financial February 12, 1999
- ------------------------------------------ Officer (Principal Financial and Accounting
Fred M. Gerson Officer)
/s/ ARTHUR A. VAN HOFF Chief Technology Officer and Director February 12, 1999
- ------------------------------------------
Arthur A. van Hoff
/s/ RAYMOND J. LANE Director February 12, 1999
- ------------------------------------------
Raymond J. Lane
/s/ DOUGLAS J. MACKENZIE Director February 12, 1999
- ------------------------------------------
Douglas J. Mackenzie
/s/ ANEEL BHUSRI Director February 12, 1999
- ------------------------------------------
Aneel Bhusri
/s/ STRATTON D. SCLAVOS Director February 12, 1999
- ------------------------------------------
Stratton D. Sclavos
</TABLE>
II-5
<PAGE> 102
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Certificate of Correction to Amended and Restated
Certificate of Incorporation.
3.3 Form of Third Amended and Restated Certificate of
Incorporation to be filed upon the closing of the offering
made pursuant to this Registration Statement.
3.4 Bylaws of the Registrant.
3.5 Amended and Restated Bylaws of the Registrant to be
effective upon the closing of the offering made pursuant to
this Registration Statement.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5.
4.2* Form of Registrant's Common Stock certificate.
4.3 Amended and Restated Investors' Rights Agreement dated
August 25, 1997.
4.4 Form of Amendment and Waiver of Registration Rights under
the Amended and Restated Investors' Rights Agreement.
4.5 Warrant to purchase shares of Series A Preferred Stock of
the Registrant issued to Lighthouse Capital Partners II,
L.P.
5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP.
10.1 Form of Indemnification Agreement entered into by the
Registrant with each of its directors and executive
officers.
10.2 1999 Omnibus Equity Incentive Plan and forms of agreements
thereunder.
10.3 Employee Stock Purchase Plan.
10.4 1999 Non-Employee Directors Option Plan.
10.5 Assignment and Assumption of Sublease between Quickturn
Design Systems, Inc. and ilicon, Inc. dated January 31,
1999.
10.6 Loan and Security Agreement between the Registrant and
Silicon Valley Bank dated May 27, 1998.
10.7+ Original Equipment Manufacturer Agreement between Tivoli
Systems Subsidiary, Inc. and the Registrant dated March 6,
1998.
10.8+ Amendment No. 1 to Original Equipment Manufacturer Agreement
between Tivoli Systems, Inc. and the Registrant dated
February 8, 1999.
10.9+ Reseller Agreement between Tivoli Systems Subsidiary, Inc.
and the Registrant dated August 14, 1997.
10.10+ Amendment No. 1 to Reseller Agreement between Tivoli
Systems, Inc. and the Registrant dated June 1, 1998.
10.11 Amendment No. 2 to Reseller Agreement between Tivoli
Systems, Inc. and the Registrant dated June 30, 1998.
10.12 Reseller License Guide to Reseller Agreement between Tivoli
Systems, Inc. and the Registrant dated November 23, 1998.
10.13+ Pricing Guide to Reseller Agreement between Tivoli Systems,
Inc. and the Registrant dated November 23, 1998.
10.14 Amendment No. 3 to Reseller Agreement between Tivoli
Systems, Inc. and the Registrant dated February 9, 1999.
23.1 Consent of Ernst & Young LLP, independent auditors (see page
II-6).
23.2* Consent of Counsel. Reference is made to Exhibit 5.1.
</TABLE>
<PAGE> 103
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
99.1 Order of the United States District Court for the Northern
District of California, San Jose Division dated December 28,
1998.
</TABLE>
- -------------------------
* To be filed by amendment.
+ Confidential treatment requested.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MARIMBA, INC.
(PURSUANT TO SECTIONS 228, 242 AND 245 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE)
Marimba, Inc., a corporation organized and existing under and by
virtue of the provisions of the General Corporation Law of the State of Delaware
(the "General Corporation Law"),
DOES HEREBY CERTIFY:
FIRST: That this corporation was originally incorporated
pursuant to the General Corporation Law on February 21, 1996 under the name of
Marimba, Inc.
SECOND: That the Board of Directors duly adopted resolutions
proposing to amend and restate the Certificate of Incorporation of this
corporation, declaring said amendment and restatement to be advisable and in the
best interests of this corporation and its stockholders, and authorizing the
appropriate officers of this corporation to solicit the consent of the
stockholders therefor, which resolution setting forth the proposed amendment and
restatement is as follows:
RESOLVED, that the Certificate of Incorporation of this
corporation be amended and restated in its entirety as follows:
ARTICLE I
The name of this corporation is Marimba, Inc.
ARTICLE II
The address of the registered office of this corporation in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is Corporation Service
Company.
ARTICLE III
The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
<PAGE> 2
ARTICLE IV
(A) Classes of Stock. This corporation is authorized to issue two
classes of stock, to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares that this corporation is authorized to issue
is Forty-Five Million (45,000,000). Thirty Million (30,000,000) shares shall be
Common Stock, par value $.0001 per share (the "Common Stock), and Fifteen
Million (15,000,000) shares shall be Preferred Stock, par value $.0001 per share
(the "Preferred Stock").
(B) Rights, Preferences and Restrictions of the Preferred Stock. The
Preferred Stock authorized by this Amended and Restated Certificate of
Incorporation may be issued from time to time in one or more series. The rights,
preferences, privileges, and restrictions granted to and imposed on the Series A
Preferred Stock, which series shall consist of Two Million Eight Hundred
Thousand (2,800,000) shares (the "Series A Preferred Stock") and the Series B
Preferred Stock, which shall consist of Three Million Fifty Thousand (3,050,000)
shares (the "Series B Preferred Stock"), are as set forth below in this Article
IV(B). Subject to obtaining the approvals required herein, the Board of
Directors is hereby authorized to fix or alter the rights, preferences,
privileges and restrictions granted to or imposed upon additional series of
Preferred Stock, and the number of shares constituting any such series and the
designation thereof, or of any of them. Subject to compliance with applicable
protective voting rights which have been or may be granted to the Preferred
Stock or series thereof in Certificates of Determination or this corporation's
Certificate of Incorporation ("Protective Provisions"), but notwithstanding any
other rights of the Preferred Stock or any series thereof, the rights,
privileges, preferences and restrictions of any such additional series may be
subordinated to, pari passu with (including, without limitation, inclusion in
provisions with respect to liquidation and acquisition preferences, redemption
and/or approval of matters by vote or written consent), or senior to any of
those of any present or future class or series of Preferred or Common Stock.
Subject to compliance with applicable Protective Provisions, the Board of
Directors is also authorized to increase or decrease the number of shares of any
series (other than the Series A Preferred Stock and Series B Preferred Stock),
prior or subsequent to the issuance of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be so decreased, the shares constituting such decrease shall resume
the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
1. Dividend Provisions.
(a) Subject to the rights of series of Preferred Stock that
may from time to time come into existence, the holders of the Series A Preferred
Stock and Series B Preferred Stock shall be entitled to receive dividends, out
of any assets legally available therefor, prior and in preference to any
declaration or payment of any dividend (payable other than in Common Stock or
other securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of this
corporation) on the Common Stock of this corporation, at the rate of $0.12 per
share per annum for the Series A Preferred Stock and $0.40 per share per annum
for the Series B Preferred Stock or, if greater (as determined on a per annum
basis and an as-converted basis for the Series A Preferred Stock and
2
<PAGE> 3
Series B Preferred Stock), an amount equal to that paid on any other outstanding
shares of this corporation, payable when, as, and if declared by the Board of
Directors. Such dividends shall not be cumulative.
(b) After payment of such dividends, any additional
dividends or distributions shall be distributed among all holders of Common
Stock, Series A Preferred Stock and Series B Preferred Stock in proportion to
the number of shares of Common Stock which would be held by each such holder if
all shares of Series A Preferred Stock and Series B Preferred Stock were
converted to Common Stock at the then effective conversion rate.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding
up of this corporation, either voluntary or involuntary, subject to the rights
of series of Preferred Stock that may from time to time come into existence, the
holders of Series A Preferred Stock and Series B Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets of this corporation to the holders of Common Stock by reason of their
ownership thereof, an amount per share equal to (i) $1.4824 for each outstanding
share of Series A Preferred Stock (the "Original Series A Issue Price") plus an
amount equal to declared but unpaid dividends on such share, and (ii) $5.0072
for each outstanding share of Series B Preferred Stock (the "Original Series B
Issue Price") plus an amount equal to declared but unpaid dividends on such
share. If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series A Preferred Stock and Series B
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amounts, then, subject to the rights of series
of Preferred Stock that may from time to time come into existence, the entire
assets and funds of this corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred Stock and Series
B Preferred Stock in proportion to the preferential amount each such holder is
otherwise entitled to receive.
(b) Upon the completion of the distribution required by
subsection 2(a) and any other distribution that may be required with respect to
series of Preferred Stock that may from time to time come into existence, the
remaining assets of this corporation available for distribution to stockholders
shall be distributed among the holders of Series A Preferred Stock, Series B
Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Preferred Stock)
until, (i) with respect to the holders of Series A Preferred Stock, such holders
shall have received an aggregate of $4.4472 per share (including amounts paid
pursuant to subsection 2(a)), and (ii) with respect to the holders of Series B
Preferred Stock, such holders shall have received an aggregate of $7.5108
(including amounts paid pursuant to Section 2(a) hereof); thereafter, subject to
the rights of series of Preferred Stock that may from time to time come into
existence, if assets remain in this corporation, the holders of the Common Stock
of this corporation shall receive all of the remaining assets of this
corporation pro rata based on the number of shares of Common Stock held by each.
3
<PAGE> 4
(c) (i) For purposes of this Section 2, a liquidation,
dissolution or winding up of this corporation shall be deemed to be occasioned
by, or to include, (A) the acquisition of this corporation by another entity by
means of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation but, excluding any
merger effected exclusively for the purpose of changing the domicile of this
corporation); or (B) a sale of all or substantially all of the assets of this
corporation; unless this corporation's stockholders of record as constituted
immediately prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration for this
corporation's acquisition or sale or otherwise) hold at least 50% of the voting
power of the surviving or acquiring entity.
(ii) In any of such events, if the consideration
received by 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 of this
corporation. Any securities shall be valued as follows:
(A) If traded on a securities exchange or through
the Nasdaq National Market system, the value shall be deemed to be the average
of the closing prices of the securities on such exchange or system over the
thirty (30) day period ending three (3) days prior to the closing of the
applicable transaction;
(B) 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 of the applicable transaction; and
(C) If there is no active public market, the value
shall be the fair market value thereof, as determined in good faith by the Board
of Directors of this corporation.
(iii) This corporation shall give each holder of record
of Series A Preferred Stock and Series B Preferred Stock written notice of such
impending transaction not later than twenty (20) days prior to the stockholders'
meeting called to approve such transaction, or twenty (20) days prior to the
closing of such transaction, whichever is earlier, and shall also notify such
holders in writing of the final approval of such transaction. The first of such
notices shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 2, and this corporation shall
thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than fifteen (15) days after
this corporation has given the first notice provided for herein or sooner than
ten (10) days after this corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the written consent of the holders of Series A Preferred Stock and Series B
Preferred Stock (voting together as a single class and on an as-converted basis)
that are entitled to such notice rights or similar notice rights and that
represent at least a majority of the voting power of all then outstanding shares
of such Preferred Stock.
4
<PAGE> 5
3. Redemption.
(a) Subject to the rights of series of Preferred Stock which
may from time to time come into existence, on or at any time after the date
August 15, 2003, this corporation shall:
(i) upon receipt by this corporation from the holders of
66.67% of the then outstanding shares of Series A Preferred Stock of their
written consent to redemption hereunder of their respective shares (the "Series
A Redemption Election"), at such time and to the extent that it may lawfully do
so, redeem in whole or in part the Series A Preferred Stock by paying in cash
therefor for each share of Series A Preferred Stock, a sum equal to $1.4824 per
share (as adjusted for any stock dividends, combinations or splits with respect
to such share) plus all declared but unpaid dividends on such share (the "Series
A Redemption Price"), and
(ii) upon receipt by this corporation from the holders
of 66.67% of the then outstanding shares of Series B Preferred Stock of their
written consent to redemption hereunder of their respective shares (the "Series
B Redemption Election") (the Series A Redemption Election and Series B
Redemption Election being referred to herein as the "Redemption Election" when
applicable to the redemption rights of both the Series A Preferred Stock and
Series B Preferred Stock), at such time and to the extent that it may lawfully
do so, redeem in whole or in part the Series B Preferred Stock by paying in cash
therefor for each share of Series B Preferred Stock, a sum equal to $5.0072 per
share (as adjusted for any stock dividends, combinations or splits with respect
to such share) plus all declared but unpaid dividends on such share (the "Series
B Redemption Price"). Any redemption pursuant to Section 3(a)(i) and this
Section 3(a)(ii) shall occur on the date forty-five (45) days after the receipt
of the Redemption Election or as soon thereafter as this corporation may
lawfully conduct such redemption under the terms of this Section 3 (the
"Redemption Date").
(b) Subject to the rights of series of Preferred Stock which
may from time to time come into existence, at least fifteen (15) but no more
than thirty (30) days prior to the Redemption Date, written notice shall be
mailed, first class postage prepaid, to each holder of record (at the close of
business on the business day next preceding the day on which notice is given) of
the Preferred Stock to be redeemed, at the address last shown on the records of
this corporation for such holder, notifying such holder of the redemption to be
effected, specifying the number of shares to be redeemed from such holder, the
applicable Redemption Date, the applicable Redemption Price, the place at which
payment may be obtained and calling upon such holder to surrender to this
corporation, in the manner and at the place designated, his, her or its
certificate or certificates representing the shares to be redeemed (the
"Redemption Notice"). In addition, the Redemption Notice shall also be sent,
within the time period provided above, to the holders of any series of Preferred
Stock who have not requested redemption. Subject to obtaining the sufficient
consent of the then outstanding shares of such series of Preferred Stock
pursuant to Section 3(a)(i) above, such holders shall also have their shares
redeemed pursuant to the terms set forth in this Section 3. In addition, such
holders may elect to have their shares redeemed as of the Redemption Date
applicable to the shares of the other series being redeemed.
5
<PAGE> 6
Except as provided in subsection (3)(c) on or after the applicable Redemption
Date, each holder of shares of Series A Preferred Stock or Series B Preferred
Stock, as applicable, to be redeemed shall surrender to this corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the applicable
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. In the event less than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
(c) From and after the applicable Redemption Date, unless
there shall have been a default in payment of the applicable Redemption Price,
all rights of the holders of shares of Series A Preferred Stock and Series B
Preferred Stock designated for redemption in the applicable Redemption Notice as
holders of Series A Preferred Stock and Series B Preferred Stock, respectively,
(except the right to receive the applicable Redemption Price without interest
upon surrender of their certificate or certificates) shall cease with respect to
such shares, and such shares shall not thereafter be transferred on the books of
this corporation or be deemed to be outstanding for any purpose whatsoever.
Subject to the rights of series of Preferred Stock which may from time to time
come into existence, if the funds of this corporation legally available for
redemption of shares of Series A Preferred Stock and Series B Preferred Stock on
the applicable Redemption Date are insufficient to redeem the total number of
shares of Series A Preferred Stock or Series B Preferred Stock, as applicable,
to be redeemed on such date, those funds which are legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock or Series B Preferred Stock, as applicable, in proportion to the
redemption amount each such holder is otherwise entitled to receive. The shares
of Series A Preferred Stock and Series B Preferred Stock not redeemed on the
applicable Redemption Date shall remain outstanding and entitled to all the
rights and preferences provided herein. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, at any time
thereafter when additional funds of this corporation are legally available for
the redemption of shares of Series A Preferred Stock or Series B Preferred
Stock, as applicable, such funds will immediately be used to redeem the balance
of the shares of Series A Preferred Stock or Series B Preferred Stock, as
applicable, which this corporation has not redeemed.
(d) Three days prior to the applicable Redemption Date, this
corporation shall deposit the aggregate applicable Redemption Price of all
outstanding shares of Series A Preferred Stock or Series B Preferred Stock, as
applicable, designated for redemption in the Redemption Notice, and not yet
redeemed or converted, with a bank or trust company having aggregate capital and
surplus in excess of $50,000,000 as a trust fund for the benefit of the
respective holders of the shares designated for redemption and not yet redeemed.
Simultaneously, this corporation shall deposit irrevocable instruction and
authority to such bank or trust company to publish the notice of redemption
thereof (or to complete such publication if theretofore commenced) and to pay,
on and after the date fixed for redemption or prior thereto, the applicable
Redemption Price of the Series A Preferred Stock or Series B Preferred Stock, as
applicable, to the holders thereof upon surrender of their certificates. Any
monies deposited by this corporation pursuant to this subsection 3(d) for the
redemption of shares which are thereafter
6
<PAGE> 7
converted into shares of Common Stock pursuant to Section 4 hereof no later than
the close of business on the applicable Redemption Date shall be returned to
this corporation forthwith upon such conversion. The balance of any monies
deposited by this corporation pursuant to this subsection 3(d) remaining
unclaimed at the expiration of two years following the applicable Redemption
Date shall thereafter be returned to this corporation, provided that the
stockholder to which such money would be payable hereunder shall be entitled,
upon proof of its ownership of the Series A Preferred Stock or Series B
Preferred Stock, as applicable, and payment of any bond reasonably requested by
this corporation, to receive such monies but without interest from the
applicable Redemption Date.
4. Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after the date
of issuance of such share, and on or prior to the close of business on the day
prior to the applicable Redemption Date, if any, as may be specified in the
applicable Redemption Notice with respect to the applicable series of Preferred
Stock, at the office of this corporation or any transfer agent for the Preferred
Stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing the Original Issue Price for such share by the
Conversion Price applicable to such share, determined as hereafter provided, in
effect on the date the certificate is surrendered for conversion. The initial
Conversion Price per share for shares of Series A Preferred Stock and Series B
Preferred Stock shall be the applicable Original Issue Price for such share;
provided, however, that the Conversion Price for the Series A Preferred Stock
and Series B Preferred Stock shall be subject to adjustment as set forth in
subsection 4(d).
(b) Automatic Conversion. Each share of Series A Preferred
Stock and Series B Preferred Stock shall automatically be converted into shares
of Common Stock at the Conversion Price at the time in effect for such share
immediately upon the consummation of the sale of this corporation's Common Stock
in an underwritten public offering pursuant to a registration statement under
the Securities Act of 1933, as amended, the public offering price of which was
not less than $7.5108 per share (as adjusted to reflect subsequent stock
dividends, contributions, stock splits or recapitalizations and the like) with
aggregate gross proceeds (excluding underwriting discounts and commissions) to
this corporation of at least $12,500,000.
(c) Mechanics of Conversion. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of this corporation or of any transfer agent for the Preferred
Stock, and shall give written notice to this corporation at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued. This corporation shall, as soon as practicable
thereafter, issue and deliver to such holder of Preferred Stock, or to the
nominee or nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as aforesaid.
Such
7
<PAGE> 8
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offering of securities
registered pursuant to the Act, the conversion may, at the option of any holder
tendering Preferred Stock for conversion, be conditioned upon the closing with
the underwriters of the sale of securities pursuant to such offering, in which
event the person(s) entitled to receive the Common Stock issuable upon such
conversion of the Preferred Stock shall not be deemed to have converted such
Preferred Stock until immediately prior to the closing of such sale of
securities.
(d) Conversion Price Adjustments of Preferred Stock for
Certain Dilutive Issuances, Splits and Combinations. The Conversion Price of the
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) If this corporation shall issue, after the date upon
which any shares of Series B Preferred Stock were first issued (the "Purchase
Date"), but prior to the date ending 180 days after the Purchase Date (the
"Ratchet Termination Date"), any Additional Stock (as defined below) without
consideration or for a consideration per share less than the Conversion Price
for the Series B Preferred Stock in effect immediately prior to the issuance of
such Additional Stock, the Conversion Price for the Series B Preferred Stock in
effect immediately prior to each such issuance shall forthwith (except as
otherwise provided in this clause (d)) be adjusted to a price equal to the price
paid per share for such Additional Stock; provided, however, that if the
Additional Stock is issued without consideration, the Conversion Price for the
Series B Preferred Stock shall be $0.01.
(ii) (A) Upon each issuance or sale by this corporation
of any Additional Stock after the Ratchet Termination Date without consideration
or for a consideration per share less than the Conversion Price for the Series B
Preferred Stock in effect immediately prior to the issuance of such Additional
Stock, the Conversion Price for the Series B Preferred Stock in effect
immediately prior to each such issuance of Additional Stock shall forthwith
(except as otherwise provided in this clause (ii)) be adjusted to a price
determined by multiplying such Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance of Additional Stock (including shares of Common Stock
deemed to be issued pursuant to subsection 4(d)(ii)(E)(1) or (2)) plus the
number of shares of Common Stock that the aggregate consideration received by
this corporation for such issuance of Additional Stock would purchase at such
Conversion Price, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance of Additional Stock
(including shares of Common Stock deemed to be issued pursuant to subsection
4(d)(ii)(E)(1) or (2)) plus the number of shares of such Additional Stock.
(B) No adjustment of the Conversion Price for the
Series B Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments that are not required to be made by reason
of this sentence shall be carried
8
<PAGE> 9
forward and shall be either taken into account in any subsequent adjustment made
prior to three years from the date of the event giving rise to the adjustment
being carried forward, or shall be made at the end of three years from the date
of the event giving rise to the adjustment being carried forward. Except to the
limited extent provided for in subsections 4(d)(ii)(E)(3) and (4), no adjustment
of the Conversion Price for the Series B Preferred Stock pursuant to this
subsection 4(d)(ii) shall have the effect of increasing such Conversion Price
above the Conversion Price for such series in effect immediately prior to such
adjustment.
(C) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
after deducting any reasonable discounts, commissions or the like, but without
deducting any other expenses allowed, paid or incurred by this corporation for
any underwriting or otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of Common Stock for
a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as reasonably determined
by the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on
or after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock, or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4(d)(ii) and subsection 4(d)(iii):
(1) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the passage of time,
but without taking into account potential antidilution adjustments) of such
options to purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
subsections 4(d)(ii)(C) and (D)), if any, received by this corporation upon the
issuance of such options or rights plus the minimum exercise price provided in
such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or exchangeability, including,
without limitation, the passage of time, but without taking into account
potential antidilution adjustments) for any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration, if any, received by this corporation for any such
securities and related options or rights, plus the minimum additional
consideration, if any, to be received by this corporation (without taking into
9
<PAGE> 10
account potential antidilution adjustments) upon the conversion or exchange of
such securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in
subsections 4(d)(ii)(C) and (D)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to this
corporation upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
Conversion Price of the Series B Preferred Stock, to the extent in any way
affected by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or exchange of such
securities.
(4) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange, or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price of the Series B Preferred Stock, to the extent
in any way affected by or computed using such options, rights or securities, or
options or rights related to such securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and convertible or
exchangeable securities that remain in effect) actually issued, if any, upon the
exercise of such options or rights, upon the conversion or exchange of such
securities, or upon the exercise of the options or rights related to such
securities.
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to subsections
4(d)(ii)(E)(1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either subsection
4(d)(ii)(E)(3) or (4).
(iii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(d)(ii)(E))
by this corporation after the effective date of filing of this Amended and
Restated Certificate of Incorporation other than:
(A) Common Stock issued pursuant to a transaction
described in subsection 4(d)(iv) hereof;
(B) Common Stock issuable or issued upon
conversion of up to 2,800,000 shares of Series A Preferred Stock and 3,050,000
shares of Series B Preferred Stock, or exercise of options exercisable for up to
320,000 shares of Common Stock and warrants exercisable for 16,865 shares of
Series A Preferred Stock outstanding as of the Purchase Date, or pursuant to
conversion of any convertible securities issuable upon exercise of options or
warrants outstanding as of the Purchase Date;
(C) Up to 4,030,279 shares of Common Stock (the
"Employee Reserve") (such amount including 320,000 shares of Common Stock
issuable
10
<PAGE> 11
pursuant to options outstanding as of the date of the filing of this Amended and
Restated Certificate of Incorporation and excluding shares repurchased at cost
in connection with the termination of services) issuable or issued to employees,
officers, directors, consultants or other service providers of this corporation
directly or pursuant to a stock option plan or restricted stock plan approved by
the Board of Directors; provided however, that the Employee Reserve shall be
increased by an amount of shares equal to 2.5% of this corporation's then
outstanding Common Stock (assuming full conversion of all then outstanding
convertible securities and exercise of all then outstanding exercisable
securities) on August 31 of each year beginning in calendar year 1998; or
(D) Shares of Common Stock or Preferred Stock,
warrants or other securities issued in connection with business relationships,
including but not limited to business combinations, corporate partnering
agreements and capital equipment leases, approved by the Board of Directors
including the consent of the director elected by the holders of Series A
Preferred Stock, voting as a separate class, and the director, if any, elected
by the holders of the Series A Preferred Stock, Series B Preferred Stock and
Common Stock, voting together as a single class; provided such issuances are
primarily for other than equity financing purposes.
(iv) In the event this corporation should at any time or
from time to time after the effective date of filing of this Amended and
Restated Certificate of Incorporation fix a record date for the effectuation of
a split or subdivision of the outstanding shares of Common Stock without a
corresponding split or subdivision of the Preferred Stock or the determination
of holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock and Series B Preferred Stock shall be
proportionally decreased so that the number of shares of Common Stock issuable
on conversion of each share of such series shall be increased in proportion to
such increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents. Any adjustment under
this Section 4(d)(iv) shall become effective on the date such subdivision or
split becomes effective.
(v) If the number of shares of Common Stock outstanding
at any time after the effective date of filing of this Amended and Restated
Certificate of Incorporation is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination, the
Conversion Price for the Series A Preferred Stock and Series B Preferred Stock
shall be proportionally increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares. Any adjustment under this
Section 4(d)(v) shall become effective on the date such combination becomes
effective.
11
<PAGE> 12
(e) Recapitalizations. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination, merger, or sale of assets transaction provided for elsewhere in
this Section 4 or in Section 2 hereof), provision shall be made so that the
holders of the Preferred Stock shall thereafter be entitled to receive upon
conversion of the Preferred Stock the number of shares of stock or other
securities or property of this corporation or otherwise, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions hereof, with respect to the rights of the holders
of the Preferred Stock after the recapitalization to the end that the provisions
of this Section 4 shall be applicable after that event as nearly equivalent as
may be practicable.
(f) No Impairment. This corporation will not, by amendment
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions hereof, and in the taking of all such as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment.
(g) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Preferred Stock, and the number of
shares of Common Stock to be issued shall be determined by rounding to the
nearest whole share. Such conversion shall be determined on the basis of the
total number of shares of Preferred Stock the holder is at the time converting
into Common Stock, and such rounding shall apply to the number of shares of
Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the applicable Conversion Price of Series A Preferred Stock or
Series B Preferred Stock pursuant to this Section 4, this corporation, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series A
Preferred Stock and Series B Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock or Series B
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, and (B) the
number of shares of Common Stock and the amount, if any, of other property that
at the time would be received upon the conversion of a share of Series A
Preferred Stock or Series B Preferred Stock, respectively.
(h) Notices of Record Date. In the event of any taking by
this corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other
12
<PAGE> 13
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, this corporation shall mail to each holder of Preferred Stock,
at least twenty (20) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
(i) Reservation of Stock Issuable Upon Conversion. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock and Series B Preferred
Stock, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series A
Preferred Stock and Series B Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Preferred Stock
and Series B Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, this corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes, including, without limitation, engaging
in best efforts to obtain the requisite stockholder approval of any necessary
amendment to this certificate.
(j) Notices. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A Preferred Stock or
Series B Preferred Stock shall be deemed given if delivered by confirmed
facsimile or electronic transmission (with duplicate original sent by United
States mail) or if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
corporation.
5. Voting Rights.
(a) Subject to Section 5(b) hereof, the holder of each share
of Preferred Stock shall have the right to one vote for each share of Common
Stock into which such share could then be converted, and with respect to such
vote, such holder shall have full voting rights and powers equal to the voting
rights and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the Bylaws of this corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an
as-converted basis (after aggregating all shares into which shares of Preferred
Stock held by each holder could be converted) shall be rounded to the nearest
whole number (with one-half being rounded upward).
(b) So long as 1,500,000 shares of Series A Preferred Stock
remain outstanding (as adjusted for subsequent reverse stock splits,
recapitalizations and the like), one member of the Board of Directors of this
corporation shall be elected by the holders of
13
<PAGE> 14
the Series A Preferred Stock, voting together as a single class. The holders of
outstanding Common Stock, Series A Preferred Stock and Series B Preferred Stock,
all voting together as a single class, shall be entitled to elect one member of
the Board of Directors of this corporation. The holders of outstanding Common
Stock voting together as a single class shall be entitled to elect any remaining
directors of this corporation. Any director who shall have been elected as
provided in this subsection 5(b) may be removed, either with or without cause,
by, and only by, the affirmative vote of the holders of the shares of the class
and/or series of stock entitled to elect such director, given either at a
special meeting of such stockholders duly called for that purpose or pursuant to
a written consent of stockholders, and any vacancy thereby created may be filled
by the holders of that class or series of stock represented at the meeting or
pursuant to a written consent.
6. Protective Provisions.
(a) Subject to the rights of series of Preferred Stock that
may from time-to-time come into existence, this corporation shall not take any
of the following actions without first obtaining the approval (by vote or
written consent, as provided by law) of at least fifty percent (50%) of the then
outstanding shares of the Series A Preferred Stock, voting as a single class on
an as-converted basis:
(i) alter or change the rights, preferences, or
privileges of the Series A Preferred Stock so as to affect adversely such series
of Preferred Stock;
(ii) increase the authorized number of shares of
Preferred Stock;
(iii) authorize or issue, or obligate itself to issue,
any other equity security (including any other security convertible into or
exercisable for such equity security) having a preference over the Series A
Preferred Stock with respect to voting, dividends, redemption or liquidation;
(iv) redeem, purchase or otherwise acquire (or pay into
or set funds aside for a sinking fund for such purpose) any share or shares of
Preferred Stock or Common Stock; provided; however, that this restriction shall
not apply to (A) the repurchase of shares of Common Stock from employees,
officers, directors, consultants or other persons performing services for this
corporation or any subsidiary pursuant to agreements under which this
corporation has the option to repurchase such shares at cost or at cost upon the
occurrence of certain events, such as the termination of employment; (B) the
repurchase of shares pursuant to the Company's Bylaws or (C) the redemption
rights set forth in Section 3 of this Article IV;
(v) increase or decrease the authorized number of
directors of this corporation; or
(vi) sell, convey or otherwise dispose of all or
substantially all of its property or business or assets or merge into or
consolidate with any other
14
<PAGE> 15
corporation (other than a wholly-owned subsidiary corporation) or effect any
transaction or series of related transactions which results in such a sale,
merger or consolidation.
(b) Subject to the rights of series of Preferred Stock that
may from time-to-time come into existence, this corporation shall not take any
of the following actions without first obtaining the approval (by vote or
written consent, as provided by law) of at least fifty percent (50%) of the then
outstanding shares of the Series B Preferred Stock, voting as a single class on
an as-converted basis:
(i) alter or change the rights, preferences or
privileges of the Series B Preferred Stock so as to affect adversely such series
of Preferred Stock;
(ii) increase the authorized number of shares of
Preferred Stock;
(iii) authorize or issue, or obligate itself to issue,
any other equity security (including any other security convertible into or
exercisable for such equity security) having a preference over the Series A
Preferred Stock or the Series B Preferred Stock with respect to voting,
dividends, redemption or liquidation;
(iv) redeem, purchase or otherwise acquire (or pay into
or set funds aside for a sinking fund for such purpose) any share or shares of
Preferred Stock or Common Stock; provided; however, that this restriction shall
not apply to (A) the repurchase of shares of Common Stock from employees,
officers, directors, consultants or other persons performing services for this
corporation or any subsidiary pursuant to agreements under which this
corporation has the option to repurchase such shares at cost or at cost upon the
occurrence of certain events, such as the termination of employment; (B) the
repurchase of shares pursuant to the Company" Bylaws or (C) the redemption
rights set forth in Section 3 of this Article IV;
(v) increase or decrease the authorized number of
directors of this corporation; or
(vi) sell, convey or otherwise dispose of all or
substantially all of its property or business or assets or merge into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any transaction or series of related transactions which
results in such a sale, merger or consolidation.
7. Status of Redeemed or Converted Stock. In the event any
shares of Preferred Stock shall be redeemed or converted pursuant to Sections 3
or 4 hereof, the shares so redeemed or converted shall be canceled and shall not
be issuable by this corporation. Subject to any required approvals, the
Certificate of Incorporation of this corporation shall be appropriately amended
to effect the corresponding reduction in this corporation's authorized capital
stock.
(C) Common Stock. The rights, preferences, privileges and
restrictions granted to and imposed on the Common Stock are as set forth below
in this Article IV(C).
15
<PAGE> 16
1. Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of this corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or
winding up of this corporation, the assets of this corporation shall be
distributed as provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock shall
have the right to one vote for each such share, and shall be entitled to notice
of any stockholders' meeting in accordance with the Bylaws of this corporation,
and shall be entitled to vote upon such matters and in such manner as may be
provided by law. Two members of the Board of Directors of this corporation shall
be elected by the holders of Common Stock, voting as a single class. Unless
otherwise approved by the Board of Directors of this corporation (which approval
shall include the consent of the director elected pursuant to Section (B)5(b) of
this Article IV), one of such directors shall be a person (a) unaffiliated with
either this corporation or any affiliate of this corporation, and (b) that has
been or is an executive officer or member of the Board of Directors of a
recognized company in this corporation's industry. Any director who shall have
been elected by the holders of Common Stock, as provided in this subsection
(c)(4), may be removed, either with or without cause, by, and only by, the
affirmative vote of the holders of the Common Stock entitled to elect such
director, given either at a special meeting of stockholders duly called for that
purpose or pursuant to a written consent of stockholders, and any vacancy
thereby created may be filled only by the holders of that class of stock
represented at the meeting or pursuant to a written consent.
ARTICLE V
A director of this corporation shall, to the fullest extent
permitted by the General Corporation Law as it now exists or as it may hereafter
be amended, not be personally liable to this corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to this
corporation or its stockholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law, or (iv) for any transaction from
which the director derived any improper personal benefit. If the General
Corporation Law is amended, after approval by the stockholders of this Article
V, to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of this corporation
shall be eliminated or limited to the fullest extent permitted by the General
Corporation Law, as so amended.
Any amendment, repeal or modification of this Article V, or the
adoption of any provision of this Amended and Restated Certificate of
Incorporation inconsistent with this
16
<PAGE> 17
Article V by the stockholders of this corporation shall not apply to or
adversely affect any right or protection of a director of this corporation
existing at the time of such amendment, repeal, modification or adoption.
ARTICLE VI
To the fullest extent permitted by applicable law, this
corporation is authorized to provide indemnification of (and advancement of
expenses to) agents of this corporation (and any other persons to which Delaware
law permits this corporation to provide indemnification) through bylaw
provisions, agreements with such agents or other persons, vote of stockholders
or disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to this
corporation, its stockholders, and others.
ARTICLE VII
Subject to any provisions set forth in this Certificate, the
Board of Directors may from time to time adopt, amend, alter, supplement,
rescind or repeal any or all of the Bylaws of this corporation without any
action on the part of the stockholders; provided, however, that the stockholders
may adopt, amend or repeal any Bylaw adopted by the Board of Directors, and no
amendment or supplement to the Bylaws adopted by the Board of Directors shall
vary or conflict with any amendment or supplement adopted by the stockholders.
ARTICLE VIII
Subject to any provisions set forth in this certificate, the
number of directors of this corporation shall be set from time to time by
resolution of the Board of Directors.
ARTICLE IX
Elections of directors need not be by written ballot unless the
Bylaws of this corporation shall so provide.
ARTICLE X
Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of this corporation may be
kept (subject to any statutory requirements) outside the State of Delaware at
such place or places as may be designated from time to time by the Board of
Directors or in the Bylaws of this corporation.
* * *
17
<PAGE> 18
THIRD: The foregoing amendment and restatement was approved by
the holders of the requisite number of shares of said corporation in accordance
with Section 228 of the General Corporation Law.
FOURTH: That said amendment and restatement was duly adopted in
accordance with the provisions of Section 242 and 245 of the General Corporation
Law.
18
<PAGE> 19
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed by the President and Secretary of this corporation
this ___ day of August, 1997.
/s/ KIM POLESE
----------------------------------------
Kim Polese, President
/s/ SCOTT C. DETTMER
----------------------------------------
Scott C. Dettmer, Secretary
19
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF CORRECTION FILED TO CORRECT
A CERTAIN ERROR IN THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MARIMBA, INC.
Marimba, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "General
Corporation Law"),
DOES HEREBY CERTIFY:
1. The name of the corporation (hereinafter called the
"Corporation") is Marimba, Inc.
2. That an Amended and Restated Certificate of Incorporation of
the Corporation was filed by the Secretary of State of Delaware on August 21,
1997, and that said Certificate requires correction as permitted by Section 103
of the General Corporation Law.
3. The inaccuracy to be corrected in said instrument is as
follows:
The third sentence of Section 2.(c)(iii) of Division B of
Article IV incorrectly states:
"The transaction shall in no event take place sooner than
fifteen (15) days after this corporation has given the first notice provided for
herein or sooner than ten (10) days after this corporation has given notice of
any material changes provided for herein; provided, however, that such periods
may be shortened upon the written consent of the holders of Series A Preferred
Stock and Series B Preferred Stock (voting together as a single class and on an
as-converted basis) that are entitled to such notice rights or similar notice
rights and that represent at least a majority of the voting power of all then
outstanding shares of such Preferred Stock."
4. The third sentence of Section 2.(c)(iii) of Division B of
Article IV is hereby corrected to read as follows:
"The transaction shall in no event take place sooner than
thirty (30) days after this corporation has given the first notice provided for
herein or sooner than ten (10) days after this corporation has given notice of
any material changes provided for herein; provided, however, that such periods
may be shortened upon the written consent of the holders of Series A Preferred
Stock and Series B Preferred Stock (voting together as a single class and on an
as-converted basis) that are entitled to such notice rights or similar notice
rights and that represent at least a majority of the voting power of all then
outstanding shares of such Preferred Stock."
<PAGE> 2
IN WITNESS WHEREOF, this Certificate of Correction to the Amended
and Restated Certificate of Incorporation has been signed by the Assistant
Secretary of the Corporation on this ____ day of August, 1997.
MARIMBA, INC.
By /s/ DOUGLAS S. BARRY
--------------------------------------
Douglas S. Barry,
Assistant Secretary
<PAGE> 1
EXHIBIT 3.3
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
MARIMBA, INC.
A DELAWARE CORPORATION
(PURSUANT TO SECTIONS 228, 242 AND 245
OF THE DELAWARE GENERAL CORPORATION LAW)
Marimba, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "General Corporation Law")
DOES HEREBY CERTIFY:
FIRST: That this corporation was originally incorporated on
February 21, 1996, pursuant to the General Corporation Law.
SECOND: That the Board of Directors duly adopted resolutions
proposing to amend and restate the Amended and Restated Certificate of
Incorporation of this corporation, declaring said amendment and restatement to
be advisable and in the best interests of this corporation and its stockholders,
and authorizing the appropriate officers of this corporation to solicit the
consent of the stockholders therefor, which resolution setting forth the
proposed amendment and restatement is as follows:
"RESOLVED, that the Amended and Restated Certificate of
Incorporation of this corporation, as amended, be amended and restated in its
entirety as follows:
ARTICLE I
The name of the corporation is Marimba, Inc. (the "Corporation").
ARTICLE II
The address of the registered office of this corporation in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is Corporation Services
Company.
ARTICLE III
The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
ARTICLE IV
The Corporation is authorized to issue two classes of stock to be
designated common stock ("Common Stock") and preferred stock ("Preferred
Stock"). The number of
<PAGE> 2
shares of Common Stock authorized to be issued is Eighty Million (80,000,000),
par value $0.0001 per share, and the number of Preferred Stock authorized to be
issued is Ten Million (10,000,000), par value $0.0001 per share.
The Preferred Stock may be issued from time to time in one or
more series, without further stockholder approval. The Board of Directors is
hereby authorized, in the resolution or resolutions adopted by the Board of
Directors providing for the issue of any wholly unissued series of Preferred
Stock, within the limitations and restrictions stated in this Second Amended and
Restated Certificate of Incorporation (the "Restated Certificate"), to fix or
alter the dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of 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 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 that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
ARTICLE V
Except as otherwise provided in this Restated Certificate, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of the Corporation.
ARTICLE VI
The number of directors of the Corporation shall be fixed from
time to time by a bylaw or amendment thereof duly adopted by the Board of
Directors or by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
ARTICLE VIII
Except as otherwise provided in this Restated Certificate, any
action required or permitted to be taken by the stockholders of the Corporation
must be effected at an annual or special meeting of the stockholders of the
Corporation, and no action required to be taken or that may be taken at any
annual or special meeting of the stockholders of the Corporation may be taken by
written consent.
2
<PAGE> 3
ARTICLE IX
A director or officer of the Corporation shall, to the fullest
extent permitted by the General Corporation Law as it now exists or as it may
hereafter be amended, not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director or
officer, except for liability (i) for any breach of the director's or officer's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director or officer derived any
improper personal benefit. 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 directors or officers
then the liability of a director or officer of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law as so amended.
Any repeal or modification of the foregoing provisions of this
Article IX by the stockholders of the Corporation shall not adversely affect any
right or protection of a director or officer of the Corporation existing at the
time of, or increase the liability of any director or officer of this
Corporation with respect to any acts or omissions of such director or officer
occurring prior to, such repeal or modification.
ARTICLE X
In addition to any vote of the holders of any class or series of
the stock of the Corporation required by law or by this Restated Certificate,
the affirmative vote of the holders of a majority of the voting power of all of
the then outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to amend or repeal any provision of this Restated Certificate of
Incorporation.
ARTICLE XI
To the fullest extent permitted by applicable law, the
Corporation is authorized to provide indemnification of (and advancement of
expenses to) agents of the Corporation (and any other persons to which General
Corporation Law permits the Corporation to provide indemnification) through
bylaw provisions, agreements with such agents or other persons, vote of
stockholders or disinterested directors or otherwise, in excess of the
indemnification and advancement otherwise permitted by Section 145 of the
General Corporation Law, subject only to limits created by applicable General
Corporation Law (statutory or non-statutory), with respect to actions for breach
of duty to the Corporation, its stockholders, and others.
Any amendment, repeal or modification of the foregoing provisions
of this Article XI shall not adversely affect any right or protection of a
director, officer, agent, or other person existing at the time of, or increase
the liability of any director of the Corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to, such amendment,
repeal or modification.
3
<PAGE> 4
* * *
THIRD: The foregoing Restated Certificate was approved by the
holders of the requisite number of shares of said corporation in accordance with
Section 228 of the General Corporation Law of the State of Delaware.
FOURTH: That said Restated Certificate was duly adopted in
accordance with the provisions of Section 242 and 245 of the General Corporation
Law of the State of Delaware.
4
<PAGE> 5
IN WITNESS WHEREOF, the undersigned has signed this Certificate
this ___ day of ____________, 1999.
----------------------------------------
Kim Polese
President and Chief Executive Officer
ATTEST:
- ------------------------------------
Scott C. Dettmer
Secretary
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
MARIMBA, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The corporation 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
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Palo Alto California, at such place as
may be fixed from time to time by the Board of Directors, or at such other place
either within or without the State of Delaware as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the
year 1996, shall be held at such date and time as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting, at
which they shall elect by a plurality vote a
Marimba, Inc. - Bylaws
1.
<PAGE> 2
board of directors, and transact such other business as may properly be brought
before the meeting.
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each stockholder entitled
to vote at such meeting not fewer than ten (10) nor more than sixty (60) days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose
or purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning at least ten
percent (10%) in amount of the entire capital stock of the corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not fewer
Marimba, Inc. - Bylaws
2.
<PAGE> 3
than ten (10) nor more than sixty (60) days before the date of the meeting, to
each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty 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 9. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by
Marimba, Inc. - Bylaws
3.
<PAGE> 4
proxy for each share of the capital stock having voting power held by such
stockholder, but no proxy shall be voted on after three years from its date,
unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such 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. 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.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the
whole board shall be determined by resolution of the Board of Directors or by
the stockholders at the annual meeting of the stockholders, except as provided
in Section 2 of this Article, and each director elected shall hold office until
his successor is elected and qualified.
Directors need not be stockholders.
Section 2. Vacancies and new created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
Marimba, Inc. - Bylaws
4.
<PAGE> 5
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. 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 Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these bylaws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of
Directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice
Marimba, Inc. - Bylaws
5.
<PAGE> 6
given as hereinafter provided for special meetings of the Board of Directors, or
as shall be specified in a written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
president on two (2) days' notice to each director by mail or twenty-four (24)
notice to each director either personally, by telegram, or by facsimile; special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of two directors unless the board consists of
only one director, in which case special meetings shall be called by the
president or secretary in like manner and on like notice on the written request
of the sole director.
Section 8. At all meetings of the board a majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation of 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 or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Marimba, Inc. - Bylaws
6.
<PAGE> 7
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board 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.
In the absence or disqualification of a 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.
Any such committee, to the extent 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 amending the certificate of incorporation, 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
Marimba, Inc. - Bylaws
7.
<PAGE> 8
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the bylaws of the corporation; and, unless the resolution or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of
the certificate of incorporation or of these bylaws, notice is required to be
given to any director or stockholder, it
Marimba, Inc. - Bylaws
8.
<PAGE> 9
shall not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such director or stockholder, at his address as
it appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a president, treasurer and a secretary. The
Board of Directors may elect from among its members a Chairman of the Board and
a Vice Chairman of the Board. The Board of Directors may also choose one or more
vice-presidents, assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, a treasurer, and a
secretary and may choose vice presidents.
Section 3. The Board of Directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Marimba, Inc. - Bylaws
9.
<PAGE> 10
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office
until their successors are chosen and qualify. Any officer elected or appointed
by the Board of Directors may be removed at any time by the affirmative vote of
a majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at
all meetings of the Board of Directors and of the stockholders at which he shall
be present. He shall have and may exercise such powers as are, from time to
time, assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which he shall be present. He shall have
and may exercise such powers as are, from time to time, assigned to him by the
Board and as may be provided by law.
THE PRESIDENT AND VICE-PRESIDENTS
Section 8. The president shall be the chief executive officer of
the corporation; and in the absence of the Chairman and Vice Chairman of the
Board he shall preside at all meetings of the stockholders and the Board of
Directors; he shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise
Marimba, Inc. - Bylaws
10.
<PAGE> 11
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation.
Section 10. In the absence of the president or in the event of
his inability or refusal to act, the vice-president, if any, (or in the event
there be more than one vice-president, the vice-presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 12. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the Board of Directors
(or if there be no such
Marimba, Inc. - Bylaws
11.
<PAGE> 12
determination, then in the order of their election) shall, in the absence of the
secretary or in the event of his inability or refusal to act, perform the duties
and exercise the powers of the secretary and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 15. If required by the Board of Directors, he shall give
the corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the restoration
to the corporation, in case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Section 16. The assistant treasurer, or if there shall be more
than one, the assistant treasurers in the order determined by the Board of
Directors (or if there be no such determination,
Marimba, Inc. - Bylaws
12.
<PAGE> 13
then in the order of their election) shall, in the absence of the treasurer or
in the event of his inability or refusal to act, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. 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 or vice-chairman of the Board of Directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Certificates may be issued for partly paid shares and in such
case upon the face or back of the certificates issued to represent any such
partly paid shares, the total amount of the consideration to be paid therefor,
and the amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each
Marimba, Inc. - Bylaws
13.
<PAGE> 14
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.
Section 2. Any of or all the signatures on the certificate may be
facsimile. 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 by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to 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. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require 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
and/or to give the corporation a bond in such sum 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.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a
Marimba, Inc. - Bylaws
14.
<PAGE> 15
new certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. 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.
REGISTERED STOCKHOLDERS
Section 6. 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 to hold liable for calls and
assessments a person registered on its books as the owner of shares 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 VII
GENERAL PROVISIONS
DIVIDENDS
Marimba, Inc. - Bylaws
15.
<PAGE> 16
Section 1. 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 at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. 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 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
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal
having inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Delaware". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
Marimba, Inc. - Bylaws
16.
<PAGE> 17
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized under the
laws of the State of Delaware, as those laws may be amended and supplemented
from time to time, indemnify any director made, or threatened to be made, a
party to an action or proceeding, whether criminal, civil, administrative or
investigative, by reason of being a director of the corporation or a predecessor
corporation or, at the corporation's request, a director or officer of another
corporation, provided, however, that the corporation shall indemnify any such
agent in connection with a proceeding initiated by such agent only if such
proceeding was authorized by the Board of Directors of the corporation. The
indemnification provided for in this Section 6 shall: (i) not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement or vote of stockholders or disinterested directors or
otherwise, both as to action in their official capacities and as to action in
another capacity while holding such office, (ii) continue as to a person who has
ceased to be a director, and (iii) inure to the benefit of the heirs, executors
and administrators of such a person. The corporation's obligation to provide
indemnification under this Section 6 shall be offset to the extent of any other
source of indemnification or any otherwise applicable insurance coverage under a
policy maintained by the corporation or any other person.
Marimba, Inc. - Bylaws
17.
<PAGE> 18
Expenses incurred by a director of the corporation in defending a
civil or criminal action, suit or proceeding by reason of the fact that he is or
was a director of the corporation (or was serving at the corporation's request
as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized by relevant sections of the
General Corporation Law of Delaware. Notwithstanding the foregoing, the
corporation shall not be required to advance such expenses to an agent who is a
party to an action, suit or proceeding brought by the corporation and approved
by a majority of the Board of Directors of the corporation which alleges willful
misappropriation of corporate assets by such agent, disclosure of confidential
information in violation of such agent's fiduciary or contractual obligations to
the corporation or any other willful and deliberate breach in bad faith of such
agent's duty to the corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be
a contract between the corporation and each director who serves in such capacity
at any time while this bylaw is in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
The Board of Directors in its discretion shall have power on
behalf of the corporation to indemnify any person, other than a director, made a
party to any action, suit or proceeding by reason of the fact that he, his
testator or intestate, is or was an officer or employee of the corporation.
Marimba, Inc. - Bylaws
18.
<PAGE> 19
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation also imposes duties on, or otherwise involves
services by, such person to the plan or participants or beneficiaries of the
plan; excise taxes assessed on a person with respect to an employee benefit plan
pursuant to such Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or
new bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
certificate or incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
Marimba, Inc. - Bylaws
19.
<PAGE> 20
ARTICLE IX
RIGHT OF FIRST REFUSAL
Section 1. 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. 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, 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 any 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 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
Marimba, Inc. - Bylaws
20.
<PAGE> 21
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 assignee(s) do not
elect to acquire 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
assignee(s) herein, transfer the shares 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. "Immediately 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.
Marimba, Inc. - Bylaws
21.
<PAGE> 22
(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.
(8) A stockholder's sale of shares pursuant to a registered
public offering by the corporation.
(9) A stockholder's transfer to (i) a wholly owned subsidiary
of such stockholder, (ii) a parent company that wholly owns such stockholder
("Parent"), (iii) any direct or indirect wholly owned subsidiary of Parent, or
(iv) a partnership of which such stockholder, or any person described in clauses
(i), (ii) or (iii) above, or any direct or indirect wholly owned subsidiary of
such stockholder, is a general partner.
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 the 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
Marimba, Inc. - Bylaws
22.
<PAGE> 23
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 February 21, 2006; 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, as provided in the
bylaws of the corporation."
Marimba, Inc. - Bylaws
23.
<PAGE> 24
CERTIFICATE OF SECRETARY OF
MARIMBA, INC.
The undersigned, Kim Polese, hereby certifies that she is the
duly elected and acting Secretary of Marimba, Inc., a Delaware corporation (the
"Corporation"), and that the Bylaws attached hereto constitute the Bylaws of
said Corporation as duly adopted by Action by Written Consent in Lieu of
Organizational Meeting by the Directors on February 21, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed her
name this 21st day of February 1996.
------------------------------
Kim Polese, Secretary
Marimba, Inc. - Bylaws
24.
<PAGE> 1
EXHIBIT 3.5
AMENDED AND RESTATED BYLAWS
OF
MARIMBA, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The corporation 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
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Mountain View California, at such place
as may be fixed from time to time by the Board of Directors, or at such other
place either within or without the State of Delaware as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with
fiscal year 2000, shall be held at such date and time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting, at which they shall elect by a plurality vote a board of directors, and
transact such other business as may properly be brought before the
1.
<PAGE> 2
meeting.
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each stockholder entitled
to vote at such meeting not fewer than ten (10) nor more than sixty (60) days
before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose
or purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, or at the request in writing of stockholders owning at least thirty
percent (30%) in amount of the entire capital stock of the corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not fewer
2.
<PAGE> 3
than ten (10) nor more than sixty (60) days before the date of the meeting, to
each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty 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 9. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each
3.
<PAGE> 4
stockholder shall at every meeting of the stockholders be entitled to one vote
in person or by proxy for each share of the capital stock having voting power
held by such stockholder, but no proxy shall be voted on after three years from
its date, unless the proxy provides for a longer period.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the
whole board shall be determined by resolution of the Board of Directors or by
the stockholders at the annual meeting of the stockholders, except as provided
in Section 2 of this Article, and each director elected shall hold office until
his successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and new created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. 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 Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the
4.
<PAGE> 5
directors chosen by the directors then in office.
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these bylaws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of
Directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
president on two (2) days' notice to each director by mail or twenty-four (24)
notice to each director either personally, by telegram, or by facsimile; special
meetings shall be called by the president or
5.
<PAGE> 6
secretary in like manner and on like notice on the written request of two
directors unless the board consists of only one director, in which case special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of the sole director.
Section 8. At all meetings of the board a majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation of 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 or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
6.
<PAGE> 7
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board 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.
In the absence or disqualification of a 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.
Any such committee, to the extent 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 amending the certificate of incorporation, 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; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
7.
<PAGE> 8
Section 12. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of
the certificate of incorporation or of these bylaws, notice is required to be
given to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be
8.
<PAGE> 9
given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a president, treasurer and a secretary. The
Board of Directors may elect from among its members a Chairman of the Board and
a Vice Chairman of the Board. The Board of Directors may also choose one or more
vice-presidents, assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, a treasurer, and a
secretary and may choose vice presidents.
Section 3. The Board of Directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office
until their successors
9.
<PAGE> 10
are chosen and qualify. Any officer elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. Any vacancy occurring in any office of the corporation
shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at
all meetings of the Board of Directors and of the stockholders at which he shall
be present. He shall have and may exercise such powers as are, from time to
time, assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which he shall be present. He shall have
and may exercise such powers as are, from time to time, assigned to him by the
Board and as may be provided by law.
THE PRESIDENT AND VICE-PRESIDENTS
Section 8. The president shall be the chief executive officer of
the corporation; and in the absence of the Chairman and Vice Chairman of the
Board he shall preside at all meetings of the stockholders and the Board of
Directors; he shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
10.
<PAGE> 11
Section 10. In the absence of the president or in the event of
his inability or refusal to act, the vice-president, if any, (or in the event
there be more than one vice-president, the vice-presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 12. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the
11.
<PAGE> 12
event of his inability or refusal to act, perform the duties and exercise the
powers of the secretary and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 15. If required by the Board of Directors, he shall give
the corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the restoration
to the corporation, in case of his death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Section 16. The assistant treasurer, or if there shall be more
than one, the assistant treasurers in the order determined by the Board of
Directors (or if there be no such determination,
12.
<PAGE> 13
then in the order of their election) shall, in the absence of the treasurer or
in the event of his inability or refusal to act, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. 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 or vice-chairman of the Board of Directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Certificates may be issued for partly paid shares and in such
case upon the face or back of the certificates issued to represent any such
partly paid shares, the total amount of the consideration to be paid therefor,
and the amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such
13.
<PAGE> 14
class or series of stock, 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.
Section 2. Any of or all the signatures on the certificate may be
facsimile. 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 by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to 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. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require 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
and/or to give the corporation a bond in such sum 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.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer
agent of the
14.
<PAGE> 15
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. 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.
REGISTERED STOCKHOLDERS
Section 6. 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 to hold liable for calls and
assessments a person registered on its books as the owner of shares 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.
15.
<PAGE> 16
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. 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 at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. 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 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
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal
having inscribed
16.
<PAGE> 17
thereon the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent
authorized under the laws of the State of Delaware, as those laws may be amended
and supplemented from time to time, indemnify any officer or director made, or
threatened to be made, a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of being an officer or
director of the corporation or a predecessor corporation or, at the
corporation's request, an officer or director of another corporation, provided,
however, that the corporation shall indemnify any such agent in connection with
a proceeding initiated by such agent only if such proceeding was authorized by
the Board of Directors of the corporation. The indemnification provided for in
this Section 6 shall: (i) not be deemed exclusive of any other rights to which
those indemnified may be entitled under any bylaw, agreement or vote of
stockholders or disinterested directors or otherwise, both as to action in their
official capacities and as to action in another capacity while holding such
office, (ii) continue as to a person who has ceased to be an officer or
director, and (iii) inure to the benefit of the heirs, executors and
administrators of such a person. The corporation's obligation to provide
indemnification under this Section 6 shall be offset to the extent of any other
source of indemnification or any otherwise applicable insurance coverage under a
policy maintained by the corporation or any other person.
Expenses incurred by an officer or director of the corporation in
defending a civil or criminal action, suit or proceeding by reason of the fact
that he is or was an officer or director of the corporation (or
17.
<PAGE> 18
was serving at the corporation's request as an officer or director of another
corporation) shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such officer or director to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized by relevant sections of the General Corporation Law of
Delaware. Notwithstanding the foregoing, the corporation shall not be required
to advance such expenses to an agent who is a party to an action, suit or
proceeding brought by the corporation and approved by a majority of the Board of
Directors of the corporation which alleges willful misappropriation of corporate
assets by such agent, disclosure of confidential information in violation of
such agent's fiduciary or contractual obligations to the corporation or any
other willful and deliberate breach in bad faith of such agent's duty to the
corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be
a contract between the corporation and each officer and director who serves in
such capacity at any time while this bylaw is in effect, and any repeal or
modification thereof shall not affect any rights or obligations then existing
with respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought based in whole or in part
upon any such state of facts.
The Board of Directors in its discretion shall have power on
behalf of the corporation to indemnify any person, other than a director, made a
party to any action, suit or proceeding by reason of the fact that he, his
testator or intestate, is or was an employee of the corporation.
To assure indemnification under this Section 6 of all directors,
officers and
18.
<PAGE> 19
employees who are determined by the corporation or otherwise to be or to have
been "fiduciaries" of any employee benefit plan of the corporation which may
exist from time to time, Section 145 of the General Corporation Law of Delaware
shall, for the purposes of this Section 6, be interpreted as follows: an "other
enterprise" shall be deemed to include such an employee benefit plan, including
without limitation, any plan of the corporation which is governed by the Act of
Congress entitled "Employee Retirement Income Security Act of 1974," as amended
from time to time; the corporation shall be deemed to have requested a person to
serve an employee benefit plan where the performance by such person of his
duties to the corporation also imposes duties on, or otherwise involves services
by, such person to the plan or participants or beneficiaries of the plan; excise
taxes assessed on a person with respect to an employee benefit plan pursuant to
such Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or
new bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
certificate or incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
19.
<PAGE> 20
CERTIFICATE OF SECRETARY OF
MARIMBA, INC.
The undersigned, Scott C. Dettmer, hereby certifies that he is
the duly elected and acting Secretary of Marimba, Inc., a Delaware corporation
(the "Corporation"), and that the Bylaws attached hereto constitute the Bylaws
of said Corporation as duly adopted at the Special Meeting of the Board of
Directors on February 2, 1999.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
name this ____ day of _________ 1999.
----------------------------------------
Scott C. Dettmer, Secretary
20.
<PAGE> 1
EXHIBIT 4.3
MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
AUGUST 25, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Registration Rights....................................................1
1.1 Definitions......................................................1
1.2 Request for Registration.........................................2
1.3 Company Registration.............................................3
1.4 Obligations of the Company.......................................4
1.5 Furnish Information..............................................5
1.6 Expenses of Demand Registration..................................6
1.7 Expenses of Company Registration.................................6
1.8 Underwriting Requirements........................................6
1.9 Delay of Registration............................................7
1.10 Indemnification..................................................7
1.11 Reports Under Securities Exchange Act of 1934....................9
1.12 Form S-3 Registration...........................................10
1.13 Assignment of Registration Rights...............................11
1.14 "Market Stand-Off"Agreement.....................................11
1.15 Termination of Registration Rights..............................12
2 Covenants of the Company..............................................12
2.1 Delivery of Financial Statements................................12
2.2 Termination of Covenants........................................13
2.3 Participation Right.............................................13
2.4 Inspection......................................................14
2.5 Employee Agreements.............................................15
2.6 Proprietary Information Agreements..............................15
2.7 Key Person Insurance............................................15
3. Voting Provisions.....................................................15
3.1. Voting on Corporate Transactions................................15
3.2. Termination of Obligations......................................16
4. Miscellaneous.........................................................16
4.1 Successors and Assigns..........................................16
4.2 Governing Law...................................................16
4.3 Counterparts....................................................16
4.4 Titles and Subtitles............................................16
4.5 Notices.........................................................16
4.6 Expenses........................................................17
4.7 Amendments and Waivers..........................................17
4.8 Severability....................................................17
4.9 Aggregation of Stock............................................17
4.10 Entire Agreement................................................17
4.11 Remedies........................................................17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
4.12 Termination of Prior Agreement..................................17
SCHEDULE A - Schedule of Investors
</TABLE>
ii
<PAGE> 4
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT is made as of the 25th day of
August, 1997, by and between Marimba, Inc., a Delaware corporation (the
"Company"), the holders of the Company's Common Stock who are signatories hereto
(the "Founders"), and the investors listed on the Schedule of Investors attached
as Schedule A hereto, each of which is herein referred to as an "Investor."
RECITALS
WHEREAS, certain of the Investors (the "Series A Investors") and
the Founders possess registration and other rights granted pursuant to the
Marimba, Inc. Investor Rights Agreement by and among the Company, the Series A
Investors and the Founders named therein, dated August 8, 1996 (the "Prior
Agreement"), entered into in connection with that certain Series A Preferred
Stock Purchase Agreement, dated August 8, 1996, by and among the Company and the
Series A Investors (the "Series A Agreement");
WHEREAS, the Prior Agreement may be amended, and any provision
therein waived, with the consent of the Company, the holders of a majority of
the "Registrable Securities" of the Company (as defined in the Prior Agreement)
then outstanding and held by the Founders and the holders of a majority of the
Registrable Securities of the Company then outstanding and held by the Series A
Investors;
WHEREAS, certain of the Investors are parties to the Series B
Preferred Stock Purchase Agreement (the "Series B Agreement"), of even date
herewith, by and among the Company and the Investors listed on Schedule A
thereto (the "Series B Investors");
WHEREAS, in order to induce the Company to enter into the Series
B Agreement and to induce the Series B Investors to invest funds in the Company
pursuant to the Series B Agreement, the Series A Investors and the Founders
desire to waive and amend certain rights and restate all rights granted to them
under the Prior Agreement, to terminate the Prior Agreement and to amend and
restate the Prior Agreement in its entirety as set forth herein; and
WHEREAS, the Series B Investors and the Company have agreed,
pursuant to the Series B Agreement, to enter into this Agreement;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as
follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "register", "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document
<PAGE> 5
in compliance with the Securities Act of 1933, as amended (the "Act"), and the
declaration or ordering of effectiveness of such registration statement or
document;
(b) The term "Registrable Securities" means (1) the Common
Stock of the Company issuable or issued upon conversion of the Series A
Preferred Stock and Series B Preferred Stock issued pursuant to the Series A
Agreement and Series B Agreement, respectively, (2) solely with respect to and
for purposes of the registration rights provided in Section 1.3 hereof, the
Common Stock of the Company held by the Founders (the "Founders' Stock"), and
(3) 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 Series A Preferred Stock, Series B Preferred Stock or
Founders' Stock;
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock then
outstanding, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities, that are Registrable Securities;
(d) The term "Initial Public Offering" means the initial
sale of the Company's Common Stock in an underwritten public offering pursuant
to a registration statement under the Act, with aggregate proceeds to the
Company of at least $12,500,000 at an initial purchase price of at least $7.5108
per share (as adjusted for stock splits, combinations and the like);
(e) The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.13 hereof; and
(f) The term "Form S-3" means such form under the Act as
in effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission ("SEC") which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
1.2 Request for Registration.
(a) If the Company shall receive at any time after the
earlier of (i) August 31, 2001, or (ii) one hundred eighty (180) days after the
Initial Public Offering, a written request from the Holders of at least
thirty-five percent (35%) of the Registrable Securities then outstanding that
the Company file a registration statement under the Act for a public offering in
which the aggregate proceeds from the offering would exceed $5,000,000, then the
Company shall, within ten (10) days of the receipt thereof, give written notice
of such request to all Holders and shall, subject to the limitations of
subsection 1.2(b) hereof, effect as soon as practicable, and in any event shall
use its best efforts to effect within ninety (90) days of the receipt of such
request, the registration under the Act of all Registrable Securities which the
Holders request to be registered within twenty (20) days of the mailing of such
notice by the Company in accordance with Section 4.5 hereof.
2
<PAGE> 6
(b) If the Holders initiating the registration request
hereunder ("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 1.2 and the
Company shall include such information in the written notice referred to in
subsection 1.2(a) hereof. The underwriter will be selected by a majority in
interest of the Initiating Holders and shall be reasonably acceptable to the
Company. 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 (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
1.4(e) hereof) 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. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all participating Holders thereof,
including the Initiating Holders, in proportion (as nearly as practicable) to
the amount of Registrable Securities of the Company owned by each participating
Holder; provided, however, that the number of shares of Registrable Securities
to be included in such underwriting shall not be reduced unless all other
securities are first entirely excluded from the underwriting.
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 1.2.
(d) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
1.2, a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than one hundred twenty
(120) days after receipt of the request of the Initiating Holders. This right
shall not be utilized more than once in any twelve month period.
1.3 Company Registration. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration.
3
<PAGE> 7
Upon the written request of each Holder given within twenty (20) days after
mailing of such notice by the Company in accordance with Section 4.5 hereof, the
Company shall, subject to the provisions of Section 1.8 hereof, cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.
1.4 Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
4
<PAGE> 8
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(i) Provided such securities are being sold through
underwriters, use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 1, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with the registration pursuant to this Section 1, (i) an
opinion, dated 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
and to the Holders requesting registration of Registrable Securities and (ii) a
letter dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters.
(j) In connection with an underwritten public offering,
(i) cooperate with the selling Holders, the underwriters participating in the
offering and their counsel in any due diligence investigation reasonably
requested by the selling Holders or the underwriters in connection therewith and
(ii) participate, to the extent reasonably requested by the managing underwriter
for the offering or the selling Holder, in efforts to sell the Registrable
Securities under the offering (including, without limitation, participating in
"roadshow" meetings with prospective investors) that would be customary for
primary offerings of equity securities by the Company.
1.5 Furnish Information.
(a) It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to
any registration requested pursuant to Section 1.12 hereof if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.12(b)(2).
1.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2 hereof,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one counsel selected by
the selling Holders by majority vote shall be borne by the Company; provided,
however, that the Company
5
<PAGE> 9
shall not be required to pay for any expenses of any registration proceeding
begun pursuant to Section 1.2 hereof if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case all participating Holders shall bear
such expenses), unless the Holders of a majority of the Registrable Securities
agree to forfeit their right to one demand registration pursuant to Section 1.2
hereof; provided further, however, that if at the time of such withdrawal, the
Holders have learned of a material adverse change in the condition or business
of the Company from that known to the Holders at the time of their request, then
the Holders shall not be required to pay any of such expenses and shall retain
their full rights pursuant to Section 1.2 hereof.
1.7 Expenses of Company Registration. The Company shall bear
and pay all expenses incurred in connection with any registration, filing, or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 hereof for each Holder, including (without limitation)
all registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the fees and disbursements of one counsel
selected by the selling Holders hereunder by majority vote, but excluding
underwriting discounts and commissions relating to the Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 hereof to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities to be sold other than
by the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders) but in no event shall (i) the amount of securities
of the selling Holders included in the offering be reduced below thirty percent
(30%) of the total amount of securities included in such offering, unless such
offering is the Company's Initial Public Offering in which case the selling
stockholders may be excluded if the underwriters make the determination
described above and no other stockholder's securities are included, or (ii) any
securities held by a Founder be included if any securities held by any selling
Holder are excluded. For purposes of the preceding sentence concerning
apportionment, for any selling stockholder which is a holder of Registrable
Securities and which is a partnership, limited liability company or corporation,
the partners, retired partners, members and stockholders of such holder, or the
estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling stockholder," and any pro rata reduction with respect to such
"selling stockholder" shall be based upon the aggregate amount of shares
carrying
6
<PAGE> 10
registration rights owned by all entities and individuals included in such
"selling stockholder," as defined in this sentence.
1.9 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the Securities Exchange Act of 1934, as amended
(the "1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, or the 1934 Act, or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, or the 1934 Act or any state securities
law; and the Company will pay to each such Holder, underwriter or controlling
person, as incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 1.10(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder, underwriter, or controlling person.
(b) To the extent permitted by law, each selling Holder,
severally and not jointly, will indemnify and hold harmless the Company, each of
its directors, each of its officers who has signed the registration statement,
each person, if any, who controls the Company within the meaning of the Act, any
underwriter, any other Holder selling securities in such registration statement
and any controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Act, or the 1934 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
7
<PAGE> 11
Violation occurs in reliance upon and in conformity with written information
furnished by an officer of such Holder with the title of Vice President or above
or, if such Holder is not a corporation, by a representative of such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this subsection 1.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 1.10(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this subsection
1.10(b) exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of receipt of notice of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.10. The indemnifying party shall not be liable for any settlement of any
proceeding without its written consent, which consent shall not be unreasonably
withheld, or, in the alternative, without full release of its liability. No
indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld), settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment of the plaintiff in any such action, the Indemnifying Party agrees to
indemnify and hold harmless any Indemnified Party from and against any loss of
liability by reason of such settlement or judgment.
8
<PAGE> 12
(d) If the indemnification provided for in this Section
1.10 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault, as determined by such court, of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.
(e) The obligations of the Company and Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration
of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable
the Holders to utilize Form S-3 for the sale of their Registrable Securities,
such action to be taken as soon as practicable after the end of the fiscal year
in which the first registration statement filed by the Company for the offering
of its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act, and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such
9
<PAGE> 13
other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Holder of any rule or
regulation of the SEC which permits the selling of any such securities without
registration or pursuant to such form.
1.12 Form S-3 Registration. If the Company receives from any
Holder or Holders of Registrable Securities then outstanding a written request
or requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(b) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within 15 days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.12: (1) if
Form S-3 is not available for such offering; (2) if the Holders, together with
the holders of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public (net of any underwriters' discounts
or commissions) of less than $1,500,000; (3) if the Company shall furnish to the
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders 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 120 days after receipt of the request of the Holder or
Holders under this Section 1.12; provided, however, that the Company shall not
utilize this right more than once in any twelve-month period; (4) if the Company
has already effected two registrations on Form S-3 for the Holders pursuant to
this Section 1.12 within the prior twelve-month period; or (5) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to this Section 1.12, including (without
limitation) all registration, filing, qualification, printer's and accounting
fees and the reasonable fees and disbursements of one counsel selected by
majority vote of the selling Holder or Holders and counsel for the Company, but
excluding any underwriters' discounts or commissions associated with Registrable
Securities, shall be borne by the Company.
10
<PAGE> 14
Registrations effected pursuant to this Section 1.12 shall not be counted as
demands for registration or registrations effected pursuant to Sections 1.2 or
1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause
the Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 50,000 shares of Registrable Securities (subject to appropriate adjustment
for stock splits, stock dividends, combinations, and other recapitalizations)
(or a lesser number if all such shares held by the transferor or assignor are
being transferred), provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. For the purposes of determining the number of shares
of Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership or of a limited liability company who are members of such
limited liability company (including spouses and ancestors, lineal descendants,
and siblings of such partners or spouses who acquire Registrable Securities by
gift, will, or intestate succession) shall be aggregated together and with the
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices, or
taking any action under this Section 1.
1.14 "Market Stand-Off" Agreement Each of the Investors hereby
agrees that, during the period of duration (not to exceed 180 days) specified by
the Company and an underwriter of Common Stock or other securities of the
Company, following the effective date of the Initial Public Offering, it shall
not, to the extent requested by the Company and such underwriter, directly or
indirectly, sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
Common Stock included in such registration; provided, however, that (i) all
officers, directors and 2% or greater stockholders of the Company, and all other
persons with registration rights are bound by similar agreements ("Lock-Up
Agreements"), (ii) that this Section 1.14 shall only apply to the first two
registration statements of the Company causing securities to be sold on its
behalf to the public in an underwritten offering, and (iii) that this Section
1.14 shall not apply to Common Stock purchased in the publicly-traded market
after the Initial Public Offering. The Company shall provide prompt written
notice to the Investors if the Company releases any officer, director or 2% or
greater stockholder from a Lock-Up Agreement.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
11
<PAGE> 15
1.15 Termination of Registration Rights. No Holder shall be
entitled to exercise any rights provided for in this Section 1 on such date
after the closing of the Initial Public Offering if all shares of Registrable
Securities held or entitled to be held upon conversion by such Holder may
immediately be sold under Rule 144 during any 90-day period (the "Rule 144(k)
Date"); provided, however that the rights set forth in Section 1.3 shall
terminate with respect to a Holder's Registrable Securities upon the later of
(i) the Rule 144(k) Date and (ii) the third anniversary after the Initial Public
Offering.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The Company shall
furnish the following information to each Holder who holds at least 125,000
shares of Registrable Securities (a "Major Investor"):
(a) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles ("GAAP")
and audited by nationally recognized independent accountants;
(b) within forty-five (45) days of the end of each month
and each quarter, an unaudited income statement and statement of cash flows and
balance sheet for and as of the end of such month or quarter, in reasonable
detail;
(c) as soon as practicable, but in any event forty-five
(45) days prior to the end of each fiscal year, a budget for the next fiscal
year, prepared on a monthly basis, including balance sheets and statements of
cash flows for such months and, as soon as prepared, any other budgets or
revised budgets prepared by the Company;
(d) such other information relating to the financial
condition, business, prospects, or corporate affairs of the Company, including
any amended or new Business Plan of the Company, as the Major Investors or any
assignee of the Major Investors may from time to time request, provided,
however, that the Company shall not be obligated under this subsection (e) or
any other subsection of Section 2.1 to provide information which it deems in
good faith to be a trade secret or similar confidential information.
The information provided pursuant to this subsection 2.1 shall
be used by each Major Investor or any permitted assignee of each Major Investor
solely in furtherance of its interests as an investor in the Company and each
such Major Investor and any permitted assignee of such Major Investor agrees to
hold in confidence and trust and to act in a fiduciary manner with respect to
all information provided in connection with this subsection 2.1, unless such
information (i) was known by such Major Investor or permitted assignee prior to
its disclosure to them by the Company, (ii) has been, is now or later becomes
rightfully learned by such Major Investor or permitted assignee without
restriction as a matter of right by a third party not affiliated with or working
for the Company nor under restriction or duty imposed by the
12
<PAGE> 16
Company, (iii) has been, is now or later becomes publicly available through no
fault of such Investor or permitted assignee, (iv) has been, is now or later is
furnished to third parties by the Company, if such disclosure is or has been
made to third parties without similar restriction, duty or limitation of use or
(v) has been, is now, or later is independently developed by such Major Investor
or permitted assignee without use of or resort to such information and can be
proven by written records. Notwithstanding the foregoing, a Major Investor may
disclose, if applicable, (i) to Major Investor's general and limited partners,
or members and managers, (ii) to an employee or subcontractor that has a need to
know such information, or (iii) to Major Investor's Board of Directors or
executive officers, such information, provided that such general or limited
partners, members, managers, employees, subcontractors, or such Board of
Directors or executive officers agree to be bound by the terms of this Section
2.1. The Company shall use reasonable efforts to mark such information as
confidential. The obligations set forth in this paragraph will survive any
termination of this subsection 2.1 or this Agreement. This Section 2.1 may be
amended only with the written consent of holders of at least 66.667% of the
Common Stock issued or issuable upon conversion of the Company's Series B
Preferred Stock.
2.2 Termination of Covenants. The covenants set forth in
Sections 2.1, 2.3, 2.4, 2.5, 2.6 and 2.7 hereof shall terminate as to the Major
Investors and be of no further force or effect following the Company's Initial
Public Offering, or when the Company first becomes subject to the periodic
reporting requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever
event shall first occur.
2.3 Participation Right. Subject to the terms and conditions
specified in this Section 2.3, the Company hereby grants to each Major Investor
a participation right with respect to future sales by the Company of its Shares
(as hereinafter defined). Each Major Investor shall be entitled to apportion the
participation right hereby granted it among itself, its partners, members and
affiliates in such proportions as it deems appropriate. Each time the Company
proposes to offer any shares of, or securities convertible into or exercisable
for any shares of, any class of its capital stock ("Shares"), the Company shall
first make an offering of such Shares to each Major Investor in accordance with
the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investor stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice,
each Major Investor may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Shares which equals
the proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of the Preferred Stock then held by such Major Investor
bears to the total number of shares of Common Stock of the Company then
outstanding (assuming full conversion of all outstanding Preferred Stock).
(c) If all Shares which a Major Investor is entitled to
obtain pursuant to subsection 2.3(b) hereof are not elected to be obtained as
provided in subsection
13
<PAGE> 17
2.3(b) hereof, the Company may, during the 60-day period following the
expiration of the period provided in subsection 2.3(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within 30 days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such Shares shall not be offered unless first reoffered
to the Major Investors in accordance herewith.
(d) The participation right in this paragraph 2.3 shall
not be applicable (i) to the future issuance or sale of shares of Common Stock
(or options therefor) to Company employees, directors, officers, or consultants
for the primary purpose of soliciting or retaining their employment or services,
(ii) the issuance of up to 3,050,000 shares of Series B Preferred Stock, (iii)
to or after consummation of the Company's Initial Public Offering, (iv) the
issuance of securities pursuant to corporate or strategic partnerships or
alliances approved by the Board of Directors, including that director elected by
the holders of the Company's Series A Preferred Stock, (v) the issuance of
Common Stock pursuant to the conversion of the Series A Preferred Stock or
Series B Preferred Stock, (vi) the issuance of securities in connection with a
bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock, or otherwise, approved
in good faith by the Board of Directors, including that director, if any,
elected by the holders of the Company's Series A Preferred Stock, Series B
Preferred Stock and Common Stock, voting together as a single class, (vii) the
issuance of securities to lenders or lessors in connection with a bona fide loan
or lease financing approved in good faith by the Company's Board of Directors,
including that director, if any, elected by the holders of the Company's Series
A Preferred Stock, Series B Preferred Stock and Common Stock, voting together as
a single class and (viii) the issuance of securities pursuant to the conversion
or exercise of convertible or exercisable securities the original issuance of
which was subject to or exempt from this Section 2.3.
2.4 Inspection. The Company shall permit each Major Investor,
at Major Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by Major Investor; provided, however, that the Company shall not be
obligated pursuant to this Section 2.4 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
2.5 Employee Agreements. Unless approved by the Board of
Directors of the Company (including the approval of (A) the director elected by
holders of the Company's Series A Preferred Stock and (B) the director, if any,
elected by holders of the Company's Series A Preferred Stock, Series B Preferred
Stock and Common Stock, voting together as a single class), all future employees
of the Company who shall purchase (other than by exercise of stock options), or
receive options to purchase, shares of the Company's Common Stock following the
date hereof shall be required to execute stock purchase or option agreements
providing for vesting of shares over a three-year period with the first 33.33%
of such shares vesting following twelve (12) months of continued employment or
services, and the remaining
14
<PAGE> 18
shares vesting in equal monthly installments over the following 24 months
thereafter. The Company shall retain the right to repurchase unvested shares at
cost.
2.6 Proprietary Information Agreements. The Company will use
its reasonable commercial efforts to ensure that all employees of and
consultants to the Company execute the Company's Proprietary Information and
Inventions Agreement.
2.7 Key Person Insurance. The Company shall obtain within 120
days after the date hereof and shall use commercially reasonable efforts to
maintain in full force and effect key person term life insurance on the lives of
Kim Polese and Arthur A. Van Hoff, the proceeds of the policy payable to the
Company in the amounts of $1,000,000, respectively.
3. Voting Provisions.
3.1 Voting on Corporate Transactions. In the event that a
Corporate Transaction (as defined below) (i) is approved by the Board of
Directors of the Company, and (ii) if applicable, receives the stockholder
approval provided in Section 6 of Article IV of the Amended and Restated
Certificate of Incorporation of the Company, then each Investor hereby agrees,
if such Corporate Transaction is intended by the parties to be accounted for as
a "pooling of interests," to take all actions reasonably deemed necessary by the
Company's Board of Directors to preserve pooling of interest accounting
treatment for such Corporate Transaction, including, but not limited to, not
exercising any dissenters' rights under applicable law and refraining from
transferring any securities of the Company, the acquiror, or any other
applicable company during any period prohibited by then applicable pooling of
interests rules, whether before or after the Corporate Transaction. For purposes
of this Section 3, a Corporate Transaction shall mean a merger or other
combination or acquisition of the Company by or with another entity, or a sale
of all or substantially all of the assets of the Company. After receiving proper
notice, the Investors and their respective affiliated entities, as holders of
shares of voting securities, shall be present, in person or by proxy, at all
meetings of stockholders of the Company to vote on the approval of a Corporate
Transaction so that all shares of voting securities beneficially owned by such
Investors and/or its affiliated entities may be counted for the purposes of
determining the presence of a quorum at such meetings. Neither an Investor nor
any of its affiliated entities shall deposit any voting securities beneficially
owned by such holders in a voting trust or subject any such securities to any
arrangement or agreement with respect to the voting of such securities.
3.2 Termination of Obligations. The voting and other
obligations of the Investors pursuant to Section 3.1 above shall terminate upon
the Company's Initial Public Offering.
4. Miscellaneous.
4.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of
15
<PAGE> 19
Registrable Securities). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. This Agreement may be assigned without the Company's consent
to (i) a transferee of 125,000 shares of Registrable Securities, (ii) a wholly
owned subsidiary of Investor, (iii) a parent company that wholly owns Investor
("Parent"), (iv) any direct or indirect wholly owned subsidiary of Parent or (v)
a partnership of which such Investor, or any person described in clauses (ii),
(iii) or (iv) above, or any direct or indirect wholly owned subsidiary of
Investor, is a general partner, provided such assignee agrees to be bound by all
the terms of this Agreement.
4.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
4.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.4 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon (i) personal delivery to the party to be notified, (ii)
five (5) days following deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties, or (iii) facsimile with confirmed receipt.
4.6 Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs, and necessary disbursements in
addition to any other relief to which such party may be entitled.
4.7 Amendments and Waivers. Unless otherwise provided herein,
any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company,
the holders of at least a majority of the Registrable Securities then
outstanding and held by the Founders, the holders of at least a majority of the
Registrable Securities then outstanding and held by the Series A Investors and
the holders of at least a majority of the Registrable Securities then
outstanding and held by the Series B Investors. Each Investor and Founder
acknowledges and agrees that any amendment or waiver effected in accordance with
this paragraph shall be binding upon all holders of any Registrable
16
<PAGE> 20
Securities, each future holder of all such Registrable Securities, and the
Company, whether or not such holder in fact consented to such amendment or
waiver.
4.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
4.9 Aggregation of Stock. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement. The term Major Investor shall include any general partners or
affiliates of the Major Investor.
4.10 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
4.11 Remedies. Notwithstanding any provision herein, the
parties recognize that the ascertainment of damages in the event of a breach of
Section 3.1 would be difficult and that there may be no adequate remedy at law
for such breach. The parties therefore agree that, in addition to any available
remedies at law, the Company shall be entitled to any and all appropriate
equitable relief, including injunctive relief, pursuant to Section 3.1 in the
event of any breach thereof.
4.12 Termination of Prior Agreement. Upon the effectiveness of
this Agreement, the Prior Agreement shall terminate and be of no further force
and effect, and shall be superseded and replaced in its entirety by this
Agreement.
17
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Investor Rights Agreement as of the date first above written.
MARIMBA, INC.
By: /s/ KIM POLESE
-------------------------------------
Kim Polese,
President and Chief Executive Officer
Address: 445 Sherman Avenue
Palo Alto, CA 94306
FOUNDERS:
/s/ JONATHAN PAYNE
----------------------------------------
JONATHAN PAYNE
Address: c/o Marimba, Inc.
445 Sherman Avenue
Palo Alto, CA 94306
/s/ KIM POLESE
----------------------------------------
KIM POLESE
Address: c/o Marimba, Inc.
445 Sherman Avenue
Palo Alto, CA 94306
/s/ SAMI SHAIO
----------------------------------------
SAMI SHAIO
Address: c/o Marimba, Inc.
445 Sherman Avenue
Palo Alto, CA 94306
/s/ ARTHUR A. VAN HOFF
----------------------------------------
ARTHUR A. VAN HOFF
Address: c/o Marimba, Inc.
445 Sherman Avenue
Palo Alto, CA 94306
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 22
INVESTORS:
KLEINER PERKINS CAUFIELD & BYERS VIII,
L.P.
By: KPCB VIII Associates, L.P., its
General Partner
By: /s/ DOUG MACKENZIE
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
KPCB INFORMATION SCIENCES ZAIBATSU FUND
II, L.P.
By: KPCB VII Associates, L.P., its
General Partner
By: /s/ DOUG MACKENZIE
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
KPCB JAVA FUND, L.P.
By: KPCB Java Associates, L.P., its
General Partner
By: /s/ DOUG MACKENZIE
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Address: c/o Kleiner Perkins Caufield & Byers
2750 Sand Hill Road
Menlo Park, CA 94025-7020
Attn: Doug MacKenzie
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 23
KPCB VIII FOUNDERS FUND, L.P.
By: KPCB VIII Associates, L.P., its
General Partner
By: /s/ DOUG MACKENZIE
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Address: c/o Kleiner Perkins Caufield & Byers
2750 Sand Hill Road
Menlo Park, CA 94025-7020
Attn: Doug MacKenzie
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 24
CPQ HOLDINGS, INC.
By: /s/ ROBERT W. STEARNS
-------------------------------------
Name: Robert W. Stearns
Title: Senior Vice President,
Technology & Corporate
Development
Address: c/o Compaq Computer Corporation
MC110701
20555 S.H. 249
Houston, TX 77070
Attn: Stephanie A. Lucie
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 25
ITOCHU Technologies, Inc.
/s/ SHIGEKI NISHIYAMA
----------------------------------------
By: Shigeki Nishiyama
Its: President
Address: c/o Itochu Technology, Inc.
3100 Patrick Henry Drive
Santa Carla, CA 95054
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 26
ITOCHU CORPORATION
/s/ EIZO KOBAYASHI
----------------------------------------
By: Eizo Kobayashi
Its: General Manager
Address: 5-1, Kita-Aoyama 2-chome
Minato-ku, Tokyo 107-77, Japan
ITOCHU TECHNO-SCIENCE CORP.
/s/ HIRO SATAKE
----------------------------------------
By: Hiro Satake
Its: President
Address: 11-5 Fujimi 1-chome
Chiyoda-ku, Tokyo 102, Japan
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 27
LEHMAN BROTHERS HOLDINGS INC.
/s/ ALAN WASHKOWITZ
----------------------------------------
By: Alan Washkowitz
Its: Vice President
Address: 3 World Financial Center
New York, NY 10285
Attn: Mike Odrich
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 28
DMG EMPLOYEE COINVESTMENT FUND, L.P.
By: /s/ GEORGE F. BOUTROS
-------------------------------------
Name: George F. Boutros
-----------------------------------
Title: Managing Director/General Partner
----------------------------------
DMG TECHNOLOGY VENTURES, L.L.C.
By: /s/ GEORGE F. BOUTROS
-------------------------------------
Name: George F. Boutros
-----------------------------------
Title: Managing Director
----------------------------------
Address: c/o DMG Technology Group
1550 El Camino Real, Suite 100
Menlo Park, CA 94025
Attn: Bill Brady
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 29
NATIONAL SEMICONDUCTOR CORPORATION
By: /s/ DONALD MACLEOD
-------------------------------------
Name: Donald Macleod
-----------------------------------
Title: Executive Vice President and CFO
----------------------------------
Address: 2900 Semiconductor Drive
Mail Stop D3-580
Santa Clara, CA 95051
Attn: Tom Humphrey
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 30
ATTRACTOR INSTITUTIONAL LP
By: MM Attractor Ventures LLC,
Its General Partner
/s/ HARVEY ALLISON
----------------------------------------
By: Harvey Allison
ATTRACTOR LP
By: MM Attractor Ventures LLC,
Its General Partner
/s/ HARVEY ALLISON
----------------------------------------
By: Harvey Allison
ATTRACTOR DEARBORN PARTNERS LP
By: MM Attractor Ventures LLC,
Its General Partner
/s/ HARVEY ALLISON
----------------------------------------
By: Harvey Allison
Address: c/o Attractor Investment Management Inc.
2730 Sand Hill Road, Suite 280
Menlo Park, CA 94025
Attn: Harvey Alison
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 31
PEOPLESOFT, INC.
By: /s/ ANEEL BHUSRI
--------------------------------------------
Aneel Bhusri
Title: Senior Vice President, Product Strategy
Address: 4440 Rosewood Drive
Pleasanton, CA 94588
Attn: Aneel Bhusri
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 32
LBI Group INC.
/s/ ALAN WASHKOWITZ
----------------------------------------
By: Alan Washkowitz
Its: Senior Vice President
Address: 3 World Financial Center
New York, NY 10285
Attn: Mike Odrich
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 33
RONALD & GAYLE CONWAY AS TRUSTEES
OF THE CONWAY FAMILY TRUST DATED
9/25/96
/s/ RONALD CONWAY
----------------------------------------
By: Ronald Conway
Trustee
Address: c/o Ronald and Gayle Conway
76 Adam Way
Atherton, CA 94027
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 34
/s/ RAYMOND J. LANE
----------------------------------------
Raymond J. Lane
Address: 127 Alta Vista
Atherton, CA 94027
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 35
HAMBRECHT & QUIST CALIFORNIA
By: /s/ LISA LEWIS
------------------------------------
Lisa Lewis,
Co-Controller
Address: Hambrecht & Quist
4th Floor Accounting
One Bush Street
San Francisco, CA 94104
Attn: Jeff Fulcher
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 36
/s/ DANIEL H. RIMER
------------------------------------
Daniel H. Rimer
Address: c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 37
KARR FAMILY 1982 TRUST
By: /s/ HOWARD L. KARR
-------------------------------------------
Howard L. Karr or Louise C. Karr, Trustees
Address: 10 Redwood Drive
Hillsborough, CA 94010
SIGNATURE PAGE TO MARIMBA, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
<PAGE> 38
SCHEDULE A
Schedule of Investors
ATTRACTOR INSTITUTIONAL LP
ATTRACTOR LP
ATTRACTOR DEARBORN PARTNERS LP
c/o Attractor Investment
Management, Inc.
2730 Sand Hill Road, Suite 280
Menlo Park, CA 94025
Attn: Harvey Alison
CPQ HOLDINGS, INC.
c/o Compaq Computer Corporation
20555 SH 249
M110701
Houston, TX 77070
Attn: Holly Wittenberg
DMG EMPLOYEE COINVESTMENT FUND, L.P.
DMG TECHNOLOGY VENTURES, L.L.C.
c/o DMG Technology Group
1550 El Camino Real, Suite 100
Menlo Park, CA 94025
Attn: William Brady
ITOCHU CORPORATION
5-1, Kita-Aoyama 2-chome
Minato-ku, Tokyo 107-77, Japan
Attn: Eizo Kobayashi
ITOCHU TECHNO-SCIENCE CORPORATION
11-5 Fujimi 1-chome
Chiyoda-ku, Tokyo 102, Japan
Attn: Shigeki Nishiyama
ITOCHU TECHNOLOGY, INC.
3100 Patrick Henry Drive
Santa Clara, CA 95054
Attn: Yasu Morimoto
S-1
<PAGE> 39
KLEINER PERKINS CAUFIELD & BYERS VIII, L.P.
KPCB INFORMATION SCIENCES ZAIBATSU FUND II, L.P.
KPCB JAVA FUND, L.P.
KPCB VII FOUNDERS FUND, L.P.
c/o Kleiner Perkins Caufield & Byers
2750 Sand Hill Road
Menlo Park, CA 94025
Attn: Douglas MacKenzie
LB I GROUP INC.
3 World Financial Center
New York, NY 10285
Attn: Michael Odrich
NATIONAL SEMICONDUCTOR CORPORATION
2900 Semiconductor Drive
Mail Stop D3-580
Santa Clara, CA 95051
Attn: Thomas Humphrey
PEOPLESOFT, INC.
4440 Rosewood Drive
Santa Clara, CA 95054
Attn: Aneel Bhusri
RONALD & GAYLE CONWAY AS
TRUSTEES OF THE CONWAY
FAMILY TRUST DATED 9/25/96
76 Adam Way
Atherton, CA 94027
RAYMOND J. LANE
127 Alta Vista
Atherton, CA 94027
HAMBRECHT & QUIST CALIFORNIA
One Bush Street
San Francisco, CA 94104
DANIEL H. RIMER
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
S-2
<PAGE> 40
KARR FAMILY 1982 TRUST
10 Redwood Drive
Hillsborough, CA 94010
S-3
<PAGE> 1
EXHIBIT 4.4
MARIMBA, INC.
AMENDMENT AND
WAIVER OF REGISTRATION RIGHTS
THIS AMENDMENT AND WAIVER OF REGISTRATION RIGHTS (this "Waiver")
is entered into as of January ___, 1999, by and among Marimba, Inc., a Delaware
corporation (the "Company"), and the undersigned holders ("Holder(s)") of the
Company's capital stock.
WHEREAS, the Company intends to offer, issue, and sell directly
to the public certain shares (the "Shares") of the Company's common stock (the
"Offering) and will undertake a registration of the Shares (the "Registration")
by preparing, executing, and filing with the Securities and Exchange Commission
a registration statement on Form S-1 (the "Registration Statement") under the
Securities Act of 1933, as amended;
WHEREAS, Kim Polese, Arthur van Hoff, Jonathan Payne and Sami
Shaio (collectively, the "Founders") may elect to sell not more than 10% of each
Founder's equity holdings in the Company in the Offering;
WHEREAS, the Company and the undersigned Holder(s) (as such terms
are defined in the Rights Agreement) are parties to that certain Amended and
Restated Investors' Rights Agreement dated as of August 25, 1997 (the "Rights
Agreement"), which grants the undersigned Holder(s), among other things, certain
registration rights in connection with the Registration;
WHEREAS, the undersigned Holder(s) desire to facilitate a
successful Offering by waiving all such registration rights in connection with
the Registration;
WHEREAS, the undersigned Holder(s) understand that the Company
and the underwriters of the Offering will proceed with the Offering in reliance
on this Waiver; and
WHEREAS, the consent of the Company, the Holders of at least a
majority of the Registrable Securities then outstanding and held by the
Founders, the Holders of at least a majority of the Registrable Securities then
outstanding and held by the Series A Investors (as defined in the Rights
Agreement), and the Holders of at least a majority of the Registrable Securities
then outstanding and held by the Series B Investors (as defined in the Rights
Agreement) will bind all such Holders under Section 4.7 of the Rights Agreement;
NOW, THEREFORE, the undersigned hereby agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein
shall have the meanings assigned to them in the Rights Agreement.
2. Registration Right. With respect to the Registration, the
undersigned Holder(s) hereby amend the Rights Agreement to waive the right (and
all notice rights related thereto) to request registration of any Registrable
Securities in the Offering (provided such Offering is consummated prior to July
31, 1999), that may arise under Section 1.3 of the Rights Agreement.
<PAGE> 2
3. Counterparts. This Waiver may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment
and Waiver as of ____________, 1999.
MARIMBA, INC.:
By:
-------------------------------------
Fred Gerson,
Vice President, Finance and
Chief Financial Officer
Address: 440 Clyde Ave.
Mountain View, CA 94043
FOUNDERS:
----------------------------------------
JONATHAN PAYNE
Address: c/o Marimba, Inc.
440 Clyde Ave.
Mountain View, CA 94043
----------------------------------------
KIM POLESE
Address: c/o Marimba, Inc.
440 Clyde Ave.
Mountain View, CA 94043
----------------------------------------
SAMI SHAIO
Address: c/o Marimba, Inc.
440 Clyde Ave.
Mountain View, CA 94043
----------------------------------------
ARTHUR A. VAN HOFF
Address: c/o Marimba, Inc.
440 Clyde Ave.
Mountain View, CA 94043
SIGNATURE PAGE TO REG. RIGHTS WAIVER
<PAGE> 3
STOCKHOLDER:
----------------------------------------
(Print or Type Holder's Name)
----------------------------------------
(Signature of Holder or Authorized
Signatory)
----------------------------------------
(Print or Type Name and Title, if Holder
is not an individual)
SIGNATURE PAGE TO REG. RIGHTS WAIVER
<PAGE> 1
Exhibit 4.5
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS
AVAILABLE WITH RESPECT THERETO.
PREFERRED STOCK PURCHASE WARRANT
Warrant No. _________
Series A Preferred Stock
MARIMBA, INC.
Void after January 31, 2004
1. PRICE, QUANTITY AND TERM
A. GRANT. This Warrant certifies that for value received
(including the execution and delivery of a Master Equipment Lease Agreement
between Company and Holder (collectively with any and all term loan promissory
notes and other financial accommodations, the "Lease")) LIGHTHOUSE CAPITAL
PARTNERS II, L.P., a Delaware limited partnership ("Lighthouse"), and its
registered assigns (collectively, "Holder"), are entitled at any time, and from
time to time, before Expiration, to purchase from Company up to 16,865 shares
(the "Exercise Quantity") of Company's Series A Preferred Stock ("Preferred
Stock"), at a price of $1.4824 per share (the "Exercise Price"), plus the Second
Tranche Shares, as hereinafter defined. If the total amounts initially advanced
under the Lease exceed $500,000, then on that date (the "Drawdown Date") this
Warrant shall additionally and automatically be exercisable for that number of
Warrant Shares (the "Second Tranche Shares") equal to $25,000 divided by the
Second Tranche Exercise Price, at a price per share equal to the Second Tranche
Exercise Price. "Second Tranche Exercise Price" means $1.4824; provided,
however, that if Company sells preferred stock for cash in a round of venture
capital financing resulting in net aggregate proceeds to Company exceeding
$5,000,000 (the "Next Round") before the exercise or conversion hereof, the
Second Tranche Exercise Price will be determined as follows: Subtract $1.4824
(the "Current Round Price") from the average price per share sold in the Next
Round (the "Next Round Price"), divide the result by the number of days between
August 8, 1996 (the "Current Round Close"), and the closing date of the Next
Round (the "Next Round Close"), multiply that result by the number of days
between the Current Round Close and the Drawdown Date and add the Current Round
Price to yield the Second Tranche Exercise Price; provided that the Second
Tranche Exercise Price shall not be higher than the Next Round Price, and if the
Next Round Price is less than or equal to the Current Round Price, the Second
Tranche Exercise Price is the Next Round Price. The term "Warrant Shares" means
Preferred Stock and the shares of any class of securities resulting from any
reclassifications of Preferred Stock, including a conversion to Common Stock, or
from any event described in SECTION 10 or SECTION 11. References to "Common
Stock" include any present or future class of Company's capital stock whose
holders are not limited to a fixed percentage or sum with respect to dividends
or liquidation proceeds, unless the context otherwise requires. References to
Exercise Quantity and Exercise Price include the Second Tranche Shares and the
Second Tranche Exercise Price, and the provisions hereof shall be applied
logically, consistently and fairly with respect to any differences between the
Exercise Price and the Second Tranche Exercise Price, unless the context
requires otherwise.
1
<PAGE> 2
2. PAYMENT. Warrant Shares may be purchased (i) in cash or by check,
(ii) by the surrender by Holder to Company of any promissory notes or other
obligations issued by Company, with Holder credited an amount equal to the
principal plus accrued interest, or (iii) by any combination of the foregoing.
3. NET ISSUE ELECTION. Holder may elect to convert all or a portion
hereof into Warrant Shares, without the payment of any additional consideration,
by the surrender of this Warrant or such portion to Company, with the net issue
election notice annexed hereto duly executed, at the principal office of
Company. Thereupon, Company shall issue to Holder such number of fully paid and
nonassessable Warrant Shares as is computed using the following formula:
X = Y (A-B)
-------
A
where: X = the number of Warrant Shares to be issued to Holder
pursuant to this Section 3.
Y = Exercise Quantity
A = the Fair Market Value of one Warrant Share.
B = the Exercise Price.
4. FAIR MARKET VALUE. Fair Market Value of a share of Preferred Stock is
the Fair Market Value of a share of Common Stock multiplied by the number of
shares of Common Stock into which Preferred Stock may then be converted. "Fair
Market Value" of a share of Common Stock as of a particular date means: (a) if
traded on an exchange or quoted on the NASDAQ National Market System, then the
average of the closing prices for the five (5) days prior to the date of the
Holder's notice of exercise, (b) if conversion or exercise is on a date from the
filing of, through to the effective date of, the registration statement for an
underwritten public offering registered under the Securities Act, the initial
public offering price (before deducting commissions, discounts or expenses) per
share sold in such offering, (c) if listed by the National Daily Quotation
Service "Pink Sheets," then the average of the most-recently reported bid and
ask prices for the ten (10) day period ending two (2) days prior to the day the
fair market value is being determined, and (d) otherwise, the price, not less
than book value, determined in good faith and in such reasonable manner as
prescribed by a majority of Company's Directors; provided, however, that (i)
Company will notify Holder of such price within ten business days after Holder
provides the Company written notice of its election; (ii) Holder will have ten
business days after receipt of such notice to dispute such price by written
notice to Company; and (iii) Holder will thereafter appoint an appraiser
reasonably acceptable to Company to determine Fair Market Value, the costs of
which Company will bear if the appraisal is 110% or more of that determined by
the Outside Directors.
5. PARTIAL EXERCISE. This Warrant may be exercised or converted in part,
and Holder shall be entitled to receive a new warrant, which shall be dated as
of the date of this Warrant, covering the number of Warrant Shares in respect of
which this Warrant shall not have been exercised.
6. FRACTIONAL SHARES. If a fractional Warrant Share would be issuable
upon exercise or conversion, Company will instead pay in cash a sum equal to the
product of such fraction and a full Warrant Share's Fair Market Value.
7. EXPIRATION DATE; ACCELERATION OF TERM UPON SALE OF THE COMPANY;
AUTOMATIC EXERCISE.
2
<PAGE> 3
(a) EXPIRATION DATE. This Warrant shall expire at the close of
business on January 31, 2004, and shall be void thereafter. Notwithstanding the
foregoing, this Warrant shall automatically be converted pursuant to SECTION 3
hereof, without any action by Holder, immediately before Expiration.
(b) ACCELERATION OF TERM UPON SALE OF THE COMPANY.
Notwithstanding the term of this Preferred Stock Purchase Warrant fixed pursuant
to SECTION 7(a) hereof and provided Holder has received reasonable advanced
notice and has not earlier converted, this Warrant shall automatically be
converted pursuant to SECTION 3 hereof, without any action by Holder upon the
closing of a sale of all or substantially all of the Company's assets, or the
merger or consolidation of the Company with or into another corporation (other
than a merger or consolidation for the principal purpose of changing the
domicile of Company), whereby the Company's stockholders immediately prior to
such merger or consolidation will hold less than 50% of the outstanding
securities of the surviving corporation immediately following such merger or
consolidation (a "Sale of the Company").
8. RESERVED SHARES; VALID ISSUANCE. Company covenants that it will at
all times from and after the date hereof reserve and keep available such number
of its authorized capital stock, free from all preemptive or similar rights
therein, as will be sufficient to permit the exercise of this Warrant in full
and the conversion into shares of Common Stock of all Warrant Shares receivable
upon such exercise. Company further covenants that such shares as may be issued
pursuant to such exercise or conversion will, upon issuance, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof; provided, however, that the Warrant shares
shall be subject to the Company's right of first refusal as provided in the
Company's Bylaws.
9. REGISTRATION RIGHTS. The Company hereby grants Holder and holders of
the Warrant Shares the "piggyback" registration rights set forth in Section 1.3
of the Investor Rights Agreement made as of August 8, 1996, as amended to date,
by and among Company and certain holders of Company's securities (the
"Registration Rights Agreement"). Company will not consent to any amendment of
the Registration Rights Agreement with respect to such "piggyback" registration
rights that would impair, subordinate or diminish such rights of Holder or
holders of Warrant Shares in relation to such rights of other Series A Preferred
Stock holders who are parties to the Registration Rights Agreement.
Notwithstanding anything to the contrary in the Registration Rights Agreement,
such "piggyback" registration rights of Holder shall be fully and completely
transferable with this Warrant and the Warrant Shares subject to the terms of
SECTION 16E hereof.
10. CAPITALIZATION.
A. SUBDIVISION OR COMBINATION. If Company subdivides or combines,
by reclassification, stock split or dividend, or otherwise, the number of
Warrant Shares outstanding into a greater or lesser number, simultaneously in
each such case the Exercise Price and the Exercise Quantity shall both be
proportionately adjusted.
B. CAPITALIZATION. If Company recapitalizes, or reorganizes or
reclassifies its capital stock, this Warrant shall thereafter be exercisable or
convertible for those shares of stock, other securities or property which a
holder of the Exercise Quantity of Warrant Shares could have received thereupon,
as further adjusted according to the terms hereof.
C. DISTRIBUTIONS. If Company declares, pays or distributes any
dividends payable in shares of its capital stock, then (i) the Exercise price
shall be adjusted, from and after the date of determination of stockholders
entitled to receive such dividend, to that price determined by multiplying the
Exercise Price in effect immediately prior to such dividend by a fraction, (x)
the numerator of which shall be the total number of shares of capital stock
outstanding immediately prior to such dividend and (y) the denominator of which
shall be the total
3
<PAGE> 4
number of shares of capital stock outstanding immediately after such dividend
and (ii) the number of Warrant Shares subject to this Warrant shall be
proportionately adjusted.
11. ANTIDILUTION RIGHTS. As of the date of this Warrant there are no
price-based antidilution rights applicable to the Series A Preferred Stock and
the Common Stock of Company. If, after the date hereof, price-based antidilution
rights are granted to the Series A Preferred Stock such rights shall also be
granted to the Holder of this Warrant. Company shall promptly provide Holder
hereof with any restatement, amendment or modification to the Articles promptly
after the same has been made.
12. CERTIFICATE OF ADJUSTMENT. Whenever the Exercise Price is adjusted,
as herein provided, Company shall promptly deliver to Holder a certificate of
Company's chief financial officer setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
13. NOTICES OF RECORD DATE, ETC. In the event of:
A. any taking by 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 any right to
subscribe for, purchase, sell or otherwise acquire or dispose of any shares of
stock of any class or any other securities or property, or to receive any other
right;
B. any reclassification of the capital stock of Company, capital
reorganization of Company, consolidation or merger involving Company, or sale or
conveyance of all or substantially all of its assets; or
C. any voluntary or involuntary dissolution, liquidation or
winding-up of Company;
then in each such event Company will provide or cause to be provided to Holder a
written notice thereof. Such notice shall be provided at least twenty (20) days
prior to the date specified in such notice on which any such action is to be
taken.
14. REPRESENTATIONS, WARRANTIES AND COVENANTS. This Warrant is issued
and delivered by Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by Company:
A. Company has all necessary authority to issue, execute and
deliver this Warrant and to perform its obligations hereunder. This Warrant has
been duly authorized issued, executed and delivered by Company and is the valid
and binding obligation of Company, enforceable in accordance with its terms.
B. The Warrant Shares issuable upon the exercise of this Warrant
have been duly authorized and reserved for issuance by Company and, when issued
in accordance with the terms hereof, will be validly issued, fully paid and
nonassessable.
C. The issuance, execution and delivery of this Warrant do not,
and the issuance of the Warrant Shares upon the exercise of this Warrant in
accordance with the terms hereof will not, (i) violate or contravene Company's
Articles or by-laws, or any law, statute, regulation, rule, judgment or order
applicable to Company, (ii) violate, contravene or result in a material breach
or default under any contract, agreement or instrument to which Company is a
party or by which Company or any of its assets are bound or (iii) require the
consent or approval of or the filing of any notice or registration with any
person or entity, except for the filing pursuant to Section 25102(f) of the
California Corporate Securities Law of 1968, as amended, and the rules
thereunder.
4
<PAGE> 5
D. As long as this Warrant is, or all of the Warrant Shares
issued upon exercise of this Warrant or any shares of Common Stock issued upon
conversion of such Warrant Shares are, issued and outstanding and held by
Lighthouse, Company will provide to Lighthouse the financial and other
information described in that certain Lease Line Schedule No. 01 to Master
Equipment Lease Agreement No. 152 between Company and Lighthouse Capital
Partners II, L.P. dated as of January 15, 1997; provided, however, that no such
information shall be provided to Lighthouse pursuant to this subparagraph 14(D)
(i) after the sale of securities pursuant to a registration statement filed by
Company under the Securities Act of 1933, as amended, in connection with the
firm commitment underwritten offering of its securities to the general public is
consummated or (ii) when Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the Exchange Act of 1934, or (iii)
Lighthouse is no longer Holder, whichever event shall first occur.
E. As of the date hereof, the authorized capital stock of Company
consists of (i) 20,000,000 shares of Common Stock, of which 10,000,000 shares
are issued and outstanding and 33,730 shares are reserved for issuance upon the
exercise of this Warrant and the conversion of the Preferred Stock, and (ii)
3,750,000 shares of Series A Preferred Stock, of which 2,765,870 are issued and
outstanding shares and 33,730 shares are reserved for issuance upon the exercise
of this Warrant.
15. AMENDMENT. The terms of this Warrant may be amended, modified or
waived only with the written consent of Holder and the Company.
16. REPRESENTATIONS AND COVENANTS OF HOLDER. This Preferred Stock
Purchase Warrant has been entered into by Company in reliance upon the following
representations and covenants of Holder, which by its execution hereof Holder
hereby confirms:
A. INVESTMENT PURPOSE. The right to acquire Preferred Stock or
the Preferred Stock issuable upon exercise of Holder's rights contained herein
will be acquired for investment and not with a view to the sale or distribution
of any part thereof, and Holder has no present intention of selling or engaging
in any public distribution of the same except pursuant to a registration or
exemption.
B. ACCREDITED INVESTOR. Holder is an "accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
C. PRIVATE ISSUE. Holder understands (i) that the Warrant and the
Warrant Shares have not been registered under the 1933 Act or qualified under
applicable state securities laws on the ground that the issuance contemplated by
this Warrant will be exempt from the registration and qualifications
requirements thereof, pursuant to Section 4(2) of the 1933 Act, and (ii) that
Company's reliance on such exemption is predicated on the representations set
forth in this SECTION 16.
D. FINANCIAL RISK. Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
E. DISPOSITION OF SHARES. Holder hereby agrees that Holder shall
make no disposition of this Warrant, and the shares issued upon exercise of this
Warrant (the "Warrant Shares"), unless (a) the Holder has first provided such
notice to the Company of its intended disposition as required under Article IX
of the Company's Bylaws and the Company or its assignee(s) elect not to acquire
this Warrant or the Warrant Shares pursuant to the right of first refusal
granted to the Company thereunder and (b) the Holder shall have provided Company
with written assurances, in form and substance satisfactory to Company, that (i)
the proposed disposition does not require registration of the Warrant or Warrant
Shares under the 1933 Act, or (ii) all appropriate action
5
<PAGE> 6
necessary for compliance with the registration requirements of the 1933 Act or
of any exemption from registration available under the 1933 Act (including Rule
144) has been taken.
F. RESTRICTIVE LEGENDS. In order to reflect the restrictions on
disposition of the Warrant Shares, the stock certificates for the Warrant Shares
will be endorsed with the following restrictive legends:
(i) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND ARE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER THE ACT. THE
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED EXCEPT (i) IN
CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE ACT OR (ii) IN COMPLIANCE WITH RULE 144 OR (iii) PURSUANT TO AN OPINION OF
COUNSEL, SATISFACTORY TO COMPANY, THAT REGISTRATION OR COMPLIANCE IS NOT
REQUIRED AS TO SUCH SALE, OFFER, PLEDGE OR HYPOTHECATION."
(ii) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A MARKET STAND-OFF AGREEMENT THAT RESTRICTS THE TRANSFER OF THESE
SHARES. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST OF THE
SECRETARY OF COMPANY.
(iii) "These securities are subject to a right of first
refusal in favor of the Company, the provisions of which are set forth in the
Company's Bylaws".
(iv) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations and Sections 417 and 418 of the California Corporations Code.
(v) Any other legend deemed necessary to reflect the
restrictions on the transfer of the Warrant Shares.
17. CALIFORNIA COMMISSIONER OF CORPORATIONS. THE SALE OF THE SECURITIES
THAT 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 FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
18. PRIVILEGE OF STOCK OWNERSHIP. Prior to the exercise of this Warrant,
except as otherwise provided herein, Holder shall not be entitled to, by virtue
of holding this Warrant, any rights of a stockholder of Company, including
(without limitation) the right to vote, receive dividends or other
distributions, or exercise preemptive rights.
19. MARKET STAND-OFF. Holder hereby agrees that, during the period of
duration specified by Company and an underwriter of common stock or other
securities of Company, following the date of the first sale to the public
pursuant to a registration statement of Company filed under the 1933 Act (a
"Registered Offering"), it shall not, to the extent requested by Company and
such underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donee who agree to be similarly
bound) any securities of Company held by it at any time during such period
except common stock included in such registration; provided, however, that:
6
<PAGE> 7
(a) all officers and directors of Company enter into similar
agreements and that the Company will not consent to any amendment of the
Investor Rights Agreement dated August 8, 1996, with respect to Section 1.14
that would impair, subordinate or diminish the rights of Holder or holders of
Warrant Shares in relation to the rights of other Series A Preferred Stock
holders who are parties to the Investor Rights Agreement; and
(b) such market stand-off time period shall not extend past the
date which is one hundred eighty (180) days after a Registered Offering; and
(c) such market stand-off agreement shall only apply to the first
two Registered Offerings.
20. NOTICES, TRANSFERS, ETC.
A. Any notice or written communication required or permitted to
be given to Holder may be given by certified mail or delivered to Holder at the
address most recently provided by Holder to Company.
B. Subject to SECTION 16 (E) hereof and in compliance with
applicable federal and state securities laws, and to Holder's obtaining
Company's prior written consent, which consent shall not be unreasonably
withheld, this Warrant may be transferred by Holder with respect to any or all
of the shares purchasable hereunder, provided, such transfer will not be to a
direct competitor of the Company. Upon surrender of this Warrant to Company,
together with the assignment notice annexed hereto duly executed, for transfer
of this Warrant as an entirety by Holder, Company shall issue a new warrant of
the same denomination to the assignee. Upon surrender of this Warrant to
Company, together with the assignment hereof properly endorsed, by Holder for
transfer with respect to a portion of the Warrant Shares purchasable hereunder,
Company shall issue a new warrant to the assignee, in such denomination as shall
be requested by Holder hereof, and shall issue to such Holder a new warrant
covering the number of shares in respect of which this Warrant shall not have
been transferred.
C. In case this Warrant shall be mutilated, lost, stolen or
destroyed, Company shall issue a new warrant of like tenor and denomination and
deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of an affidavit of Holder or other evidence
reasonably satisfactory to Company of the loss, theft or destruction of such
Warrant
21. NO IMPAIRMENT. Company will not, by amendment of its Articles or
through any reclassification, capital reorganization, consolidation, merger,
sale or conveyance of assets, dissolution, liquidation, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
of performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
Holders.
22. GOVERNING LAW. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the State of
California.
23. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon Company's
successors and assigns and shall inure to the benefit of Holder's successors,
legal representatives and permitted assigns.
24. BUSINESS DAYS. If the last or appointed day for the taking of any
action required of the expiration of any rights granted herein shall be a
Saturday or Sunday or a legal holiday in California, then such action may be
taken or right may be exercised on the next succeeding day which is not a
Saturday or Sunday or such a legal holiday.
7
<PAGE> 8
25. VALUE. Company and Holder agree that the value of this Warrant on
the date of grant is $100.00.
Dated: February 11, 1997.
MARIMBA, INC.
By: /s/ KIM POLESE
---------------------------------
Name: Kim Polese
-------------------------------
Title: President and CEO
------------------------------
8
<PAGE> 9
SUBSCRIPTION
To: Date:
------------------------------- -------------------------------
The undersigned hereby subscribes for Warrant Shares covered by this
Warrant. The certificate(s) for such shares shall be issued in the name of the
undersigned or as otherwise indicated below:
-------------------------------
Signature
-------------------------------
Name for Registration
-------------------------------
Mailing Address
NET ISSUE ELECTION NOTICE
To: Date:
------------------------------- -------------------------------
The undersigned hereby elects under SECTION 4 to surrender the right to
purchase __________ Warrant Shares pursuant to this Warrant. The certificate(s)
for such shares issuable upon such net issue election shall be issued in the
name of the undersigned or as otherwise indicated below:
-------------------------------
Signature
-------------------------------
Name for Registration
-------------------------------
Mailing Address
<PAGE> 10
ASSIGNMENT
For value received _____________________________ hereby sells, assigns
and transfers unto _____________________________________________________________
________________________________________________________________________________
[Please print or typewrite name and address of Assignee]
________________________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoint
____________________ _____________________________ its attorney to transfer the
within Warrant on the books of the within named Company with full power of
substitution on the premises.
Dated:_____________________________
_____________________________
In the Presence of:
_____________________________
<PAGE> 1
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of
________ __, 1999, between MARIMBA, INC., a Delaware corporation ("the
Company"), and _____________ ("Indemnitee").
WITNESSETH THAT:
WHEREAS, Indemnitee performs a valuable service for the Company;
and
WHEREAS, the Board of Directors of the Company has adopted Bylaws
(the "Bylaws") providing for the indemnification of the officers and directors
of the Company to the maximum extent authorized by Section 145 of the Delaware
General Corporation Law, as amended ("Law"); and
WHEREAS, the Bylaws and the Law, by their nonexclusive nature,
permit contracts between the Company and the officers or directors of the
Company with respect to indemnification of such officers or directors; and
WHEREAS, in accordance with the authorization as provided by the
Law, the Company may purchase and maintain a policy or policies of directors'
and officers' liability insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its officers or directors in the
performance of their obligations to the Company; and
WHEREAS, in recognition of past services and in order to induce
Indemnitee to continue to serve as an officer or director of the Company, the
Company has determined and agreed to enter into this contract with Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's service as an
officer or director after the date hereof, the parties hereto agree as follows:
1. Indemnity of Indemnitee. The Company hereby agrees to hold
harmless and indemnify Indemnitee to the full extent authorized or permitted by
the provisions of the Law, as such may be amended from time to time, and Article
VII of the Bylaws, as such may be amended. In furtherance of the foregoing
indemnification, and without limiting the generality thereof:
(a) Proceedings Other Than Proceedings by or in the Right of
the Company. Indemnitee shall be entitled to the rights of indemnification
provided in this Section l(a) if, by reason of his Corporate Status (as
hereinafter defined), he is, or is threatened to be made, a party to or
participant in any Proceeding (as hereinafter defined) other than a Proceeding
by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee
shall be indemnified against all Expenses (as hereinafter defined), judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with such Proceeding or any claim, issue
or matter therein, if he acted in good faith
<PAGE> 2
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal Proceeding, had no
reasonable cause to believe his conduct was unlawful.
(b) Proceedings by or in the Right of the Company. Indemnitee
shall be entitled to the rights of indemnification provided in this Section 1(b)
if, by reason of his Corporate Status, he is, or is threatened to be made, a
party to or participant in any Proceeding brought by or in the right of the
Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified against
all Expenses actually and reasonably incurred by him or on his behalf in
connection with such Proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company; provided, however, that, if applicable law so provides, no
indemnification against such Expenses shall be made in respect of any claim,
issue or matter in such Proceeding as to which Indemnitee shall have been
adjudged to be liable to the Company unless and to the extent that the Court of
Chancery of the State of Delaware shall determine that such indemnification may
be made.
(c) Indemnification for Expenses of a Party Who is Wholly or
Partly Successful. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified to the maximum extent permitted by law against all Expenses actually
and reasonably incurred by him or on his behalf in connection therewith. If
Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify Indemnitee against all
Expenses actually and reasonably incurred by him or on his behalf in connection
with each successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue or matter in
such a Proceeding by dismissal, with or without prejudice, shall be deemed to be
a successful result as to such claim, issue or matter.
2. Additional Indemnity. In addition to, and without regard to
any limitations on, the indemnification provided for in Section 1, the Company
shall and hereby does indemnify and hold harmless Indemnitee against all
Expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by him or on his behalf if, by reason of his Corporate
Status, he is, or is threatened to be made, a party to or participant in any
Proceeding (including a Proceeding by or in the right of the Company),
including, without limitation, all liability arising out of the negligence or
active or passive wrongdoing of Indemnitee. The only limitation that shall exist
upon the Company's obligations pursuant to this Agreement shall be that the
Company shall not be obligated to make any payment to Indemnitee that is finally
determined (under the procedures, and subject to the presumptions, set forth in
Sections 6 and 7 hereof) to be unlawful under Delaware law.
3. Contribution in the Event of Joint Liability.
(a) Whether or not the indemnification provided in Sections 1
and 2 hereof is available, in respect of any threatened, pending or completed
action, suit or proceeding
2
<PAGE> 3
in which Company is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), Company shall pay, in the first instance, the
entire amount of any judgment or settlement of such action, suit or proceeding
without requiring Indemnitee to contribute to such payment and Company hereby
waives and relinquishes any right of contribution it may have against
Indemnitee. Company shall not enter into any settlement of any action, suit or
proceeding in which Company is jointly liable with Indemnitee (or would be if
joined in such action, suit or proceeding) unless such settlement provides for a
full and final release of all claims asserted against Indemnitee.
(b) Without diminishing or impairing the obligations of the
Company set forth in the preceding subparagraph, if, for any reason, Indemnitee
shall elect or be required to pay all or any portion of any judgment or
settlement in any threatened, pending or completed action, suit or proceeding in
which Company is jointly liable with Indemnitee (or would be if joined in such
action, suit or proceeding), Company shall contribute to the amount of expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred and paid or payable by Indemnitee in proportion
to the relative benefits received by the Company and all officers, directors or
employees of the Company other than Indemnitee who are jointly liable with
Indemnitee (or would be if joined in such action, suit or proceeding), on the
one hand, and Indemnitee, on the other hand, from the transaction from which
such action, suit or proceeding arose; provided, however, that the proportion
determined on the basis of relative benefit may, to the extent necessary to
conform to law, be further adjusted by reference to the relative fault of
Company and all officers, directors or employees of the Company other than
Indemnitee who are jointly liable with Indemnitee (or would be if joined in such
action, suit or proceeding), on the one hand, and Indemnitee, on the other hand,
in connection with the events that resulted in such expenses, judgments, fines
or settlement amounts, as well as any other equitable considerations which the
law may require to be considered. The relative fault of Company and all
officers, directors or employees of the Company other than Indemnitee who are
jointly liable with Indemnitee (or would be if joined in such action, suit or
proceeding), on the one hand, and Indemnitee, on the other hand, shall be
determined by reference to, among other things, the degree to which their
actions were motivated by intent to gain personal profit or advantage, the
degree to which their liability is primary or secondary, and the degree to which
their conduct is active or passive.
(c) Company hereby agrees to fully indemnify and hold
Indemnitee harmless from any claims of contribution which may be brought by
officers, directors or employees of the Company other than Indemnitee who may be
jointly liable with Indemnitee.
4. Indemnification for Expenses of a Witness. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of his Corporate Status, a witness in any Proceeding to which Indemnitee is not
a party, he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith.
5. Advancement of Expenses. Notwithstanding any other provision
of this Agreement, the Company shall advance all Expenses incurred by or on
behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee's
Corporate Status within ten (10) days
3
<PAGE> 4
after the receipt by the Company of a statement or statements from Indemnitee
requesting such advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the Expenses incurred by Indemnitee and shall include or be
preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay
any Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses. Any advances and
undertakings to repay pursuant to this Section 5 shall be unsecured and interest
free. Notwithstanding the foregoing, the obligation of the Company to advance
Expenses pursuant to this Section 5 shall be subject to the condition that, if,
when and to the extent that the Company determines that Indemnitee would not be
permitted to be indemnified under applicable law, the Company shall be entitled
to be reimbursed, within thirty (30) days of such determination, by Indemnitee
(who hereby agrees to reimburse the Company) for all such amounts theretofore
paid; provided, however, that if Indemnitee has commenced or thereafter
commences legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, any
determination made by the Company that Indemnitee would not be permitted to be
indemnified under applicable law shall not be binding and Indemnitee shall not
be required to reimburse the Company for any advance of Expenses until a final
judicial determination is made with respect thereto (as to which all rights of
appeal therefrom have been exhausted or lapsed).
6. Procedures and Presumptions for Determination of Entitlement
to Indemnification. It is the intent of this Agreement to secure for Indemnitee
rights of indemnity that are as favorable as may be permitted under the law and
public policy of the State of Delaware. Accordingly, the parties agree that the
following procedures and presumptions shall apply in the event of any question
as to whether Indemnitee is entitled to indemnification under this Agreement:
(a) To obtain indemnification (including, but not limited to,
the advancement of Expenses and contribution by the Company) under this
Agreement, Indemnitee shall submit to the Company a written request, including
therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification. The Secretary of the
Company shall, promptly upon receipt of such a request for indemnification,
advise the Board of Directors in writing that Indemnitee has requested
indemnification.
(b) Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 6(a) hereof, a determination, if
required by applicable law, with respect to Indemnitee's entitlement thereto
shall be made in the specific case by one of the following three methods, which
shall be at the election of Indemnitee: (1) by a majority vote of the
disinterested directors, even though less than a quorum, or (2) by independent
legal counsel in a written opinion, or (3) by the stockholders.
(c) If the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 6(b) hereof, the
Independent Counsel shall be selected as provided in this Section 6(c). The
Independent Counsel shall be selected by
4
<PAGE> 5
Indemnitee (unless Indemnitee shall request that such selection be made by the
Board of Directors). Indemnitee or the Company, as the case may be, may, within
10 days after such written notice of selection shall have been given, deliver to
the Company or to Indemnitee, as the case may be, a written objection to such
selection; provided, however, that such objection may be asserted only on the
ground that the Independent Counsel so selected does not meet the requirements
of "Independent Counsel" as defined in Section 13 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. Absent a proper and timely objection, the person so selected shall
act as Independent Counsel. If a written objection is made and substantiated,
the Independent Counsel selected may not serve as Independent Counsel unless and
until such objection is withdrawn or a court has determined that such objection
is without merit. If, within 20 days after submission by Indemnitee of a written
request for indemnification pursuant to Section 6(a) hereof, no Independent
Counsel shall have been selected and not objected to, either the Company or
Indemnitee may petition the Court of Chancery of the State of Delaware or other
court of competent jurisdiction for resolution of any objection which shall have
been made by the Company or Indemnitee to the other's selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the court or by such other person as the court shall designate, and the
person with respect to whom all objections are so resolved or the person so
appointed shall act as Independent Counsel under Section 6(b) hereof. The
Company shall pay any and all reasonable fees and expenses of Independent
Counsel incurred by such Independent Counsel in connection with acting pursuant
to Section 6(b) hereof, and the Company shall pay all reasonable fees and
expenses incident to the procedures of this Section 6(c), regardless of the
manner in which such Independent Counsel was selected or appointed.
(d) In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under
this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 6(a) of this Agreement. Anyone seeking to overcome this
presumption shall have the burden of proof and the burden of persuasion, by
clear and convincing evidence.
(e) Indemnitee shall be deemed to have acted in good faith if
Indemnitee's action is based on the records or books of account of the
Enterprise, including financial statements, or on information supplied to
Indemnitee by the officers of the Enterprise in the course of their duties, or
on the advice of legal counsel for the Enterprise or on information or records
given or reports made to the Enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Enterprise. In addition, the knowledge and/or actions, or failure to act, of
any director, officer, agent or employee of the Enterprise shall not be imputed
to Indemnitee for purposes of determining the right to indemnification under
this Agreement. Whether or not the foregoing provisions of this Section 6(e) are
satisfied, it shall in any event be presumed that Indemnitee has at all times
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. Anyone seeking to overcome this
presumption shall have the burden of proof and the burden of persuasion, by
clear and convincing evidence.
5
<PAGE> 6
(f) If the person, persons or entity empowered or selected
under Section 6 to determine whether Indemnitee is entitled to indemnification
shall not have made a determination within thirty (30) days after receipt by the
Company of the request therefor, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall be
entitled to such indemnification, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law; provided, however, that such 30 day period may be extended for a reasonable
time, not to exceed an additional fifteen (15) days, if the person, persons or
entity making the determination with respect to entitlement to indemnification
in good faith requires such additional time for the obtaining or evaluating
documentation and/or information relating thereto; and provided, further, that
the foregoing provisions of this Section 6(g) shall not apply if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 6(b) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such
determination the Board of Directors or the Disinterested Directors, if
appropriate, resolve to submit such determination to the stockholders for their
consideration at an annual meeting thereof to be held within seventy five (75)
days after such receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within fifteen (15) days after such receipt
for the purpose of making such determination, such meeting is held for such
purpose within sixty (60) days after having been so called and such
determination is made thereat.
(g) Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
Independent Counsel, member of the Board of Directors, or stockholder of the
Company shall act reasonably and in good faith in making a determination under
the Agreement of the Indemnitee's entitlement to indemnification. Any costs or
expenses (including attorneys' fees and disbursements) incurred by Indemnitee in
so cooperating with the person, persons or entity making such determination
shall be borne by the Company (irrespective of the determination as to
Indemnitee's entitlement to indemnification) and the Company hereby indemnifies
and agrees to hold Indemnitee harmless therefrom.
(h) The Company acknowledges that a settlement or other
disposition short of final judgment may be successful if it permits a party to
avoid expense, delay, distraction, disruption and uncertainty. In the event that
any action, claim or proceeding to which Indemnitee is a party is resolved in
any manner other than by adverse judgment against Indemnitee (including, without
limitation, settlement of such action, claim or proceeding with or without
payment of money or other consideration) it shall be presumed that Indemnitee
has been successful on the merits or otherwise in such action, suit or
proceeding. Anyone seeking to overcome this presumption shall have the burden of
proof and the burden of persuasion, by clear and convincing evidence.
6
<PAGE> 7
7. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant to
Section 6 of this Agreement that Indemnitee is not entitled to indemnification
under this Agreement, (ii) advancement of Expenses is not timely made pursuant
to Section 5 of this Agreement, (iii) no determination of entitlement to
indemnification shall have been made pursuant to Section 6(b) of this Agreement
within 90 days after receipt by the Company of the request for indemnification,
(iv) payment of indemnification is not made pursuant to this Agreement within
ten (10) days after receipt by the Company of a written request therefor, or (v)
payment of indemnification is not made within ten (10) days after a
determination has been made that Indemnitee is entitled to indemnification or
such determination is deemed to have been made pursuant to Section 6 of this
Agreement, Indemnitee shall be entitled to an adjudication in an appropriate
court of the State of Delaware, or in any other court of competent jurisdiction,
of his entitlement to such indemnification. Indemnitee shall commence such
proceeding seeking an adjudication within 180 days following the date on which
Indemnitee first has the right to commence such proceeding pursuant to this
Section 7(a). The Company shall not oppose Indemnitee's right to seek any such
adjudication.
(b) In the event that a determination shall have been made
pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding commenced pursuant to this Section 7
shall be conducted in all respects as a de novo trial, on the merits and
Indemnitee shall not be prejudiced by reason of that adverse determination under
Section 6(b).
(c) If a determination shall have been made pursuant to
Section 6(b) of this Agreement that Indemnitee is entitled to indemnification,
the Company shall be bound by such determination in any judicial proceeding
commenced pursuant to this Section 7, absent a prohibition of such
indemnification under applicable law.
(d) In the event that Indemnitee, pursuant to this Section 7,
seeks a judicial adjudication of his rights under, or to recover damages for
breach of, this Agreement, or to recover under any directors' and officers'
liability insurance policies maintained by the Company the Company shall pay on
his behalf, in advance, any and all expenses (of the types described in the
definition of Expenses in Section 13 of this Agreement) actually and reasonably
incurred by him in such judicial adjudication, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, advancement of
expenses or insurance recovery.
(e) The Company shall be precluded from asserting in any
judicial proceeding commenced pursuant to this Section 7 that the procedures and
presumptions of this Agreement are not valid, binding and enforceable and shall
stipulate in any such court that the Company is bound by all the provisions of
this Agreement.
7
<PAGE> 8
8. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
(a) The rights of indemnification as provided by this
Agreement shall not be deemed exclusive of any other rights to which Indemnitee
may at any time be entitled under applicable law, the certificate of
incorporation of the Company, the Bylaws, any agreement, a vote of stockholders
or a resolution of directors, or otherwise. No amendment, alteration or repeal
of this Agreement or of any provision hereof shall limit or restrict any right
of Indemnitee under this Agreement in respect of any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal. To the extent that a change in the Law, whether by statute or judicial
decision, permits greater indemnification than would be afforded currently under
the Bylaws and this Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
such change. No right or remedy herein conferred is intended to be exclusive of
any other right or remedy, and every other right and remedy shall be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance
policy or policies providing liability insurance for directors, officers,
employees, or agents or fiduciaries of the Company or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which such person serves at the request of the Company, Indemnitee shall be
covered by such policy or policies in accordance with its or their terms to the
maximum extent of the coverage available for any such director, officer,
employee or agent under such policy or policies.
(c) In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to
make any payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.
9. Exception to Right of Indemnification. Notwithstanding any
other provision of this Agreement, Indemnitee shall not be entitled to
indemnification under this Agreement with respect to any Proceeding brought by
Indemnitee, or any claim therein, unless (a) the bringing of such Proceeding or
making of such claim shall have been approved by the Board of Directors of the
Company or (b) such Proceeding is being brought by the Indemnitee to assert,
interpret or enforce his rights under this Agreement.
10. Duration of Agreement. All agreements and obligations of the
Company contained herein shall continue during the period Indemnitee is an
officer or director of the
8
<PAGE> 9
Company (or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise) and shall continue thereafter so long as Indemnitee
shall be subject to any Proceeding (or any proceeding commenced under Section 7
hereof) by reason of his Corporate Status, whether or not he is acting or
serving in any such capacity at the time any liability or expense is incurred
for which indemnification can be provided under this Agreement. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), assigns, spouses,
heirs, executors and personal and legal representatives. This Agreement shall
continue in effect regardless of whether Indemnitee continues to serve as an
officer or director of the Company or any other Enterprise at the Company's
request.
11. Security. To the extent requested by the Indemnitee and
approved by the Board of Directors of the Company, the Company may at any time
and from time to time provide security to the Indemnitee for the Company's
obligations hereunder through an irrevocable bank line of credit, funded trust
or other collateral. Any such security, once provided to the Indemnitee, may not
be revoked or released without the prior written consent of the Indemnitee.
12. Enforcement.
(a) The Company expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on it hereby in
order to induce Indemnitee to serve as an officer or director of the Company,
and the Company acknowledges that Indemnitee is relying upon this Agreement in
serving as an officer or director of the Company.
(b) This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral, written and implied, between the
parties hereto with respect to the subject matter hereof.
13. Definitions. For purposes of this Agreement:
(a) "Corporate Status" describes the status of a person who is
or was a director, officer, employee or agent or fiduciary of the Company or of
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise which such person is or was serving at the express written
request of the Company.
(b) "Disinterested Director" means a director of the Company
who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(c) "Enterprise" shall mean the Company and any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise of which Indemnitee is
9
<PAGE> 10
or was serving at the express written request of the Company as a director,
officer, employee, agent or fiduciary.
(d) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, participating, or being or preparing to
be a witness in a Proceeding.
(e) "Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent: (i)
the Company or Indemnitee in any matter material to either such party (other
than with respect to matters concerning the Indemnitee under this Agreement, or
of other indemnitees under similar indemnification agreements), or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine Indemnitee's rights
under this Agreement. The Company agrees to pay the reasonable fees of the
Independent Counsel referred to above and to fully indemnify such counsel
against any and all Expenses, claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.
(f) "Proceeding" includes any threatened, pending or completed
action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought by or in the right of the Company or
otherwise and whether civil, criminal, administrative or investigative, in which
Indemnitee was, is or will be involved as a party or otherwise, by reason of the
fact that Indemnitee is or was a director of the Company, by reason of any
action taken by him or of any inaction on his part while acting as an officer or
director of the Company, or by reason of the fact that he is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other Enterprise; in each case
whether or not he is acting or serving in any such capacity at the time any
liability or expense is incurred for which indemnification can be provided under
this Agreement; including one pending on or before the date of this Agreement;
and excluding one initiated by an Indemnitee pursuant to Section 7 of this
Agreement to enforce his rights under this Agreement.
14. Severability. If any provision or provisions of this
Agreement shall be held by a court of competent jurisdiction to be invalid,
void, illegal or otherwise unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby and shall remain enforceable to the
fullest extent permitted by law; and (b) to the fullest extent
10
<PAGE> 11
possible, the provisions of this Agreement (including, without limitation, each
portion of any section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
thereby.
15. Modification and Waiver. No supplement, modification,
termination or amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
16. Notice By Indemnitee. Indemnitee agrees promptly to notify
the Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification covered hereunder. The failure
to so notify the Company shall not relieve the Company of any obligation which
it may have to the Indemnitee under this Agreement or otherwise unless and only
to the extent that such failure or delay materially prejudices the Company.
17. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee, to the address set forth below
Indemnitee signature hereto.
(b) If to the Company, to:
440 Clyde Avenue
Mountain View, California 94043
Attention: Todd Smithline, Esq.
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
18. 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 one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
19. Headings. The headings of the paragraphs of this Agreement
are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
11
<PAGE> 12
20. Governing Law. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware without application of the conflict of laws principles
thereof.
21. Gender. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the day and year first above written.
MARIMBA, INC.
By:____________________________________
Name:____________________________
Title:___________________________
Address: 440 Clyde Avenue
Mountain View, California 94043
INDEMNITEE
----------------------------------------
Address:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE> 1
EXHIBIT 10.2
MARIMBA, INC.
1999 OMNIBUS EQUITY INCENTIVE PLAN
(AS ADOPTED FEBRUARY 2, 1999)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. INTRODUCTION..................................................................... 1
ARTICLE 2. ADMINISTRATION................................................................... 1
2.1 Committee Composition........................................................... 1
2.2 Committee Responsibilities...................................................... 1
2.3 Committee for Non-Officer Grants................................................ 1
ARTICLE 3. SHARES AVAILABLE FOR GRANTS...................................................... 2
3.1 Basic Limitation................................................................ 2
3.2 Additional Shares............................................................... 2
3.3 Dividend Equivalents............................................................ 2
ARTICLE 4. ELIGIBILITY...................................................................... 2
4.1 Incentive Stock Options......................................................... 2
4.2 Other Grants.................................................................... 2
ARTICLE 5. OPTIONS.......................................................................... 2
5.1 Stock Option Agreement.......................................................... 2
5.2 Number of Shares................................................................ 3
5.3 Exercise Price.................................................................. 3
5.4 Exercisability and Term......................................................... 3
5.5 Modification or Assumption of Options........................................... 3
5.6 Buyout Provisions............................................................... 3
ARTICLE 6. PAYMENT FOR OPTION SHARES........................................................ 4
6.1 General Rule.................................................................... 4
6.2 Surrender of Stock.............................................................. 4
6.3 Exercise/Sale................................................................... 4
6.4 Exercise/Pledge................................................................. 4
6.5 Promissory Note................................................................. 4
6.6 Other Forms of Payment.......................................................... 4
ARTICLE 7. STOCK APPRECIATION RIGHTS........................................................ 4
7.1 SAR Agreement................................................................... 4
7.2 Number of Shares................................................................ 5
7.3 Exercise Price.................................................................. 5
7.4 Exercisability and Term......................................................... 5
7.5 Exercise of SARs................................................................ 5
7.6 Modification or Assumption of SARs.............................................. 5
ARTICLE 8. RESTRICTED SHARES................................................................ 6
8.1 Restricted Stock Agreement...................................................... 6
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
8.2 Payment for Awards.............................................................. 6
8.3 Vesting Conditions.............................................................. 6
8.4 Voting and Dividend Rights...................................................... 6
ARTICLE 9. STOCK UNITS...................................................................... 6
9.1 Stock Unit Agreement............................................................ 6
9.2 Payment for Awards.............................................................. 6
9.3 Vesting Conditions.............................................................. 6
9.4 Voting and Dividend Rights...................................................... 6
9.5 Form and Time of Settlement of Stock Units...................................... 7
9.6 Death of Recipient.............................................................. 7
9.7 Creditors' Rights............................................................... 7
ARTICLE 10. CHANGE IN CONTROL............................................................... 7
ARTICLE 11. PROTECTION AGAINST DILUTION..................................................... 8
11.1 Adjustments.................................................................... 8
11.2 Dissolution or Liquidation..................................................... 8
11.3 Reorganizations................................................................ 8
ARTICLE 12. DEFERRAL OF AWARDS.............................................................. 9
ARTICLE 13. AWARDS UNDER OTHER PLANS........................................................ 9
ARTICLE 14. PAYMENT OF DIRECTOR'S FEES IN SECURITIES........................................ 9
14.1 Effective Date................................................................. 9
14.2 Elections to Receive NSOs, Restricted Shares or Stock Units.................... 9
14.3 Number and Terms of NSOs, Restricted Shares or Stock Units..................... 10
ARTICLE 15. LIMITATION ON RIGHTS............................................................ 10
15.1 Retention Rights............................................................... 10
15.2 Stockholders' Rights........................................................... 10
15.3 Regulatory Requirements........................................................ 10
ARTICLE 16. WITHHOLDING TAXES............................................................... 10
16.1 General........................................................................ 10
16.2 Share Withholding.............................................................. 10
ARTICLE 17. FUTURE OF THE PLAN.............................................................. 11
17.1 Term of the Plan............................................................... 11
17.2 Amendment or Termination....................................................... 11
ARTICLE 18. LIMITATION ON PAYMENTS.......................................................... 11
18.1 Scope of Limitation............................................................ 11
18.2 Basic Rule..................................................................... 11
18.3 Reduction of Payments.......................................................... 11
18.4 Overpayments and Underpayments................................................. 12
18.5 Related Corporations........................................................... 12
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 19. DEFINITIONS..................................................................... 12
</TABLE>
iii
<PAGE> 5
MARIMBA, INC.
1999 OMNIBUS EQUITY INCENTIVE PLAN
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board on February 2, 1999 to be
effective as of the date of the IPO. The purpose of the Plan is to promote the
long-term success of the Company and the creation of stockholder value by (a)
encouraging Employees, Outside Directors and Consultants to focus on critical
long-range objectives, (b) encouraging the attraction and retention of
Employees, Outside Directors and Consultants with exceptional qualifications and
(c) linking Employees, Outside Directors and Consultants directly to stockholder
interests through increased stock ownership. The Plan seeks to achieve this
purpose by providing for Awards in the form of Restricted Shares, Stock Units,
Options (which may constitute incentive stock options or nonstatutory stock
options) or stock appreciation rights.
The Plan shall be governed by, and construed in accordance with,
the laws of the State of Delaware (except their choice-of-law provisions).
ARTICLE 2. ADMINISTRATION.
2.1 COMMITTEE COMPOSITION. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of two or more directors of
the Company, who shall be appointed by the Board. In addition, the composition
of the Committee shall satisfy:
(a) Such requirements as the Securities and Exchange Commission
may establish for administrators acting under plans intended to qualify
for exemption under Rule 16b-3 (or its successor) under the Exchange
Act; and
(b) Such requirements as the Internal Revenue Service may
establish for outside directors acting under plans intended to qualify
for exemption under section 162(m)(4)(C) of the Code.
2.2 COMMITTEE RESPONSIBILITIES. The Committee shall (a) select the
Employees, Outside Directors and Consultants who are to receive Awards under the
Plan, (b) determine the type, number, vesting requirements and other features
and conditions of such Awards, (c) interpret the Plan and (d) make all other
decisions relating to the operation of the Plan. The Committee may adopt such
rules or guidelines as it deems appropriate to implement the Plan. The
Committee's determinations under the Plan shall be final and binding on all
persons.
2.3 COMMITTEE FOR NON-OFFICER GRANTS. The Board may also appoint a
secondary committee of the Board, which shall be composed of one or more
directors of the Company who need not satisfy the requirements of Section 2.1.
Such secondary committee may administer the Plan with respect to Employees and
Consultants who are not considered officers or directors of
<PAGE> 6
the Company under section 16 of the Exchange Act, may grant Awards under the
Plan to such Employees and Consultants and may determine all features and
conditions of such Awards. Within the limitations of this Section 2.3, any
reference in the Plan to the Committee shall include such secondary committee.
ARTICLE 3. SHARES AVAILABLE FOR GRANTS.
3.1 BASIC LIMITATION. Common Shares issued pursuant to the Plan may be
authorized but unissued shares or treasury shares. The aggregate number of
Options, SARs, Stock Units and Restricted Shares awarded under the Plan shall
not exceed (a) 2,000,000, plus (b) the additional Common Shares described in
Section 3.2. The limitation of this Section 3.1 shall be subject to adjustment
pursuant to Article 11.
3.2 ADDITIONAL SHARES. If Restricted Shares or Common Shares issued upon
the exercise of Options are forfeited, then such Common Shares shall again
become available for Awards under the Plan. If Stock Units, Options or SARs are
forfeited or terminate for any other reason before being exercised, then the
corresponding Common Shares shall again become available for Awards under the
Plan. If Stock Units are settled, then only the number of Common Shares (if any)
actually issued in settlement of such Stock Units shall reduce the number
available under Section 3.1 and the balance shall again become available for
Awards under the Plan. If SARs are exercised, then only the number of Common
Shares (if any) actually issued in settlement of such SARs shall reduce the
number available under Section 3.1 and the balance shall again become available
for Awards under the Plan. The foregoing notwithstanding, the aggregate number
of Common Shares that may be issued under the Plan upon the exercise of ISOs
shall not be increased when Restricted Shares or other Common Shares are
forfeited.
3.3 DIVIDEND EQUIVALENTS. Any dividend equivalents paid or credited
under the Plan shall not be applied against the number of Restricted Shares,
Stock Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.
ARTICLE 4. ELIGIBILITY.
4.1 INCENTIVE STOCK OPTIONS. Only Employees who are common-law employees
of the Company, a Parent or a Subsidiary shall be eligible for the grant of
ISOs. In addition, an Employee who owns more than 10% of the total combined
voting power of all classes of outstanding stock of the Company or any of its
Parents or Subsidiaries shall not be eligible for the grant of an ISO unless the
requirements set forth in section 422(c)(6) of the Code are satisfied.
4.2 OTHER GRANTS. Only Employees, Outside Directors and Consultants
shall be eligible for the grant of Restricted Shares, Stock Units, NSOs or SARs.
ARTICLE 5. OPTIONS.
5.1 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are
2
<PAGE> 7
not inconsistent with the Plan. The Stock Option Agreement shall specify whether
the Option is an ISO or an NSO. The provisions of the various Stock Option
Agreements entered into under the Plan need not be identical. Options may be
granted in consideration of a reduction in the Optionee's other compensation. A
Stock Option Agreement may provide that a new Option will be granted
automatically to the Optionee when he or she exercises a prior Option and pays
the Exercise Price in the form described in Section 6.2.
5.2 NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 11. Options granted to any
Optionee in a single fiscal year of the Company shall not cover more than
100,000 Common Shares, except that Options granted to a new Employee in the
fiscal year of the Company in which his or her service as an Employee first
commences shall not cover more than 300,000 Common Shares. The limitations set
forth in the preceding sentence shall be subject to adjustment in accordance
with Article 11.
5.3 EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price under an ISO shall in no event
be less than 100% of the Fair Market Value of a Common Share on the date of
grant and the Exercise Price under an NSO shall in no event be less than 85% of
the Fair Market Value of a Common Share on the date of grant. In the case of an
NSO, a Stock Option Agreement may specify an Exercise Price that varies in
accordance with a predetermined formula while the NSO is outstanding.
5.4 EXERCISABILITY AND TERM. Each Stock Option Agreement shall specify
the date or event when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option; provided that the term of an ISO shall in no event exceed 10 years from
the date of grant. A Stock Option Agreement may provide for accelerated
exercisability in the event of the Optionee's death, disability or retirement or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee's service. Options may be awarded in
combination with SARs, and such an Award may provide that the Options will not
be exercisable unless the related SARs are forfeited.
5.5 MODIFICATION OR ASSUMPTION OF OPTIONS. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding options or may
accept the cancellation of outstanding options (whether granted by the Company
or by another issuer) in return for the grant of new options for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations under
such Option.
5.6 BUYOUT PROVISIONS. The Committee may at any time (a) offer to buy
out for a payment in cash or cash equivalents an Option previously granted or
(b) authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.
3
<PAGE> 8
ARTICLE 6. PAYMENT FOR OPTION SHARES.
6.1 GENERAL RULE. The entire Exercise Price of Common Shares issued upon
exercise of Options shall be payable in cash or cash equivalents at the time
when such Common Shares are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment shall
be made only pursuant to the express provisions of the applicable Stock
Option Agreement. The Stock Option Agreement may specify that payment
may be made in any form(s) described in this Article 6.
(b) In the case of an NSO, the Committee may at any time accept
payment in any form(s) described in this Article 6.
6.2 SURRENDER OF STOCK. To the extent that this Section 6.2 is
applicable, all or any part of the Exercise Price may be paid by surrendering,
or attesting to the ownership of, Common Shares that are already owned by the
Optionee. Such Common Shares shall be valued at their Fair Market Value on the
date when the new Common Shares are purchased under the Plan. The Optionee shall
not surrender, or attest to the ownership of, Common Shares in payment of the
Exercise Price if such action would cause the Company to recognize compensation
expense (or additional compensation expense) with respect to the Option for
financial reporting purposes.
6.3 EXERCISE/SALE. To the extent that this Section 6.3 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) an irrevocable direction to a
securities broker approved by the Company to sell all or part of the Common
Shares being purchased under the Plan and to deliver all or part of the sales
proceeds to the Company.
6.4 EXERCISE/PLEDGE. To the extent that this Section 6.4 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) an irrevocable direction to
pledge all or part of the Common Shares being purchased under the Plan to a
securities broker or lender approved by the Company, as security for a loan, and
to deliver all or part of the loan proceeds to the Company.
6.5 PROMISSORY NOTE. To the extent that this Section 6.5 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) a full-recourse promissory
note. However, the par value of the Common Shares being purchased under the
Plan, if newly issued, shall be paid in cash or cash equivalents.
6.6 OTHER FORMS OF PAYMENT. To the extent that this Section 6.6 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid in any other form that is consistent with applicable laws, regulations
and rules.
ARTICLE 7. STOCK APPRECIATION RIGHTS.
7.1 SAR AGREEMENT. Each grant of an SAR under the Plan shall be
evidenced by an SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with
4
<PAGE> 9
the Plan. The provisions of the various SAR Agreements entered into under the
Plan need not be identical. SARs may be granted in consideration of a reduction
in the Optionee's other compensation.
7.2 NUMBER OF SHARES. Each SAR Agreement shall specify the number of
Common Shares to which the SAR pertains and shall provide for the adjustment of
such number in accordance with Article 11. SARs granted to any Optionee in a
single fiscal year shall in no event pertain to more than 100,000 Common Shares,
except that SARs granted to a new Employee in the fiscal year of the Company in
which his or her service as an Employee first commences shall not pertain to
more than 300,000 Common Shares. The limitations set forth in the preceding
sentence shall be subject to adjustment in accordance with Article 11.
7.3 EXERCISE PRICE. Each SAR Agreement shall specify the Exercise Price.
An SAR Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the SAR is outstanding.
7.4 EXERCISABILITY AND TERM. Each SAR Agreement shall specify the date
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. An SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may be
awarded in combination with Options, and such an Award may provide that the SARs
will not be exercisable unless the related Options are forfeited. An SAR may be
included in an ISO only at the time of grant but may be included in an NSO at
the time of grant or thereafter. An SAR granted under the Plan may provide that
it will be exercisable only in the event of a Change in Control.
7.5 EXERCISE OF SARS. Upon exercise of an SAR, the Optionee (or any
person having the right to exercise the SAR after his or her death) shall
receive from the Company (a) Common Shares, (b) cash or (c) a combination of
Common Shares and cash, as the Committee shall determine. The amount of cash
and/or the Fair Market Value of Common Shares received upon exercise of SARs
shall, in the aggregate, be equal to the amount by which the Fair Market Value
(on the date of surrender) of the Common Shares subject to the SARs exceeds the
Exercise Price. If, on the date when an SAR expires, the Exercise Price under
such SAR is less than the Fair Market Value on such date but any portion of such
SAR has not been exercised or surrendered, then such SAR shall automatically be
deemed to be exercised as of such date with respect to such portion.
7.6 MODIFICATION OR ASSUMPTION OF SARS. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of an SAR shall, without the consent of the
Optionee, alter or impair his or her rights or obligations under such SAR.
5
<PAGE> 10
ARTICLE 8. RESTRICTED SHARES.
8.1 RESTRICTED STOCK AGREEMENT. Each grant of Restricted Shares under
the Plan shall be evidenced by a Restricted Stock Agreement between the
recipient and the Company. Such Restricted Shares shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Stock
Agreements entered into under the Plan need not be identical.
8.2 PAYMENT FOR AWARDS. Subject to the following sentence, Restricted
Shares may be sold or awarded under the Plan for such consideration as the
Committee may determine, including (without limitation) cash, cash equivalents,
full-recourse promissory notes, past services and future services. To the extent
that an Award consists of newly issued Restricted Shares, the Award recipient
shall furnish consideration with a value not less than the par value of such
Restricted Shares in the form of cash, cash equivalents or past services
rendered to the Company (or a Parent or Subsidiary), as the Committee may
determine.
8.3 VESTING CONDITIONS. Each Award of Restricted Shares may or may not
be subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Restricted Stock Agreement. A
Restricted Stock Agreement may provide for accelerated vesting in the event of
the Participant's death, disability or retirement or other events.
8.4 VOTING AND DIVIDEND RIGHTS. The holders of Restricted Shares awarded
under the Plan shall have the same voting, dividend and other rights as the
Company's other stockholders. A Restricted Stock Agreement, however, may require
that the holders of Restricted Shares invest any cash dividends received in
additional Restricted Shares. Such additional Restricted Shares shall be subject
to the same conditions and restrictions as the Award with respect to which the
dividends were paid.
ARTICLE 9. STOCK UNITS.
9.1 STOCK UNIT AGREEMENT. Each grant of Stock Units under the Plan shall
be evidenced by a Stock Unit Agreement between the recipient and the Company.
Such Stock Units shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Stock Unit Agreements entered into under the Plan need
not be identical. Stock Units may be granted in consideration of a reduction in
the recipient's other compensation.
9.2 PAYMENT FOR AWARDS. To the extent that an Award is granted in the
form of Stock Units, no cash consideration shall be required of the Award
recipients.
9.3 VESTING CONDITIONS. Each Award of Stock Units may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. A Stock
Unit Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events.
9.4 VOTING AND DIVIDEND RIGHTS. The holders of Stock Units shall have no
voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under
the Plan may, at the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the
6
<PAGE> 11
holder to be credited with an amount equal to all cash dividends paid on one
Common Share while the Stock Unit is outstanding. Dividend equivalents may be
converted into additional Stock Units. Settlement of dividend equivalents may be
made in the form of cash, in the form of Common Shares, or in a combination of
both. Prior to distribution, any dividend equivalents which are not paid shall
be subject to the same conditions and restrictions as the Stock Units to which
they attach.
9.5 FORM AND TIME OF SETTLEMENT OF STOCK UNITS. Settlement of vested
Stock Units may be made in the form of (a) cash, (b) Common Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Common Shares over a series of trading days.
Vested Stock Units may be settled in a lump sum or in installments. The
distribution may occur or commence when all vesting conditions applicable to the
Stock Units have been satisfied or have lapsed, or it may be deferred to any
later date. The amount of a deferred distribution may be increased by an
interest factor or by dividend equivalents. Until an Award of Stock Units is
settled, the number of such Stock Units shall be subject to adjustment pursuant
to Article 11.
9.6 DEATH OF RECIPIENT. Any Stock Units Award that becomes payable after
the recipient's death shall be distributed to the recipient's beneficiary or
beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.
9.7 CREDITORS' RIGHTS. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Unit Agreement.
ARTICLE 10. CHANGE IN CONTROL.
Unless the applicable agreement evidencing the Award provides
otherwise, in the event of any Change in Control, the vesting of each
outstanding Award shall automatically accelerate so that each such Award shall,
immediately prior to the effective date of the Change in Control, become fully
exercisable for all of the Common Shares at the time subject to such Award and
may be exercised for any or all of those shares as fully-vested Common Shares.
However, an outstanding Award shall NOT so accelerate if and to the extent such
Award, in connection with the Change in Control, remains outstanding, or is
assumed by the surviving corporation (or parent thereof) or substituted with an
award with substantially the same terms by the surviving corporation (or parent
thereof). The determination of whether a substituted award has substantially the
same terms as an Award shall be made by the Committee, and its determination
shall be final, binding and conclusive.
7
<PAGE> 12
ARTICLE 11. PROTECTION AGAINST DILUTION.
11.1 ADJUSTMENTS. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a combination
or consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a lesser number of Common Shares, a recapitalization, a spin-off
or a similar occurrence, the Committee shall make such adjustments as it, in its
sole discretion, deems appropriate in one or more of:
(a) The number of Options, SARs, Restricted Shares and Stock
Units available for future Awards under Article 3;
(b) The limitations set forth in Sections 5.2 and 7.2;
(c) The number of Common Shares covered by each outstanding
Option and SAR;
(d) The Exercise Price under each outstanding Option and SAR; or
(e) The number of Stock Units included in any prior Award which
has not yet been settled.
Except as provided in this Article 11, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
11.2 DISSOLUTION OR LIQUIDATION. To the extent not previously exercised
or settled, Options, SARs and Stock Units shall terminate immediately prior to
the dissolution or liquidation of the Company.
11.3 REORGANIZATIONS. In the event that the Company is a party to a
merger or other reorganization, outstanding Awards shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for (a) the
continuation of the outstanding Awards by the Company, if the Company is a
surviving corporation, (b) the assumption of the outstanding Awards by the
surviving corporation or its parent or subsidiary, (c) the substitution by the
surviving corporation or its parent or subsidiary of its own awards for the
outstanding Awards, (d) full exercisability or vesting and accelerated
expiration of the outstanding Awards or (e) settlement of the full value of the
outstanding Awards in cash or cash equivalents followed by cancellation of such
Awards.
8
<PAGE> 13
ARTICLE 12. DEFERRAL OF AWARDS.
The Committee (in its sole discretion) may permit or require a
Participant to:
(a) Have cash that otherwise would be paid to such Participant
as a result of the exercise of an SAR or the settlement of Stock Units
credited to a deferred compensation account established for such
Participant by the Committee as an entry on the Company's books;
(b) Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR converted
into an equal number of Stock Units; or
(c) Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR or the
settlement of Stock Units converted into amounts credited to a deferred
compensation account established for such Participant by the Committee
as an entry on the Company's books. Such amounts shall be determined by
reference to the Fair Market Value of such Common Shares as of the date
when they otherwise would have been delivered to such Participant.
A deferred compensation account established under this Article 12 may be
credited with interest or other forms of investment return, as determined by the
Committee. A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms pertaining to such Awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Article 12.
ARTICLE 13. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such
awards may be settled in the form of Common Shares issued under this Plan. Such
Common Shares shall be treated for all purposes under the Plan like Common
Shares issued in settlement of Stock Units and shall, when issued, reduce the
number of Common Shares available under Article 3.
ARTICLE 14. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
14.1 EFFECTIVE DATE. No provision of this Article 14 shall be effective
unless and until the Board has determined to implement such provision.
14.2 ELECTIONS TO RECEIVE NSOs, RESTRICTED SHARES OR STOCK UNITS. An
Outside Director may elect to receive his or her annual retainer payments and/or
meeting fees from the Company in the form of cash, NSOs, Restricted Shares or
Stock Units, or a combination thereof, as determined by the Board. Such NSOs,
Restricted Shares and Stock Units shall be issued
9
<PAGE> 14
under the Plan. An election under this Article 14 shall be filed with the
Company on the prescribed form.
14.3 NUMBER AND TERMS OF NSOs, RESTRICTED SHARES OR STOCK UNITS. The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The terms
of such NSOs, Restricted Shares or Stock Units shall also be determined by the
Board.
ARTICLE 15. LIMITATION ON RIGHTS.
15.1 RETENTION RIGHTS. Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain an Employee,
Outside Director or Consultant. The Company and its Parents, Subsidiaries and
Affiliates reserve the right to terminate the service of any Employee, Outside
Director or Consultant at any time, with or without cause, subject to applicable
laws, the Company's certificate of incorporation and by-laws and a written
employment agreement (if any).
15.2 STOCKHOLDERS' RIGHTS. A Participant shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any Common Shares
covered by his or her Award prior to the time when a stock certificate for such
Common Shares is issued or, if applicable, the time when he or she becomes
entitled to receive such Common Shares by filing any required notice of exercise
and paying any required Exercise Price. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to such time,
except as expressly provided in the Plan.
15.3 REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Award prior to the satisfaction of all legal requirements relating to the
issuance of such Common Shares, to their registration, qualification or listing
or to an exemption from registration, qualification or listing.
ARTICLE 16. WITHHOLDING TAXES.
16.1 GENERAL. To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.
16.2 SHARE WITHHOLDING. The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Common Shares that otherwise
would be issued to him or her or by surrendering all or a portion of any Common
Shares that he or she previously acquired. Such Common Shares shall be valued at
their Fair Market Value on the date when taxes otherwise would be withheld in
cash.
10
<PAGE> 15
ARTICLE 17. FUTURE OF THE PLAN.
17.1 TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective as of the date of the IPO. The Plan shall remain in effect until it is
terminated under Section 17.2, except that no ISOs shall be granted on or after
the 10th anniversary of the later of (a) the date when the Board adopted the
Plan or (b) the date when the Board adopted the most recent increase in the
number of Common Shares available under Article 3 which was approved by the
Company's stockholders.
17.2 AMENDMENT OR TERMINATION. The Board may, at any time and for any
reason, amend or terminate the Plan. An amendment of the Plan shall be subject
to the approval of the Company's stockholders only to the extent required by
applicable laws, regulations or rules. No Awards shall be granted under the Plan
after the termination thereof. The termination of the Plan, or any amendment
thereof, shall not affect any Award previously granted under the Plan.
ARTICLE 18. LIMITATION ON PAYMENTS.
18.1 SCOPE OF LIMITATION. This Article 18 shall apply to an Award only
if:
(a) The independent auditors most recently selected by the Board
(the "Auditors") determine that the after-tax value of such Award to the
Participant, taking into account the effect of all federal, state and
local income taxes, employment taxes and excise taxes applicable to the
Participant (including the excise tax under section 4999 of the Code),
will be greater after the application of this Article 18 than it was
before the application of this Article 18; or
(b) The Committee, at the time of making an Award under the Plan
or at any time thereafter, specifies in writing that such Award shall be
subject to this Article 18 (regardless of the after-tax value of such
Award to the Participant).
If this Article 18 applies to an Award, it shall supersede any contrary
provision of the Plan or of any Award granted under the Plan.
18.2 BASIC RULE. In the event that the Auditors determine that any
payment or transfer by the Company under the Plan to or for the benefit of a
Participant (a "Payment") would be nondeductible by the Company for federal
income tax purposes because of the provisions concerning "excess parachute
payments" in section 280G of the Code, then the aggregate present value of all
Payments shall be reduced (but not below zero) to the Reduced Amount. For
purposes of this Article 18, the "Reduced Amount" shall be the amount, expressed
as a present value, which maximizes the aggregate present value of the Payments
without causing any Payment to be nondeductible by the Company because of
section 280G of the Code.
18.3 REDUCTION OF PAYMENTS. If the Auditors determine that any Payment
would be nondeductible by the Company because of section 280G of the Code, then
the Company shall promptly give the Participant notice to that effect and a copy
of the detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion,
11
<PAGE> 16
which and how much of the Payments shall be eliminated or reduced (as long as
after such election the aggregate present value of the Payments equals the
Reduced Amount) and shall advise the Company in writing of his or her election
within 10 days of receipt of notice. If no such election is made by the
Participant within such 10-day period, then the Company may elect which and how
much of the Payments shall be eliminated or reduced (as long as after such
election the aggregate present value of the Payments equals the Reduced Amount)
and shall notify the Participant promptly of such election. For purposes of this
Article 18, present value shall be determined in accordance with section
280G(d)(4) of the Code. All determinations made by the Auditors under this
Article 18 shall be binding upon the Company and the Participant and shall be
made within 60 days of the date when a Payment becomes payable or transferable.
As promptly as practicable following such determination and the elections
hereunder, the Company shall pay or transfer to or for the benefit of the
Participant such amounts as are then due to him or her under the Plan and shall
promptly pay or transfer to or for the benefit of the Participant in the future
such amounts as become due to him or her under the Plan.
18.4 OVERPAYMENTS AND UNDERPAYMENTS. As a result of uncertainty in the
application of section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company which should not have been made (an "Overpayment") or that
additional Payments which will not have been made by the Company could have been
made (an "Underpayment"), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Participant which the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount which is subject to taxation under section 4999 of
the Code. In the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the Company
to or for the benefit of the Participant, together with interest at the
applicable federal rate provided in section 7872(f)(2) of the Code.
18.5 RELATED CORPORATIONS. For purposes of this Article 18, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with section 280G(d)(5) of the Code.
ARTICLE 19. DEFINITIONS.
19.1 "AFFILIATE" means any entity other than a Subsidiary, if the
Company and/or one or more Subsidiaries own not less than 50% of such entity.
19.2 "AWARD" means any award of an Option, an SAR, a Restricted Share or
a Stock Unit under the Plan.
19.3 "BOARD" means the Company's Board of Directors, as constituted from
time to time.
12
<PAGE> 17
19.4 "CHANGE IN CONTROL" shall mean:
(a) The consummation of a merger or consolidation of the Company
with or into another entity or any other corporate reorganization, if
more than 50% of the combined voting power of the continuing or
surviving entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
stockholders of the Company immediately prior to such merger,
consolidation or other reorganization;
(b) The sale, transfer or other disposition of all or
substantially all of the Company's assets;
(c) A change in the composition of the Board, as a result of
which fewer than 50% of the incumbent directors are directors who either
(i) had been directors of the Company on the date 24 months prior to the
date of the event that may constitute a Change in Control (the "original
directors") or (ii) were elected, or nominated for election, to the
Board with the affirmative votes of at least a majority of the aggregate
of the original directors who were still in office at the time of the
election or nomination and the directors whose election or nomination
was previously so approved; or
(d) Any transaction as a result of which any person is the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing at
least 50% of the total voting power represented by the Company's then
outstanding voting securities. For purposes of this Paragraph (d), the
term "person" shall have the same meaning as when used in sections 13(d)
and 14(d) of the Exchange Act but shall exclude (i) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or of a Parent or Subsidiary and (ii) a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the Common
Shares of the Company.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
19.5 "CODE" means the Internal Revenue Code of 1986, as amended.
19.6 "COMMITTEE" means a committee of the Board, as described in Article
2.
19.7 "COMMON SHARE" means one share of the common stock of the Company.
19.8 "COMPANY" means Marimba, Inc., a Delaware corporation.
19.9 "CONSULTANT" means a consultant or adviser who provides bona fide
services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as a
13
<PAGE> 18
Consultant shall be considered employment for all purposes of the Plan, except
as provided in Section 4.1.
19.10 "EMPLOYEE" means a common-law employee of the Company, a Parent, a
Subsidiary or an Affiliate.
19.11 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
19.12 "EXERCISE PRICE," in the case of an Option, means the amount for
which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of an SAR, means an amount, as specified in the applicable SAR Agreement,
which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.
19.13 "FAIR MARKET VALUE" means the market price of Common Shares,
determined by the Committee in good faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in The Wall Street Journal. Such determination
shall be conclusive and binding on all persons.
19.14 "IPO" means the initial offering of Common Shares to the public
pursuant to a registration statement filed by the Company with the Securities
and Exchange Commission.
19.15 "ISO" means an incentive stock option described in section 422(b)
of the Code.
19.16 "NSO" means a stock option not described in sections 422 or 423 of
the Code.
19.17 "OPTION" means an ISO or NSO granted under the Plan and entitling
the holder to purchase Common Shares.
19.18 "OPTIONEE" means a person or estate who holds an Option or SAR.
19.19 "OUTSIDE DIRECTOR" shall mean a member of the Board who is not an
Employee. Service as an Outside Director shall be considered employment for all
purposes of the Plan, except as provided in Section 4.1.
19.20 "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.
19.21 "PARTICIPANT" means a person or estate who holds an Award.
19.22 "PLAN" means this Marimba, Inc. 1999 Omnibus Equity Incentive
Plan, as amended from time to time.
19.23 "RESTRICTED SHARE" means a Common Share awarded under the Plan.
14
<PAGE> 19
19.24 "RESTRICTED STOCK AGREEMENT" means the agreement between the
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Share.
19.25 "SAR" means a stock appreciation right granted under the Plan.
19.26 "SAR AGREEMENT" means the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.
19.27 "STOCK OPTION AGREEMENT" means the agreement between the Company
and an Optionee that contains the terms, conditions and restrictions pertaining
to his or her Option.
19.28 "STOCK UNIT" means a bookkeeping entry representing the equivalent
of one Common Share, as awarded under the Plan.
19.29 "STOCK UNIT AGREEMENT" means the agreement between the Company and
the recipient of a Stock Unit which contains the terms, conditions and
restrictions pertaining to such Stock Unit.
19.30 "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
15
<PAGE> 1
EXHIBIT 10.3
MARIMBA, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
(AS ADOPTED FEBRUARY 2, 1999)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. PURPOSE OF THE PLAN.............................................................. 1
SECTION 2. ADMINISTRATION OF THE PLAN....................................................... 1
(a) Committee Composition........................................................... 1
(b) Committee Responsibilities...................................................... 1
SECTION 3. ENROLLMENT AND PARTICIPATION..................................................... 1
(a) Offering Periods................................................................ 1
(b) Contribution Periods............................................................ 1
(c) Enrollment...................................................................... 1
(d) Duration of Participation....................................................... 1
(e) Applicable Offering Period...................................................... 2
SECTION 4. EMPLOYEE CONTRIBUTIONS........................................................... 2
(a) Frequency of Payroll Deductions................................................. 2
(b) Amount of Payroll Deductions.................................................... 2
(c) Changing Withholding Rate....................................................... 2
(d) Discontinuing Payroll Deductions................................................ 3
(e) Limit on Number of Elections.................................................... 3
SECTION 5. WITHDRAWAL FROM THE PLAN......................................................... 3
(a) Withdrawal...................................................................... 3
(b) Re-Enrollment After Withdrawal.................................................. 3
SECTION 6. CHANGE IN EMPLOYMENT STATUS...................................................... 3
(a) Termination of Employment....................................................... 3
(b) Leave of Absence................................................................ 3
(c) Death........................................................................... 3
SECTION 7. PLAN ACCOUNTS AND PURCHASE OF SHARES............................................. 4
(a) Plan Accounts................................................................... 4
(b) Purchase Price.................................................................. 4
(c) Number of Shares Purchased...................................................... 4
(d) Available Shares Insufficient................................................... 4
(e) Issuance of Stock............................................................... 4
(f) Unused Cash Balances............................................................ 5
(g) Stockholder Approval............................................................ 5
SECTION 8. LIMITATIONS ON STOCK OWNERSHIP................................................... 5
(a) Five Percent Limit.............................................................. 5
(b) Dollar Limit.................................................................... 5
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 9. RIGHTS NOT TRANSFERABLE.......................................................... 6
SECTION 10. NO RIGHTS AS AN EMPLOYEE........................................................ 6
SECTION 11. NO RIGHTS AS A STOCKHOLDER...................................................... 6
SECTION 12. SECURITIES LAW REQUIREMENTS..................................................... 7
SECTION 13. STOCK OFFERED UNDER THE PLAN.................................................... 7
(a) Authorized Shares............................................................... 7
(b) Anti-Dilution Adjustments....................................................... 7
(c) Reorganizations................................................................. 7
SECTION 14. AMENDMENT OR DISCONTINUANCE..................................................... 7
SECTION 15. DEFINITIONS..................................................................... 8
(b) Board........................................................................... 8
(c) Code............................................................................ 8
(d) Committee....................................................................... 8
(e) Company......................................................................... 8
(f) Compensation.................................................................... 8
(a) Contribution Period............................................................. 8
(g) Corporate Reorganization........................................................ 8
(h) Eligible Employee............................................................... 8
(i) Exchange Act.................................................................... 9
(j) Fair Market Value............................................................... 9
(k) IPO9
(l) Offering Period................................................................. 9
(m) Participant..................................................................... 9
(n) Participating Company........................................................... 9
(o) Plan............................................................................ 9
(p) Plan Account.................................................................... 9
(q) Purchase Price.................................................................. 9
(r) Stock........................................................................... 9
(s) Subsidiary...................................................................... 10
</TABLE>
ii
<PAGE> 4
MARIMBA, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE OF THE PLAN.
The Plan was adopted by the Board on February 2, 1999, effective as of
the date of the IPO. The purpose of the Plan is to provide Eligible Employees
with an opportunity to increase their proprietary interest in the success of the
Company by purchasing Stock from the Company on favorable terms and to pay for
such purchases through payroll deductions. The Plan is intended to qualify under
section 423 of the Code.
SECTION 2. ADMINISTRATION OF THE PLAN.
(a) COMMITTEE COMPOSITION. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of one or more directors of
the Company, who shall be appointed by the Board.
(b) COMMITTEE RESPONSIBILITIES. The Committee shall interpret the Plan
and make all other policy decisions relating to the operation of the Plan. The
Committee may adopt such rules, guidelines and forms as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be final
and binding on all persons.
SECTION 3. ENROLLMENT AND PARTICIPATION.
(a) OFFERING PERIODS. While the Plan is in effect, two overlapping
Offering Periods shall commence in each calendar year. The Offering Periods
shall consist of the 24-month periods commencing on each May 1 and November 1,
except that the first Offering Period shall commence on the date of the IPO and
end on April 30, 2001.
(b) CONTRIBUTION PERIODS. While the Plan is in effect, two Contribution
Periods shall commence in each calendar year. The Contribution Periods shall
consist of the six-month periods commencing on each May 1 and November 1, except
that the first Contribution Period shall commence on the date of the IPO and end
on October 31, 1999.
(c) ENROLLMENT. Any individual who, on the day preceding the first day
of an Offering Period, qualifies as an Eligible Employee may elect to become a
Participant in the Plan for such Offering Period by executing the enrollment
form prescribed for this purpose by the Committee. The enrollment form shall be
filed with the Company at the prescribed location not later than 10 days prior
to the commencement of such Offering Period.
(d) DURATION OF PARTICIPATION. Once enrolled in the Plan, a Participant
shall continue to participate in the Plan until he or she ceases to be an
Eligible Employee, withdraws from the Plan under Section 5(a) or reaches the end
of the Contribution Period in which his or her employee contributions were
discontinued under Section 4(d) or 8(b). A Participant who
<PAGE> 5
discontinued employee contributions under Section 4(d) or withdrew from the Plan
under Section 5(a) may again become a Participant, if he or she then is an
Eligible Employee, by following the procedure described in Subsection (c) above.
A Participant whose employee contributions were discontinued automatically under
Section 8(b) shall automatically resume participation at the beginning of the
earliest Contribution Period ending in the next calendar year, if he or she then
is an Eligible Employee.
(e) APPLICABLE OFFERING PERIOD. For purposes of calculating the Purchase
Price under Section 7(b), the applicable Offering Period shall be determined as
follows:
(i) Once a Participant is enrolled in the Plan for an Offering
Period, such Offering Period shall continue to apply to him or her until
the earliest of (A) the end of such Offering Period, (B) the end of his
or her participation under Subsection (d) above or (C) re-enrollment for
a subsequent Offering Period under Paragraph (ii) or (iii) below.
(ii) In the event that the Fair Market Value of Stock on the
last trading day before the commencement of the Offering Period for
which the Participant is enrolled is higher than on the last trading day
before the commencement of any subsequent Offering Period, the
Participant shall automatically be re-enrolled for such subsequent
Offering Period.
(iii) Any other provision of the Plan notwithstanding, the
Company (at its sole discretion) may determine prior to the commencement
of any new Offering Period that all Participants shall be re-enrolled
for such new Offering Period.
(iv) When a Participant reaches the end of an Offering Period
but his or her participation is to continue, then such Participant shall
automatically be re-enrolled for the Offering Period that commences
immediately after the end of the prior Offering Period.
SECTION 4. EMPLOYEE CONTRIBUTIONS.
(a) FREQUENCY OF PAYROLL DEDUCTIONS. A Participant may purchase shares
of Stock under the Plan solely by means of payroll deductions. Payroll
deductions, as designated by the Participant pursuant to Subsection (b) below,
shall occur on each payday during participation in the Plan.
(b) AMOUNT OF PAYROLL DEDUCTIONS. An Eligible Employee shall designate
on the enrollment form the portion of his or her Compensation that he or she
elects to have withheld for the purchase of Stock. Such portion shall be a whole
percentage of the Eligible Employee's Compensation, but not less than 1% nor
more than 10%.
(c) CHANGING WITHHOLDING RATE. If a Participant wishes to change the
rate of payroll withholding, he or she may do so by filing a new enrollment form
with the Company at the prescribed location at any time. The new withholding
rate shall be effective as soon as
2
<PAGE> 6
reasonably practicable after such form has been received by the Company. The new
withholding rate shall be a whole percentage of the Eligible Employee's
Compensation, but not less than 1% nor more than 10%.
(d) DISCONTINUING PAYROLL DEDUCTIONS. If a Participant wishes to
discontinue employee contributions entirely, he or she may do so by filing a new
enrollment form with the Company at the prescribed location at any time. Payroll
withholding shall cease as soon as reasonably practicable after such form has
been received by the Company. (In addition, employee contributions may be
discontinued automatically pursuant to Section 8(b).) A Participant who has
discontinued employee contributions may resume such contributions by filing a
new enrollment form with the Company at the prescribed location. Payroll
withholding shall resume as soon as reasonably practicable after such form has
been received by the Company.
(e) LIMIT ON NUMBER OF ELECTIONS. No Participant shall make more than
one election under Subsection (c) or (d) above per quarter within any
Contribution Period.
SECTION 5. WITHDRAWAL FROM THE PLAN.
(a) WITHDRAWAL. A Participant may elect to withdraw from the Plan by
filing the prescribed form with the Company at the prescribed location at any
time before the last day of a Contribution Period. As soon as reasonably
practicable thereafter, payroll deductions shall cease and the entire amount
credited to the Participant's Plan Account shall be refunded to him or her in
cash, without interest. No partial withdrawals shall be permitted.
(b) RE-ENROLLMENT AFTER WITHDRAWAL. A former Participant who has
withdrawn from the Plan shall not be a Participant until he or she re-enrolls in
the Plan under Section 3(c). Re-enrollment may be effective only at the
commencement of an Offering Period.
SECTION 6. CHANGE IN EMPLOYMENT STATUS.
(a) TERMINATION OF EMPLOYMENT. Termination of employment as an Eligible
Employee for any reason, including death, shall be treated as an automatic
withdrawal from the Plan under Section 5(a). (A transfer from one Participating
Company to another shall not be treated as a termination of employment.)
(b) LEAVE OF ABSENCE. For purposes of the Plan, employment shall not be
deemed to terminate when the Participant goes on a military leave, a sick leave
or another bona fide leave of absence, if the leave was approved by the Company
in writing. Employment, however, shall be deemed to terminate 90 days after the
Participant goes on a leave, unless a contract or statute guarantees his or her
right to return to work. Employment shall be deemed to terminate in any event
when the approved leave ends, unless the Participant immediately returns to
work.
(c) DEATH. In the event of the Participant's death, the amount credited
to his or her Plan Account shall be paid to a beneficiary designated by him or
her for this purpose on the prescribed form or, if none, to the Participant's
estate. Such form shall be valid only if it was filed with the Company at the
prescribed location before the Participant's death.
3
<PAGE> 7
SECTION 7. PLAN ACCOUNTS AND PURCHASE OF SHARES.
(a) PLAN ACCOUNTS. The Company shall maintain a Plan Account on its
books in the name of each Participant. Whenever an amount is deducted from the
Participant's Compensation under the Plan, such amount shall be credited to the
Participant's Plan Account. Amounts credited to Plan Accounts shall not be trust
funds and may be commingled with the Company's general assets and applied to
general corporate purposes. No interest shall be credited to Plan Accounts.
(b) PURCHASE PRICE. The Purchase Price for each share of Stock purchased
at the close of an Contribution Period shall be the lower of:
(i) 85% of the Fair Market Value of such share on the last
trading day in such Contribution Period; or
(ii) 85% of the Fair Market Value of such share on the last
trading day before the commencement of the applicable Offering Period
(as determined under Section 3(e)) or, in the case of the first Offering
Period under the Plan, 85% of the price at which one share of Stock is
offered to the public in the IPO.
(c) NUMBER OF SHARES PURCHASED. As of the last day of each Contribution
Period, each Participant shall be deemed to have elected to purchase the number
of shares of Stock calculated in accordance with this Subsection (c), unless the
Participant has previously elected to withdraw from the Plan in accordance with
Section 5(a). The amount then in the Participant's Plan Account shall be divided
by the Purchase Price, and the number of shares that results shall be purchased
from the Company with the funds in the Participant's Plan Account. The foregoing
notwithstanding, no Participant shall purchase more than 500 shares of Stock
with respect to any Contribution Period nor more than the amounts of Stock set
forth in Sections 8(b) and 13(a). The Committee may determine with respect to
all Participants that any fractional share, as calculated under this Subsection
(c), shall be (i) rounded down to the next lower whole share or (ii) credited as
a fractional share.
(d) AVAILABLE SHARES INSUFFICIENT. In the event that the aggregate
number of shares that all Participants elect to purchase during a Contribution
Period exceeds the maximum number of shares remaining available for issuance
under Section 13(a), then the number of shares to which each Participant is
entitled shall be determined by multiplying the number of shares available for
issuance by a fraction, the numerator of which is the number of shares that such
Participant has elected to purchase and the denominator of which is the number
of shares that all Participants have elected to purchase.
(e) ISSUANCE OF STOCK. Certificates representing the shares of Stock
purchased by a Participant under the Plan shall be issued to him or her as soon
as reasonably practicable after the close of the applicable Contribution Period,
except that the Committee may determine that such shares shall be held for each
Participant's benefit by a broker designated by the Committee (unless the
Participant has elected that certificates be issued to him or her). Shares may
be registered in the name of the Participant or jointly in the name of the
Participant and his or her spouse as joint tenants with right of survivorship or
as community property.
4
<PAGE> 8
(f) UNUSED CASH BALANCES. An amount remaining in the Participant's Plan
Account that represents the Purchase Price for any fractional share shall be
carried over in the Participant's Plan Account to the next Contribution Period.
Any amount remaining in the Participant's Plan Account that represents the
Purchase Price for whole shares that could not be purchased by reason of
Subsection (c) above, Section 8(b) or Section 13(a) shall be refunded to the
Participant in cash, without interest.
(g) STOCKHOLDER APPROVAL. Any other provision of the Plan
notwithstanding, no shares of Stock shall be purchased under the Plan unless and
until the Company's stockholders have approved the adoption of the Plan.
SECTION 8. LIMITATIONS ON STOCK OWNERSHIP.
(a) FIVE PERCENT LIMIT. Any other provision of the Plan notwithstanding,
no Participant shall be granted a right to purchase Stock under the Plan if such
Participant, immediately after his or her election to purchase such Stock, would
own stock possessing more than 5% of the total combined voting power or value of
all classes of stock of the Company or any parent or Subsidiary of the Company.
For purposes of this Subsection (a), the following rules shall apply:
(i) Ownership of stock shall be determined after applying the
attribution rules of section 424(d) of the Code;
(ii) Each Participant shall be deemed to own any stock that he
or she has a right or option to purchase under this or any other plan;
and
(iii) Each Participant shall be deemed to have the right to
purchase 500 shares of Stock under this Plan with respect to each
Contribution Period.
(b) DOLLAR LIMIT. Any other provision of the Plan notwithstanding, no
Participant shall purchase Stock with a Fair Market Value in excess of the
following limit:
(i) In the case of Stock purchased during an Offering Period
that commenced in the current calendar year, the limit shall be equal to
(A) $25,000 minus (B) the Fair Market Value of the Stock that the
Participant previously purchased in the current calendar year (under
this Plan and all other employee stock purchase plans of the Company or
any parent or Subsidiary of the Company).
(ii) In the case of Stock purchased during an Offering Period
that commenced in the immediately preceding calendar year, the limit
shall be equal to (A) $50,000 minus (B) the Fair Market Value of the
Stock that the Participant previously purchased (under this Plan and all
other employee stock purchase plans of the Company or any parent or
Subsidiary of the Company) in the current calendar year and in the
immediately preceding calendar year.
5
<PAGE> 9
(iii) In the case of Stock purchased during an Offering Period
that commenced in the second preceding calendar year, the limit shall be
equal to (A) $75,000 minus (B) the Fair Market Value of the Stock that
the Participant previously purchased (under this Plan and all other
employee stock purchase plans of the Company or any parent or Subsidiary
of the Company) in the current calendar year and in the two preceding
calendar years.
For purposes of this Subsection (b), the Fair Market Value of Stock shall be
determined in each case as of the beginning of the Offering Period in which such
Stock is purchased. Employee stock purchase plans not described in section 423
of the Code shall be disregarded. If a Participant is precluded by this
Subsection (b) from purchasing additional Stock under the Plan, then his or her
employee contributions shall automatically be discontinued and shall resume at
the beginning of the earliest Contribution Period ending in the next calendar
year (if he or she then is an Eligible Employee).
SECTION 9. RIGHTS NOT TRANSFERABLE.
The rights of any Participant under the Plan, or any Participant's
interest in any Stock or moneys to which he or she may be entitled under the
Plan, shall not be transferable by voluntary or involuntary assignment or by
operation of law, or in any other manner other than by beneficiary designation
or the laws of descent and distribution. If a Participant in any manner attempts
to transfer, assign or otherwise encumber his or her rights or interest under
the Plan, other than by beneficiary designation or the laws of descent and
distribution, then such act shall be treated as an election by the Participant
to withdraw from the Plan under Section 5(a).
SECTION 10. NO RIGHTS AS AN EMPLOYEE.
Nothing in the Plan or in any right granted under the Plan shall confer
upon the Participant any right to continue in the employ of a Participating
Company for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Participating Companies or of the
Participant, which rights are hereby expressly reserved by each, to terminate
his or her employment at any time and for any reason, with or without cause.
SECTION 11. NO RIGHTS AS A STOCKHOLDER.
A Participant shall have no rights as a stockholder with respect to any
shares of Stock that he or she may have a right to purchase under the Plan until
such shares have been purchased on the last day of the applicable Contribution
Period.
SECTION 12. SECURITIES LAW REQUIREMENTS.
Shares of Stock shall not be issued under the Plan unless the issuance
and delivery of such shares comply with (or are exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange or other
securities market on which the Company's securities may then be traded.
6
<PAGE> 10
SECTION 13. STOCK OFFERED UNDER THE PLAN.
(a) AUTHORIZED SHARES. The number of shares of Stock available for
purchase under the Plan shall be 500,000 (subject to adjustment pursuant to this
Section 13). As of January 1 of each year, commencing with the year 2000, the
aggregate number of shares of Stock available for purchase during the life of
the Plan shall automatically increase by a number equal to the lesser of (a) 2%
of the total number of shares of Stock then outstanding or (b) 500,000.
(b) ANTI-DILUTION ADJUSTMENTS. The aggregate number of shares of Stock
offered under the Plan, the 500-share limitation described in Section 7(c) and
the price of shares that any Participant has elected to purchase shall be
adjusted proportionately by the Committee for any increase or decrease in the
number of outstanding shares of Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, any other increase
or decrease in such shares effected without receipt or payment of consideration
by the Company, the distribution of the shares of a Subsidiary to the Company's
stockholders or a similar event.
(c) REORGANIZATIONS. Any other provision of the Plan notwithstanding,
immediately prior to the effective time of a Corporate Reorganization, the
Offering Period and Contribution Period then in progress shall terminate and
shares shall be purchased pursuant to Section 7, unless the Plan is assumed by
the surviving corporation or its parent corporation pursuant to the plan of
merger or consolidation. The Plan shall in no event be construed to restrict in
any way the Company's right to undertake a dissolution, liquidation, merger,
consolidation or other reorganization.
SECTION 14. AMENDMENT OR DISCONTINUANCE.
The Board shall have the right to amend, suspend or terminate the Plan
at any time and without notice. Except as provided in Section 13, any increase
in the aggregate number of shares of Stock to be issued under the Plan shall be
subject to approval by a vote of the stockholders of the Company. In addition,
any other amendment of the Plan shall be subject to approval by a vote of the
stockholders of the Company to the extent required by an applicable law or
regulation.
SECTION 15. DEFINITIONS.
(a) "BOARD" means the Board of Directors of the Company, as constituted
from time to time.
(b) "CODE" means the Internal Revenue Code of 1986, as amended.
(c) "COMMITTEE" means a committee of the Board, as described in Section
2.
(d) "COMPANY" means Marimba, Inc., a Delaware corporation.
(e) "COMPENSATION" means (i) the total compensation paid in cash to a
Participant by a Participating Company, including salaries, wages, bonuses,
incentive compensation, commissions, overtime pay and shift premiums, plus (ii)
any pre-tax contributions made by the
7
<PAGE> 11
Participant under section 401(k) or 125 of the Code. "Compensation" shall
exclude all non-cash items, moving or relocation allowances, cost-of-living
equalization payments, car allowances, tuition reimbursements, imputed income
attributable to cars or life insurance, severance pay, fringe benefits,
contributions or benefits received under employee benefit plans, income
attributable to the exercise of stock options, and similar items. The Committee
shall determine whether a particular item is included in Compensation.
(f) "CONTRIBUTION PERIOD" means a six-month period during which
contributions may be made toward the purchase of Stock under the Plan, as
determined pursuant to Section 3(b).
(g) "CORPORATE REORGANIZATION" means:
(i) The consummation of a merger or consolidation of the Company
with or into another entity or any other corporate reorganization; or
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets or the complete liquidation or
dissolution of the Company.
(h) "ELIGIBLE EMPLOYEE" means any employee of a Participating Company
whose customary employment is for more than five months per calendar year and
for more than 20 hours per week.
The foregoing notwithstanding, an individual shall not be considered an Eligible
Employee if his or her participation in the Plan is prohibited by the law of any
country which has jurisdiction over him or her or if he or she is subject to a
collective bargaining agreement that does not provide for participation in the
Plan.
(i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(j) "FAIR MARKET VALUE" means the market price of Stock, determined by
the Committee as follows:
(i) If the Stock was traded on The Nasdaq National Market on the
date in question, then the Fair Market Value shall be equal to the
last-transaction price quoted for such date by The Nasdaq National
Market;
(ii) If the Stock was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date;
or
(iii) If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good faith
on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in The Wall Street Journal or as reported
directly to the Company by Nasdaq or a stock exchange. Such determination shall
be conclusive and binding on all persons.
8
<PAGE> 12
(k) "IPO" means the initial offering of Stock to the public pursuant to
a registration statement filed by the Company with the Securities and Exchange
Commission.
(l) "OFFERING PERIOD" means a 24-month period with respect to which the
right to purchase Stock may be granted under the Plan, as determined pursuant to
Section 3(a).
(m) "PARTICIPANT" means an Eligible Employee who elects to participate
in the Plan, as provided in Section 3(c).
(n) "PARTICIPATING COMPANY" means (i) the Company and (ii) each present
or future Subsidiary designated by the Committee as a Participating Company.
(o) "PLAN" means this Marimba, Inc. 1999 Employee Stock Purchase Plan,
as it may be amended from time to time.
(p) "PLAN ACCOUNT" means the account established for each Participant
pursuant to Section 7(a).
(q) "PURCHASE PRICE" means the price at which Participants may purchase
Stock under the Plan, as determined pursuant to Section 7(b).
(r) "STOCK" means the Common Stock of the Company.
(s) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
9
<PAGE> 1
Exhibit 10.4
MARIMBA, INC.
1999 NON-EMPLOYEE DIRECTORS OPTION PLAN
(AS ADOPTED FEBRUARY 2, 1999)
<PAGE> 2
MARIMBA, INC.
1999 NON-EMPLOYEE DIRECTORS OPTION PLAN
ARTICLE 1. PURPOSE OF THE PLAN
The Plan is intended to promote the interests of the Company by
providing the non-employee members of the Board with the opportunity to acquire
a proprietary interest, or otherwise increase their proprietary interest, in the
Company as an incentive for them to remain in the service of the Company.
ARTICLE 2. ADMINISTRATION
The terms and conditions of each automatic option grant
(including the timing and pricing of the option grant) shall be determined by
the express terms and conditions of the Plan, and neither the Board nor any
committee of the Board shall exercise any discretionary functions with respect
to option grants made pursuant to the Plan.
ARTICLE 3. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under
the Plan and shall be drawn from either the Company's authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Company on the open market. The number of shares of
Common Stock reserved for issuance over the term of the Plan shall be fixed at
150,000 shares. As of January 1 of each year, starting in 2000, the aggregate
number of shares of Common Stock available for purchase during the life of the
Plan shall automatically be increased by the number of shares necessary to cause
the number of shares then available for purchase to be restored to 150,000.
B. Should one or more outstanding options under this Plan expire
or terminate for any reason prior to exercise in full, then the shares subject
to the portion of each option not so exercised shall be available for subsequent
option grant under the Plan. In addition, should the exercise price of an
outstanding option under the Plan be paid with shares of Common Stock, then the
number of shares of Common Stock available for issuance under the Plan shall be
reduced by the net number of shares of Common Stock actually issued to the
holder of such option.
C. Should any change be made to the Common Stock issuable under
the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Company's receipt of
consideration, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan, (ii) the number
and/or class of securities for which automatic option grants are to be
subsequently made to each newly-elected or continuing non-employee Board member
under the Plan, and (iii) the number and/or class of securities and price per
share in effect under each option outstanding under the Plan. The adjustments to
the outstanding options shall be made by the Board in a manner which shall
<PAGE> 3
preclude the enlargement or dilution of rights and benefits under such options
and shall be final, binding and conclusive.
ARTICLE 4. ELIGIBILITY
The individuals eligible to receive automatic option grants
pursuant to the provisions of this Plan shall be limited to (i) those
individuals serving as non-employee Board members on the effective date of the
IPO and (ii) those individuals who are first elected or appointed as
non-employee Board members after the effective date of the IPO, whether through
appointment by the Board or election by the Company's stockholders. A
non-employee Board member shall not be eligible to receive the initial automatic
option grant described in Section 5.A.2 if such individual has previously been
in the employ of the Company (or any parent or subsidiary). However, a
non-employee Board member shall be eligible to receive one or more annual option
grants described in Section 5.A.3, whether or not he or she has previously been
in the employ of the Company (or any parent or subsidiary). Each non-employee
Board member eligible to participate in the Plan pursuant to the foregoing
criteria is hereby designated an Eligible Director.
ARTICLE 5. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Date. Option grants shall be made on the dates specified
below:
1. Each individual who first became an Eligible Director prior
to 1999 and is an Eligible Director on the effective date of the IPO
shall automatically be granted, on the effective date of the IPO, a
fully vested non-statutory option to purchase 7,500 shares of Common
Stock.
2. Each individual who first becomes an Eligible Director after
the effective date of the IPO, whether through election by the Company's
stockholders or appointment by the Board, shall automatically be
granted, at the time of such initial election or appointment, a fully
vested non-statutory option to purchase 15,000 shares of Common Stock.
3. On the date of each Annual Meeting, beginning with the 2000
Annual Meeting, each Eligible Director who serves on the Board at the
time of that Annual Meeting, whether or not standing for re-election,
shall automatically be granted a fully vested non-statutory option to
purchase 7,500 shares of Common Stock. An Eligible Director who resigns
effective at an Annual Meeting shall not be eligible to be granted a
non-statutory option at that time. There shall be no limit on the number
of such annual 7,500-share option grants any one Eligible Director may
receive over his or her period of continued Board service.
4. However, each Eligible Director who in a calendar year
received a non-statutory option to purchase 15,000 shares of Common
Stock under this Plan (as described in Section 5.A.2) shall first be
eligible to be granted a non-statutory option to purchase 7,500 shares
of Common Stock under this Plan (as described in Section 5.A.3) at the
Annual Meeting occurring at any time in the
2
<PAGE> 4
year that is two calendar years following the year in which the Eligible
Director received the non-statutory option to purchase 15,000 shares
under this Plan (as described in Section 5.A.2). For example, if an
Eligible Director received a non-statutory option to purchase 15,000
shares of Common Stock (as described in Section 5.A.2) in 1999, this
Eligible Director will first become eligible to receive a non-statutory
option to purchase 7,500 shares of Common Stock (as described in Section
5.A.3) at the Annual Meeting occurring in 2001.
B. Exercise Price. The exercise price per share of Common Stock
subject to each automatic option grant shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the automatic grant
date, except that the exercise price per share of Common Stock subject to the
automatic grant described in Section 5.A.1 above will be the initial price
offered to the public on the effective date of the IPO.
C. Payment.
The exercise price shall become immediately due upon exercise of
the option and shall be payable in one of the alternative forms specified below:
(i) all or part of the exercise price may be paid in cash
or check made payable to the Company's order; or
(ii) all or part of the exercise price may be paid by
surrendering, or attesting to the ownership of, shares of Common Stock that are
already owned by the Optionee. Such shares of Common Stock shall be valued at
their Fair Market Value on the date when the new shares of Common Stock are
purchased under the Plan. The Optionee shall not surrender, or attest to the
ownership of, shares of Common Stock in payment of the exercise price if such
action would cause the Company to recognize compensation expense (or additional
compensation expense) with respect to the Option for financial reporting
purposes; or
(iii) all or part of the exercise price may be paid by
delivering (on a form prescribed by the Company) an irrevocable direction to a
securities broker approved by the Company to sell all or part of the shares of
Common Stock being purchased under the Plan and to deliver all or part of the
sales proceeds to the Company; or
(iv) all or part of the exercise price may be paid by
delivering (on a form prescribed by the Company) an irrevocable direction to
pledge all or part of the shares of Common Stock being purchased under the Plan
to a securities broker or lender approved by the Company, as security for a
loan, and to deliver all or part of the loan proceeds to the Company.
D. Exercisability/Vesting. Each automatic option grant shall be
fully vested on the date of option grant.
E. Option Term. Each automatic option grant under the Plan shall
have a maximum term of ten (10) years measured from the automatic grant date.
3
<PAGE> 5
F. Non-Transferability. During the lifetime of the Optionee, each
automatic option grant shall be exercisable only by the Optionee and shall not
be assignable or transferable by the Optionee other than a transfer of the
option effected by will or by the laws of descent and distribution following
Optionee's death.
G. Effect of Termination of Board Service.
1. Should the Optionee cease to serve as a Board member
for any reason (other than Disability or death) while holding one or more
automatic option grants under the Plan, then such individual shall have a
three-month period following the date of such cessation of Board service in
which to exercise each such option for any or all of the option shares for which
the option is exercisable at the time of his or her cessation of Board service.
2. Should the Optionee cease to serve as a Board member as
a result of a Disability while holding one or more automatic option grants under
the Plan, then such individual shall have a six-month period following the date
of such cessation of Board service in which to exercise each such option for any
or all of the option shares for which the option is exercisable at the time of
his or her cessation of Board service.
3. Should the Optionee die while serving as a Board
member, then any automatic option grant held by the Optionee at the time of
death may subsequently be exercised, for the option shares for which the option
is exercisable at the time of his or her cessation of Board service (less any
option shares purchased by the Optionee prior to death), by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution. The right to exercise each such option shall
lapse upon the expiration of the twelve-month period measured from the date of
the Optionee's cessation of service.
4. In no event shall any automatic option grant under this
Plan remain exercisable after the expiration date of the maximum ten-year option
term. Upon the expiration of the applicable post-service exercise period under
subparagraphs 1 through 3 above or (if earlier) upon the expiration of the
maximum ten-year option term, the unexercised automatic option grant shall
terminate and cease to be outstanding.
H. Stockholder Rights. The holder of an automatic option grant
shall have none of the rights of a stockholder with respect to any shares
subject to such option until such individual shall have exercised the option and
paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each
automatic option grant shall be as set forth in the form Stock Option Agreement
approved for use under the Plan.
J. Affiliates of Eligible Directors. The Board may provide that
the non-statutory options that otherwise would be granted to an Eligible
Director under this Article 5 shall instead be granted to an affiliate of such
Eligible Director. Such affiliate shall then be deemed to be an Eligible
Director for purposes of the Plan, provided that the service-related termination
provisions pertaining to the non-statutory options shall be applied with regard
to the service of the Eligible Director.
4
<PAGE> 6
ARTICLE 6. AMENDMENT OF THE PLAN AND AWARDS
The Board has complete and exclusive power and authority to amend
or modify the Plan (or any component thereof) in any or all respects whatsoever.
However, no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan,
unless the affected Optionees consent to such amendment. Stockholder approval
shall be obtained to the extent required by applicable law.
ARTICLE 7. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective on the effective date of the
IPO. One or more automatic option grants may be made under the Plan at any time
on or after the effective date of the IPO.
B. The Plan shall terminate upon the earlier of (i) February 1,
2009 or (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options granted under the
Plan. If the date of termination is determined under clause (i) above, then all
option grants outstanding on such date shall thereafter continue to have force
and effect in accordance with the provisions of the agreements evidencing those
option grants.
ARTICLE 8. USE OF PROCEEDS
Any cash proceeds received by the Company from the sale of shares
pursuant to option grants under the Plan shall be used for general corporate
purposes.
ARTICLE 9. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Plan and the issuance of Common Stock upon the exercise of the option
grants made hereunder shall be subject to the Company's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of the Nasdaq National Market or any stock exchange on which the Common Stock is
then listed for trading.
ARTICLE 10. NO IMPAIRMENT OF RIGHTS
Neither the action of the Company in establishing the Plan nor
any provision of the Plan shall be construed or interpreted so as to affect
adversely or otherwise impair the right of the Company or the stockholders to
remove any individual from the Board at any time in accordance with the
provisions of applicable law.
5
<PAGE> 7
ARTICLE 11. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the
Plan may not be assigned, encumbered or otherwise transferred by any Optionee.
B. The provisions of the Plan relating to the exercise of options
shall be governed by the laws of the State of Delaware, as such laws are applied
to contracts entered into and performed in such State.
C. The provisions of the Plan shall inure to the benefit of, and
be binding upon, the Company and its successors or assigns, whether by a change
in control or otherwise, and the Optionees, the legal representatives of their
respective estates, their respective heirs or legatees and their permitted
assignees.
ARTICLE 12. DEFINITIONS
ANNUAL MEETING: the annual meeting of the Company's stockholders.
BOARD: the Company's Board of Directors.
CODE: the Internal Revenue Code of 1986, as amended.
COMMON STOCK: shares of the Company's common stock.
COMPANY: Marimba, Inc., a Delaware corporation.
DISABILITY: the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment.
FAIR MARKET VALUE: the market price of shares of Common Stock,
determined by the Board in good faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Board shall be
based on the prices reported in The Wall Street Journal. Such determination
shall be conclusive and binding on all persons.
IPO: the initial offering of Common Stock to the public pursuant
to a registration statement filed by the Company with the Securities and
Exchange Commission.
1934 ACT: the Securities Exchange Act of 1934, as amended.
OPTIONEE: any person to whom an option is granted under the Plan.
PLAN: this Marimba, Inc. 1999 Non-Employee Directors Option Plan.
6
<PAGE> 1
EXHIBIT 10.5
ASSIGNMENT AND ASSUMPTION OF SUBLEASE
440 Clyde Avenue
Mountain View, California
THIS ASSIGNMENT AND ASSUMPTION OF SUBLEASE (this "Assignment") is made and
entered into on January 31, 1999, by and between QUICKTURN DESIGN SYSTEMS, INC.,
a Delaware Corporation ("Quickturn"), and ilicon, INC., a California corporation
("ilicon").
RECITALS:
A. ilicon and Quickturn are parties to (1) a Standard Industrial/
Commercial Single-Tenant Lease-Net with First Addendum and Second Addendum dated
March 17, 1993, pursuant to which ilicon, as Lessor, leased to Quickturn, as
Lessee, and Quickturn leased from ilicon, a portion of the real property
commonly known as 440 Clyde Avenue, Mountain View, California, consisting of the
first floor of the two story building and the one story building located at 440
Clyde Avenue, Mountain View, California, and (2) a Standard Industrial/
Commercial Single-Tenant Lease-Net with First Addendum and Second Addendum dated
March 17, 1993, pursuant to which ilicon, as Lessor, leased to Quickturn, as
Lessee, and Quickturn leased from ilicon, a portion of the real property
commonly known as 440 Clyde Avenue, Mountain View, California, consisting of the
second floor of the two story building located at 440 Clyde Avenue, Mountain
View, California. Said Leases are referred to herein as the "440 Clyde Avenue
Leases." The two story building and the one story building at 440 Clyde Avenue,
Mountain View, California are referred to herein as the "440 Clyde Avenue
Premises."
B. Quickturn has subleased the 440 Clyde Avenue Premises to Marimba,
Inc., a Delaware corporation ("Marimba") pursuant to a Sublease dated September
26, 1997 between Quickturn, as Sublessor, and Marimba, as Sublessee (the
"Marimba Sublease"). A true and complete copy of the Marimba Sublease and all
amendments thereto is attached hereto as Exhibit "A."
C. ilicon and Quickturn are parties to an Agreement Terminating Leases
dated as of January 15, 1999 (the "Termination Agreement") pursuant to which
ilicon and Quickturn have agreed to a mutual termination of the 440 Clyde Avenue
Leases and the Lease of 441 Logue Avenue effective as of 11:59 p.m. on January
31, 1999, subject to the conditions precedent set forth therein. ilicon has
<PAGE> 2
elected to continue the Marimba Sublease in effect as a direct lease between
ilicon and Marimba following the termination of the 440 Clyde Avenue Leases.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:
1. Assignment and Assumption of Marimba Sublease. Quickturn hereby
assigns to ilicon all of Quickturn's right, title and interest in, to and under
the Marimba Sublease effective as of 11:59 p.m. on January 31, 1999 (the
"Effective Date"), and ilicon hereby accepts such assignment and agrees to
perform all of the covenants, agreements, and obligations of Quickturn, as
Sublessor, under the Marimba Sublease from and after the Effective Date.
Quickturn agrees that ilicon shall collect the installment of rent and other
charges for the month of February 1999 payable by Marimba as the Sublessee under
the Marimba Sublease and all subsequent installments of rent and other charges
payable by Marimba. Quickturn hereby represents and warrants to ilicon that the
Marimba Sublease is in full force and effect and that Quickturn has neither
given nor received any notice of default thereunder. Quickturn shall deliver to
ilicon concurrently with the execution and delivery of this Assignment the
original fully executed copy of the Marimba Sublease.
2. Conditions Precedent. This Assignment is subject to the satisfaction,
prior to January 31, 1999, of the conditions precedent set forth in Paragraph 2
of the Termination Agreement. If said conditions precedent are not satisfied
prior to January 31, 1999, this Assignment shall be null and void and of no
force or effect.
3. Further Assurances. Each party hereto agrees to execute and deliver to
the other party such further documents or instruments as may be necessary or
appropriate in order to carry out the intentions of the parties as contained in
this Assignment.
4. Counterparts. This Assignment may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of
the day and year first above written.
"Quickturn"
QUICKTURN DESIGN SYSTEMS, INC.,
a Delaware corporation
By: /s/ RAYMOND OSTBY
----------------------------
Its: Vice President
---------------------------
"ilicon"
ILICON, INC.,
a California corporation
By: /s/ DAVID FLETCHER
----------------------------
Its Attorney in Fact
<PAGE> 4
ATTACHMENT A
SUBLEASE
1. PARTIES. This Sublease is made and effective this 26th day of September,
1997 ("Effective Date") by and between Quickturn Design Systems, Inc., a
Delaware corporation ("Sublessor"), and Marimba, Inc., a Delaware
corporation ("Sublessee").
2. PREMISES. Sublessor hereby leases to Sublessee and Sublessee hereby
subleases from Sublessor for the Term (as defined below in Section 3),
at the Rent set forth in Section 4 below, and upon all of the conditions
set forth herein, that certain property situated in the County of Santa
Clara, State of California, commonly known as 440 Clyde Avenue, Mountain
View, CA 94040 and described as two (2) joined buildings consisting of
approximately Thirty Five Thousand Two Hundred Seventy Three (35,273)
rentable square feet and Twelve Thousand Two Hundred (12,200) rentable
square feet, respectively, for a total of approximately Forty Seven
Thousand Four Hundred Seventy Three (47,473) rentable square feet. (See
attached Exhibit A for further description.)
3. TERM.
3.1 TERM. The term of this Sublease shall be for approximately two
(2) years and six (6) months (the "Term") commencing on or about
November 1, 1997 ("Commencement Date") and ending on April 30,
2000, unless sooner terminated pursuant to any provision herein
("Termination Date").
3.2 DELAY IN COMMENCEMENT. If for any reason Sublessor cannot
deliver possession of the Premises to Sublessee on November 1,
1997, Sublessor shall not be subject to any liability therefore,
nor shall such failure affect the validity of this Lease or the
obligations of Sublessee hereunder or extend the term of this
Sublease. Notwithstanding the foregoing, Sublessee shall not be
obligated to pay rent until Sublessor tenders possession of the
Premises to Sublessee. If Sublessor has not delivered possession
of the Premises by January 1, 1998, Sublessee may, at its
option, notify Sublessor in writing on or before January 10,
1998, that Sublessee intends to cancel this Sublease. In the
event of such cancellation, the parties shall be discharged from
all obligations hereunder.
3.3 EARLY COMMENCEMENT. If Sublessee occupies the Premises prior to
November 1, 1997, such occupancy shall be subject to all
provisions of this Sublease, such occupancy shall not advance
the Termination Date and Sublessee shall pay rent for such
period at the initial monthly rates set forth below.
4. RENT; OPERATING EXPENSES AND REAL ESTATE TAXES.
4.1 RENT FOR PREMISES. The Rent is calculated for the Premises as
follows:
11/1/1997 through 1/31/1999 $1.95/sq. foot/month NNN
02/1/1999 through 4/30/2000 $2.00/sq. foot/month NNN
<PAGE> 5
Sublessee shall pay to Sublessor as rent for the Premises equal monthly
payments of Ninety Two Thousand Five Hundred Seventy Two and 35/100 Dollars
($92,572.35), in advance, on the first day of each month for months 1 through 15
of the Term and Ninety Four Thousand Nine Hundred Forty Six and 00/100 Dollars
($94,946.00), in advance, on the first day of each month for months 16 through
30 of the Term (collectively, the "Rent"). Sublessee shall pay to Sublessor on
the Effective Date the sum of $92,572.35 as payment for the first month's Rent.
Sublessor shall apply any partial Rent payments made by Sublessee on a pro rata
basis toward the monthly Rent then due. Rent shall be payable in lawful money of
the United States to Sublessor at the address stated herein or to such other
persons or at such other places as Sublessor may designate in writing.
4.2 OPERATING EXPENSES; REAL ESTATE TAXES. This Sublease is a
"triple net" or "NNN" sublease and Sublessee shall be
responsible for paying directly for services such as utilities,
janitorial costs, all operating expenses and annual increases
(including without limitation building and common area
maintenance such as parking, landscaping and lighting), costs of
insurance, repairs, operations and real property taxes.
Sublessee shall have the right to verify all operating expenses.
5. SECURITY DEPOSIT. Sublessee shall deposit with Sublessor on the
Effective Date an amount equal to two (2) months Rent at the rate of
Ninety Four Thousand Nine Hundred Forty Six and 00/100 Dollars
($94,946.00) per month, for a sum total of One Hundred Eighty Nine Eight
Hundred Ninety Two and 00/100 Dollars ($189,892.00), as security for
Sublessee's faithful performance of its obligations hereunder (the
"Security Deposit"). If Sublessee fails to pay Rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this
Sublease, Sublessor may use, apply or retain all or any portion of the
Security Deposit for the payment of any Rent or other charge in default
or for the payment of any other sum to which Sublessor may become
obligated by reason of Sublessee's default, or to compensate Sublessor
for any loss or damage which Sublessor may suffer thereby. If Sublessor
so uses or applies all or any portion of the Security Deposit, Sublessee
shall, within ten (10) days after its receipt of Sublessor's written
demand, deposit cash with Sublessor in an amount sufficient to restore
the Security Deposit to the full amount set forth above. Sublessee's
failure to do so shall be a material breach of this Sublease. Sublessor
shall not be required to keep the Security Deposit separate from its
general accounts. If Sublessee performs all of its obligations
hereunder, following the Termination Date and after Sublessee has
vacated the Premises, Sublessor shall return the Security Deposit (or
the portion thereof which has not been applied by Sublessor) to
Sublessee (or at Sublessor's option, to the last assignee, if any, of
Sublessee's interest in the Sublease). No trust relationship is created
herein between Sublessor and Sublessee with respect to the Security
Deposit. No payment of interest or other incremental charge shall be
payable to Sublessee for Sublessor's use of the Security Deposit.
6. USE.
6.1 USE. The Premises shall be used and occupied by Sublessee only
for research and development, office administration, storage and
other legal uses approved by the City of Mountain View.
2
<PAGE> 6
6.2 COMPLIANCE WITH LAW.
(a) SUBLESSOR'S WARRANTY RE COMPLIANCE. As of the Commencement
Date, Sublessor warrants to Sublessee that, to the best of
Sublessor's knowledge and without independent investigation, the
Premises, in their existing state, do not violate any applicable
building code regulation or ordinance; provided, however,
Sublessor's warranty is given without regard to the use for
which Sublessee intends to use the Premises. Sublessor shall
rectify promptly, at its sole cost and expense, any violation of
such warranty, after written notice from Sublessee.
Notwithstanding the foregoing, the Premises may not meet all
requirements of the Americans with Disabilities Act ("ADA") and
Sublessor makes no warranty nor assumes any liability with
respect to ADA compliance. It shall be conclusively deemed that
no violation of Sublessor's warranty existed unless written
notice to the contrary is received by Sublessor prior to the
first anniversary of the Commencement Date.
(b) SUBLESSEE'S COMPLIANCE. Except as provided in Section
6.2(a), Sublessee shall, at its sole expense, comply promptly
with all applicable statutes, ordinances, rules, regulations,
orders, restrictions of record, and requirements in effect
during the Term regulating Sublessee's use of the Premises.
Sublessee shall not use or permit the use of the Premises in any
manner that will tend to (i) create waste or a nuisance; or (ii)
to disturb other tenants of the Premises, if there are multiple
tenants in the building containing the Premises.
6.3 CONDITION OF PREMISES; IMPROVEMENTS.
(a) "AS IS" CONDITION OF PREMISES. Sublessor shall provide
Sublessee with sufficient opportunity to conduct its own review
of all operating systems prior to the Commencement Date.
Sublessor makes no representation or gives no warranty with
respect to the condition of such operating systems. Except as
expressly provided in Section 6.2(a) and this Section 6.3,
Sublessee hereby accepts (a) the Premises "AS IS" in their
condition existing as of the Commencement Date, subject to all
applicable zoning, municipal, county and state laws, ordinances,
and regulations governing and regulating the use of the
Premises; (b) this Sublease subject thereto; and (c) all matters
disclosed thereby and in any exhibits attached to this Sublease.
Notwithstanding the foregoing, prior to the Commencement Date
Sublessor shall clean the carpets and floors at the Premises and
replace defective ceiling tiles and light bulbs. All other
improvements shall be at Sublessee's sole expense. Sublessee
acknowledges that neither Sublessor nor Sublessor's agents have
made any representation or warranty as to the suitability of the
Premises for the conduct of Sublessee's business.
(b) IMPROVEMENTS BY SUBLESSEE. Sublessee shall have the right to
modify the building interiors of the Premises with Sublessor's
and Master Lessor's prior written consent, which consent shall
not be unreasonably withheld or delayed, subject to the
appropriate provisions of the Master Lease. To the best of
Sublessor's knowledge, there are no permit violations of
existing building improvements.
3
<PAGE> 7
6.4 SUBLESSEE'S INDEMNIFICATION RE HAZARDOUS SUBSTANCES. Sublessee
shall indemnify, defend and hold Sublessor and Master Lessor,
and each of their agents, employees and lenders, harmless from
and against any and all losses, costs, claims, damages,
liabilities and causes of action (including attorney's fees and
costs and consultants' fees) arising out of or in any way
connected with any hazardous substance located on the Premises
immediately subsequent to the Commencement Date or any
subsequent presence of hazardous substances on or about the
Premises, including the soils and ground waters thereof, caused
or permitted by Sublessee. Sublessee's obligations under this
provision shall survive the expiration or termination of the
Sublease.
6.5 SUBLESSOR'S INDEMNIFICATION RE HAZARDOUS SUBSTANCES. Sublessor
shall indemnify, defend and hold Sublessee and Master Lessor,
and each of their agents, employees and lenders, harmless from
and against any and all losses, costs, claims, damages,
liabilities and causes of action (including attorney's fees and
costs and consultants' fees) arising out of or in any way
connected with any hazardous substance brought onto the Premises
by or for Sublessor in violation of any Applicable Law prior to
the Commencement Date. Sublessor's obligations under this
provision shall survive the expiration or termination of the
Sublease.
7. MASTER LEASE.
7.1 MASTER LEASES; CONFLICTS; DEFINITIONS.
(a) MASTER LEASES. Sublessor is the lessee of the Premises by
virtue of two leases by and between Sublessor and MV440, Inc.
("Master Lessor"). The lease for the first floor of the
two-story building consisting of approximately 17,637 square
feet and the single story building consisting of approximately
12,200 square feet (for a total of 29,837 square feet) is dated
March 17, 1993, as amended by those certain Addenda No. 1 and
No. 2 to Master Lease dated March 17, 1993 (collectively the
"First Floor Master Lease"), a copy of which is attached hereto
as Exhibit B-1 and incorporated herein by reference. The lease
for the second floor of the two-story building consisting of
approximately 17,636 square feet is dated March 17, 1993, as
amended by those certain Addenda No. 1 and No. 2 to Master Lease
dated March 17, 1993 (collectively, the "Second Floor Master
Lease"), a copy of which is attached hereto as Exhibit B-2 and
incorporated herein by reference. The First Floor Master Lease
and the Second Floor Master Lease shall be referred to
collectively herein as the "Master Lease."
(b) CONFLICTS. This Sublease is and shall be at all times
subject and subordinate to the Master Lease. The terms,
conditions and respective obligations of Sublessor and Sublessee
to each other under this Sublease shall be the terms and
conditions of the Master Lease except for those provisions of
the Master Lease which are expressly changed by this Sublease.
In the event of any conflict between the terms of this Sublease
and the terms of the Master Lease, as between Sublessor and
Sublessee the terms of this Sublease shall control over the
Master Lease. In the event of any conflict between the terms of
this Sublease and the terms of the Master Lease, as between
Master Lessor and Sublessor the terms of the Master Lease shall
control over the Sublease.
4
<PAGE> 8
(c) DEFINITIONS. The term "Lessor" in the Master Lease shall be
deemed in this Sublease to refer to the "Sublessor." The term
"Lessee" in the Master Lease shall be deemed in this Sublease to
refer to the "Sublessee." Any capitalized terms not defined in
this Sublease shall have the meaning ascribed to them by the
Master Lease.
7.2 SUBLESSEE'S ASSUMPTION OF OBLIGATIONS. During the Term and for
all periods subsequent with respect to obligations which have
arisen prior to the Termination Date, Sublessee does hereby
expressly assume and agree to perform and comply with, for the
benefit of Sublessor and Master Lessor, each and every
obligation of Sublessor under the Master Lease ("Sublessee's
Assumed Obligations"). Sublessee shall hold Sublessor free and
harmless of and from all liability, judgments, costs, damages,
claims or demands, including reasonable attorney's fees, arising
out of Sublessee's failure to comply with or perform Sublessee's
Assumed Obligations. Notwithstanding the foregoing, Sublessee
does not assume any obligations for removal of alterations made
by Sublessor prior to the Commencement Date, if such removal is
required by Master Lessor at the end of the Lease Term.
7.3 SUBLESSOR'S COMPLIANCE WITH MASTER LEASE. Sublessor represents
to Sublessee that as of the Effective Date the Master Lease is
in full force and effect and that no default exists on the part
of any party to the Master Lease.
8. DEFAULT.
8.1 DEFAULTS BY SUBLESSOR. Master Lessor agrees that unless and
until Sublessor materially defaults on the Master Lease,
Sublessor may receive, collect and enjoy the rents accruing
under this Sublease. However, if Sublessor defaults in the
performance of its obligations to Master Lessor, then Master
Lessor may, at its option, receive and collect, directly from
Sublessee, all rent owing and to be owed under this Sublease;
provided, however, Master Lessor agrees that it shall only be
entitled to fifty percent (50%) of the Excess Rent. Master
Lessor shall not, by reason of this assignment of the Sublease
nor by reason of the collection of the rents from the Sublessee,
be deemed liable to Sublessee for any failure of the Sublessor
to perform and comply with its obligations hereunder.
8.2 SUBLESSEE'S PAYMENT TO MASTER LESSOR. Sublessor hereby
irrevocably authorizes and directs Sublessee, upon receipt of
any written notice from the Master Lessor stating that a default
exists in the performance of Sublessor under the Master Lease,
to pay to Master Lessor the rents due and to become due under
the Sublease. Sublessor agrees that Sublessee shall have the
right to rely upon any such statement and request from Master
Lessor, and that Sublessee shall pay such rents to Master Lessor
without any obligation or right to inquire as to whether such
default exists and notwithstanding any notice from or claim from
Sublessor to the contrary. Sublessor agrees that it shall have
no right or claim against Sublessee for any such rents so paid
by Sublessee.
8.3 NO MODIFICATIONS WITHOUT MASTER LESSOR'S CONSENT. No changes or
modifications shall be made to this Sublease without the prior
written consent of Master Lessor.
5
<PAGE> 9
8.4 AGREEMENT NOT TO EXERCISE OPTION TO EXTEND. Sublessor agrees not
to exercise its option to extend the Lease. Sublessee agrees
that it has no right to exercise the option to extend the Lease.
9. CONSENT OF MASTER LESSOR TO SUBLEASE.
9.1 CONSENT; SUBLESSOR'S OBLIGATION TO PAY COSTS. Sublessor and
Sublessee agree to present this executed Sublease to Master
Lessor for its written approval. Master Lessor's consent to this
Sublease will not release Sublessor from its obligation to pay
rent and perform and comply with all of its obligations under
the Master Lease. Sublessor agrees that it shall be responsible
to pay any and all real estate commissions associated with this
Sublease as a cost of sublease. Sublessor also agrees as a cost
of sublease to pay the reasonable costs and expenses of Master
Lessor for its fees and costs (e.g., attorney's fees) associated
with Master Lessor's review and approval of this Sublease.
9.2 NO WAIVER. The acceptance of rent by Master Lessor from
Sublessee or any one else liable under the Master Lease shall
not be deemed a waiver by Master Lessor of any provisions of the
Master Lease. The consent to this Sublease shall not constitute
a consent to any subsequent subletting or assignment. In the
event of any default of Sublessor under the Master Lease, Master
Lessor may proceed directly against Sublessor or any one else
liable under the Master Lease or this Sublease without first
exhausting Master Lessor's remedies against any other person or
entity liable thereon to Master Lessor.
9.3 SUBLESSOR'S CONSENT TO ADDITIONAL SUBLETTING. Sublessor will not
unreasonably withhold consent to any assignment or sub-sublease
by Sublessee, subject to consent by Master Lessor.
9.4 ATTORNMENT. In the event that Sublessor defaults in its
obligations under the Master Lease, then Master Lessor, at its
option and without being obligated to do so, may require
Sublessee to attorn to Master Lessor, in which case Sublessee
shall attorn to Master Lessor and Sublessee shall perform all of
the terms and conditions of this Sublease directly to Master
Lessor, as if Sublessee and Master Lessor were Lessor and
Lessee. In any event, Master Lessor shall allow Sublessee to
cure any default by Sublessor within the applicable cure period
after due notice to Sublessee of the default. In such event,
Master Lessor shall undertake the obligations of Sublessor under
this Sublease from the time of the exercise of said option until
the Termination Date. Notwithstanding the foregoing, Master
Lessor shall not be liable for any prepaid rents nor any
security deposit paid by Sublessee, nor shall it be liable for
any other defaults of the Sublessor under the Sublease.
Sublessor and Sublessee acknowledge and agree that Rent due and
payable to Master Lessor in the case of such Sublessor default,
and Sublessee's attornment, shall be the Rent set forth in this
Sublease, and not the Rent set forth in the Master Lease.
9.5 MASTER LEASE IN GOOD STANDING. Master Lessor acknowledges that,
to the best of Master Lessor's knowledge, no default presently
exists under the Master Lease of
6
<PAGE> 10
obligations to be performed by Sublessor and that the Master
Lease is in full force and effect.
9.6 COPIES OF DEFAULT NOTICES TO SUBLESSEE. In the event that
Sublessor defaults under its obligations to be performed under
the Master Lease, Master Lessor agrees to deliver to Sublessee a
copy of any such notice of default. Sublessee shall have the
right to cure any default of Sublessor described in any notice
of default within ten days after service of such notice of
default on Sublessee. If such default is cured by Sublessee then
Sublessee shall have the right of reimbursement and offset from
and against Sublessor.
9.7 CAPITAL IMPROVEMENTS. Master Lessor agrees that any ADA upgrades
or roof or HVAC replacement or extensive repairs to the Premises
shall made subject to the Section 6, Expenses, Subsection C,
Capital Leases and Capital Improvements, of the Second Addendum
to Lease.
IN WITNESS WHEREOF, the authorized representatives of each of the
parties duly execute this Sublease in the County of Santa Clara, California, as
of the date first written above.
SUBLESSOR: QUICKTURN DESIGN SYSTEMS, INC.
By:
-------------------------------
Title:
----------------------------
SUBLESSEE: MARIMBA, INC.
By:
-------------------------------
Title:
----------------------------
7
<PAGE> 11
CONSENT TO SUBLEASE BY MASTER LESSOR
The undersigned ("Master Lessor"), as owner of the real property on
which the Premises are located and Lessor under the Master Lease, subject to the
terms and conditions contained in this Consent, hereby consents to the foregoing
Sublease between Quickturn Design Systems, Inc., a Delaware corporation
("Sublessor"), and Marimba, Inc., a Delaware corporation ("Sublessee"), but
without thereby releasing Sublessor as Lessee under the Master Lease from any
liability or obligation to Master Lessor under the Master Lease, and without
waiving the provisions of the Master Lease which require Master Lessor's prior
written consent to any subsequent assignment or subletting of the Premises or
any portion thereof by Sublessor.
Master Lessor expressly confirms and approves Paragraphs 9.5, 9.6, and
9.7 of the Sublease.
DATED: September 30, 1997.
MV 440, INC.,
a California corporation
By:
------------------------------
Its: Attorney-In-Fact
<PAGE> 12
EXHIBIT A
[MAP OF PROPERTY]
<PAGE> 13
ATTACHMENT B
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE--NET
(DO NOT USE THIS FORM FOR MULTI-TENANT PROPERTY)
1. BASIC PROVISIONS ("BASIC PROVISIONS")
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
March 17, 1993, is made by and between MV 440, INC., a California corporation
("LESSOR") and QUICKTURN SYSTEMS. INC., a California corporation ("LESSEE"),
(collectively the "PARTIES," or individually a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known by the street address of 440 Clyde Avenue, Mountain View, located in the
County of Santa Clara, State of California and generally described as (describe
briefly the nature of the property) that improved property referred to as 440
Clyde Avenue, also described as Santa Clara APN# 160-57-009, consisting of
approximately 29,837 square feet of office/R&D space located in two buildings,
First Floor (17,637 sq. ft.) of the two-story building and one 12,200 sq. ft.,
single story building ("PREMISES"). See Exhibit "A" attached hereto. (See
Paragraph 2 for further provisions.)
1.3 TERM: seven (7) years and zero (0) months ("ORIGINAL TERM")
commencing May 1, 1993 ("COMMENCEMENT DATE"), and ending April 30, 2000
("EXPIRATION DATE"). (See Paragraph 3 for further provisions.)
1.4 EARLY POSSESSION: March 22, 1993 ("EARLY POSSESSION DATE") (See
Paragraphs 3.2 and 3.3 for further provisions.)
1.5 BASE RENT: $21,436.50 per month ("BASE RENT"), payable on the first
(1st) day of each month commencing May 1, 1993. (See Paragraph 4 for further
provisions.)
[ ] If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted.
1.6 BASE RENT PAID UPON EXECUTION: $21,436.50 as Base Rent for the
period May 1, 1993 through May 31, 1993
1.7 SECURITY DEPOSIT: $50,000.00 ("SECURITY DEPOSIT"). (See Paragraph 5
for further provisions.)
1.8 PERMITTED USE: Office, administration, research and development and
all other uses legally permitted by the City of Mountain View. (See Paragraph 6
for further provisions.)
1.9 INSURING PARTY: Lessor is the "INSURING PARTY" unless otherwise
stated herein. (See Paragraph 8 for further provisions.)
1.10 REAL ESTATE BROKERS: The following real estate brokers
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
Cornish & Carey Commercial represents
[X] Lessor exclusively ("LESSOR'S BROKER"); [ ] both Lessor and Lessee, and
Wayne Mascia Associates represents
[X] Lessee exclusively ("LESSEE'S BROKER"); [ ] both Lessee and Lessor. (See
Paragraph 15 for further
provisions.)
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to be
guaranteed by N/A ("GUARANTOR"). (See Paragraph 37 for further provisions.)
1.12 ADDENDA. Attached hereto is an Addendum or Addenda consisting of
Paragraphs 49 through 50 and a Second Addendum to Lease all of which constitute
a part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which Lessor
and Lessee agree is reasonable and the rental based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, fire sprinkler system, lighting, air conditioning, heating, roof and
loading doors, if any, in the Premises, other than those constructed by Lessee,
shall be in good operating condition on the Commencement Date. If a
non-compliance with said warranty exists as of the Commencement Date, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within thirty
(30) days after the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Commencement Date. Said warranty
does not apply to the use to which Lessee will put the Premises or to any
Alterations or Utility Installations (as defined in Paragraph 7.3 (a)) made or
to be made by Lessee. If the Premises do not comply with said warranty, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify the same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within six (6)
months following the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
been advised by the Brokers to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, compliance with Applicable Law, as
defined in Paragraph 6.3) and the present and future suitability of the Premises
for Lessee's intended use, (b) that Lessee has made such investigation as it
deems necessary with reference to such matters and assumes all responsibility
therefor as the same relate to Lessee's occupancy of the Premises and/or the
term of this Lease, and (c) that neither Lessor, nor any of Lessor's agents, has
made any oral or written representations or warranties with respect to the said
matters other than as set forth in this Lease.
2.5 LESSEE PRIOR OWNER/OCCUPANT. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee's sole cost and expense, correct any
non-compliance of the Premises with said warranties.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this
Lease, however, (including but not limited to the obligations to pay Real
Property Taxes and insurance premiums and to maintain the Premises) shall be in
effect during such period. Any such early possession shall not affect nor
advance the Expiration Date of the Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, if one is specified in Paragraph 1.4, or, if no Early Possession Date is
specified, by the Commencement Date, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease, or
the obligations of Lessee hereunder, or extend the term hereof, but in such
case, Lessee shall not, except as otherwise provided herein, be obligated to pay
rent or perform any other obligation of Lessee under the terms of this Lease
until Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ten (10) days thereafter, cancel this Lease, in which event the Parties
shall be discharged from all obligations hereunder; provided, however, that if
such written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease shall terminate and be of no further
force or effect. Except as may be otherwise provided, and regardless of when the
term actually commences, if possession is not tendered to Lessee when required
by this Lease and Lessee does
<PAGE> 14
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to what Lessee
would otherwise have enjoyed under the terms hereof, but minus any days of delay
caused by the acts, changes or omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall cause payment of Base Rent and other rent or
charges, as the same may be adjusted from time to time, to be received by Lessor
in lawful money of the United States, without offset or deduction, on or before
the day on which it is due under the terms of this Lease. Base Rent and all
other rent and charges for any period during the term hereof which is for less
than one (1) full calendar month shall be prorated based upon the actual number
of days of the calendar month involved. Payment of Base Rent and other charges
shall be made to Lessor at its address stated herein or to such other persons or
at such other addresses as Lessor may from time to time designate in writing to
Lessee.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefor
deposit moneys with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional moneys with Lessor sufficient to maintain the same ratio between the
Security Deposit and the Base Rent as those amounts are specified in the Basic
Provisions. Lessor shall not be required to keep all or any part of the Security
Deposit separate from its general accounts. Lessor shall, at the expiration or
earlier termination of the term hereof and after Lessee has vacated the
Premises, return to Lessee (or, at Lessor's option, to the last assignee, if
any, of Lessee's interest herein), that portion of the Security Deposit not used
or applied by Lessor. Unless otherwise expressly agreed in writing by Lessor, no
part of the Security Deposit shall be considered to be held in trust, to bear
interest or other increment for its use, or to be prepayment for any moneys to
be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the purposes
set forth in Paragraph 1.8, or any other use which is comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that creates waste or a nuisance, or that unreasonably disturbs owners
and/or occupants of, or causes damage to, neighboring premises or properties.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect,
either by itself or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety or
welfare, the environment or the Premises, (ii) regulated or monitored by any
governmental authority, or (iii) a basis for liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in, on or about the Premises
which constitutes a Reportable Use (as hereinafter defined) of Hazardous
Substances without the express prior written consent of Lessor and compliance in
a timely manner (at Lessee's sole cost and expense) with all Applicable Law (as
defined in Paragraph 6.3). "REPORTABLE USE" shall mean (i) the installation or
use of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority.
Reportable Use shall also include Lessee's being responsible for the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Law requires that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but in compliance with all Applicable Law,
use any ordinary and customary materials reasonably required to be used by
Lessee in the normal course of Lessee's business permitted on the Premises, so
long as such use is not a Reportable Use and does not expose the Premises or
neighboring properties to any meaningful risk of contamination or damage or
expose Lessor to any liability therefor. In addition, Lessor may (but without
any obligation to do so) condition its consent to the use or presence of any
Hazardous Substance, activity or storage tank by Lessee upon Lessee's giving
Lessor such additional assurances as Lessor, in its reasonable discretion, deems
necessary to protect itself, the public, the Premises and the environment
against damage, contamination or injury and/or liability therefrom or therefor,
including, but not limited to, the installation (and removal on or before Lease
expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the deposit
of an additional Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance, or a condition involving or
resulting from same, has come to be located in, on, under or about the Premises,
other than as previously consented to by Lessor, Lessee shall immediately give
written notice of such fact to Lessor. Lessee shall also immediately give Lessor
a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action or proceeding given to, or received from,
any governmental authority or private party, or persons entering or occupying
the Premises, concerning the presence, spill, release, discharge of, or exposure
to, any Hazardous Substance or contamination in, on, or about the Premises
including but not limited to all such documents as may be involved in any
Reportable Uses involving the Premises.
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, permits and
attorney's and consultant's fees arising out of or involving any Hazardous
Substance or storage tank brought onto the Premises by or for Lessee or under
Lessee's control in violation of any Applicable Law. Lessee's obligations under
this Paragraph 6 shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation (including consultant's and
attorney's fees and testing), removal, remediation, restoration and/or abatement
thereof, or of any contamination therein involved, and shall survive the
expiration or earlier termination of this Lease. No termination, cancellation or
release agreement entered into by Lessor and Lessee shall release Lessee from
its obligations under this Lease with respect to Hazardous Substances or storage
tanks, unless specifically so agreed by Lessor in writing at the time of such
agreement.
6.3 LESSEE'S COMPLIANCE WITH LAW. Except as otherwise provided in this
Lease, Lessee, shall, at Lessee's sole cost and expense, fully, diligently and
in a timely manner, comply with all "APPLICABLE LAW," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the reasonable
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill or release of any Hazardous Substance or storage
tank), now in effect or which may hereafter come into effect, and whether or not
reflecting a change in policy from any previously existing policy. Lessee shall,
within five (5) days after receipt of Lessor's written request, provide Lessor
with copies of all documents and information, including, but not limited to,
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any actual claim, notice, citation, warning, complaint or
report pertaining to or involving failure by Lessee or the Premises to comply
with any Applicable Law.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's Lender(s) (as defined in
Paragraph 8.3(a)) shall have the right to enter the Premises at any time, in the
case of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance by Lessee
with this Lease and all Applicable Laws (as defined in Paragraph 6.3), and to
employ experts and/or consultants in connection therewith and/or to advise
Lessor with respect to Lessee's activities including but not limited to the
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance or storage tank on or from the Premises. The costs and
expenses of any such inspections shall be paid by the party requesting same,
unless a Default or Breach of this Lease, violation of Applicable Law, or a
contamination, caused or materially contributed to by Lessee is found to exist
or be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In any such case, Lessee shall upon request reimburse Lessor
or Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraph 2.2 (Lessor's warranty
as to condition), 2.3 (Lessor's warranty as to compliance with covenants, etc),
7.2 (Lessor's obligations to repair), 9 (damage and destruction), and 14
(condemnation), Lessee shall, at Lessee's sole cost and expense and at all
times, keep the Premises and every part thereof in good order, condition and
repair, structural and non-structural (whether or not such portion of the
Premises requiring repair, or the means of repairing the same, are reasonably or
readily accessible to Lessee, and whether or not the need for such repairs
occurs as a result of Lessee's use, any prior use, the elements or the age of
such portion of the Premises), including, without limiting the generality of the
foregoing, all equipment or facilities serving the Premises, such as plumbing,
heating, air conditioning, ventilating, electrical, lighting facilities,
boilers, fired or unfired pressure vessels, fire sprinkler and/or standpipe and
hose or other automatic fire extinguishing system, including fire alarm and/or
smoke detection systems and equipment, fire hydrants, fixtures, walls (interior
and exterior), foundations, ceilings, roofs, floors, windows,
PAGE 2
<PAGE> 15
doors, plate glass, skylights, landscaping, driveways, parking lots, fences,
retaining walls, signs, sidewalks and parkways located in, on, about, or
adjacent to the Premises. Lessee shall not cause or permit any Hazardous
Substance to be spilled or released in, on, under or about the Premises
(including through the plumbing or sanitary sewer system) and shall promptly, at
Lessee's expense, take all investigatory and/or remedial action reasonably
recommended, whether or not formally ordered or required, for the cleanup of any
contamination of, and for the maintenance, security and/or monitoring of, the
Premises, the elements surrounding same, or neighboring properties, that was
caused or materially contributed to by Lessee, or pertaining to or involving any
Hazardous Substance and/or storage tank brought onto the Premises by or for
Lessee or under its control. Lessee, in keeping the Premises in good order,
condition and repair, shall exercise and perform good maintenance practices.
Lessee's obligations shall include restorations when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair. If Lessee occupies the Premises for more than seven (7)
years, Lessor may require Lessee to repaint the exterior of the buildings on the
Premises as reasonably required, but not more frequently than once every seven
(7) years.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain contracts, with copies to Lessor, in customary form and substance for,
and with contractors specializing and experienced in, the inspection,
maintenance and service of the following equipment and improvements, if any,
located on the Premises: (i) heating, air conditioning and ventilation
equipment, (ii) boiler, fired or unfired pressure vessels, (iii) fire sprinkler
and/or standpipe and hose or other automatic fire extinguishing systems,
including fire alarm and/or smoke detection, (iv) landscaping and irrigation
systems, (v) roof covering and drain maintenance and (vi) asphalt and parking
lot maintenance.
7.2 LESSOR'S OBLIGATIONS. Except for the warranties and agreements of
Lessor contained in Paragraphs 2.2 (relating to condition of the Premises) 2.3
(relating to compliance with covenants, restrictions and building code), 9
(relating to destruction of the Premises) and 14 (relating to condemnation of
the Premises), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises, the
improvements located thereon, or the equipment therein, whether structural or
non structural, all of which obligations are intended to be that of the Lessee
under Paragraph 7.1 hereof. It is the intention of the Parties that the terms of
this Lease govern the respective obligations of the Parties as to maintenance
and repair of the Premises. Lessee and Lessor expressly waive the benefit of any
statute now or hereafter in effect to the extent it is inconsistent with the
terms of this Lease with respect to, or which affords Lessee the right to make
repairs at the expense of Lessor or to terminate this Lease by reason of, any
needed repairs.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" is used in this Lease to refer to all carpeting, window
coverings, air lines, power panels, electrical distribution, security, fire
protection systems, communication systems, lighting fixtures, heating,
ventilating, and air conditioning equipment, plumbing, and fencing in, on or
about the Premises. The term "TRADE FIXTURES" shall mean Lessee's machinery and
equipment that can be removed without doing material damage to the Premises. The
term "ALTERATIONS" shall mean any modification of the improvements on the
Premises from that which are provided by Lessor under the terms of this Lease,
other than Utility Installations or Trade Fixtures, whether by addition or
deletion. "LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor as defined in Paragraph 7.4(a). Lessee shall not make any Alterations
or Utility Installations in, on, under or about the Premises without Lessor's
prior written consent. Lessee may, however, make non-structural Utility
Installations to the interior of the Premises (excluding the roof), as long as
they are not visible from the outside, do not involve puncturing, relocating or
removing the roof or any existing walls, and the cumulative cost thereof during
the term of this Lease as extended does not exceed $25,000.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon: (i) Lessee's acquiring all applicable
permits required by governmental authorities, (ii) the furnishing of copies of
such permits together with a copy of the plans and specifications for the
Alteration or Utility Installation to Lessor prior to commencement of the work
thereon, and (iii) the compliance by Lessee with all conditions of said permits
in a prompt and expeditious manner. Any Alterations or Utility Installations by
Lessee during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and in compliance with all
Applicable Law. Lessee shall promptly upon completion thereof furnish Lessor
with as-built plans and specifications therefor. Lessor may (but without
obligation to do so) condition its consent to any requested Alteration or
Utility Installation that costs $10,000 or more upon Lessee's providing Lessor
with a lien and completion bond in an amount equal to one and one-quarter times
the estimated cost of such Alteration or Utility Installation and/or upon
Lessee's posting an additional Security Deposit with Lessor under Paragraph 36
hereof.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanics' or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility in or on the Premises as provided by
law. If Lessee shall, in good faith, content the validity of any such lien,
claim or demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises. If Lessor shall require, Lessee
shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal
to one and one quarter times the amount of such contested lien claim or demand
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's reasonable attorney's fees and costs
in participating in such action if Lessor shall decide it is to its best
interest to do so.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their removal
or become the owner thereof as hereinafter provided in this Paragraph 7.4, all
Alterations and Utility Additions made to the Premises by Lessee shall be the
property of and owned by Lessee, but considered a part of the Premises. Lessor
may, at any time and at its option, elect in writing to Lessee to be the owner
of all or any specified part of the Lessee Owned Alterations, and Utility
Installations. Unless otherwise instructed per subparagraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
earlier termination of this Lease, become the property of Lessor and remain upon
and be surrendered by Lessee with the Premises.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may
require that any or all Lessee Owned Alterations or Utility Installations be
removed by the expiration of this Lease, notwithstanding their installation may
have been consented to by Lessor. Lessor may require the removal of all or any
part of any Lessee Owned Alterations or Utility Installations made without the
required consent of Lessor only if Lessee has requested Lessor's decision on
such removal in writing.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date, with
all of the improvements, parts and surfaces thereof clean and free of debris and
in good operating order, condition and state of repair, ordinary wear and tear
excepted. "ORDINARY WEAR AND TEAR" shall not include any damage or deterioration
that would have been prevented by good maintenance practice or by Lessee
performing all of its obligations under this Lease. Except as otherwise agreed
or specified in writing by Lessor, the Premises, as surrendered, shall include
the Utility Installations. The obligation of Lessee shall include the repair of
any damage occasioned by the installation, maintenance or removal of Lessee's
Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Law and/or good practice. Lessee's Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee subject to its obligation to repair and
restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Regardless of whether the Lessor or Lessee is
the Insuring Party, Lessee shall pay for all insurance required under this
Paragraph 8 except to the extent of the cost attributable to liability insurance
carried by Lessor in excess of $1,000,000 per occurrence. Premiums for policy
periods commencing prior to or extending beyond the Lease term shall be prorated
to correspond to the Lease term. Payment shall be made by Lessee to Lessor
within ten (10) days following receipt of an invoice for any amount due.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less than $1,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises"
Endorsement and contain the "Amendment of the Pollution Exclusion" for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intra-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease as an "insured
contract" for the performance of Lessee's indemnity obligations under this
Lease. The limits of said insurance required by this Lease or as carried by
Lessee shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All insurance to be carried by Lessee shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.
PAGE 3
<PAGE> 16
(b) CARRIED BY LESSOR. Lessor shall also maintain liability
insurance described in Paragraph 8.2(a), above, in addition to, and not in lieu
of, the insurance required to be maintained by Lessee. Lessee shall not be named
as an additional insured therein.
8.3 PROPERTY INSURANCE-BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
and keep in force during the term of this Lease a policy or policies in the name
of Lessor, with loss payable to Lessor and to the holders of any mortgages,
deeds of trust or ground leases on the Premises ("LENDER(S)"), insuring loss or
damage to the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature or age of the improvements involved, such later amount is less than full
replacement cost. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations shall be insured by Lessee under Paragraph
8.4 rather than by Lessor. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender), including coverage for any additional costs resulting
from debris removal and reasonable amounts of coverage for the enforcement of
any ordinance or law regulating the reconstruction or replacement of any
undamaged sections of the Premises required to be demolished or removed by
reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located. If such insurance coverage has a
deductible clause, the deductible amount shall not exceed $1,000 per occurrence,
and Lessee shall be liable for such deductible amount in the event of an Insured
Loss, as defined in Paragraph 9.1(c).
(b) RENTAL VALUE. The Insuring Party shall, in addition, obtain
and keep in force during the term of this Lease a policy or policies in the name
of Lessor, with loss payable to Lessor and Lender(s), insuring the loss of the
full rental and other charges payable by Lessee to Lessor under this Lease for
one (1) year (including all real estate taxes, insurance costs, and any
scheduled rental increases). Said insurance shall provide that in the event the
Lease is terminated by reason of an insured loss, the period of indemnity for
such coverage shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income,
property taxes, insurance premium costs and other expenses, if any, otherwise
payable by Lessee, for the next twelve (12) month period. Lessee shall be liable
for any deductible amount in the event of such loss.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or if the Premises are part of a group of buildings owned by Lessor
which are adjacent to the Premises, the Lessee shall pay for any increase in the
premiums for the property insurance of such building or buildings if said
increase is caused by Lessee's acts, omissions, use or occupancy of the
Premises.
(d) TENANT'S IMPROVEMENTS. If the Lessor is the Insuring Party,
the Lessor shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease. If Lessee is the Insuring Party, the policy
carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned Alterations
and Utility Installations.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Lessee Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal property or the restoration of Lessee Owned Alterations
and Utility Installations. Lessee shall be the Insuring Party with respect to
the insurance required by this Paragraph 8.4 and shall provide Lessor with
written evidence that such insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender having a
lien on the Premises, as set forth in the most current issue of "Best's
Insurance Guide." Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in this Paragraph 8. If Lessee is
the Insuring Party, Lessee shall cause to be delivered to Lessor certified
copies of policies of such insurance or certificates evidencing the existence
and amounts of such insurance with the insureds and loss payable clauses as
required by this Lease. No such policy shall be cancelable or subject to
modification except after thirty (30) days prior written notice to Lessor.
Lessee shall at least thirty (30) days prior to the expiration of such policies,
furnish Lessor with evidence of renewals or "insurance binders" evidencing
renewal thereof, or Lessor may order such insurance and charge the cost thereof
to Lessee, which amount shall be payable by Lessee to Lessor upon demand. If the
Insuring Party shall fail to procure and maintain the insurance required to be
carried by the Insuring Party under this Paragraph 8, the other Party may, but
shall not be required to, procure and maintain the same, but at Lessee's
expense.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor ("WAIVING PARTY") each hereby release and relieve
the other, and waive their entire right to recover damages (whether in contract
or in tort) against the other, for loss of or damage to the Waiving Party's
property arising out of or incident to the perils required to be insured against
under Paragraph 8. The effect of such releases and waivers of the right to
recover damages shall not be limited by the amount of insurance carried or
required, or by any deductibles applicable thereto.
8.7 INDEMNITY. Except for Lessor's negligence or that of its agents,
employees, invitees or contractors and/or breach of express warranties, Lessee
shall indemnify, protect, defend and hold harmless the Premises, Lessor and its
agents, Lessor's master or ground lessor, partners and Lenders, from and against
any and all claims, loss of rents and/or damages, costs, liens, judgments,
penalties, permits, attorney's and consultant's fees, expenses and/or
liabilities arising out of, involving, or in dealing with, the occupancy of the
Premises by Lessee, the conduct of Lessee's business, any act, omission or
neglect of Lessee, its agents, contractors, employees or invitees, and out of
any Default or Breach by Lessee in the performance in a timely manner of any
obligation on Lessee's part to be performed under this Lease. The foregoing
shall include, but not be limited to, the defense or pursuit of any claim or any
action or proceeding involved therein, and whether or not (in the case of claims
made against Lessor) litigated and/or reduced to judgment, and whether well
founded or not. In case any action or proceeding be brought against Lessor by
reason of any of the foregoing matters, Lessee upon notice from Lessor shall
defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor
and Lessor shall cooperate with Lessee in such defense. Lessor need not have
first paid any such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Except to the extent caused by
the negligence or willful misconduct of Lessor, its agents, employees,
contractors or invitees, Lessor shall not be liable for injury or damage to the
person or goods, wares, merchandise or other property of Lessee, Lessee's
employees, contractors, invitees, customers, or any other person in or about the
Premises, whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, tire sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to
the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, the repair cost of which damage or destruction is less
than 50% of the then Replacement Cost of the Premises immediately prior to such
damage or destruction, excluding from such calculation the value of the land and
Lessee Owned Alterations and Utility Installations.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction
to the Premises, other than Lessee Owned Alterations and Utility Installations,
the repair cost of which damage or destruction is 50% or more of the then
Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(c) "INSURED LOSS" shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits Involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE-INSURED LOSS. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total
<PAGE> 17
cost to repair of which is $10,000 or less, and, in such event, Lessor shall
make the insurance proceeds available to Lessee on a reasonable basis for that
purpose. Notwithstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party shall promptly contribute the shortage in proceeds (except as to
the deductible which is Lessee's responsibility) as and when required to
complete said repairs. In the event, however, the shortage in proceeds was due
to the fact that, by reason of the unique nature of the improvements, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefore. If Lessor receives said funds or adequate assurance thereof
within said ten (10) day period, the party responsible for making the repairs
shall complete them as soon as reasonably possible and this Lease shall remain
in full force and effect. If Lessor does not receive such funds or assurance
within said period, Lessor may nevertheless elect by written notice to Lessee
within ten (10) days thereafter to make such restoration and repair as is
commercially reasonable with Lessor paying any shortage in proceeds, in which
case this Lease shall remain in full force and effect. If in such case Lessor
does not so elect, then this Lease shall terminate as of the date of the
occurrence of the damage or destruction. Unless otherwise agreed, Lessee shall
in no event have any right to reimbursement from Lessor for any funds
contributed by Lessee to repair any such damage or destruction. Premises partial
Damage due to flood or earthquake shall be subject to Paragraph 9.3 rather than
Paragraph 9.2, notwithstanding that there may be some insurance coverage, but
the net proceeds of any such insurance shall be made available for the repairs
if made by either Party.
9.3 PARTIAL DAMAGE-UNINSURED LOSS. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, either: (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such damage of Lessor's desire to terminate this Lease as of the
date sixty (60) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage totally at Lessee's expense and without reimbursement from Lessor.
Lessee shall provide Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following Lessee's said commitment. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the funds
or assurance thereof within the times specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
negligence or willful misconduct of Lessee. In the event, however, that the
damage or destruction was caused by the negligence, or willful misconduct of
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one (1) month's Base Rent, whether or not an Insured Loss, Lessor may,
at Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, within twenty (20) days following the occurrence of the damage, or
before the expiration of the time provided in such option for its exercise,
whichever is earlier ("Exercise Period"), (i) exercising such option and (ii)
providing Lessor with any shortage in insurance proceeds for adequate assurance
thereof) needed to make the repairs. If Lessee duly exercises such option during
said Exercise Period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's
expense repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during said Exercise Period, then Lessor may at
Lessor's option terminate this Lease as of the expiration of said sixty (60) day
period following the occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within ten (10) days after the expiration
of the Exercise Period, notwithstanding any term or provision in the grant of
option to the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described in Paragraph 9.2 (Partial
Damage--Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues (not to exceed the period for
which rental value insurance is required under Paragraph 8.3(b)), shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement of Base Rent, Real Property Taxes, insurance
premiums, and other charges, if any, as aforesaid, all other obligations of
Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after receipt of such notice, this Lease shall
continue in full force and effect. "COMMENCE" as used in this Paragraph shall
mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first
occurs.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option either (i) investigate
and remediate such Hazardous Substance Condition, if required, as soon as
reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to investigate
and remediate such condition exceeds twelve (12) times the then monthly Base
Rent or $100,000, whichever is greater, give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
Hazardous Substance Condition of Lessor's desire to terminate this Lease as of
the date sixty (60) days following the giving of such notice. In the event
Lessor elects to give such notice of Lessor's intention to terminate this Lease,
Lessee shall have the right within ten (10) days after the receipt of such
notice to give written notice to Lessor of Lessee's commitment to pay for the
investigation and remediation of such Hazardous Substance Condition totally at
Lessee's expense and without reimbursement from Lessor except to the extent of
an amount equal to twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance thereof within thirty (30) days following
Lessee's said commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such investigation and remediation
as soon as reasonably possible and the required funds are available. It Lessee
does not give such notice and provide the required funds or assurance thereof
within the times specified above, this Lease shall terminate as of the date
specified In Lessor's notice of termination. If a Hazardous Substance Condition
occurs for which Lessee is not legally responsible, there shall be abatement of
Lessee's obligations under this Lease to the same extent as provided in
Paragraph 9.6(a) for a period of not to exceed twelve months.
9.8 TERMINATION--ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit
as has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 WAIVE STATUTES. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 (a) PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises during the term of this
Lease. Subject to Paragraph 10.1(b), all such payments shall be made at least
ten (10) days prior to the delinquency date of the applicable installment.
Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes
have been paid. If any such taxes to be paid by Lessee shall cover any period of
time prior to or after the expiration or earlier termination of the term hereof,
Lessee's share of such taxes shall be equitably prorated to cover only the
period of time within the tax fiscal year this Lease is in effect, and Lessor
shall reimburse Lessee for any overpayment after such proration. If Lessee shall
fail to pay any Real Property Taxes required by this Lease to be paid by Lessee,
Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor
therefor upon demand.
(b) ADVANCE PAYMENT. In order to insure payment when due and
before delinquency of any or all Real Property Taxes, Lessor reserves the right,
at Lessor's option, to estimate the current Real Property Taxes applicable to
the Premises, and to require such current year's Real Property Taxes to be paid
in advance to Lessor by Lessee, either: (i) in a lump sum amount equal to the
installment due, at least twenty (20) days prior to the applicable delinquency
date, or (ii) monthly in advance with the payment of the Base Rent. If Lessor
elects to require payment monthly in advance, the monthly payment shall be the
equal monthly amount which, over the number of months remaining before the month
in which the applicable tax
<PAGE> 18
installment would become delinquent (and without interest thereon), would
provide a fund large enough to fully discharge before delinquency the estimated
installment of taxes to be paid. When the actual amount of the applicable tax
bill is known, the amount of such equal monthly advance payment shall be
adjusted as required to provide the fund needed to pay the applicable taxes
before delinquency. If the amounts paid to Lessor by Lessee under the provisions
of this Paragraph are insufficient to discharge the obligations of Lessee to pay
such Real Property Taxes as the same become due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums as are necessary to pay such
obligations. All moneys paid to Lessor under this Paragraph may be intermingled
with other moneys of Lessor and shall not bear interest.
10.2 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term "REAL
PROPERTY TAXES" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part, Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "REAL PROPERTY TAXES" shall also
include any tax, fee, levy, assessment or charge, or any increase therein
imposed by reason of events occurring, or changes in applicable law taking
effect, during the term of this Lease, including but not limited to the
execution of this Lease, or any modification, amendment or transfer thereof, and
whether or not contemplated by the Parties.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures, furnishings, equipment and all other personal property
to be assessed and billed separately from the real property of Lessor. If any of
Lessee's said personal property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee within ten (10) days
after receipt of a written statement setting forth the taxes applicable to
Lessee's property or, at Lessor's option, as provided in Paragraph 10.1(b).
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"ASSIGNMENT") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent given under and subject to
the terms of Paragraph 36 which consent shall not be unreasonably withheld or
delayed.
(b) Deleted.
(c) Deleted.
(d) Deleted.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall
not constitute a consent to any subsequent assignment or subletting by Lessee or
to any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee or
anyone else liable on the Lease or sublease and without obtaining their consent,
and such action shall not relieve such persons from liability under this Lease
or sublease.
(d) In the event of any Default or Breach of Lessee's obligations
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
any one else responsible for the performance of the Lessee's obligations under
this Lease, including the sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor or Lessee.
(e) Each request for consent to an assignment or subletting shall
be in writing, accompanied by information relevant to Lessor's determination as
to the financial and operational responsibility and appropriateness of the
proposed assignee or sublessee, including but not limited to the intended use
and/or required modification of the Premises. Lessee agrees to provide Lessor
with such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed,
for the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) Deleted.
(h) Deleted.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that unless a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of this or any
other assignment of such sublease to Lessor, nor by reason of the collection of
the rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such sublessee
under such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee's obligations under this Lease, to pay to
Lessor the rents and other charges due and to become due under the sublease.
Sublessee shall rely upon any such statement and request from Lessor and shall
pay such rents and other charges to Lessor without any obligation or right to
inquire as to whether such Breach exists and notwithstanding any notice from or
claim from Lessee to the contrary Lessee shall have no right or claim against
said sublessee, or, until the Breach has been cured, against Lessor, for any
such rents and other charges so paid by said sublessee to Lessor.
(b) Deleted.
(c) Any matter of thing requiring the consent of the sublessor
under the sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any part
of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by either party in connection with a Default or Breach (as hereinafter
defined), $350.00 is a reasonable minimum sum per such occurrence for legal
services and costs in the preparation and service of a notice
<PAGE> 19
of Default, and that either party may include the cost of such services and
costs in said notice as due and payable to cure said Default. A "DEFAULT" is
defined as a failure by either party to observe, comply with or perform any of
the terms, covenants, conditions or rules applicable to Lessee under this Lease.
A "BREACH" is defined as the occurrence of any one or more of the following
Defaults, and, where a grace period for cure after notice is specified herein,
the failure by Lessee to cure such Default prior to the expiration of the
applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to
reoccupy same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee hereunder, whether to Lessor or to a third party
as and when due, the failure by Lessee to provide Lessor with reasonable
evidence of insurance or surety bond required under this Lease, or the failure
of Lessee to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) days following receipt or written notice thereof by or on behalf of Lessor
to Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with applicable law per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the recission of an unauthorized assignment or
subletting per Paragraph 12.1(b), (iv) a Tenancy Statement per Paragraphs 16 or
37, (v) the subordination or non-subordination of this Lease per Paragraph 30,
(vi) the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information, which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of twenty (20) days
following receipt of written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
that are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs (a), (b) or (c), above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) The making
by Lessee of any general arrangement or assignment for the benefit of creditors:
(ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within sixty (60) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not within sixty (60) days; provided; however, in the event that any
provision of this subparagraph (e) is contrary to any applicable law, such
provision shall be of no force or effect, and not affect the validity of the
remaining provisions.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee of any Guarantor of Lessee's obligations hereunder was
materially false.
(g) If the performance of Lessee's obligations under this Lease
is guaranteed: (i) the death of a guarantor, (ii) the termination of a
guarantor's liability with respect to this Lease other than in accordance with
the terms of such guaranty, (iii) a guarantor's becoming insolvent or the
subject of a bankruptcy filing, (iv) a guarantor's refusal to honor the
guaranty, or (v) a guarantor's breach of its guaranty obligation on an
anticipatory breach basis and Lessee's failure, within sixty (60) days following
written notice by or on behalf of Lessor to Lessee of any such event, to provide
Lessor with written alternative assurance or security, which, when coupled with
the then existing resources of Lessee, equals or exceeds the combined financial
resources of Lessee and the guarantors that existed at the time of execution of
this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its option,
may require all future payments to be made under this Lease by Lessee to be made
only by cashier's check. In the event of a Breach of this Lease by Lessee, as
defined in Paragraph 13.1, with or without further notice or demand, and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination: (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of the leasing commission paid by Lessor applicable to the unexpired
term of this Lease. The worth at the time of award of the amount referred to in
provision (iii) of the prior sentence shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent. Efforts by Lessor to mitigate damages caused by
Lessee's Default or Breach of this Lease shall not waive Lessor's right to
recover damages under this Paragraph. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding the unpaid rent and damages as are recoverable
therein, or Lessor may reserve therein the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and grace
period required under subparagraphs 13.1(b), (c) or (d) was not previously
given, a notice to pay rent or quit, or to perform or quit, as the case may be,
given to Lessee under any statute authorizing the forfeiture of leases for
unlawful detainer shall also constitute the applicable notice for grace period
purposes required by subparagraphs 13.1(b), (c) or (d). In such case, the
applicable grace period under subparagraphs 13.1(b), (c) or (d) and under the
unlawful detainer statute shall run concurrently after the one such statutory
notice, and the failure of Lessee to cure the Default within the greater of the
two such grace periods shall constitute both an unlawful detainer and a Breach
of this Lease entitling Lessor to the remedies provided for in this Lease and/or
by said statute.
(b) Continue the Lease and Lessee's right to possession in effect
(in California under California Civil Code Section 1951.4) after Lessee's Breach
and abandonment and recover the rent as It becomes due, provided Lessee has the
right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under the Lease, shall not constitute a
termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "INDUCEMENT PROVISIONS" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach of this Lease by Lessee, as defined In Paragraph 13.1, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph shall not be deemed a waiver by Lessor of the provisions of this
Paragraph unless specifically so stated in writing by Lessor at the time of such
acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within five (5) days
after receipt of notice from Lessor that such amount shall be due, then, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor
<PAGE> 20
will incur by reason of late payment by Lessee. Acceptance of such late charge
by Lessor shall in no event constitute a waiver of Lessee's Default or Breach
with respect to such overdue amount, nor prevent Lessor from exercising any of
the other rights and remedies granted hereunder. In the event that a late charge
is payable hereunder, whether or not collected, for three (3) consecutive
installments of Base Rent, then notwithstanding Paragraph 4.1 or any other
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by the holders of any ground lease, mortgage or deed of trust
covering the Premises whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days after such notice
are reasonably required for its performance, then Lessor shall not be in breach
of this Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the land area
not occupied by any building, is taken by condemnation, Lessee may, at Lessee's
option, to be exercised in writing within ten (10) days after Lessor shall have
given Lessee written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the total
rentable floor area of the building located on the Premises. No reduction of
Base Rent shall occur if the only portion of the Premises taken is land on which
there is no building. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided however that Lessee
shall be entitled to any compensation separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of its net severance damages received, over and above the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.
15. BROKERS FEE.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay to
said Brokers jointly or in such separate shares as they may mutually designate
in writing, a fee as set forth in a separate written agreement between Lessor
and said Brokers for brokerage services rendered by said Brokers to Lessor in
this transaction.
15.3 Deleted
15.4 Deleted
15.5 Lessee and Lessor each represent and warrant to the other that it
has had no dealings with any person, firm, broker or finder (other than the
Brokers, if any named in Paragraph 1.10) in connection with the negotiation of
this Lease and/or the consummation of the transaction contemplated hereby and
that no broker or other person, firm or entity other than said named Brokers is
entitled to any commission or finder's fee in connection with said transaction.
Lessee and Lessor do each hereby agree to indemnify, protect, defend, and hold
the other harmless from and against liability for compensation or charges which
may be claimed by any such unnamed broker, finder or other similar party by
reason of any dealings or actions of the indemnifying Party, including any
costs, expenses, attorneys' fees reasonably incurred with respect thereto.
15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. TENANCY STATEMENT.
16.1 Each Party (as "RESPONDING PARTY") shall within ten (10) days after
written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "TENANCY STATEMENT" form published by the
American Industrial Real Estate Association plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
16.2 It Lessor desires to finance, refinance. or sell the Premises any
part thereof, or the building of which the Premises are a part, Lessee and all
Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor such financial statements of Lessee and
such Guarantors as may be reasonably required by such lender or purchaser,
including but not limited to Lessee's financial statements for the past three
(3) years. All such financial statements shall be received by Lessor and such
lender or purchaser in confidence and shall be used only for the purposes herein
set forth.
17. LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the
owner at the time in question of the fee title to the Premises, or, if this is a
sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or in this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor at the time of such transfer or assignment.
Except as provided in Paragraph 15, upon such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of an other provision hereof.
19. INTEREST ON PAST-Due Obligations. Any monetary payment due Lessor
hereunder other than late charges, not received by Lessor within thirty (30)
days following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Broker that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to the Lease and as to
the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.
23. NOTICES.
23.1 All notices required or permitted by this Lease shall be in writing
and may be delivered in person (by hand or by messenger or courier service) or
may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail with postage prepaid or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notice purposes. Either Party may by
written notice to the other specify a different address for notice purposes,
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for the purpose of mailing or delivering notices to
Lessee. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate by written notice
to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given forty-eight (48) hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone confirmation of receipt of the transmission thereof,
provided a copy is also delivered via delivery or mail. If notice is received on
a Sunday or legal holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any
<PAGE> 21
subsequent or similar act by Lessee, or be construed as the basis of an estoppel
to enforce the provision or provisions of this Lease requiring such consent.
Regardless of Lessor's knowledge of a Default or Breach at the time of accepting
rent, the acceptance of rent by Lessor shall not be a waiver of any preceding
Default or Breach by Lessee of any provision hereof, other than the failure of
Lessee to pay the particular rent so accepted. Any payment given Lessor by
Lessee may be accepted by Lessor on account of moneys or damages due Lessor,
notwithstanding any qualifying statements or conditions made by Lessee in
connection therewith, which such statements and/or conditions shall be of no
force or effect whatsoever unless specifically agreed to in writing by Lessor at
or before the time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECTS; CHOICE OF LAW. This lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed by Lessor upon the real property of which the Premises are
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessee under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address has been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice, the cure of
said default before invoking any remedies Lessee may have by reason thereof. If
any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device notwithstanding the relative dates of the documentation or
recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provision of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance ("NON-DISTURBANCE AGREEMENT") from the
Lender that Lessee's possession and this Lease, including any option to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided however,
that, upon written request from Lessor or a Lender or Lessee in connection with
a sale, financing or refinancing of the Premises, Lessee and Lessor shall
execute such further writings as may be reasonably required to separately
document any such subordination or non-subordination, attornment and
non-disturbance agreement as is provided for herein.
31. ATTORNEY'S FEES. If any Party or Broker brings an action or proceeding
to enforce the terms hereof or declare rights hereunder, the Prevailing Party
(as hereafter defined) or Broker in any such proceeding, action, or appeal
thereon, shall be entitled to reasonable attorney's fees. Such fees may be
awarded in the same suit or recovered in a separate suit, whether or not such
action or proceeding is pursued to decision or judgment. The term "PREVAILING
PARTY" shall include, without limitation, a Party or Broker who substantially
obtains or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or Broker of its
claim or defense. The attorney's fee award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorney's fees reasonably incurred. Lessor shall be entitled to attorney's
fees, costs and expenses incurred in the preparation and service of notices of
Default and consultations in connection therewith only if a legal action is
subsequently commenced in connection with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the building of which
they are a part, as Lessor may reasonably deem necessary. Lessor may at any time
place on or about the Premises or building any ordinary "For Sale" signs and
Lessor may at any time during the last one hundred twenty (120) days of the term
hereof place on or about the Premises any ordinary "For Lease" signs. All such
activities of Lessor shall be without abatement of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the Premises, except that
Lessee may, with Lessor's prior written consent, install (but not on the roof)
such signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to:
provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations, Trade
Fixtures and Alterations). Unless otherwise expressly agreed herein, Lessor
reserves all rights to the use of the roof and the right to install, and all
revenues from the installation of, such advertising signs on the Premises,
including the roof, as do not unreasonably interfere with the conduct of
Lessee's business.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' or other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for a
Lessor consent pertaining to this Lease for the Premises, including but not
limited to consents to an assignment, a subletting or the presence or use of a
Hazardous Substance, practice or storage tank, shall be paid by Lessee to Lessor
upon receipt of an invoice and supporting documentation therefor. Subject to
Paragraph 12.2(e) (applicable to assignment or subletting), Lessor's consent to
any act, assignment of this Lease or subletting of the Premises by Lessee shall
not constitute an acknowledgement that no Default or Breach by Lessee of this
Lease exists, nor shall such consent be deemed a waiver of any then existing
Default or Breach, except as may be otherwise specifically stated in writing by
Lessor at the time of such consent.
(b) The failure to specify herein any particular condition to
Lessor's consent shall not preclude the imposition by Lessor at the time of
consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given.
37. GUARANTOR.
37.1 If there are to be any Guarantors of this Lease per Paragraph 1.11,
the form of the guaranty to be executed by each such Guarantor shall be the form
most recently published by the American Industrial Real Estate Association, and
each said Guarantor shall have the same obligations as Lessor under this Lease,
including but not limited to the obligation to provide the Tenancy Statement and
information called for by Paragraph 16.
37.2 It shall constitute a default of the Lessee under this Lease if any
such Guarantor fails or refuses, upon reasonable request by Lessor to give (a)
evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and including
in the case of a corporate Guarantor, a certified copy of a resolution of its
board of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signatures of the persons authorized to
sign on its behalf, (b) current financial statements of Guarantor as may from
time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
<PAGE> 22
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises
and the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Paragraph 39 the word "OPTION" has the
following meanings: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 Deleted.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or review this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid, or
(iii) during the time Lessee is in Breach of this Lease, or (iv) in the event
that Lessor has given to Lessee three (3) or more notices of Default under
Paragraph 13.1, whether or not the Defaults are cured, during the twelve (12)
month period immediately preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provision of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due or (ii)
Lessor gives to Lessee three or more notices of Default under Paragraph 13.1
during any twelve month period that remain uncured.
40. MULTIPLE BUILDINGS. If the premises are part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of such other buildings and their
invitees, and that Lessee will pay its fair share of common expenses incurred in
connection therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees, and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights, and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps, and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as voluntary payment and there shall survive the right on
the part of said Party to institute suit for recovery of such sum. If it shall
be adjudged that there was no legal obligation on the part of said Party to pay
such sum or any part thereof, said Party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE, SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF
ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION OR BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR EMPLOYEES
AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS
LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY
SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX
CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS LOCATED IN A
STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE
PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
Executed at Palo Alto Executed at Palo Alto
on March 17, 1993 on March 17, 1993
by LESSOR: by LESSEE:
MV 440, INC., QUICKTURN SYSTEMS, INC.
- ------------------------------- -------------------------------
a California corporation a California corporation
- ------------------------------- -------------------------------
By: By:
- ------------------------------- ----------------------------
Name Printed: William J. Hurwick Name Printed: Dennis Favero
Title: Title: VP/CFO
------------------------- -------------------------
<PAGE> 23
NOTICES TO BE SENT TO: By: _____________________________
Name Printed: William J. Hurwick/WJH Group Name Printed: ___________________
Title: Cornish & Carey Commercial Title: __________________________
Address: 400 Hamilton Avenue Address: ________________________
Palo Alto, CA 94301 ________________________
Tel. No. (415) 688-8550 Fax No. (415) 321-0719 Tel. No. (____) ________ Fax. No.
(___) _________
<PAGE> 24
ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-NET
DATED MARCH 17, 1993
BY AND BETWEEN MV 440, INC. ("LESSOR") AND
QUICKTURN SYSTEMS, INC. ("LESSEE"), A CALIFORNIA CORPORATION
49. Payment of Direct As additional rent during the term hereof,
Expenses: Lessee shall pay to Lessor direct expenses
("Direct Expenses") incurred by Lessor in the
operation and maintenance of the Premises
(including all direct costs of management for
the Project, which shall be fixed at $1,000.00
per month for the term of this Lease), real
property taxes, insurance premiums, maintenance
contracts for the repair and maintenance of the
heating, ventilating and air-conditioning system
and landscaping.
Lessor estimates that Direct Expenses for the
Premises (including the costs of management for
the Project applicable to the Premises) during
the first calendar year of the Lease term
hereunder will be the equivalent of $3,878.81
per month. Accordingly, during the first year of
the Lease term, Lessee shall pay to Lessor
$3,878.81 per month as additional rent
attributable to Direct Expenses. At the
commencement of each year of the term hereof,
Lessor will notify Lessee of the monthly amount
to be paid for Direct Expenses for that year.
Lessee shall have the right to audit Lessor's
books and records with respect to Direct
Expenses within thirty (30) days after receipt
from Lessor of the new calculation of Direct
Expenses. If the audit discloses that an
overpayment was required of Lessee, Lessor, as
soon as reasonably practical, shall refund the
excess amount overpaid by Lessee. If the audit
discloses that Lessee has underpaid the Direct
Expenses, Lessee shall pay the excess amount
owing to Lessor as soon as reasonably practical.
50. Roof and HVAC Lessor shall be responsible for all roof
Warranty; Building maintenance (other than maintenance needed due
Systems: to Lessee's negligence) for the period from May
1, 1993 through April 30, 1994. Lessor also
shall warrant the HVAC system to be in working
order and be responsible for all
parts/components replacement for the period from
May 1, 1993 through April 30, 1994.
Notwithstanding the foregoing, as of the
Commencement Date, the Premises shall be in
broom-clean condition, and all utilities, HVAC
systems, plumbing, electrical (including,
without limitation, outlets and light fixtures)
and fire and landscape sprinkler systems
("Building Systems") shall be in good working
order and repair.
Lessor's Lessee's
Initials: ____ Initials: _____
<PAGE> 25
Attachment C
SECOND ADDENDUM TO LEASE
THIS SECOND ADDENDUM TO LEASE ("Addendum") is dated for reference
purposes only as of March 17, 1993, and is made between MV 440, INC., a
California corporation ("Lessor") and QUICKTURN SYSTEMS, INC., a California
corporation ("Lessee"), to be a part of that certain Standard
Industrial/Commercial Single-Tenant Lease-Net of even date herewith between
Lessor and Lessee (herein the "Lease Form") concerning 29,837 square feet of
space (the "Premises") within two certain buildings ("Buildings") located at 440
Clyde Avenue, Mountain View, California.
1. LESSEE IMPROVEMENTS: The parties acknowledge that, at Lessee's sole
cost and expense, Lessee shall construct certain non-structural improvements
(the "Lessee Improvements") described in plans and specifications previously
approved by Lessor. The Lessee Improvements shall he constructed in accordance
with the plans and specifications and in a good and workmanlike manner.
2. ACCEPTANCE OF PREMISES: Notwithstanding anything to the contrary in
the Lease, Lessee's acceptance of the Premises or Lessee's submission of a
"punch list" to Lessor not later than sixty (60) days after the Commencement
Date shall not be deemed a waiver of Lessee's right to have latent defects in
the Premises (excluding the Lessee Improvements) repaired at Lessor's sole
expense. Lessee shall give notice to Lessor whenever any latent defect (i.e.,
any defect that could not reasonably have been discovered by Lessee) becomes
reasonably apparent, and Lessor shall repair such defect as soon as practicable.
Lessor also hereby assigns to Lessee all warranties with respect to the Premises
which would reduce Lessee's maintenance obligations hereunder and shall
cooperate with Lessee to enforce all such warranties.
3. COMPLIANCE WITH LAWS: At the Commencement Date, the Premises and the
project in which the Premises are located ("Project") shall conform to all
underwriter's requirements and all rules, regulations, statutes, ordinances,
laws and building codes (collectively "Applicable Laws") applicable thereto,
including, without limitation, all Applicable Laws governing Hazardous
Materials, as defined in the Lease. Lessee shall not be required to construct or
to pay the cost of complying with any underwriters requirements or Applicable
Laws requiring construction of improvements in the Premises which are properly
capitalized under generally accepted accounting principles, unless such
compliance is necessitated solely because of Lessee's particular use of the
Premises. Lessor represents and warrants that, to the best of its knowledge,
there are no covenants, conditions, restrictions or encumbrances ("CC&R's")
affecting the Project.
4. USE OF PREMISES: If the Premises should become not reasonably
suitable for Lessee's use as a consequence of (i) cessation of utilities or
other services; (ii) interference with access to the Premises; or (iii) legal
restrictions, so long as items (i) through (iii) do not result from the fault
of, or are beyond the control of, Lessor and Lessee, or the presence of any
Hazardous Material which does not result from Lessee's use, storage or disposal
of such Hazardous Material in or about the Premises, and in any of the foregoing
cases the interference with Lessee's use of the Premises persists for one
hundred twenty (120) continuous days, then Lessee shall be entitled to terminate
this Lease.
<PAGE> 26
5. ALTERATIONS, ADDITIONS AND IMPROVEMENTS: Notwithstanding anything to
the contrary in the Lease:
A. If Lessor has not consented to Lessee's request to construct
alterations, utility installations, additions and improvements ("Alterations")
in the Premises within three (3) business days after the date of Lessee's
written request therefor, Lessor shall be deemed to have consented to the
Alteration.
B. Lessor shall have no lien or other interest whatsoever in any
item of Lessee's trade fixtures and personal property located in the Premises,
and shall execute any document reasonably necessary to waive any lien or
interest in Lessee's trade fixtures and personal property located at the
Premises.
C. Upon request, Lessor shall advise Lessee in writing whether it
reserves the right to require Lessee to remove any Alterations from the Premises
upon termination of the Lease.
D. Alterations and Lessee's trade fixtures, furniture, equipment
and other personal property installed in the Premises ("Lessee's Property")
shall at all times be and remain Lessee's Property, and Lessee shall be entitled
to all depreciation, amortization and other tax benefits with respect thereto.
Except for Alterations which cannot be removed without structural injury to the
Premises, at any time Lessee may remove Lessee's Property from the Premises,
provided Lessee repairs all damage caused by such removal.
6. EXPENSES: Notwithstanding anything to the contrary in the Lease, in
no event shall Lessee have any obligation to perform, to pay directly, or to
reimburse Lessor for, all or any portion of the following repairs, maintenance,
improvements, replacements, premiums, claims, losses, fees, commissions,
charges, disbursements, attorneys' fees, experts' fees, costs and expenses
(collectively "Costs"):
A. LOSSES CAUSED BY OTHERS, CONSTRUCTION DEFECTS AND FAILURE TO
BUILD IN COMPLIANCE WITH LAW: Costs to correct any construction defect in the
Premises (other than in the Lessee Improvements) or the Project, or Costs
arising out of a failure to construct the Building or common areas in accordance
with all Applicable Laws and private restrictions.
B. CASUALTIES, CONDEMNATIONS AND INSURANCE COSTS: Costs
occasioned by fire, acts of God, or other casualties or by the exercise of the
power of eminent domain or Costs for insurance coverage not customarily paid by
tenants of similar projects in the vicinity of the Premises and/or co-insurance
payments.
C. CAPITAL LEASES AND CAPITAL IMPROVEMENTS: Lease payments and
other Direct Expenses to acquire, install or replace capital machinery and
equipment (such as air conditioners, elevators, and the like), and Costs which
would properly be capitalized under generally accepted accounting principles and
which relate to repairs, alterations, improvements, equipment and tools to the
extent that Lessee's share of the total Cost of such capital item exceed (i) the
reduction in other expenses payable by Lessee under the Lease which results from
the capital repair or installation of the capital item; or (ii) in any year, the
annual amortized cost of
2
<PAGE> 27
the item based on its useful life determined in accordance with generally
accepted accounting principles.
D. STRUCTURAL REPAIRS: Costs relating to the replacement of the
structural elements of the Building and Project.
E. REIMBURSABLE EXPENSES: Costs for which Lessor has a right of
reimbursement from others or Costs which Lessee pays directly to a third person.
F. RESERVES: Depreciation, amortization or other expense
reserves.
G. MORTGAGES: Interest, charges and fees incurred on debt,
payments on mortgagees and rent under ground leases.
H. HAZARDOUS MATERIALS: Costs incurred to investigate the
presence of any Hazardous Material, Costs to respond to any claim of Hazardous
Material contamination or damage, Costs to remove any Hazardous Material from
the Project or to remediate any Hazardous Material contamination and any
judgments or other Costs incurred in connection with any Hazardous Material
exposure or release, except to the extent the Cost is caused by the storage, use
or disposal of the Hazardous Material in question by Lessee. (Lessee shall have
no liability to Lessor or any of its officers, agents, partners or tenants as a
consequence of the presence of Hazardous Materials in or about the Premises that
were not used, stored, treated or disposed of in or about the Premises in
violation of Applicable Law by Lessee or Lessee's agents, employees or
contractors.)
I. REAL ESTATE TAXES: Taxes, assessments, all other governmental
levies, and any increases in the foregoing occasioned by or relating to a
voluntary or involuntary change of ownership or other conveyance of the
Premises.
7. SURRENDER: Notwithstanding anything to the contrary in the Lease,
Lessee's obligations to surrender the Premises shall be fulfilled if Lessee
surrenders possession of the Premises in the condition existing at the
commencement of the Lease, except for ordinary wear and tear, acts of God,
casualties, condemnation, Hazardous Materials (other than those stored, used or
disposed of by Lessee in or about the Premises), and Alterations concerning
which Lessor has not reserved the right to require removal, or if it has
reserved the right the require removal, it does not elect to have Lessee remove
from the Premises at the end of the term.
8. INDEMNITY: Notwithstanding anything to the contrary in the Lease,
Lessor shall not be released from, and shall indemnify, defend, protect, and
hold harmless Lessee from, all damages, liabilities, judgments, actions, claims,
attorneys' fees, consultants' fees, payments, costs and expenses arising from
the negligence or willful misconduct of Lessor or its employees, agents,
contractors or invitees, Lessor's violation of Applicable Law, or a breach of
Lessor's obligations or representations under this Lease.
9. ASSIGNMENT AND SUBLETTING: Lessee may, without Lessor's prior written
consent, sublet the Premises or assign the Lease to: (i) a subsidiary,
affiliate, franchise, division or corporation controlled or under common control
with Lessee; (ii) a successor corporation related to Lessee by merger,
consolidation, non-bankruptcy reorganization, or government action; or
3
<PAGE> 28
(iii) a purchaser of substantially all of Lessee's assets located at the
Premises, so long as the purchaser, at the time of the purchase, has a net worth
substantially the same as that of Lessee as of the date of its execution of the
Lease. For the purpose of the Lease, sale of Lessee's capital stock through any
public exchange shall not be deemed an assignment, subletting, or any other
transfer of the Lease or the Premises.
10. RULES AND REGULATIONS: Lessor shall not require Lessee's compliance
with any rule or regulation applicable to the Premises that unreasonably
interferes with Lessee's use of the Premises or materially changes Lessee's
rights under the Lease.
11. DEFAULT AND LATE CHARGE: Notwithstanding anything to the contrary in
the Lease, Lessee shall not be deemed to be in default, Lessor shall not be
entitled to cure any breach by Lessee under the Lease, nor shall any late charge
or interest be imposed, on account of (i) Lessee's failure to pay money to
Lessor, unless Lessee's failure to pay continues for five (5) days after
Lessee's actual receipt of written notice of delinquency; or (ii) Lessee's
failure to perform any covenant of this Lease (other than a covenant to pay
money to Lessor), unless Lessee's failure to perform such covenant continues
after Lessee's actual receipt of written notice for a period of thirty (30) days
or such longer time as may reasonably be required to cure the default. Further,
Lessee shall not be in default of this Lease solely because (a) it abandons or
vacates the Premises; or (b) as a consequence of the filing of an involuntary
bankruptcy petition, the appointment of a receiver, the attachment of any
interest in the Lease or of Lessee's other assets or the exercise by any third
party of any other remedy with respect to Lessee, Lessee's interest in this
Lease or Lessee's other assets, unless the petition, receiver, attachment or
other remedy is not discharged within sixty (60) days.
12. LESSOR'S ENTRY: Notwithstanding anything to the contrary in the
Lease, Lessor and Lessor's agents, except in the case of emergency, shall
provide Lessee with twenty-four (24) hours' notice prior to entry of the
Premises. Such entry by Lessor and Lessor's agents shall not impair Lessee's
operations more than reasonably necessary, and Lessor and Lessor's agents shall
be accompanied at all times by an employee of Lessor.
13. APPROVALS: Whenever the Lease requires an approval, consent,
designation, determination or judgment by either Lessor or Lessee, such
approval. consent, designation, determination or judgment (including, without
limiting the generality of the foregoing, those required in connection with
assignment and subletting) shall not be unreasonably withheld or delayed and in
exercising any right or remedy hereunder, each party shall at all times act
reasonably and in good faith.
14. REASONABLE EXPENDITURES: Any expenditure by a party permitted or
required under the Lease, for which such party is entitled to demand and does
demand reimbursement from the other party, shall be limited to the fair market
value of the goods and services involved, shall be reasonably incurred, and
shall be substantiated by documentary evidence available for inspection and
review by the other party or its representative during normal business hours.
4
<PAGE> 29
15. OPTION TO EXTEND: Notwithstanding anything to the contrary in the
Lease:
A. GRANT OF OPTION: Lessor hereby grants to Lessee one option(s)
(the "Option(s)" to extend the term of the Lease, each for an additional term
five (5) years, commencing on May 1, 2000, upon the terms and conditions set
forth in this Paragraph 15.
B. EXERCISE OF OPTION: Lessee shall exercise such option by
giving Lessor written notice of its intention not less than twelve (12) months
prior to the expiration of the then-existing term of this Lease.
C. EXTENDED TERM RENT: If this Option is exercised, the basic
rent for the Premises shall be ninety-five percent (95%) of the then-current
fair market monthly rent ("Fair Market Rent") for the Premises as of the
commencement date of the applicable extended term, as determined by the
agreement of the parties, or, if the parties cannot agree, then the Fair Market
Rent shall be determined by three appraisers selected and governed by the Rules
of the American Arbitration Association. All other terms and conditions
contained in the Lease and this Addendum, as the same may be amended from time
to time by the parties in accordance with the provisions of the Lease, shall
remain in full force and effect and shall apply during the Option term.
D. RESCISSION: Notwithstanding anything to the contrary contained
in this paragraph, if the basic rent during the Option period is determined by
appraisal and if Lessee does not, in its discretion, approve the rental amount
established by such appraisal, Lessee may rescind its exercise of the Option not
later than six (6) months prior to the last day of the Term by giving Lessor
written notice of such election to rescind. If Lessee timely rescinds its
exercise of the Option, then Lessee shall pay all costs and expenses of the
appraisal.
16. DAMAGE AND DESTRUCTION OF PREMISES: Notwithstanding anything to the
contrary contained in the Lease:
A. Lessor shall not have the right to terminate the Lease if
damage to or destruction of the Premises or the building in which the Premises
is located, or both, results from a casualty ordinarily covered by insurance
required to be carried by Lessor under the Lease.
B. In the event of damage to the Premises which is not required
to be covered by insurance, and is not covered by insurance actually carried,
Lessor shall not have the right to terminate the Lease (i) if the damage is
relatively minor (e.g., repair or restoration would take fewer than sixty (60)
days or it would cost less than ten percent (10%) of the replacement cost of the
Premises) or (ii) if Lessee agrees to pay the cost of repair in excess of ten
percent (10%) of the then replacement cost of the Premises.
C. If the Premises are damaged by any peril ant Lessor does not
elect to terminate the Lease or is not entitled to terminate the Lease pursuant
to its terms, then as soon as reasonably practicable, Lessor shall furnish
Lessee with a written opinion of Lessor's architect or construction consultant
as to when the restoration work required of Lessor may be completed. Lessee
shall have the option to terminate the Lease in the event any of the following
occurs, which option may be exercised by delivery to Lessor of a written notice
of election to terminate within thirty (30) days after Lessee receives from
Lessor the estimate of the time needed to
5
<PAGE> 30
complete such restoration: (i) the Premises, with reasonable diligence, cannot
be fully repaired by Lessor within one hundred twenty (120) days after the
damage or destruction; or (ii) if the Premises are damaged by any peril within
twelve (12) months of the last day of term, and cannot be substantially restored
within sixty (60) days after the date of such damage.
D. If the Lease is not terminated by Lessor or Lessee as provided
herein, Lesser shall restore the Premises and all tenant improvements installed
by Lessor to the condition in which they existed immediately prior to the
casualty.
17. TAXES AND ASSESSMENTS: Notwithstanding anything to the contrary
contained in the Lease, if any assessments are levied against the Project or
Premises, Lessor may elect to either pay the assessment in full or allow the
assessment to go to bond and pay it in installments. In either case, however,
Lessee shall only be obligated to pay to Lessor with regard to such assessment,
a sum equal to that which would have been payable by Lessee with respect to
installments of principal and interest which would have become due during the
Lease term had Lessor allowed the assessment to go to bond.
18. LESSEE'S RIGHT TO BRING TAX PROCEEDING: Lessee shall have the right
to contest, in good faith, the validity or the amount of any tax or assessment
levied against the entire demised premises by such appellate or other
proceedings as may be appropriate in the jurisdiction, and may defer payment of
such obligation, pay same under protest, or take such steps as Lessee may deem
appropriate. Lessor shall cooperate in the institution and prosecution of any
such proceedings, including permitting the action to be brought in the name of
the Lessor, and will execute any documents required therefor. The expense of
such proceedings shall be borne by the Lessee and any refunds or rebates secured
shall belong to the Lessee.
19. LESSOR'S REPRESENTATIONS: To the best of Lessor's knowledge: (i) the
Premises and the operations conducted thereon prior to the Commencement Date are
in compliance with all Applicable Laws regarding Hazardous Materials; and (ii)
handling, transportation, storage, treatment, disposal, release or use of
Hazardous Materials that has occurred on or about the Premises or the Project or
the soil, groundwater or surface water thereof prior to the Commencement Date
have been in compliance with all Applicable Laws. Also to the best of Lessor's
knowledge, no litigation has been brought or threatened, nor any settlements
reached with any governmental or private party, concerning the actual or alleged
presence or Hazardous Materials on or about the Premises or Project, or the
soil, groundwater or surface water thereof, nor has Lessor received any notice
of any violation or alleged violation of any Applicable Laws, pending claims or
pending investigations with respect to the presence of Hazardous Materials on or
about the Premises or Project, or the soil, groundwater or surface water
thereof. Lessee, its agents, employees, contractors, officers, directors,
shareholders, successors or assigns shall not be responsible for, and Lessor
shall indemnify, defend with counsel reasonably acceptable to Lessee and hold
Lessee harmless against, (i) any claim, remediation obligation, investigation
obligation, liability, cause of action, penalty, attorneys' fee, consultants'
cost, expense or damage owing or alleged to be owing with respect to any
Hazardous Materials present on or about the Premises or the Project, or the
soil, groundwater or surface water thereof; or (ii) the removal, investigation,
monitoring or remediation of any Hazardous Material present on or about the
Premises or the Project, or the soil, groundwater or surface water thereof with
respect to the Premises or the Project and caused by any source, including third
parties, other than Lessee, prior
6
<PAGE> 31
the Commencement Date. Lessor's representations under this Paragraph shall
survive the termination of the Lease.
20. RECOGNITION: Lessor hereby represents that as of the date of both
parties' execution of the Lease, there is no loan, mortgage, deed of trust or
ground lease affecting the Premises or Project other than a first deed of trust
in favor of Home Savings & Loan ("Lender"). As a condition to Lessee's
obligations under this Lease, Lessor, within a reasonable period of time after
the date of execution of this Lease by both parties, but in any event not later
than ninety (90) days after that execution date, shall provide Lessee with a
recognition and non-disturbance agreement, in form reasonably satisfactory to
Lender, Lessor and Lessee, from Lender providing for recognition of Lessee's
interests hereunder in the event of a foreclosure of Lender's security interest.
21. CAPITAL IMPROVEMENTS: Any replacement or repair by Lessor of any
items of a capital nature located within the Premises shall be of Substantially
the same quality as the item to be repaired or replaced.
22. EXCESS RENTS: Notwithstanding anything to the contrary in the Lease,
if Lessee enters a permissible assignment or sublet pursuant to the Lease as
amended by Paragraph 9 of this Second Addendum, Lessee shall deliver to Lessor
fifty percent (50%) of any consideration payable to Lessee thereunder in excess
of the Rent payable by Lessee under the Lease, after deducting therefrom all
reasonable costs necessary to effect the assignment or sublet, including,
without limitation, brokerage and attorneys' fees, advertising costs,
redecorating costs, and the cost to Lessee of the installation of the Lessee
Improvements in the Premises.
23. EFFECT OF SECOND ADDENDUM: In the event of any inconsistency between
this Second Addendum and/or the Exhibits hereto and the Lease Form, and any of
the other addenda, riders, exhibits, rules, regulations, covenants, attachments,
conditions, and restrictions referred to in the Lease Form and the Addendum, the
terms of this Second Addendum and the Exhibits hereto shall prevail. As used
herein, the term "Lease" shall mean the Lease Form, the Addendum, this Second
Addendum and all addenda, riders, exhibits, rules, regulations, covenants,
conditions and restrictions referred to in the Lease Form or this Addendum.
7
<PAGE> 32
LESSOR: LESSEE:
MV 440, INC., QUICKTURN SYSTEMS, INC.
a California corporation a California corporation
By: /s/ William J. Hurwick By: /s/ Dennis Favero
------------------------------- ------------------------------
Printed Printed
Name: William J. Hurwick Name: Dennis Favero
----------------------------- ----------------------------
Title: Title: VP/CFO
---------------------------- ---------------------------
Date: 3/17/93 Date: 3/17/93
------------------------------- ----------------------------
8
<PAGE> 33
Attachment D
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE--NET
(DO NOT USE THIS FORM FOR MULTI-TENANT PROPERTY)
1. BASIC PROVISIONS ("BASIC PROVISIONS")
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
March 17, 1993, is made by and between MV 440, INC,. a California corporation
("LESSOR") and QUICKTURN SYSTEMS. INC., a California corporation ("LESSEE"),
(collectively the "PARTIES," or individually a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known by the street address of 440 Clyde Avenue, Mountain View, located in the
County of Santa Clara, State of California and generally described as (describe
briefly the nature of the property) that improved property referred to as 440
Clyde Avenue, also described as APN# 160-57-009, consisting of the second floor
of a two-story building, which is approximately 17,636 square feet of office/R&D
space ("PREMISES"). (See Paragraph 2 for further provisions.)
1.3 TERM: six (6) years and four (4) months ("ORIGINAL TERM") commencing
January 1, 1994 ("COMMENCEMENT DATE"), and ending April 30, 2000 ("EXPIRATION
DATE"). (See Paragraph 3 for further provisions.)
1.4 EARLY POSSESSION: N/A ("Early Possession Date") (See Paragraphs 3.2
and 3.3 for further provisions.)
1.5 BASE RENT: $12,663.50 per month ("BASE RENT"), payable on the first
(1st) day of each month commencing January 1, 1994. (See Paragraph 4 for further
provisions.)
[X] If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted.
1.6 BASE RENT PAID UPON EXECUTION: N/A
1.7 SECURITY DEPOSIT: N/A ("SECURITY DEPOSIT"). (See Paragraph 5 for
further provisions.)
1.8 PERMITTED USE: Office, administration, research and development and
all other uses legally permitted by City of Mountain View. (See Paragraph 6 for
further provisions.)
1.9 INSURING PARTY: Lessor is the "INSURING PARTY" unless otherwise
stated herein. (See Paragraph 8 for further provisions.)
1.10 REAL ESTATE BROKERS: The following real estate brokers
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
Cornish & Carey Commercial represents
[X] Lessor exclusively ("LESSOR'S BROKER"); [ ] both LESSOR and LESSEE, and
Wayne Mascia Associates represents
[X] Lessee exclusively ("LESSEE'S BROKER"); [ ] both LESSEE and LESSOR. (See
Paragraph 15 for further
provisions.)
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to be
guaranteed by N/A ("GUARANTOR"). (See Paragraph 37 for further provisions.)
1.12 ADDENDA. Attached hereto is an Addendum or Addenda consisting of
Paragraphs 49 through 50 and a Second Addendum to Lease all of which constitute
a part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which Lessor
and Lessee agree is reasonable and the rental based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, fire sprinkler system, lighting, air conditioning, heating, roof and
loading doors, if any, in the Premises, other than those constructed by Lessee,
shall be in good operating condition on the Commencement Date. If a
non-compliance with said warranty exists as of the Commencement Date, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within thirty
(30) days after the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Commencement Date. Said warranty
does not apply to the use to which Lessee will put the Premises or to any
Alterations or Utility Installations (as defined in Paragraph 7.3 (a)) made or
to be made by Lessee. If the Premises do not comply with said warranty, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify the same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within six (6)
months following the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
been advised by the Brokers to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, compliance with Applicable Law, as
defined in Paragraph 6.3) and the present and future suitability of the Premises
for Lessee's intended use, (b) that Lessee has made such investigation as it
deems necessary with reference to such matters and assumes all responsibility
therefor as the same relate to Lessee's occupancy of the Premises and/or the
term of this Lease, and (c) that neither Lessor, nor any of Lessor's agents, has
made any oral or written representations or warranties with respect to the said
matters other than as set forth in this Lease.
2.5 LESSEE PRIOR OWNER/OCCUPANT. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee's sole cost and expense, correct any
non-compliance of the Premises with said warranties.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this
Lease, however, (including but not limited to the obligations to pay Real
Property Taxes and insurance premiums and to maintain the Premises) shall be in
effect during such period. Any such early possession shall not affect nor
advance the Expiration Date of the Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, if one is specified in Paragraph 1.4, or, if no Early Possession Date is
specified, by the Commencement Date, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease, or
the obligations of Lessee hereunder, or extend the term hereof, but in such
case, Lessee shall not, except as otherwise provided herein, be obligated to pay
rent or perform any other obligation of Lessee under the terms of this Lease
until Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ten (10) days thereafter, cancel this Lease, in which event the Parties
shall be discharged from all obligations hereunder; provided, however, that if
such written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease shall terminate and be of no further
force or effect. Except as may be otherwise provided, and regardless of when the
term actually commences, if possession is not tendered to Lessee when required
by this Lease and Lessee does
<PAGE> 34
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to what Lessee
would otherwise have enjoyed under the terms hereof, but minus any days of delay
caused by the acts, changes or omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall cause payment of Base Rent and other rent or
charges, as the same may be adjusted from time to time, to be received by Lessor
in lawful money of the United States, without offset or deduction, on or before
the day on which it is due under the terms of this Lease. Base Rent and all
other rent and charges for any period during the term hereof which is for less
than one (1) full calendar month shall be prorated based upon the actual number
of days of the calendar month involved. Payment of Base Rent and other charges
shall be made to Lessor at its address stated herein or to such other persons or
at such other addresses as Lessor may from time to time designate in writing to
Lessee.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefor
deposit moneys with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional moneys with Lessor sufficient to maintain the same ratio between the
Security Deposit and the Base Rent as those amounts are specified in the Basic
Provisions. Lessor shall not be required to keep all or any part of the Security
Deposit separate from its general accounts. Lessor shall, at the expiration or
earlier termination of the term hereof and after Lessee has vacated the
Premises, return to Lessee (or, at Lessor's option, to the last assignee, if
any, of Lessee's interest herein), that portion of the Security Deposit not used
or applied by Lessor. Unless otherwise expressly agreed in writing by Lessor, no
part of the Security Deposit shall be considered to be held in trust, to bear
interest or other increment for its use, or to be prepayment for any moneys to
be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the purposes
set forth in Paragraph 1.8, or any other use which is comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that creates waste or a nuisance, or that unreasonably disturbs owners
and/or occupants of, or causes damage to, neighboring premises or properties.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect,
either by itself or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety or
welfare, the environment or the Premises, (ii) regulated or monitored by any
governmental authority, or (iii) a basis for liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in, on or about the Premises
which constitutes a Reportable Use (as hereinafter defined) of Hazardous
Substances without the express prior written consent of Lessor and compliance in
a timely manner (at Lessee's sole cost and expense) with all Applicable Law (as
defined in Paragraph 6.3). "REPORTABLE USE" shall mean (i) the installation or
use of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority.
Reportable Use shall also include Lessee's being responsible for the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Law requires that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but in compliance with all Applicable Law,
use any ordinary and customary materials reasonably required to be used by
Lessee in the normal course of Lessee's business permitted on the Premises, so
long as such use is not a Reportable Use and does not expose the Premises or
neighboring properties to any meaningful risk of contamination or damage or
expose Lessor to any liability therefor. In addition, Lessor may (but without
any obligation to do so) condition its consent to the use or presence of any
Hazardous Substance, activity or storage tank by Lessee upon Lessee's giving
Lessor such additional assurances as Lessor, in its reasonable discretion, deems
necessary to protect itself, the public, the Premises and the environment
against damage, contamination or injury and/or liability therefrom or therefor,
including, but not limited to, the installation (and removal on or before Lease
expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the deposit
of an additional Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance, or a condition involving or
resulting from same, has come to be located in, on, under or about the Premises,
other than as previously consented to by Lessor, Lessee shall immediately give
written notice of such fact to Lessor. Lessee shall also immediately give Lessor
a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action or proceeding given to, or received from,
any governmental authority or private party, or persons entering or occupying
the Premises, concerning the presence, spill, release, discharge of, or exposure
to, any Hazardous Substance or contamination in, on, or about the Premises
including but not limited to all such documents as may be involved in any
Reportable Uses involving the Premises.
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, permits and
attorney's and consultant's fees arising out of or involving any Hazardous
Substance or storage tank brought onto the Premises by or for Lessee or under
Lessee's control in violation of any Applicable Law. Lessee's obligations under
this Paragraph 6 shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation (including consultant's and
attorney's fees and testing), removal, remediation, restoration and/or abatement
thereof, or of any contamination therein involved, and shall survive the
expiration or earlier termination of this Lease. No termination, cancellation or
release agreement entered into by Lessor and Lessee shall release Lessee from
its obligations under this Lease with respect to Hazardous Substances or storage
tanks, unless specifically so agreed by Lessor in writing at the time of such
agreement.
6.3 LESSEE'S COMPLIANCE WITH LAW. Except as otherwise provided in this
Lease, Lessee, shall, at Lessee's sole cost and expense, fully, diligently and
in a timely manner, comply with all "APPLICABLE LAW," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the reasonable
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill or release of any Hazardous Substance or storage
tank), now in effect or which may hereafter come into effect, and whether or not
reflecting a change in policy from any previously existing policy. Lessee shall,
within five (5) days after receipt of Lessor's written request, provide Lessor
with copies of all documents and information, including, but not limited to,
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any actual claim, notice, citation, warning, complaint or
report pertaining to or involving failure by Lessee or the Premises to comply
with any Applicable Law.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's Lender(s) (as defined in
Paragraph 8.3(a)) shall have the right to enter the Premises at any time, in the
case of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance by Lessee
with this Lease and all Applicable Laws (as defined in Paragraph 6.3), and to
employ experts and/or consultants in connection therewith and/or to advise
Lessor with respect to Lessee's activities including but not limited to the
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance or storage tank on or from the Premises. The costs and
expenses of any such inspections shall be paid by the party requesting same,
unless a Default or Breach of this Lease, violation of Applicable Law, or a
contamination, caused or materially contributed to by Lessee is found to exist
or be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In any such case, Lessee shall upon request reimburse Lessor
or Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraph 2.2 (Lessor's warranty
as to condition), 2.3 (Lessor's warranty as to compliance with covenants, etc),
7.2 (Lessor's obligations to repair), 9 (damage and destruction), and 14
(condemnation), Lessee shall, at Lessee's sole cost and expense and at all
times, keep the Premises and every part thereof in good order, condition and
repair, structural and non-structural (whether or not such portion of the
Premises requiring repair, or the means of repairing the same, are reasonably or
readily accessible to Lessee, and whether or not the need for such repairs
occurs as a result of Lessee's use, any prior use, the elements or the age of
such portion of the Premises), including, without limiting the generality of the
foregoing, all equipment or facilities serving the Premises, such as plumbing,
heating, air conditioning, ventilating, electrical, lighting facilities,
boilers, fired or unfired pressure vessels, fire sprinkler and/or standpipe and
hose or other automatic fire extinguishing system, including fire alarm and/or
smoke detection systems and equipment, fire hydrants, fixtures, walls (interior
and exterior), foundations, ceilings, roofs, floors, windows,
PAGE 2
<PAGE> 35
doors, plate glass, skylights, landscaping, driveways, parking lots, fences,
retaining walls, signs, sidewalks and parkways located in, on, about, or
adjacent to the Premises. Lessee shall not cause or permit any Hazardous
Substance to be spilled or released in, on, under or about the Premises
(including through the plumbing or sanitary sewer system) and shall promptly, at
Lessee's expense, take all investigatory and/or remedial action reasonably
recommended, whether or not formally ordered or required, for the cleanup of any
contamination of, and for the maintenance, security and/or monitoring of, the
Premises, the elements surrounding same, or neighboring properties, that was
caused or materially contributed to by Lessee, or pertaining to or involving any
Hazardous Substance and/or storage tank brought onto the Premises by or for
Lessee or under its control. Lessee, in keeping the Premises in good order,
condition and repair, shall exercise and perform good maintenance practices.
Lessee's obligations shall include restorations when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair. If Lessee occupies the Premises for more than seven (7)
years, Lessor may require Lessee to repaint the exterior of the buildings on the
Premises as reasonably required, but not more frequently than once every seven
(7) years.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain contracts, with copies to Lessor, in customary form and substance for,
and with contractors specializing and experienced in, the inspection,
maintenance and service of the following equipment and improvements, if any,
located on the Premises: (i) heating, air conditioning and ventilation
equipment, (ii) boiler, fired or unfired pressure vessels, (iii) fire sprinkler
and/or standpipe and hose or other automatic fire extinguishing systems,
including fire alarm and/or smoke detection, (iv) landscaping and irrigation
systems, (v) roof covering and drain maintenance and (vi) asphalt and parking
lot maintenance.
7.2 LESSOR'S OBLIGATIONS. Except for the warranties and agreements of
Lessor contained in Paragraphs 2.2 (relating to condition of the Premises) 2.3
(relating to compliance with covenants, restrictions and building code), 9
(relating to destruction of the Premises) and 14 (relating to condemnation of
the Premises), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises, the
improvements located thereon, or the equipment therein, whether structural or
non structural, all of which obligations are intended to be that of the Lessee
under Paragraph 7.1 hereof. It is the intention of the Parties that the terms of
this Lease govern the respective obligations of the Parties as to maintenance
and repair of the Premises. Lessee and Lessor expressly waive the benefit of any
statute now or hereafter in effect to the extent it is inconsistent with the
terms of this Lease with respect to, or which affords Lessee the right to make
repairs at the expense of Lessor or to terminate this Lease by reason of, any
needed repairs.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" is used in this Lease to refer to all carpeting, window
coverings, air lines, power panels, electrical distribution, security, fire
protection systems, communication systems, lighting fixtures, heating,
ventilating, and air conditioning equipment, plumbing, and fencing in, on or
about the Premises. The term "TRADE FIXTURES" shall mean Lessee's machinery and
equipment that can be removed without doing material damage to the Premises. The
term "ALTERATIONS" shall mean any modification of the improvements on the
Premises from that which are provided by Lessor under the terms of this Lease,
other than Utility Installations or Trade Fixtures, whether by addition or
deletion. "LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor as defined in Paragraph 7.4(a). Lessee shall not make any Alterations
or Utility Installations in, on, under or about the Premises without Lessor's
prior written consent. Lessee may, however, make non-structural Utility
Installations to the interior of the Premises (excluding the roof), as long as
they are not visible from the outside, do not involve puncturing, relocating or
removing the roof or any existing walls, and the cumulative cost thereof during
the term of this Lease as extended does not exceed $25,000.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon: (i) Lessee's acquiring all applicable
permits required by governmental authorities, (ii) the furnishing of copies of
such permits together with a copy of the plans and specifications for the
Alteration or Utility Installation to Lessor prior to commencement of the work
thereon, and (iii) the compliance by Lessee with all conditions of said permits
in a prompt and expeditious manner. Any Alterations or Utility Installations by
Lessee during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and in compliance with all
Applicable Law. Lessee shall promptly upon completion thereof furnish Lessor
with as-built plans and specifications therefor. Lessor may (but without
obligation to do so) condition its consent to any requested Alteration or
Utility Installation that costs $10,000 or more upon Lessee's providing Lessor
with a lien and completion bond in an amount equal to one and one-quarter times
the estimated cost of such Alteration or Utility Installation and/or upon
Lessee's posting an additional Security Deposit with Lessor under Paragraph 36
hereof.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanics' or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility in or on the Premises as provided by
law. If Lessee shall, in good faith, content the validity of any such lien,
claim or demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises. If Lessor shall require, Lessee
shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal
to one and one quarter times the amount of such contested lien claim or demand
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's reasonable attorney's fees and costs
in participating in such action if Lessor shall decide it is to its best
interest to do so.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their removal
or become the owner thereof as hereinafter provided in this Paragraph 7.4, all
Alterations and Utility Additions made to the Premises by Lessee shall be the
property of and owned by Lessee, but considered a part of the Premises. Lessor
may, at any time and at its option, elect in writing to Lessee to be the owner
of all or any specified part of the Lessee Owned Alterations, and Utility
Installations. Unless otherwise instructed per subparagraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
earlier termination of this Lease, become the property of Lessor and remain upon
and be surrendered by Lessee with the Premises.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may
require that any or all Lessee Owned Alterations or Utility Installations be
removed by the expiration of this Lease, notwithstanding their installation may
have been consented to by Lessor. Lessor may require the removal of all or any
part of any Lessee Owned Alterations or Utility Installations made without the
required consent of Lessor only if Lessee has requested Lessor's decision on
such removal in writing.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date, with
all of the improvements, parts and surfaces thereof clean and free of debris and
in good operating order, condition and state of repair, ordinary wear and tear
excepted. "ORDINARY WEAR AND TEAR" shall not include any damage or deterioration
that would have been prevented by good maintenance practice or by Lessee
performing all of its obligations under this Lease. Except as otherwise agreed
or specified in writing by Lessor, the Premises, as surrendered, shall include
the Utility Installations. The obligation of Lessee shall include the repair of
any damage occasioned by the installation, maintenance or removal of Lessee's
Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Law and/or good practice. Lessee's Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee subject to its obligation to repair and
restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Regardless of whether the Lessor or Lessee is
the Insuring Party, Lessee shall pay for all insurance required under this
Paragraph 8 except to the extent of the cost attributable to liability insurance
carried by Lessor in excess of $1,000,000 per occurrence. Premiums for policy
periods commencing prior to or extending beyond the Lease term shall be prorated
to correspond to the Lease term. Payment shall be made by Lessee to Lessor
within ten (10) days following receipt of an invoice for any amount due.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less than $1,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises"
Endorsement and contain the "Amendment of the Pollution Exclusion" for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intra-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease as an "insured
contract" for the performance of Lessee's indemnity obligations under this
Lease. The limits of said insurance required by this Lease or as carried by
Lessee shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All insurance to be carried by Lessee shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.
PAGE 3
<PAGE> 36
(b) CARRIED BY LESSOR. Lessor shall also maintain liability
insurance described in Paragraph 8.2(a), above, in addition to, and not in lieu
of, the insurance required to be maintained by Lessee. Lessee shall not be named
as an additional insured therein.
8.3 PROPERTY INSURANCE-BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
and keep in force during the term of this Lease a policy or policies in the name
of Lessor, with loss payable to Lessor and to the holders of any mortgages,
deeds of trust or ground leases on the Premises ("LENDER(S)"), insuring loss or
damage to the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature or age of the improvements involved, such later amount is less than full
replacement cost. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations shall be insured by Lessee under Paragraph
8.4 rather than by Lessor. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender), including coverage for any additional costs resulting
from debris removal and reasonable amounts of coverage for the enforcement of
any ordinance or law regulating the reconstruction or replacement of any
undamaged sections of the Premises required to be demolished or removed by
reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located. If such insurance coverage has a
deductible clause, the deductible amount shall not exceed $1,000 per occurrence,
and Lessee shall be liable for such deductible amount in the event of an Insured
Loss, as defined in Paragraph 9.1(c).
(b) RENTAL VALUE. The Insuring Party shall, in addition, obtain
and keep in force during the term of this Lease a policy or policies in the name
of Lessor, with loss payable to Lessor and Lender(s), insuring the loss of the
full rental and other charges payable by Lessee to Lessor under this Lease for
one (1) year (including all real estate taxes, insurance costs, and any
scheduled rental increases). Said insurance shall provide that in the event the
Lease is terminated by reason of an insured loss, the period of indemnity for
such coverage shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income,
property taxes, insurance premium costs and other expenses, if any, otherwise
payable by Lessee, for the next twelve (12) month period. Lessee shall be liable
for any deductible amount in the event of such loss.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or if the Premises are part of a group of buildings owned by Lessor
which are adjacent to the Premises, the Lessee shall pay for any increase in the
premiums for the property insurance of such building or buildings if said
increase is caused by Lessee's acts, omissions, use or occupancy of the
Premises.
(d) TENANT'S IMPROVEMENTS. If the Lessor is the Insuring Party,
the Lessor shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease. If Lessee is the Insuring Party, the policy
carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned Alterations
and Utility Installations.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Lessee Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal property or the restoration of Lessee Owned Alterations
and Utility Installations. Lessee shall be the Insuring Party with respect to
the insurance required by this Paragraph 8.4 and shall provide Lessor with
written evidence that such insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender having a
lien on the Premises, as set forth in the most current issue of "Best's
Insurance Guide." Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in this Paragraph 8. If Lessee is
the Insuring Party, Lessee shall cause to be delivered to Lessor certified
copies of policies of such insurance or certificates evidencing the existence
and amounts of such insurance with the insureds and loss payable clauses as
required by this Lease. No such policy shall be cancelable or subject to
modification except after thirty (30) days prior written notice to Lessor.
Lessee shall at least thirty (30) days prior to the expiration of such policies,
furnish Lessor with evidence of renewals or "insurance binders" evidencing
renewal thereof, or Lessor may order such insurance and charge the cost thereof
to Lessee, which amount shall be payable by Lessee to Lessor upon demand. If the
Insuring Party shall fail to procure and maintain the insurance required to be
carried by the Insuring Party under this Paragraph 8, the other Party may, but
shall not be required to, procure and maintain the same, but at Lessee's
expense.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor ("WAIVING PARTY") each hereby release and relieve
the other, and waive their entire right to recover damages (whether in contract
or in tort) against the other, for loss of or damage to the Waiving Party's
property arising out of or incident to the perils required to be insured against
under Paragraph 8. The effect of such releases and waivers of the right to
recover damages shall not be limited by the amount of insurance carried or
required, or by any deductibles applicable thereto.
8.7 INDEMNITY. Except for Lessor's negligence or that of its agents,
employees, invitees or contractors and/or breach of express warranties, Lessee
shall indemnify, protect, defend and hold harmless the Premises, Lessor and its
agents, Lessor's master or ground lessor, partners and Lenders, from and against
any and all claims, loss of rents and/or damages, costs, liens, judgments,
penalties, permits, attorney's and consultant's fees, expenses and/or
liabilities arising out of, involving, or in dealing with, the occupancy of the
Premises by Lessee, the conduct of Lessee's business, any act, omission or
neglect of Lessee, its agents, contractors, employees or invitees, and out of
any Default or Breach by Lessee in the performance in a timely manner of any
obligation on Lessee's part to be performed under this Lease. The foregoing
shall include, but not be limited to, the defense or pursuit of any claim or any
action or proceeding involved therein, and whether or not (in the case of claims
made against Lessor) litigated and/or reduced to judgment, and whether well
founded or not. In case any action or proceeding be brought against Lessor by
reason of any of the foregoing matters, Lessee upon notice from Lessor shall
defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor
and Lessor shall cooperate with Lessee in such defense. Lessor need not have
first paid any such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Except to the extent caused by
the negligence or willful misconduct of Lessor, its agents, employees,
contractors or invitees, Lessor shall not be liable for injury or damage to the
person or goods, wares, merchandise or other property of Lessee, Lessee's
employees, contractors, invitees, customers, or any other person in or about the
Premises, whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, tire sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to
the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, the repair cost of which damage or destruction is less
than 50% of the then Replacement Cost of the Premises immediately prior to such
damage or destruction, excluding from such calculation the value of the land and
Lessee Owned Alterations and Utility Installations.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction
to the Premises, other than Lessee Owned Alterations and Utility Installations,
the repair cost of which damage or destruction is 50% or more of the then
Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(c) "INSURED LOSS" shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits Involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE-INSURED LOSS. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total
PAGE 4
<PAGE> 37
cost to repair of which is $10,000 or less, and, in such event, Lessor shall
make the insurance proceeds available to Lessee on a reasonable basis for that
purpose. Notwithstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party shall promptly contribute the shortage in proceeds (except as to
the deductible which is Lessee's responsibility) as and when required to
complete said repairs. In the event, however, the shortage in proceeds was due
to the fact that, by reason of the unique nature of the improvements, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefore. If Lessor receives said funds or adequate assurance thereof
within said ten (10) day period, the party responsible for making the repairs
shall complete them as soon as reasonably possible and this Lease shall remain
in full force and effect. If Lessor does not receive such funds or assurance
within said period, Lessor may nevertheless elect by written notice to Lessee
within ten (10) days thereafter to make such restoration and repair as is
commercially reasonable with Lessor paying any shortage in proceeds, in which
case this Lease shall remain in full force and effect. If in such case Lessor
does not so elect, then this Lease shall terminate as of the date of the
occurrence of the damage or destruction. Unless otherwise agreed, Lessee shall
in no event have any right to reimbursement from Lessor for any funds
contributed by Lessee to repair any such damage or destruction. Premises partial
Damage due to flood or earthquake shall be subject to Paragraph 9.3 rather than
Paragraph 9.2, notwithstanding that there may be some insurance coverage, but
the net proceeds of any such insurance shall be made available for the repairs
if made by either Party.
9.3 PARTIAL DAMAGE-UNINSURED LOSS. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, either: (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such damage of Lessor's desire to terminate this Lease as of the
date sixty (60) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage totally at Lessee's expense and without reimbursement from Lessor.
Lessee shall provide Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following Lessee's said commitment. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the funds
or assurance thereof within the times specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
negligence or willful misconduct of Lessee. In the event, however, that the
damage or destruction was caused by the negligence, or willful misconduct of
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one (1) month's Base Rent, whether or not an Insured Loss, Lessor may,
at Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, within twenty (20) days following the occurrence of the damage, or
before the expiration of the time provided in such option for its exercise,
whichever is earlier ("Exercise Period"), (i) exercising such option and (ii)
providing Lessor with any shortage in insurance proceeds for adequate assurance
thereof) needed to make the repairs. If Lessee duly exercises such option during
said Exercise Period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's
expense repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during said Exercise Period, then Lessor may at
Lessor's option terminate this Lease as of the expiration of said sixty (60) day
period following the occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within ten (10) days after the expiration
of the Exercise Period, notwithstanding any term or provision in the grant of
option to the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described in Paragraph 9.2 (Partial
Damage--Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues (not to exceed the period for
which rental value insurance is required under Paragraph 8.3(b)), shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement of Base Rent, Real Property Taxes, insurance
premiums, and other charges, if any, as aforesaid, all other obligations of
Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after receipt of such notice, this Lease shall
continue in full force and effect. "COMMENCE" as used in this Paragraph shall
mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first
occurs.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option either (i) investigate
and remediate such Hazardous Substance Condition, if required, as soon as
reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to investigate
and remediate such condition exceeds twelve (12) times the then monthly Base
Rent or $100,000, whichever is greater, give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
Hazardous Substance Condition of Lessor's desire to terminate this Lease as of
the date sixty (60) days following the giving of such notice. In the event
Lessor elects to give such notice of Lessor's intention to terminate this Lease,
Lessee shall have the right within ten (10) days after the receipt of such
notice to give written notice to Lessor of Lessee's commitment to pay for the
investigation and remediation of such Hazardous Substance Condition totally at
Lessee's expense and without reimbursement from Lessor except to the extent of
an amount equal to twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance thereof within thirty (30) days following
Lessee's said commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such investigation and remediation
as soon as reasonably possible and the required funds are available. It Lessee
does not give such notice and provide the required funds or assurance thereof
within the times specified above, this Lease shall terminate as of the date
specified In Lessor's notice of termination. If a Hazardous Substance Condition
occurs for which Lessee is not legally responsible, there shall be abatement of
Lessee's obligations under this Lease to the same extent as provided in
Paragraph 9.6(a) for a period of not to exceed twelve months.
9.8 TERMINATION--ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit
as has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 WAIVE STATUTES. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 (a) PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises during the term of this
Lease. Subject to Paragraph 10.1(b), all such payments shall be made at least
ten (10) days prior to the delinquency date of the applicable installment.
Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes
have been paid. If any such taxes to be paid by Lessee shall cover any period of
time prior to or after the expiration or earlier termination of the term hereof,
Lessee's share of such taxes shall be equitably prorated to cover only the
period of time within the tax fiscal year this Lease is in effect, and Lessor
shall reimburse Lessee for any overpayment after such proration. If Lessee shall
fail to pay any Real Property Taxes required by this Lease to be paid by Lessee,
Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor
therefor upon demand.
(b) ADVANCE PAYMENT. In order to insure payment when due and
before delinquency of any or all Real Property Taxes, Lessor reserves the right,
at Lessor's option, to estimate the current Real Property Taxes applicable to
the Premises, and to require such current year's Real Property Taxes to be paid
in advance to Lessor by Lessee, either: (i) in a lump sum amount equal to the
installment due, at least twenty (20) days prior to the applicable delinquency
date, or (ii) monthly in advance with the payment of the Base Rent. If Lessor
elects to require payment monthly in advance, the monthly payment shall be the
equal monthly amount which, over the number of months remaining before the month
in which the applicable tax
PAGE 5
<PAGE> 38
installment would become delinquent (and without interest thereon), would
provide a fund large enough to fully discharge before delinquency the estimated
installment of taxes to be paid. When the actual amount of the applicable tax
bill is known, the amount of such equal monthly advance payment shall be
adjusted as required to provide the fund needed to pay the applicable taxes
before delinquency. If the amounts paid to Lessor by Lessee under the provisions
of this Paragraph are insufficient to discharge the obligations of Lessee to pay
such Real Property Taxes as the same become due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums as are necessary to pay such
obligations. All moneys paid to Lessor under this Paragraph may be intermingled
with other moneys of Lessor and shall not bear interest.
10.2 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term "REAL
PROPERTY TAXES" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part, Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "REAL PROPERTY TAXES" shall also
include any tax, fee, levy, assessment or charge, or any increase therein
imposed by reason of events occurring, or changes in applicable law taking
effect, during the term of this Lease, including but not limited to the
execution of this Lease, or any modification, amendment or transfer thereof, and
whether or not contemplated by the Parties.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures, furnishings, equipment and all other personal property
to be assessed and billed separately from the real property of Lessor. If any of
Lessee's said personal property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee within ten (10) days
after receipt of a written statement setting forth the taxes applicable to
Lessee's property or, at Lessor's option, as provided in Paragraph 10.1(b).
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"ASSIGNMENT") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent given under and subject to
the terms of Paragraph 36 which consent shall not be unreasonably withheld or
delayed.
(b) Deleted.
(c) Deleted.
(d) Deleted.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall
not constitute a consent to any subsequent assignment or subletting by Lessee or
to any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee or
anyone else liable on the Lease or sublease and without obtaining their consent,
and such action shall not relieve such persons from liability under this Lease
or sublease.
(d) In the event of any Default or Breach of Lessee's obligations
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
any one else responsible for the performance of the Lessee's obligations under
this Lease, including the sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor or Lessee.
(e) Each request for consent to an assignment or subletting shall
be in writing, accompanied by information relevant to Lessor's determination as
to the financial and operational responsibility and appropriateness of the
proposed assignee or sublessee, including but not limited to the intended use
and/or required modification of the Premises. Lessee agrees to provide Lessor
with such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed,
for the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) Deleted.
(h) Deleted.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that unless a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of this or any
other assignment of such sublease to Lessor, nor by reason of the collection of
the rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such sublessee
under such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee's obligations under this Lease, to pay to
Lessor the rents and other charges due and to become due under the sublease.
Sublessee shall rely upon any such statement and request from Lessor and shall
pay such rents and other charges to Lessor without any obligation or right to
inquire as to whether such Breach exists and notwithstanding any notice from or
claim from Lessee to the contrary Lessee shall have no right or claim against
said sublessee, or, until the Breach has been cured, against Lessor, for any
such rents and other charges so paid by said sublessee to Lessor.
(b) Deleted.
(c) Any matter of thing requiring the consent of the sublessor
under the sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any part
of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by either party in connection with a Default or Breach (as hereinafter
defined), $350.00 is a reasonable minimum sum per such occurrence for legal
services and costs in the preparation and service of a notice
PAGE 6
<PAGE> 39
of Default, and that either party may include the cost of such services and
costs in said notice as due and payable to cure said Default. A "DEFAULT" is
defined as a failure by either party to observe, comply with or perform any of
the terms, covenants, conditions or rules applicable to Lessee under this Lease.
A "BREACH" is defined as the occurrence of any one or more of the following
Defaults, and, where a grace period for cure after notice is specified herein,
the failure by Lessee to cure such Default prior to the expiration of the
applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to
reoccupy same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee hereunder, whether to Lessor or to a third party
as and when due, the failure by Lessee to provide Lessor with reasonable
evidence of insurance or surety bond required under this Lease, or the failure
of Lessee to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of three
(3) days following receipt or written notice thereof by or on behalf of Lessor
to Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with applicable law per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the recission of an unauthorized assignment or
subletting per Paragraph 12.1(b), (iv) a Tenancy Statement per Paragraphs 16 or
37, (v) the subordination or non-subordination of this Lease per Paragraph 30,
(vi) the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information, which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of twenty (20) days
following receipt of written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
that are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs (a), (b) or (c), above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) The making
by Lessee of any general arrangement or assignment for the benefit of creditors:
(ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within sixty (60) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not within sixty (60) days; provided; however, in the event that any
provision of this subparagraph (e) is contrary to any applicable law, such
provision shall be of no force or effect, and not affect the validity of the
remaining provisions.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee of any Guarantor of Lessee's obligations hereunder was
materially false.
(g) If the performance of Lessee's obligations under this Lease
is guaranteed: (i) the death of a guarantor, (ii) the termination of a
guarantor's liability with respect to this Lease other than in accordance with
the terms of such guaranty, (iii) a guarantor's becoming insolvent or the
subject of a bankruptcy filing, (iv) a guarantor's refusal to honor the
guaranty, or (v) a guarantor's breach of its guaranty obligation on an
anticipatory breach basis and Lessee's failure, within sixty (60) days following
written notice by or on behalf of Lessor to Lessee of any such event, to provide
Lessor with written alternative assurance or security, which, when coupled with
the then existing resources of Lessee, equals or exceeds the combined financial
resources of Lessee and the guarantors that existed at the time of execution of
this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its option,
may require all future payments to be made under this Lease by Lessee to be made
only by cashier's check. In the event of a Breach of this Lease by Lessee, as
defined in Paragraph 13.1, with or without further notice or demand, and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination: (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of the leasing commission paid by Lessor applicable to the unexpired
term of this Lease. The worth at the time of award of the amount referred to in
provision (iii) of the prior sentence shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent. Efforts by Lessor to mitigate damages caused by
Lessee's Default or Breach of this Lease shall not waive Lessor's right to
recover damages under this Paragraph. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding the unpaid rent and damages as are recoverable
therein, or Lessor may reserve therein the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and grace
period required under subparagraphs 13.1(b), (c) or (d) was not previously
given, a notice to pay rent or quit, or to perform or quit, as the case may be,
given to Lessee under any statute authorizing the forfeiture of leases for
unlawful detainer shall also constitute the applicable notice for grace period
purposes required by subparagraphs 13.1(b), (c) or (d). In such case, the
applicable grace period under subparagraphs 13.1(b), (c) or (d) and under the
unlawful detainer statute shall run concurrently after the one such statutory
notice, and the failure of Lessee to cure the Default within the greater of the
two such grace periods shall constitute both an unlawful detainer and a Breach
of this Lease entitling Lessor to the remedies provided for in this Lease and/or
by said statute.
(b) Continue the Lease and Lessee's right to possession in effect
(in California under California Civil Code Section 1951.4) after Lessee's Breach
and abandonment and recover the rent as It becomes due, provided Lessee has the
right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under the Lease, shall not constitute a
termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "INDUCEMENT PROVISIONS" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach of this Lease by Lessee, as defined In Paragraph 13.1, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph shall not be deemed a waiver by Lessor of the provisions of this
Paragraph unless specifically so stated in writing by Lessor at the time of such
acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within five (5) days
after receipt of notice from Lessor that such amount shall be due, then, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor
Page 7
<PAGE> 40
will incur by reason of late payment by Lessee. Acceptance of such late charge
by Lessor shall in no event constitute a waiver of Lessee's Default or Breach
with respect to such overdue amount, nor prevent Lessor from exercising any of
the other rights and remedies granted hereunder. In the event that a late charge
is payable hereunder, whether or not collected, for three (3) consecutive
installments of Base Rent, then notwithstanding Paragraph 4.1 or any other
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by the holders of any ground lease, mortgage or deed of trust
covering the Premises whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days after such notice
are reasonably required for its performance, then Lessor shall not be in breach
of this Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the land area
not occupied by any building, is taken by condemnation, Lessee may, at Lessee's
option, to be exercised in writing within ten (10) days after Lessor shall have
given Lessee written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the total
rentable floor area of the building located on the Premises. No reduction of
Base Rent shall occur if the only portion of the Premises taken is land on which
there is no building. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided however that Lessee
shall be entitled to any compensation separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of its net severance damages received, over and above the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.
15. BROKERS FEE.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay to
said Brokers jointly or in such separate shares as they may mutually designate
in writing, a fee as set forth in a separate written agreement between Lessor
and said Brokers for brokerage services rendered by said Brokers to Lessor in
this transaction.
15.3 Deleted
15.4 Deleted
15.5 Lessee and Lessor each represent and warrant to the other that it
has had no dealings with any person, firm, broker or finder (other than the
Brokers, if any named in Paragraph 1.10) in connection with the negotiation of
this Lease and/or the consummation of the transaction contemplated hereby and
that no broker or other person, firm or entity other than said named Brokers is
entitled to any commission or finder's fee in connection with said transaction.
Lessee and Lessor do each hereby agree to indemnify, protect, defend, and hold
the other harmless from and against liability for compensation or charges which
may be claimed by any such unnamed broker, finder or other similar party by
reason of any dealings or actions of the indemnifying Party, including any
costs, expenses, attorneys' fees reasonably incurred with respect thereto.
15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. TENANCY STATEMENT.
16.1 Each Party (as "RESPONDING PARTY") shall within ten (10) days after
written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "TENANCY STATEMENT" form published by the
American Industrial Real Estate Association plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
16.2 It Lessor desires to finance, refinance. or sell the Premises any
part thereof, or the building of which the Premises are a part, Lessee and all
Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor such financial statements of Lessee and
such Guarantors as may be reasonably required by such lender or purchaser,
including but not limited to Lessee's financial statements for the past three
(3) years. All such financial statements shall be received by Lessor and such
lender or purchaser in confidence and shall be used only for the purposes herein
set forth.
17. LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the
owner at the time in question of the fee title to the Premises, or, if this is a
sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or in this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor at the time of such transfer or assignment.
Except as provided in Paragraph 15, upon such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of an other provision hereof.
19. INTEREST ON PAST-Due Obligations. Any monetary payment due Lessor
hereunder other than late charges, not received by Lessor within thirty (30)
days following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Broker that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to the Lease and as to
the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.
23. NOTICES.
23.1 All notices required or permitted by this Lease shall be in writing
and may be delivered in person (by hand or by messenger or courier service) or
may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail with postage prepaid or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notice purposes. Either Party may by
written notice to the other specify a different address for notice purposes,
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for the purpose of mailing or delivering notices to
Lessee. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate by written notice
to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given forty-eight (48) hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone confirmation of receipt of the transmission thereof,
provided a copy is also delivered via delivery or mail. If notice is received on
a Sunday or legal holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any
PAGE 8
<PAGE> 41
subsequent or similar act by Lessee, or be construed as the basis of an estoppel
to enforce the provision or provisions of this Lease requiring such consent.
Regardless of Lessor's knowledge of a Default or Breach at the time of accepting
rent, the acceptance of rent by Lessor shall not be a waiver of any preceding
Default or Breach by Lessee of any provision hereof, other than the failure of
Lessee to pay the particular rent so accepted. Any payment given Lessor by
Lessee may be accepted by Lessor on account of moneys or damages due Lessor,
notwithstanding any qualifying statements or conditions made by Lessee in
connection therewith, which such statements and/or conditions shall be of no
force or effect whatsoever unless specifically agreed to in writing by Lessor at
or before the time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECTS; CHOICE OF LAW. This lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed by Lessor upon the real property of which the Premises are
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessee under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address has been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice, the cure of
said default before invoking any remedies Lessee may have by reason thereof. If
any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device notwithstanding the relative dates of the documentation or
recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provision of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance ("NON-DISTURBANCE AGREEMENT") from the
Lender that Lessee's possession and this Lease, including any option to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided however,
that, upon written request from Lessor or a Lender or Lessee in connection with
a sale, financing or refinancing of the Premises, Lessee and Lessor shall
execute such further writings as may be reasonably required to separately
document any such subordination or non-subordination, attornment and
non-disturbance agreement as is provided for herein.
31. ATTORNEY'S FEES. If any Party or Broker brings an action or proceeding
to enforce the terms hereof or declare rights hereunder, the Prevailing Party
(as hereafter defined) or Broker in any such proceeding, action, or appeal
thereon, shall be entitled to reasonable attorney's fees. Such fees may be
awarded in the same suit or recovered in a separate suit, whether or not such
action or proceeding is pursued to decision or judgment. The term "PREVAILING
PARTY" shall include, without limitation, a Party or Broker who substantially
obtains or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or Broker of its
claim or defense. The attorney's fee award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorney's fees reasonably incurred. Lessor shall be entitled to attorney's
fees, costs and expenses incurred in the preparation and service of notices of
Default and consultations in connection therewith only if a legal action is
subsequently commenced in connection with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the building of which
they are a part, as Lessor may reasonably deem necessary. Lessor may at any time
place on or about the Premises or building any ordinary "For Sale" signs and
Lessor may at any time during the last one hundred twenty (120) days of the term
hereof place on or about the Premises any ordinary "For Lease" signs. All such
activities of Lessor shall be without abatement of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the Premises, except that
Lessee may, with Lessor's prior written consent, install (but not on the roof)
such signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to:
provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations, Trade
Fixtures and Alterations). Unless otherwise expressly agreed herein, Lessor
reserves all rights to the use of the roof and the right to install, and all
revenues from the installation of, such advertising signs on the Premises,
including the roof, as do not unreasonably interfere with the conduct of
Lessee's business.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' or other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for a
Lessor consent pertaining to this Lease for the Premises, including but not
limited to consents to an assignment, a subletting or the presence or use of a
Hazardous Substance, practice or storage tank, shall be paid by Lessee to Lessor
upon receipt of an invoice and supporting documentation therefor. Subject to
Paragraph 12.2(e) (applicable to assignment or subletting), Lessor's consent to
any act, assignment of this Lease or subletting of the Premises by Lessee shall
not constitute an acknowledgement that no Default or Breach by Lessee of this
Lease exists, nor shall such consent be deemed a waiver of any then existing
Default or Breach, except as may be otherwise specifically stated in writing by
Lessor at the time of such consent.
(b) The failure to specify herein any particular condition to
Lessor's consent shall not preclude the imposition by Lessor at the time of
consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given.
37. GUARANTOR.
37.1 If there are to be any Guarantors of this Lease per Paragraph 1.11,
the form of the guaranty to be executed by each such Guarantor shall be the form
most recently published by the American Industrial Real Estate Association, and
each said Guarantor shall have the same obligations as Lessor under this Lease,
including but not limited to the obligation to provide the Tenancy Statement and
information called for by Paragraph 16.
37.2 It shall constitute a default of the Lessee under this Lease if any
such Guarantor fails or refuses, upon reasonable request by Lessor to give (a)
evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and including
in the case of a corporate Guarantor, a certified copy of a resolution of its
board of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signatures of the persons authorized to
sign on its behalf, (b) current financial statements of Guarantor as may from
time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
PAGE 9
<PAGE> 42
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises
and the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Paragraph 39 the word "OPTION" has the
following meanings: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 Deleted.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or review this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid, or
(iii) during the time Lessee is in Breach of this Lease, or (iv) in the event
that Lessor has given to Lessee three (3) or more notices of Default under
Paragraph 13.1, whether or not the Defaults are cured, during the twelve (12)
month period immediately preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provision of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due or (ii)
Lessor gives to Lessee three or more notices of Default under Paragraph 13.1
during any twelve month period that remain uncured.
40. MULTIPLE BUILDINGS. If the premises are part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of such other buildings and their
invitees, and that Lessee will pay its fair share of common expenses incurred in
connection therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees, and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights, and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps, and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as voluntary payment and there shall survive the right on
the part of said Party to institute suit for recovery of such sum. If it shall
be adjudged that there was no legal obligation on the part of said Party to pay
such sum or any part thereof, said Party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE, SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF
ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION OR BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR EMPLOYEES
AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS
LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY
SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX
CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS LOCATED IN A
STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE
PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
Executed at Palo Alto Executed at Palo Alto
on March 17, 1993 on March 17, 1993
by LESSOR: by LESSEE:
MV 440, INC., QUICKTURN SYSTEMS, INC.
- ------------------------------- -------------------------------
a California corporation a California corporation
- ------------------------------- -------------------------------
By: By:
---------------------------- -----------------------------
Name Printed: William J. Hurwick Name Printed: Dennis Favero
Title: Title: VP/CFO
------------------------- ---------------------------
PAGE 10
<PAGE> 43
NOTICES TO BE SENT TO: By:
-------------------------------
Name Printed: William J. Hurwick/WJH Group Name Printed:
----------------------
Title: Cornish & Carey Commercial Title:
-----------------------------
Address: 400 Hamilton Avenue Address:
---------------------------
Palo Alto, CA 94301
Tel. No. (415) 688-8550 Fax No. Tel. No. (____) ________ Fax. No.
(415) 321-0719 (___)__________
PAGE 11
<PAGE> 44
ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-NET
DATED MARCH 17, 1993
BY AND BETWEEN MV 440, INC. ("LESSOR") AND
QUICKTURN SYSTEMS, INC. ("LESSEE"), A CALIFORNIA CORPORATION
49. Payment of Direct As additional rent during the term hereof,
Expenses: Lessee shall pay to Lessor direct expenses
("Direct Expenses") incurred by Lessor in the
operation and maintenance of the Premises
(including all direct costs of management for
the Project, which shall be fixed at $1,000.00
per month for the term of this Lease), real
property taxes, insurance premiums, maintenance
contracts for the repair and maintenance of the
heating, ventilating and air-conditioning system
and landscaping.
Lessor estimates that Direct Expenses for the
Premises (including the costs of management for
the Project applicable to the Premises) during
the first calendar year of the Lease term
hereunder will be the equivalent of $3,878.81
per month. Accordingly, during the first year of
the Lease term, Lessee shall pay to Lessor
$3,878.81 per month as additional rent
attributable to Direct Expenses. At the
commencement of each year of the term hereof,
Lessor will notify Lessee of the monthly amount
to be paid for Direct Expenses for that year.
Lessee shall have the right to audit Lessor's
books and records with respect to Direct
Expenses within thirty (30) days after receipt
from Lessor of the new calculation of Direct
Expenses. If the audit discloses that an
overpayment was required of Lessee, Lessor, as
soon as reasonably practical, shall refund the
excess amount overpaid by Lessee. If the audit
discloses that Lessee has underpaid the Direct
Expenses, Lessee shall pay the excess amount
owing to Lessor as soon as reasonably practical.
50. Roof and HVAC Lessor shall be responsible for all roof
Warranty; Building maintenance (other than maintenance needed due
Systems: to Lessee's negligence) for the period from May
1, 1993 through April 30, 1994. Lessor also
shall warrant the HVAC system to be in working
order and be responsible for all
parts/components replacement for the period from
May 1, 1993 through April 30, 1994.
Notwithstanding the foregoing, as of the
Commencement Date, the Premises shall be in
broom-clean condition, and all utilities, HVAC
systems, plumbing, electrical (including,
without limitation, outlets and light fixtures)
and fire and landscape sprinkler systems
("Building Systems") shall be in good working
order and repair.
Lessor's Lessee's
Initials: ____ Initials: _____
<PAGE> 45
ATTACHMENT E
SECOND ADDENDUM TO LEASE
THIS SECOND ADDENDUM TO LEASE ("Addendum") is dated for reference
purposes only as of March 17, 1993, and is made between MV 440, INC., a
California corporation ("Lessor") and QUICKTURN SYSTEMS, INC., a California
corporation ("Lessee"), to be a part of that certain Standard
Industrial/Commercial Single-Tenant Lease-Net of even date herewith between
Lessor and Lessee (herein the Please Form "Lease Form") concerning 17,636 square
feet of space (the "Premises") located on the second floor of the two-story
building ("Building") located at 440 Clyde Avenue, Mountain View, California.
1. LESSEE IMPROVEMENTS: The parties acknowledge that, at Lessee's sole
cost and expense, Lessee shall construct certain non-structural improvements
(the "Lessee Improvements") described in plans and specifications previously
approved by Lessor. The Lessee Improvements shall be constructed in accordance
with the plans and specifications and in a good and workmanlike manner.
2. ACCEPTANCE OF PREMISES: Notwithstanding anything to the contrary in
the Lease, Lessee's sole acceptance of the Premises or Lessee's submission of a
"punch list" to Lessor not later than sixty (60) days after the Commencement
Date shall not be deemed a waiver of Lessee's right to have latent defects in
the Premises (excluding the Lessee Improvements) repaired at Lessor's sole
expense. Lessee shall give notice to Lessor whenever any latent defect (i.e.,
any defect that could not reasonably have been discovered by Lessee) becomes
reasonably apparent, and Lessor shall repair such defect as soon as practicable.
Lessor also hereby assigns to Lessee all warranties with respect to the Premises
which would reduce Lessee's maintenance obligations hereunder and shall
cooperate with Lessee to enforce all such warranties.
3. COMPLIANCE WITH LAWS: At the Commencement Date, the Premises and the
project in which the Premises are located ("Project") shall conform to all
underwriter's requirements and all rules, regulations, statutes, ordinances,
laws and building codes (collectively "Applicable Laws") applicable thereto,
including, without limitation, all Applicable Laws governing Hazardous
Materials, as defined in the Lease. Lessee shall not be required to construct or
to pay the cost of complying with any underwriters requirements or Applicable
Laws requiring construction of improvements in the Premises which are properly
capitalized under generally accepted accounting principles, unless such
compliance is necessitated solely because of Lessee's particular use of the
Premises. Lessor represents and warrants that, to the best of its knowledge,
there are no covenants, conditions, restrictions or encumbrances ("CC&R's")
affecting the Project.
4. USE OF PREMISES: If the Premises should become not reasonably
suitable for Lessee's use as a consequence of (i) cessation of utilities or
other services; (ii) interference with access to the Premises; or (iii) legal
restrictions, so long as items (i) through (iii) do not result from the fault
of, or are beyond the control of, Lessor and Lessee, or the presence of any
Hazardous Material which does not result form Lessee's use, storage or disposal
of such Hazardous Material in or about the Premises, and in any of the foregoing
cases the interference with Lessee's use of the Premises persists for one
hundred twenty (120) continuous days, then Lessee shall be entitled to terminate
this Lease.
<PAGE> 46
5. ALTERATIONS, ADDITIONS AND IMPROVEMENTS: Notwithstanding anything to
the contrary in the Lease:
A. If Lessor has not consented to Lessee's request to construct
alterations, utility installations, additions and improvements ("Alterations")
in the Premises within three (3) business days after the date of Lessee's
written request therefor, Lessor shall be deemed to have consented to the
Alteration.
B. Lessor shall have no lien or other interest whatsoever in any
item of Lessee's trade fixtures and personal property located in the Premises,
and shall execute any document reasonably necessary to waive any lien or
interest in Lessee's trade fixtures and personal property located at the
Premises.
C. Upon request, Lessor shall advise Lessee in writing whether it
reserves the right to require Lessee to remove any Alterations from the Premises
upon termination of the Lease.
D. Alterations and Lessee's trade fixtures, furniture, equipment
and other personal property installed in the Premises ("Lessee's Property")
shall at all times be and remain Lessee's Property, and Lessee shall be entitled
to all depreciation, amortization and other tax benefits with respect thereto.
Except for Alterations which cannot be removed without structural injury to the
Premises, at any time Lessee may remove Lessee's Property from the Premises,
provided Lessee repairs all damage caused by such removal.
6. EXPENSES: Notwithstanding anything to the contrary in the Lease, in
no event shall Lessee have any obligation to perform, to pay directly, or to
reimburse Lessor for, all or any portion of the following repairs, maintenance,
improvements, replacements, premiums, claims, losses, fees, commissions,
charges, disbursements, attorneys' fees, experts' fees, costs and expenses
(collectively "Costs"):
A. Losses Caused By Others, Construction Defects and Failure to
Build In Compliance With Law: Costs to correct any construction defect in the
Premises (other than in the Lessee Improvements) or the Project, or Costs
arising out of a failure to construct the Building or common areas in accordance
with all Applicable Laws and private restrictions.
B. Casualties, Condemnations and Insurance Costs: Costs
occasioned by fire, acts of God, or other casualties or by the exercise of the
power of eminent domain or Costs for insurance coverage not customarily paid by
tenants of similar projects in the vicinity of the Premises and/or co-insurance
payments.
C. Capital Leases and Capital Improvements: Lease payments and
other Direct Expenses to acquire, install or replace capital machinery and
equipment (such as air conditioners, elevators, and the like), and Costs which
would properly be capitalized under generally accepted accounting principles and
which relate to repairs, alterations, improvements, equipment and tools to the
extent that Lessee's share of the total Cost of such capital item exceed (i) the
reduction in other expenses payable by Lessee under the Lease which results from
the capital repair or installation of the capital item; or (ii) in any year, the
annual amortized cost of
2
<PAGE> 47
the item based on its useful life determined in accordance with generally
accepted accounting principles.
D. Structural Repairs: Costs relating to the replacement of the
structural elements of the Building and Project.
E. Reimbursable Expenses: Costs for which Lessor has a right of
reimbursement from others or Costs which Lessee pays directly to a third person.
F. Reserves: Depreciation, amortization or other expense
reserves.
G. Mortgages: Interest, charges and fees incurred on debt,
payments on mortgages and rent under ground leases.
H. Hazardous Materials: Costs incurred to investigate the
presence of any Hazardous Materials, Costs to respond to any claim of Hazardous
Material contamination or damage, Costs to remove any Hazardous Material from
the Project or to remediate any Hazardous Material contamination and any
judgments or other Costs incurred in connection with any Hazardous Material
exposure or release, except to the extent the Cost is caused by the storage, use
or disposal of the Hazardous Material in question by Lessee. (Lessee shall have
no liability to Lessor or any of its officers, agents, partners or tenants as a
consequence of the presence of Hazardous Materials in or about the Premises that
were not used, stored, treated or disposed of in or about the Premises in
violation of Applicable Law by Lessee or Lessee's agents, employees or
contractors.)
I. Real Estate Taxes: Taxes, assessments, all other governmental
levies, and any increases in the foregoing occasioned by or relating to a
voluntary or involuntary change of ownership or other conveyance of the
Premises.
7. SURRENDER: Notwithstanding anything to the contrary in the Lease,
Lessee's obligations to surrender the Premises shall be fulfilled if Lessee
surrenders possession of the Premises in the condition existing at the
commencement of the Lease, except for ordinary wear and tear, acts of God,
casualties, condemnation, Hazardous Materials (other than those stored, used or
disposed of by Lessee in or about the Premises), and alterations concerning
which Lessor has not reserved the right to require removal, or if it has
reserved the right of removal, it does not elect to have Lessee remove from the
Premises at the end of the term.
8. INDEMNITY: Notwithstanding anything to the contrary in the Lease,
Lessor shall not be released from, and shall indemnify, defend, protect, and
hold harmless Lessee from, all damages, liabilities, judgments, actions, claims,
attorneys' fees, consultants' fees, payments, costs and expenses arising from
the negligence or willful misconduct of Lessor or its employees, agents,
contractors or invitees, Lessor's violation of Applicable Law, or a breach of
Lessor's obligations or representations under this Lease.
9. ASSIGNMENT AND SUBLETTING: Lessee may, without Lessor's prior written
consent, sublet the Premises or assign the Lease to: (i) a subsidiary,
affiliate, franchisee, division or corporation controlled or under common
control with Lessee; (ii) a successor corporation related to Lessee by merger,
consolidation, non-bankruptcy reorganization, or government
3
<PAGE> 48
action; or (iii) a purchaser of substantially all of Lessee's assets located at
the Premises, so long as the purchaser, at the time of the purchase, has a net
worth substantially the same as that of Lessee as of the date of its execution
of the Lease. For the purpose of the Lease, sale of Lessee's capital stock
through any public exchange shall not be deemed an assignment, subletting, or
any other transfer of the Lease or the Premises.
10. RULES AND REGULATIONS: Lessor shall not require Lessee's compliance
with any rule or regulation applicable to the Premises that unreasonably
interferes with Lessee's use of the Premises or materially changes Lessee's
rights under the Lease.
11. DEFAULT AND LATE CHARGE: Notwithstanding anything to the contrary in
the Lease, Lessee shall not be deemed to be in default, Lessor shall not be
entitled to cure any breach by Lessee under the Lease, nor shall any late charge
or interest be imposed, on account of (i) Lessee's failure to pay money to
Lessor, unless Lessee's failure to pay continues for five (5) days after
Lessee's actual receipt of written notice of delinquency; or (ii) Lessee's
failure to perform any covenant of this Lease (other than a covenant to pay
money to Lessor), unless Lessee's failure to perform such covenant continues
after Lessee's actual receipt of written notice for a period of thirty (30) days
or such longer time as may reasonably be required to cure the default. Further,
Lessee shall not be in default of this Lease solely because (a) it abandons or
vacates the Premises; or (b) as a consequence of the filing of an involuntary
bankruptcy petition, the appointment of a receiver, the attachment of any
interest in the Lease or of Lessee's other assets or the exercise by any third
party of any other remedy with respect to Lessee, Lessee's interest in this
Lease or Lessee's other assets, unless the petition, receiver, attachment or
other remedy is not discharged within sixty (60) days.
12. LESSOR'S ENTRY: Notwithstanding anything to the contrary in the
Lease, Lessor and Lessor's agents, except in the case of emergency, shall
provide Lessee with twenty-four (24) hours' notice prior to entry of the
Premises. Such entry by Lessor and Lessor's agents shall not impair Lessee's
operations more than reasonably necessary, and Lessor and Lessor's agents shall
be accompanied at all times by an employee of Lessee.
13. APPROVALS: Whenever the Lease requires an approval, consent,
designation, determination or judgment by either Lessor or Lessee, such
approval, consent, designation, determination or judgment (including, without
limiting the generality of the foregoing, those required in connection with
assignment and subletting) shall not be unreasonably withheld or delayed and in
exercising any right or remedy hereunder, each party shall at all times act
reasonably and in good faith.
14. REASONABLE EXPENDITURES: Any expenditure by a party permitted or
required under the Lease, for which such party is entitled to demand and does
demand reimbursement from the other party, shall be limited to the fair market
value of the goods and services involved, shall be reasonably incurred, and
shall be substantiated by documentary evidence available for inspection and
review by the other party or its representative during normal business hours.
15. OPTION TO EXTEND: Notwithstanding anything to the contrary in the
Lease:
4
<PAGE> 49
A. Grant of Option: Lessor hereby grants to Lessee one option(s)
(the "Option(s)") to extend the term of the Lease, each for an additional term
five (5) years, commencing on May 1, 2000, upon the terms and conditions set
forth in this Paragraph 15.
B. Exercise of Option: Lessee shall exercise such option by
giving Lessor written notice of its intention not less than twelve (12) months
prior to the expiration of the then-existing term of the Lease.
C. Extended Term Rent: If this Option is exercised, the basic
rent for the Premises shall be ninety-five percent (95%) of the then-current
fair market monthly rent ("Fair Market Rent") for the Premises as of the
commencement date of the applicable extended term, as determined by the
agreement of the parties, or, if the parties cannot agree, then the Fair Market
Rent shall be determined by three appraisers selected and governed by the Rules
of the American Arbitration Association. All other terms and conditions
contained in the Lease and this Addendum, as the same may be amended from time
to time by the parties in accordance with the provisions of the Lease, shall
remain in full force and effect and shall apply during the Option term.
D. Rescission: Notwithstanding anything to the contrary contained
in this paragraph, if the basic rent during the Option period is determined by
appraisal and if Lessee does not, in its discretion, approve the rental amount
established by such appraisal, Lessee may rescind its exercise of the Option not
later than six (6) months prior to the last day of the Term by giving Lessor
written notice of such election to rescind. If Lessee timely rescinds its
exercise of the Option, then Lessee shall pay all costs and expenses of the
appraisal.
16. DAMAGE AND DESTRUCTION OF PREMISES: Notwithstanding anything to the
contrary contained in the Lease:
A. Lessor shall not have the right to terminate the Lease if
damage to or destruction of the Premises or the building in which the Premises
is located, or both, results from a casualty ordinarily covered by insurance
required to be carried by Lessor under the Lease.
B. In the event of damaged to the Premises which is not required
to be covered by insurance, and is not covered by insurance actually carried,
Lessor shall not have the right to terminate the Lease (i) if the damage is
relatively minor (e.g., repair or restoration would take fewer than sixty (60)
days or it would cost less than ten percent (10%) of the replacement cost of the
Premises) or (ii) if Lessee agrees to pay the cost of repair in excess of ten
percent (10%) of the then replacement cost of the Premises.
C. If the Premises are damaged by any peril and Lessor does not
elect to terminate the Lease or is not entitled to terminate the Lease pursuant
to its terms, then as soon as reasonably practicable, Lessor shall furnish
Lessee with a written opinion of Lessor's architect or construction consultant
as to when the restoration work required of Lessor may be completed. Lessee
shall have the option to terminate the Lease in the event any of the following
occurs, which option may be exercised by delivery to Lessor of a written notice
of election to terminate within thirty (30) days after Lessee receives from
Lessor the estimate of the time needed to complete such restoration: (i) the
Premises, with reasonable diligence, cannot be fully repaired
5
<PAGE> 50
by Lessor within one hundred twenty (120) days after the damage or destruction;
or (ii) if the Premises are damaged by any peril within twelve (12) months of
the last day of term, and cannot be substantially restored within sixty (60)
days after the date of such damage.
D. If the Lease is not terminated by Lessor or Lessee as provided
herein, Lessor shall restore the Premises and all tenant improvements installed
by Lessor to the condition in which they existed immediately prior to the
casualty.
17. TAXES AND ASSESSMENTS: Notwithstanding anything to the contrary
contained in the Lease, if any assessments are levied against the Project or
Premises, Lessor may elect to either pay the assessment in full or allow the
assessment to go to bond and pay it in installments. In either case, however,
Lessee shall only be obligated to pay to Lessor with regard to such assessment,
a sum equal to that which would have been payable by Lessee with respect to
installments of principal and interest which would have become due during the
Lease term had Lessor allowed the assessment to go to bond.
18. LESSEE'S RIGHT TO BRING TAX PROCEEDING: Lessee shall have the right
to consent, in good faith, the validity or the amount of any tax or assessment
levied against the entire demised premises by such appellate or other
proceedings as may be appropriate in the jurisdiction, and may defer payment of
such obligation, pay same under protest, or take such steps as Lessee may deem
appropriate. Lessor shall cooperate in the institution and prosecution of any
such proceedings, including permitting the action to be brought in the name of
the Lessor, and will execute any documents required therefor. The expense of
such proceedings shall be borne by the Lessee and any refunds or rebates secured
shall belong to the Lessee.
19. LESSOR'S REPRESENTATIONS: To the best of Lessor's knowledge: (i) the
Premises and the operations conducted thereon prior to the Commencement Date are
in compliance with all Applicable Laws regarding Hazardous Materials; and (ii)
handling, transportation, storage, treatment, disposal, release or use of
Hazardous Materials that has occurred on or about the Premises or the Project or
the soil, groundwater or surface water thereof prior to the Commencement Date
have been in compliance with all Applicable Laws. Also to the best of Lessor's
knowledge, no litigation has been brought or threatened, nor any settlements
reached with any governmental or private party, concerning the actual or alleged
presence or Hazardous Materials on or about the Premises or Project, or the
soil, groundwater or surface water thereof, nor has Lessor received any notice
of any violation or alleged violation of any Applicable Laws, pending claims or
pending investigations with respect to the presence of Hazardous Materials on or
about the Premises or Project, or the soil, groundwater or surface water
thereof. Lessee, its agents, employees, contractors, officers, directors,
shareholders, successors or assigns shall not be responsible for, and Lessor
shall indemnify, defend with counsel reasonably acceptable to Lessee and hold
Lessee harmless against, (i) any claim, remediation obligation, investigation
obligation, liability, cause of action, penalty, attorneys' fee, consultants'
cost, expense or damage owing or alleged to be owing with respect to any
Hazardous Material present on or about the Premises or the Project, or the soil,
groundwater or surface water thereof; or (ii) the removal, investigation,
monitoring or remediation of any Hazardous Material present on or about the
Premises or the Project, or the soil, groundwater or surface water thereof with
respect to the Premises or the Project and caused by any source, including third
parties, other than Lessee, prior
6
<PAGE> 51
the Commencement Date. Lessor's representations under this Paragraph shall
survive the termination of the Lease.
20. RECOGNITION: Lessor hereby represents that as of the date of both
parties' execution of the Lease, there is no loan, mortgage, deed of trust or
ground lease affecting the Premises or Project other than a first deed of trust
in favor of Home Savings & Loan ("Lender"). As a condition to Lessee's
obligations under this Lease, Lessor, within a reasonable period of time after
the date of execution of this Lease by both parties, but in any event not later
than ninety (90) days after that execution date, shall provide Lessee with a
recognition and non-disturbance agreement, in form reasonably satisfactory to
Lender, Lessor and Lessee, from Lender providing for recognition of Lessee's
interests hereunder in the event of a foreclosure of Lender's security interest.
7
<PAGE> 1
Exhibit 10.6
- --------------------------------------------------------------------------------
MARIMBA, INC.
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<S> <C>
1. DEFINITIONS AND CONSTRUCTION....................................................... 1
1.1 Definitions................................................................. 1
1.2 Accounting Terms............................................................ 6
2. LOAN AND TERMS OF PAYMENT.......................................................... 6
2.1 Obligations................................................................. 6
2.2 Overadvances................................................................ 8
2.3 Interest Rates, Payments, and Calculations.................................. 8
2.4 Crediting Payments.......................................................... 9
2.5 Fees........................................................................ 9
2.6 Additional Costs............................................................ 9
2.7 Term........................................................................ 10
3. CONDITIONS OF LOANS................................................................ 10
3.1 Conditions Precedent to Initial Advance..................................... 10
3.2 Conditions Precedent to all Advances........................................ 10
4. CREATION OF SECURITY INTEREST...................................................... 11
4.1 Grant of Security Interest.................................................. 11
4.2 Delivery of Additional Documentation Required............................... 11
4.3 Right to Inspect............................................................ 11
5. REPRESENTATIONS AND WARRANTIES..................................................... 11
5.1 Due Organization and Qualification.......................................... 11
5.2 Due Authorization; No Conflict.............................................. 11
5.3 No Prior Encumbrances....................................................... 11
5.4 Bona Fide Eligible Accounts................................................. 11
5.5 Merchantable Inventory...................................................... 11
5.6 Name; Location of Chief Executive Office.................................... 11
5.7 Litigation.................................................................. 12
5.8 No Material Adverse Change in Financial Statements.......................... 12
5.9 Solvency.................................................................... 12
5.10 Regulatory Compliance....................................................... 12
5.11 Environmental Condition..................................................... 12
5.12 Taxes....................................................................... 12
5.13 Subsidiaries................................................................ 12
5.14 Government Consents......................................................... 12
5.15 Full Disclosure............................................................. 12
6. AFFIRMATIVE COVENANTS.............................................................. 13
6.1 Good Standing............................................................... 13
6.2 Government Compliance....................................................... 13
6.3 Financial Statements, Reports, Certificates................................. 13
6.4 Inventory; Returns.......................................................... 13
6.5 Taxes....................................................................... 14
6.6 Insurance................................................................... 14
6.7 Principal Depository........................................................ 14
6.8 Tangible Net Worth.......................................................... 14
6.9 Liquidity Coverage Ratio.................................................... 14
6.10 Further Assurances.......................................................... 14
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7. NEGATIVE COVENANTS................................................................. 14
7.1 Dispositions................................................................ 15
7.2 Change in Business.......................................................... 15
7.3 Mergers or Acquisitions..................................................... 15
7.4 Indebtedness................................................................ 15
7.5 Encumbrances................................................................ 15
7.6 Distributions............................................................... 15
7.7 Investments................................................................. 15
7.8 Transactions with Affiliates................................................ 15
7.9 Subordinated Debt........................................................... 15
7.10 Inventory................................................................... 15
7.11 Compliance.................................................................. 15
8. EVENTS OF DEFAULT.................................................................. 16
8.1 Payment Default............................................................. 16
8.2 Covenant Default............................................................ 16
8.3 Material Adverse Change..................................................... 16
8.4 Attachment.................................................................. 16
8.5 Insolvency.................................................................. 16
8.6 Other Agreements............................................................ 16
8.7 Subordinated Debt........................................................... 16
8.8 Judgments................................................................... 17
8.9 Misrepresentations.......................................................... 17
9. BANK'S RIGHTS AND REMEDIES......................................................... 17
9.1 Rights and Remedies......................................................... 17
9.2 Power of Attorney........................................................... 18
9.3 Accounts Collection......................................................... 18
9.4 Bank Expenses............................................................... 18
9.5 Bank's Liability for Collateral............................................. 18
9.6 Remedies Cumulative......................................................... 18
9.7 Demand; Protest............................................................. 18
10. NOTICES............................................................................ 19
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER......................................... 19
12. GENERAL PROVISIONS................................................................. 19
12.1 Successors and Assigns...................................................... 19
12.2 Indemnification............................................................. 19
12.3 Time of Essence............................................................. 20
12.4 Severability of Provisions.................................................. 20
12.5 Amendments in Writing, Integration.......................................... 20
12.6 Counterparts................................................................ 20
12.7 Survival.................................................................... 20
12.8 Confidentiality............................................................. 20
</TABLE>
<PAGE> 4
This LOAN AND SECURITY AGREEMENT is entered into as of May 27, 1998, by
and between SILICON VALLEY BANK ("Bank") and MARIMBA, INC. ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.
"Advance" or "Advances" means an Advance under the
Revolving Facility.
"Affiliate" means, with respect to any Person, any Person
that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents (including fees and expenses
of appeal), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and
records including: ledgers; records concerning Borrower's assets or liabilities,
the Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1
hereof.
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A
attached hereto.
1
<PAGE> 5
"Contingent Obligation" means, as applied to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Current Assets" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current assets on
the consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date,
all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
as at such date, plus, to the extent not already included therein, all
outstanding Advances made under this Agreement, including all Indebtedness that
is payable upon demand or within one year from the date of determination thereof
unless such Indebtedness is renewable or extendable at the option of Borrower or
any Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations owed
at the end of a given day.
"Debt Service Coverage" means (a) the sum of (i) earnings
after tax plus interest and non-cash (i.e., depreciation and amortization)
expenses, minus increases in capitalized software divided by (b) the sum of (i)
the current portion of long term debt plus interest expense.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon thirty (30) days prior written notification
thereof to Borrower in accordance with the provisions hereof. Unless otherwise
agreed to by Bank, Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay
within ninety (90) days of due date;
(b) Accounts with respect to an account debtor, fifty
percent (50%) of whose Accounts the account debtor has failed to pay within
ninety (90) days of invoice date;
(c) Accounts with respect to which the account debtor is
an officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is
an Affiliate of Borrower;
2
<PAGE> 6
(f) Accounts with respect to which the account debtor does
not have its principal place of business in the United States, except for
Eligible Foreign Accounts, and Accounts arising from products shipped to or
services provided to branches or offices located in the United States of any
account debtor that does not have its principal place of business in the United
States;
(g) Accounts with respect to which the account debtor is
the United States or any department, agency, or instrumentality of the United
States;
(h) Accounts with respect to which Borrower is liable to
the account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed
twenty-five percent (25%) of all Accounts, to the extent such obligations exceed
the aforementioned percentage, except (i) as approved in writing by Bank, (ii)
for pre-approved Accounts, listed on the attached Schedule, for which the
applicable percentage shall be thirty-five percent (35%), and (iii) for Accounts
owing by Netscape Communications and Tivoli, as to which the applicable
percentage shall be seventy-five percent (75%);
(j) Accounts with respect to which the account debtor
disputes liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute (but
only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(k) Accounts the collection of which Bank reasonably
determines to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect to
which the account debtor does not have its principal place of business in the
United States and that are: (1) covered by credit insurance in form and amount,
and by an insurer satisfactory to Bank less the amount of any deductible(s)
which may be or become owing thereon; or (2) supported by one or more letters of
credit in favor of Bank as beneficiary, in an amount and of a tenor, and issued
by a financial institution, acceptable to Bank; or (3) that Bank approves on a
case-by-case basis. Bank acknowledges approving Accounts owing by Fujitsu,
Hitachi, Itochu, Toshiba and Daou Technologies.
"Eligible Inventory" means that portion of Borrower's
inventory that is located at Borrower's principal place of business or such
other locations as are permitted under Section 7.10 and that complies with the
representations and warranties set forth in Section 5.5.
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"Equipment Maturity Date" means May 26, 2002.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as
in effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed
money or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
3
<PAGE> 7
"Insolvency Proceeding" means any proceeding commenced by
or against any person or entity under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in
which Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"Investment" means any beneficial ownership of (including
stock, partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any
note or notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect
on (i) the business operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means the day before the first anniversary
of the Closing Date.
"Negotiable Collateral" means all of Borrower's present
and future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Non-Formula Line" means One Million Dollars ($1,000,000).
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
4
<PAGE> 8
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising
under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and
disclosed in the Schedule;
(c) Subordinated Debt; and
(d) Indebtedness to trade creditors incurred in the
ordinary course of business.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in
the Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc., (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank and (iv) Investments made in accordance with
the investment policy in the form attached hereto.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed
in the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, provided the same have no priority over any of
Bank's security interests;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (a) through (c) above, provided that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per
annum, most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount
thereof shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
5
<PAGE> 9
"Responsible Officer" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Advance" or "Revolving Advances" means a cash
advance or cash advances under the Revolving Facility.
"Revolving Committed Line" means Four Million Dollars
($4,000,000).
"Revolving Facility" means the facility under which
Borrower may request Bank to issue cash advances, as specified in Section 2.1
hereof.
"Schedule" means the schedule of exceptions attached
hereto.
"Subordinated Debt" means any debt incurred by Borrower
that is subordinated to the debt owing by Borrower to Bank on terms acceptable
to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which
(i) any general partnership interest or (ii) more than 50% of the stock of which
by the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Tangible Net Worth" means at any date as of which the
amount thereof shall be determined, the consolidated total assets of Borrower
and its Subsidiaries minus, without duplication, (i) the sum of any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, patents, trade and service marks and names, copyrights and
research and development expenses except prepaid expenses, and (c) all reserves
not already deducted from assets, and (ii) Total Liabilities.
"Total Liabilities" means at any date as of which the
amount thereof shall be determined, all obligations that should, in accordance
with GAAP be classified as liabilities on the consolidated balance sheet of
Borrower, including in any event all Indebtedness, but specifically excluding
Subordinated Debt.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 Obligations. Borrower promises to pay to the order of Bank,
in lawful money of the United States of America, the aggregate unpaid principal
amount of all Obligations made by Bank to Borrower hereunder. Borrower shall
also pay interest on the unpaid principal amount of such Obligations at rates in
accordance the terms hereof.
2.1.1 Revolving Facility.
(a) Advances. Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Revolving Advances to Borrower
in an aggregate amount not to exceed the lesser of the Revolving Committed Line
or the Borrowing Base minus in each case the face amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit). For
purposes of this Agreement, "Borrowing Base" shall mean an amount equal to
eighty percent (80%) of Eligible Accounts. Subject to the terms and conditions
of this Agreement, amounts borrowed pursuant to this Section 2.1 may be repaid
and reborrowed at any time prior to the Maturity Date.
(b) Procedures. Whenever Borrower desires a Revolving
Advance, Borrower will notify Bank by facsimile transmission or telephone no
later than 3:00 p.m. California time, on the
6
<PAGE> 10
Business Day that the Revolving Advance is to be made. Each such notification
shall be promptly confirmed by a Payment/Advance Form in substantially the form
of Exhibit B hereto. Bank is authorized to make Revolving Advances under this
Agreement, based upon instructions received from a Responsible Officer, or
without instructions if in Bank's discretion such Revolving Advances are
necessary to meet Revolving Obligations which have become due and remain unpaid.
Bank shall be entitled to rely on any telephonic notice given by a person who
Bank reasonably believes to be a Responsible Officer, and Borrower shall
indemnify and hold Bank harmless for any damages or loss suffered by Bank as a
result of such reliance. Bank will credit the amount of Revolving Advances made
under this Section 2.1.1 to Borrower's deposit account.
(c) Maturity. The Revolving Facility shall terminate
on the Maturity Date, at which time all Revolving Advances under this Section
2.1.1 shall be immediately due and payable.
2.1.2 Letters of Credit.
(a) Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued letters of credit (each a
"Letter of Credit," collectively, the "Letters of Credit") for the account of
Borrower in an aggregate face amount not to exceed the lesser of (i) the
Revolving Committed Line or (ii) the Borrowing Base minus in each case the sum
of the then outstanding principal balance of the Revolving Advances and the face
amount of outstanding Letters of Credit; provided that the face amount of
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) shall not in any case exceed Five Hundred Thousand Dollars ($500,000).
Each such Letter of Credit shall have an expiry date no later than the Revolving
Maturity Date. All such Letters of Credit shall be, in form and substance,
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank's form of application and letter of credit agreement. All
amounts actually paid by Bank in respect of a letter of credit shall, when paid,
constitute a Revolving Advance under this Agreement.
(b) The obligation of Borrower to immediately
reimburse Bank for drawings made under Letters of Credit shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement and such Letters of Credit, under all
circumstances whatsoever. Borrower shall indemnify, defend and hold Bank
harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with any
Letters of Credit.
(c) Borrower may request that Bank issue a Letter of
Credit payable in a currency other than United States Dollars. If a demand for
payment is made under any such Letter of Credit, Bank shall treat such demand as
an advance to Borrower of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for cable transfer
to the country of which it is the currency.
(d) Upon the issuance of any Letter of Credit payable
in a currency other than United States Dollars, Bank shall create a reserve
under the Committed Line for Letters of Credit against fluctuations in currency
exchange rates, in an amount equal to ten percent (10%) of the face amount of
such Letter of Credit. The amount of such reserve may be amended by Bank from
time to time to account for fluctuations in the exchange rate. The availability
of funds under the Committed Line shall be reduced by the amount of such reserve
for so long as such Letter of Credit remains outstanding.
7
<PAGE> 11
2.1.3 Equipment Advances.
(a) At any time from the date hereof through May 26,
1999 (the "Equipment Availability Date"), Borrower may from time to time request
advances (each an "Equipment Advance" and, collectively the "Equipment
Advances") from Bank in an aggregate principal amount of up to One Million Five
Hundred Thousand Dollars ($1,500,000). The Equipment Advances shall be used to
purchase Equipment approved from time to time by Bank and shall not exceed one
hundred percent (100%) of the cost of such Equipment, excluding installation
expense, freight discounts, warranty charges and taxes. Up to thirty percent
(30%) of the Equipment Advances may be used for software and leasehold
improvements or other soft costs.
(b) Interest shall accrue from the date of each
Equipment Advance at the rate specified in Section 2.3(a), and shall be payable
monthly for each month through the month in which the Equipment Availability
Date falls. The Equipment Advance or Equipment Advances that are outstanding on
the Equipment Availability Date will be payable in thirty-six (36) equal monthly
installments of principal plus accrued interest, beginning on the twenty sixth
(26th) day of the month following the Equipment Availability Date, and
continuing through the Equipment Maturity Date, on which date the entire
principal amount and all accrued but unpaid interest shall be due and payable.
(c) When Borrower desires to obtain and Equipment
Advance, Borrower shall notify Bank (which notice shall be irrevocable) by
facsimile transmission received no later than 3:00 p.m. California time one (1)
Business Day before the day on which the Equipment Advance is to be made. Such
notice shall be in substantially the form of Exhibit B. The notice shall be
signed by a Responsible Officer and include a copy of the invoice for the
Equipment to be financed.
2.1.4 Non-Formula Advances. Subject to and upon the terms
and conditions of this Agreement, Bank agrees to make Advances ("Non-Formula
Advances") to Borrower in an aggregate amount not to exceed the Non-Formula
Line. Subject to the terms and conditions of this Agreement, amounts borrowed
pursuant to this Section 2.1.4 may be repaid and reborrowed at any time prior to
the Maturity Date.
2.2 Overadvances. If, at any time or for any reason, the amount
of Obligations owed by Borrower to Bank pursuant to Section 2.1.1 of this
Agreement is greater than the lesser of (i) the Revolving Committed Line or (ii)
the Borrowing Base, such excess shall be deemed an Advance under the Non Formula
Line. If the amount of the aggregate Obligations owed pursuant to Section 2.1.1
and Section 2.1.4 exceeds the sum of (A) the lesser of (i) the Revolving
Committed Line or (ii) the Borrowing Base plus (B) the amount of the Non-Formula
Line, Borrower shall immediately pay to Bank, in cash, the amount of such
excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate.
(i) Except as set forth in Section 2.3(b), all
Revolving Advances shall bear interest, on the average Daily Balance, at a rate
equal to the Prime Rate.
(ii) Except as set forth in Section 2.3(b), all
Equipment Advances shall bear interest, on the average Daily Balance, at a rate
equal to the Prime Rate.
(iii) Except as set forth in Section 2.3(b), all
Non-Formula Advances shall bear interest, on the average Daily Balance, at a
rate equal to the Prime Rate.
(b) Default Rate. All Obligations shall bear interest,
from and after the occurrence of an Event of Default, at a rate equal to five
(5) percentage points above the interest rate applicable immediately prior to
the occurrence of the Event of Default.
8
<PAGE> 12
(c) Payments. Interest hereunder shall be due and payable
on the twenty sixth (26th) calendar day of each month during the term hereof.
Bank shall, at its option, charge such interest, all Bank Expenses, and all
Periodic Payments against Borrower's Account No.___ , or any of Borrower's other
deposit accounts, or against the Committed Line, in which case those amounts
shall thereafter accrue interest at the rate then applicable hereunder. Any
interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder.
(d) Computation. In the event the Prime Rate is changed
from time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon California time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to Five Thousand
Dollars ($5,000), which fee shall be due on the Closing Date and shall be fully
earned and nonrefundable;
(b) Financial Examination and Appraisal Fees. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon the date hereof, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses, and, after the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
2.6 Additional Costs. In case any change in any law, regulation,
treaty or official directive or the interpretation or application thereof by any
court or any governmental authority charged with the administration thereof or
the compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to
its performance under this Agreement,
9
<PAGE> 13
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 Term. This Agreement shall become effective on the Closing
Date and, subject to Section 12.7, shall continue in full force and effect for a
term ending on the Maturity Date. Notwithstanding the foregoing, Bank shall have
the right to terminate its obligation to make Advances under this Agreement
immediately and without notice upon the occurrence and during the continuance of
an Event of Default. Notwithstanding termination, Bank's Lien on the Collateral
shall remain in effect for so long as any Obligations are outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Advance. The obligation of
Bank to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to incumbency and resolutions authorizing the execution and delivery of
this Agreement;
(c) a negative pledge agreement in substantially the same
form as Exhibit E attached hereto;
(d) financing statement (Form UCC-1);
(e) insurance certificate;
(f) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof; and
(g) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank
to make each Advance, including the initial Advance, is further subject to the
following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in
Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Advance as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Advance. The making of
each Advance shall be deemed to be a representation and warranty by Borrower on
the date of such Advance as to the accuracy of the facts referred to in this
Section 3.2(b).
10
<PAGE> 14
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
Notwithstanding the foregoing or any other provision in this Agreement, Borrower
is not required to register its copyrights or file any documents with the United
States Copyright Office to perfect Bank's security interest in any part of the
Collateral.
4.2 Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona
fide existing obligations. The property giving rise to such Eligible Accounts
has been delivered to the account debtor or to the account debtor's agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material
respects of good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Except as disclosed
in the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.
11
<PAGE> 15
5.7 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral. Borrower does not have knowledge of
any such pending or threatened actions or proceedings.
5.8 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.9 Solvency. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's failure
to comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could reasonably be
expected to have a Material Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused to
be filed all tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.14 Government Consents. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted.
5.15 Full Disclosure. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
12
<PAGE> 16
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could reasonably be expected to have a Material Adverse
Effect. Borrower shall maintain, and shall cause each of its Subsidiaries to
maintain, to the extent consistent with prudent management of Borrower's
business, in force all licenses, approvals and agreements, the loss of which
could reasonably be expected to have a Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause
each Subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could reasonably be expected to have a Material Adverse Effect or a
material adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each month, a company prepared consolidated balance sheet
and income statement covering Borrower's consolidated operations during such
period, certified by a Responsible Officer; (b) as soon as available, but in any
event within one hundred twenty (120) days after the end of Borrower's fiscal
year, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an unqualified opinion
on such financial statements of an independent certified public accounting firm
reasonably acceptable to Bank; (c) within five (5) days upon becoming available,
copies of all statements, reports and notices sent or made available generally
by Borrower to its security holders or to any holders of Subordinated Debt and
all reports on Form 10-K and 10-Q filed with the Securities and Exchange
Commission; (d) promptly upon receipt of notice thereof, a report of any legal
actions pending or threatened against Borrower or any Subsidiary that could
result in damages or costs to Borrower or any Subsidiary of One Hundred Thousand
Dollars ($100,000) or more; and (e) such budgets, sales projections, operating
plans or other financial information as Bank may reasonably request from time to
time.
Within thirty (30) days after the last day of each month in which any
amount is outstanding under Section 2.1.1, 2.1.2 or 2.1.4 (or as a condition to
requesting any such amount at any time that Bank does not then have a current
Borrowing Base Certificate), Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer in substantially the form of Exhibit
C hereto, together with aged listings of accounts receivable and accounts
payable.
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted no
more often than every six (6) months unless an Event of Default has occurred and
is continuing.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good
and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
13
<PAGE> 17
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary
to make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form,
with such companies, and in such amounts as reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. Unless an Event
of Default is continuing, Borrower may at its option, use the proceeds of
casualty insurance to repair or replace lost or damaged property. Subject to the
preceding sentence, all proceeds payable under any such policy shall, at the
option of Bank, be payable to Bank to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
depository and operating accounts with Bank.
6.8 Tangible Net Worth. Borrower shall maintain, as of the last
day of each calendar month, a Tangible Net Worth, plus Subordinated Debt, plus
deferred revenues, of not less than Ten Million Dollars ($10,000,000).
6.9 Liquidity Coverage Ratio. Borrower shall maintain, as of the
last day of each calendar month, Liquidity of not less than 1.50 to 1.00.
"Liquidity" means a ratio of (i) the sum of unrestricted cash plus cash
equivalents divided by (ii) the outstanding aggregate amount of Equipment
Advances. After Borrower has maintained a Debt Service Coverage of not less than
1.50 to 1.00 for two consecutive fiscal quarters, the requirement in the
immediately preceding sentence shall expire, and Borrower thereafter shall
maintain, as of the last day of each fiscal quarter, a Debt Service Coverage of
at least 1.50 to 1.00.
6.10 Further Assurances. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
14
<PAGE> 18
7.1 Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than: (i) Transfers
of Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment or Equipment
that Borrower does not expect to use in the ordinary course of its business; or
(iv) Transfers of other property in an aggregate amount not to exceed $100,000.
7.2 Change in Business. Engage in any business, or permit any of
its Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change in Borrower's ownership.
Borrower will not, without thirty (30) days prior written notification to Bank,
relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any
of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person, provided
one or more Subsidiaries may merge with Borrower or another Subsidiary as long
as Borrower is the surviving entity.
7.4 Indebtedness. Create, incur, assume or be or remain liable
with respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any
Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock.
7.7 Investments. Directly or indirectly acquire or own, or make
any Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman,
or similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could
15
<PAGE> 19
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on the Collateral or the priority of Bank's Lien on the Collateral, or
permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event
of Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the principal of,
or any interest on, any Advances when due and payable; or fails to pay any
portion of any other Obligations not constituting such principal or interest,
including without limitation Bank Expenses, within thirty (30) days of receipt
by Borrower of an invoice for such other Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within twenty (20) days after Borrower receives notice thereof
or any officer of Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the twenty (20) day period or
cannot after diligent attempts by Borrower be cured within such twenty (20) day
period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional reasonable period (which shall not in any case
exceed forty-five (45) days) to attempt to cure such default, and within such
reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Advances will be required to be
made during such cure period);
8.3 Material Adverse Change. If there occurs a material adverse
change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within twenty (20) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within twenty (20)
days after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within thirty (30)
days (provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could reasonably be expected to have a Material
Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account
of Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
16
<PAGE> 20
8.8 Judgments. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least One Hundred
Thousand Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of twenty (20) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);
(b) Cease advancing money or extending credit to or for
the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(d) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
(e) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Bank is hereby granted a license or other right,
solely pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(g) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
17
<PAGE> 21
(h) Bank may credit bid and purchase at any public sale;
and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions
with respect to Borrower's policies of insurance; and (e) settle and adjust
disputes and claims respecting the accounts directly with account debtors, for
amounts and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. At any time from the date of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Revolving Facility as Bank deems necessary to protect Bank
from the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type discussed in Section 6.6 of this Agreement, and take any
action with respect to such policies as Bank deems prudent. Any amounts so paid
or deposited by Bank shall constitute Bank Expenses, shall be immediately due
and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies
with reasonable banking practices, Bank shall not in any way or manner be liable
or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
damage thereto occurring or arising in any manner or fashion from any cause; (c)
any diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
18
<PAGE> 22
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
If to Borrower: Marimba, Inc.
440 Clyde Avenue
Mountain View, CA 94043
Attn: Mr. Fred Gerson
FAX: (650) 930-5602
If to Bank: Silicon Valley Bank
1731 Embarcadero Road, Suite 220
Palo Alto, CA 94303
Attn: Mr. Chris Wagner
FAX: (650) 812-0640
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and inure
to the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
19
<PAGE> 23
12.3 Time of Essence. Time is of the essence for the performance
of all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made
in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run,
provided that so long as the obligations set forth in the first sentence of this
Section 12.7 have been satisfied, and Bank has no commitment to make any
Advances or to make any other loans to Borrower, Bank shall release all security
interests granted hereunder and redeliver all Collateral held by it in
accordance with applicable law.
12.8 Confidentiality. In handling any confidential information
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order, (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and (v)
as Bank may determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include information that
either: (a) is in the public domain or in the knowledge or possession of Bank
when disclosed to Bank, or becomes part of the public domain after disclosure to
Bank through no fault of Bank; or (b) is disclosed to Bank by a third party,
provided Bank does not have actual knowledge that such third party is prohibited
from disclosing such information.
20
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
MARIMBA, INC.
By: /s/ FRED GERSON
-------------------------------
Title: VP/CFO
----------------------------
SILICON VALLEY BANK
By: /s/ CHRISTOPHER WAGNER
-------------------------------
Title: Vice President
----------------------------
21
<PAGE> 25
EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, income tax refunds, payments of
insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, letters of credit, certificates of deposit,
instruments and chattel paper now owned or hereafter acquired and Borrower's
Books relating to the foregoing;
(f) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not be deemed to
include any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; any patents,
trademarks, servicemarks and applications therefor; any trade secret rights,
including any rights to unpatented inventions, know-how, operating manuals,
license rights and agreements and confidential information, now owned or
hereafter acquired; or any claims for damages by way of any past, present and
future infringement of any of the foregoing; provided Collateral shall include
the proceeds of any of the foregoing.
Notwithstanding the foregoing, the Collateral shall not include
Equipment that Borrower leases from a third party to the extent that contracts
evidencing such lease prohibit the granting of a security interest therein to
any third party; provided, however, that Collateral shall include such Equipment
and the proceeds thereof upon the cessation (by termination of such contract or
otherwise) of the contractual restriction on the grant of a security interest in
such otherwise excluded Equipment.
22
<PAGE> 26
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., PACIFIC TIME
TO: CENTRAL CLIENT SERVICE DIVISION DATE: _____________
TIME: _____________
FAX#: (408) 496-2426
FROM:__________________________________________________________________________
CLIENT NAME (BORROWER)
REQUESTED BY:__________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:__________________________________________________________
PHONE NUMBER:__________________________________________________________________
FROM ACCOUNT # ______________________________ TO ACCOUNT # ____________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $___________________________
PRINCIPAL PAYMENT (ONLY) $___________________________
INTEREST PAYMENT (ONLY) $___________________________
PRINCIPAL AND INTEREST (PAYMENT) $___________________________
OTHER INSTRUCTIONS:____________________________________________________________
_______________________________________________________________________________
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the date
of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
BANK USE ONLY
TELEPHONE REQUEST:
4
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
______________________________ ______________________________
Authorized Requester Phone #
______________________________ ______________________________
Received By (Bank) Phone #
______________________________
Authorized Signature (Bank)
23
<PAGE> 27
EXHIBIT C
BORROWING BASE CERTIFICATE
- --------------------------------------------------------------------------------
Borrower: Marimba, Inc. Lender: Silicon Valley Bank
Commitment Amount: $4,000,000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ________ $____________
2. Additions (please explain on reverse) $____________
3. TOTAL ACCOUNTS RECEIVABLE $____________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $____________
5. Balance of 50% over 90 day accounts $____________
6. Concentration Limits* $____________
7. Foreign Accounts $____________
8. Governmental Accounts $____________
9. Contra Accounts $____________
10. Promotion or Demo Accounts $____________
11. Intercompany/Employee Accounts $____________
12. Other (please explain on reverse) $____________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $____________
14. Eligible Accounts (#3 minus #13) $____________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $____________
BALANCES
16. Maximum Loan Amount $____________
17. Total Funds Available [Lesser of #16 or #15] $____________
18. Outstanding under Sublimits ( ) $____________
19. RESERVE POSITION (#17 minus #18) $____________
</TABLE>
*except pre-approved Accounts which shall be 35%
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS: BANK USE ONLY
MARIMBA, INC. Rec'd By: ____________________
Auth Signer
Date: ________________________
By:
------------------------------- Verified: ____________________
Authorized Signer Auth. Signer
Date:_________________________
24
<PAGE> 28
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: MARIMBA, INC.
The undersigned authorized officer of Marimba, Inc. hereby certifies
that in accordance with the terms and conditions of the Loan and Security
Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in
complete compliance for the period ending ______________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
<TABLE>
<CAPTION>
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
<S> <C> <C> <C>
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 120 days Yes No
A/R & A/P Agings Monthly within 30 days Yes No
A/R Audit Initial and Semi-Annual Yes No
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
<S> <C> <C> <C> <C>
Maintain on a Monthly Basis:
Minimum Tangible Net Worth* $10,000,000 $_________ Yes No
Minimum Liquidity** 1.5:1.00 _____:1.00 Yes No
</TABLE>
*includes Subordinate Debt and deferred revenues
**After Borrower has maintained a Debt Service Coverage of not less than
1.50 to 1.00 for two consecutive fiscal quarters, the requirement in the
immediately preceding sentence shall expire, and Borrower thereafter
shall maintain, as of the last day of each fiscal quarter, a Debt
Service Coverage of at least 1.50 to 1.00.
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Rec'd By: ____________________
Sincerely, Auth Signer
Date: ________________________
MARIMBA, INC.
Verified: ____________________
SIGNATURE Auth. Signer
Date:_________________________
Compliance Status: Yes No
- -------------------------------
TITLE
- -------------------------------
DATE
25
<PAGE> 29
EXHIBIT E
NEGATIVE PLEDGE AGREEMENT
This Negative Pledge Agreement is made as of May 27, 1998, by and
between MARIMBA, INC. ("Borrower") and SILICON VALLEY BANK ("Bank").
In connection with the Loan Documents being concurrently executed
between Borrower and Bank, Borrower agrees as follows:
1. Except as permitted in the Loan Documents (including without
limitation Section 7.1 of the Loan and Security Agreement of even date
herewith), Borrower shall not sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber any of Borrower's intellectual
property, including, without limitation, the following:
a. Any and all copyright rights, copyright applications,
copyright registrations and like protection in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held (collectively, the "Copyrights");
b. Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
c. Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;
d. All patents, patent applications and like protections,
including, without limitation, improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same, including, without
limitation, the patents and patent applications (collectively, the "Patents");
e. Any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks (collectively, the "Trademarks");
f. Any and all claims for damages by way of past, present and
future infringements of any of the rights included above, with the right, but
not the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;
g. All licenses or other rights to use any of the Copyrights,
Patents or Trademarks and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
h. All amendments, extensions, renewals and extensions of any of
the Copyrights, Patents or Trademarks; and
i. All proceeds and products of the foregoing, including, without
limitation, all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
2. Nothing in this Negative Pledge Agreement shall restrict Borrower
from licensing its software in the ordinary course of its business.
3. It shall be an Event of Default under the Loan Documents between
Borrower and Bank if there is a breach of any term of this Negative Pledge
Agreement.
4. Capitalized items used herein without definition shall have the same
meanings as set forth in the Loan and Security Agreement of even date herewith.
MARIMBA, INC. SILICON VALLEY BANK
By: By:
------------------------------- -------------------------------
Title: Title:
---------------------------- ----------------------------
26
<PAGE> 30
Schedule of Exceptions
The following constitutes an itemization by Marimba, Inc. ("Borrower") of
exceptions to the items set forth in the Loan and Security Agreement by and
between the Borrower and Silicon Valley Bank dated as of May __, 1998. Section
references are for convenience only; disclosures made under the headings of one
section may apply to augment or qualify disclosures under one or more sections.
Section 1. Definitions.
Permitted Investments (a): Includes any investment made pursuant to
Borrower's investment policy, a copy of which is attached.
Permitted Liens (a): Includes any lien on equipment purchased pursuant
to the Master Lease Agreement with Lighthouse Capital Partners II, L.P. dated
January 15, 1997 (the "Equipment Lease"). To date, the Company has drawn down
approximately $378,218 of credit under the Equipment Lease. The line of credit
under the Equipment Lease has expired.
Section 5.1 Organization, Good Standing and Qualification. The Company
is qualified to do business as a foreign corporation in the state of California
under the name "Marimba Systems, Inc." The Company is qualified to do business
as a foreign corporation in the state of New York.
Section 5.6 Name; Location of Chief Executive Officer. See 5.1 above.
Section 5.7 Litigation. On March 3, 1997, Novadigm, Inc. ("Novadigm")
filed a complaint against the Company alleging patent infringement by the
Company. The complaint alleges that the Company, by making, using or selling
computer software, including its Castanet products, infringes certain patent
rights under a U.S. patent held by Novadigm. The complaint seeks injunctive
relief, damages, exemplary damages and attorneys' fees. On May 2, 1997, the
Company filed an answer to Novadigm's complaint and a counter-claim for
declaratory relief in which the Company denies that it infringes Novadigm's
patent and asserts that the Novadigm patent is invalid and unenforceable. The
litigation and related discovery matters are currently ongoing.
[ATTACH - MARIMBA INVESTMENT POLICY]
<PAGE> 31
Investment Rules
Purpose: Invest excess cash temporarily in vehicles consistent with liquidity,
safety and preservation of capital for future long-term investment in Marimba.
The maturities of individual vehicles shall be consistent with the cash needs of
the Company and shall be less than 2 years.
The Company will restrict short-term investments to the following categories of
investment vehicles:
o Direct obligations of the U.S.A. and obligations of any agency
which are fully guaranteed by same.
o Direct obligations of, and obligations fully guaranteed by any
of the fifty states of the U.S.A. that are rated investment
grade by Standard & Poors or equivalently by Moodys.
o Indebtedness of any county or other local governmental body
within the U.S. rated at least A1 or AA by Standard & Poors or
equivalently by Moodys.
o Investments in any U.S. corporation rated A1 or AA by Standard &
Poors or equivalently by Moodys.
o Money market investments, deposits or notes issued by any
commercial bank who has a net worth of at least $100 million and
whose commercial paper rating is at least A1 or AA by Standard
and Poors or equivalently by Moodys.
o Money market investments, deposits, notes or money market
investments directly guaranteed by any non-U.S. commercial bank
ranked among the 50 largest banks in the world (as measured by
assets and ranked by the American Banker Journal) that has a net
worth of at least U.S. $500 million or whose rating is at least
A1 or AA by Standard & Poors or equivalently by Moodys.
Marimba shall not borrow funds from any institution for speculative
investment purposes.
Marimba shall establish and maintain accounts with leading financial
firms which have an A1 or AA rating by Standard & Poors or equivalently
by Moodys, a company formerly considered a primary government securities
dealer, or any entity that meets the criteria of a domestic or
international commercial bank.
Portfolio Parameters:
Marimba shall, in no event, invest more than the lesser of $2
million or 20% of the total investment portfolio with any one
issuer, except for the U.S. Government or Agency thereof.
Marimba shall, in no event, invest more than 50% of the
portfolio in any one industry group, as is consistent with
safely, liquidity and preservation of capital.
Marimba shall, in no event, invest more than 20% of the
portfolio in entities or issuers of any one country other than
the U.S.A., as is consistent with safety, liquidity and
preservation of capital. Investment in issues of these entities
shall be limited to U.S. denominated currency obligations of the
50 largest non-U.S. based banks, each with a net worth in excess
of $500 million.
Marimba shall not invest in any derivative securities of any
kind.
Controls:
The cash investment group shall prepare and regularly publish a Cash
Flow Report and an investment report, without fail, including a complete
report of investments held, their issuers, maturities, amounts invested
and market value as of report date.
The Investment Committee shall include: The Chief Financial Officer,
Controller and President. As deemed necessary, the Board of Directors
may appoint other members to the Investment Committee.
<PAGE> 32
Authorized investors for Marimba include: The President, Chief Financial
Officer and Controller.
Exceptions to this policy may only be made by the President or Chief
Financial Officer, and must be made in writing.
The cash investment group, at least annually, shall determine the total
return on (investable) assets and document said return on investment
against Fed Funds on an after tax basis.
There shall be at least one unscheduled audit by a non-Treasury auditor
of cash investment activities each year.
All confirmations of investments shall be received and approved by a
person not directly involved in cash investments.
It is the responsibility of the investment group to immediately report
to the Investment Committee any credit downgrade, default, bankruptcy or
event which may affect an investment's value. The report shall include
an analysis of available elections with respect to the investment in
question. The Investment Committee shall also investigate the original
transaction to verify the investment's compliance at the time. Assuming
the original transaction was within this policy's mandate, no punitive
action would be taken.
Securities or investments which no longer meet the criteria of this
policy should be sold or exchanged when market conditions permit
realization of reasonable value. The Investment Committee shall decide
an appropriate strategy regarding such an investment.
The Chief Financial Officer shall have oversight responsibility for the
cash investments and shall take steps to ensure conformance to policies.
Authorized cash managers for Marimba shall have the authority to
purchase and sell securities only as permitted by the investment
guidelines set forth in this document.
Electronic Funds Transfer shall be an acceptable vehicle to move funds.
All vendors will receive written instructions from the Chief Financial
Officer informing them of the authorized investors and the receiving
location of any Marimba funds.
<PAGE> 33
- --------------------------------------------------------------------------------
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Marimba, Inc. Bank: Silicon Valley Bank
- --------------------------------------------------------------------------------
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $4,000,000, and a variable rate Equipment Loan of a principal
amount of $1,500,000 and a variable rate Non-Formula Line of Credit of a
principal amount up to $1,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
<TABLE>
<CAPTION>
Revolving Line Equipment Loan Non-Formula
-------------- -------------- -----------
<S> <C> <C> <C>
Amount paid to Borrower directly: $___________ $___________ $___________
Undisbursed Funds $___________ $___________ $___________
Principal $4,000,000 $1,500,000 $1,000,000
</TABLE>
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
<TABLE>
<S> <C>
Charges Paid in Cash:
$5,000 Loan Fee
$_____ Accounts Receivables Audit
$_____ UCC Search Fees
$_____ UCC Filing Fees
$_____ Outside Counsel Fees and Expenses
(Estimate)
Total Charges Paid in Cash $_____
</TABLE>
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered ______ the amount of any loan payment. If the funds
in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF _____________, 1998.
BORROWER:
MARIMBA, INC.
- -------------------------------
Authorized Officer
<PAGE> 34
- --------------------------------------------------------------------------------
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: Marimba, Inc. BANK: Silicon Valley Bank
- --------------------------------------------------------------------------------
INSURANCE REQUIREMENTS. Marimba, Inc. ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
<TABLE>
<S> <C>
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation
that coverage will not be cancelled or
diminished without a minimum of twenty (20)
days' prior written notice to Bank.
</TABLE>
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of May 27, 1998, or earlier. Grantor acknowledges and agrees that
if Grantor fails to provide any required insurance or fails to continue such
insurance in force, Bank may do so at Grantor's expense as provided in the Loan
and Security Agreement. The cost of such insurance, at the option of Bank, shall
be payable on demand or shall be added to the indebtedness as provided in the
security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MAY 27, 1998.
GRANTOR:
MARIMBA, INC.
x
-------------------------------
Authorized Officer
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE:__________________________________ PHONE:______________
AGENT'S NAME:__________________________
INSURANCE COMPANY:_____________________
POLICY NUMBER:_________________________
EFFECTIVE DATES:_______________________
COMMENTS:______________________________
<PAGE> 35
CORPORATE RESOLUTIONS TO BORROW
- --------------------------------------------------------------------------------
BORROWER: MARIMBA, INC.
- --------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of Marimba, Inc.
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the State of Delaware.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Certificate of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
<TABLE>
<CAPTION>
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
<S> <C> <C>
- ------------------------- ------------------------- -------------------------
- ------------------------- ------------------------- -------------------------
- ------------------------- ------------------------- -------------------------
- ------------------------- ------------------------- -------------------------
- ------------------------- ------------------------- -------------------------
</TABLE>
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of May 27, 1998 (the "Loan
Agreement").
EXECUTE NOTES. To execute and deliver to Bank the promissory note or
notes of the Corporation, on Lender's forms, at such rates of interest and on
such terms as may be agreed upon, evidencing the sums of money so borrowed or
any indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
1
<PAGE> 36
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on May ___, 1998 and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X
-------------------------------
2
<PAGE> 1
EXHIBIT 10.7
MARIMBA, INC.
OEM AGREEMENT
This OEM Agreement ("Agreement") is entered as of March 6th, 1998 (the
"Effective Date") by and between Marimba, Inc. ("Marimba"), a Delaware
corporation, and Tivoli Systems Subsidiary, Inc. ("OEM"), a Texas corporation
and a wholly-owned subsidiary of International Business Machines Corporation
("IBM"), a New York corporation.
1. License Grant.
a. Subject to all the terms of this Agreement, Marimba grants OEM a
right to:
(i) reproduce and distribute copies of the Programs (as
defined on Attachment A), but only as integrated into
and/or bundled with an OEM Application (as defined on
Attachment A) and only to end-user customers directly or
through Subdistributors (as defined in Section 1(b)) in
the Territory. This license includes the right for OEM
to make Derivative Works (as defined on Attachment A) of
the Program to the extent necessary to perform any
integration of the Program with an OEM Application.
(ii) to use, display and perform the Programs solely for the
purpose of demonstration, testing and training.
(iii) to permit the OEM Internet Business Unit ("IBU") to use
the Programs internally and externally to update IBU
applications and programs (the "IBU Update License");
provided, all copies of the Program (excluding the
Tuner) must be installed at the IBU.
(iv) to make Derivative Works of Externals and to reproduce
and distribute such Externals and Derivative Works as
part of OEM products, but solely for the purpose of
ensuring compatibility and consistency with the Programs
as integrated into and/or bundled with an OEM
Application.
b. OEM shall have the right to sublicense the license rights set forth
above to the extent necessary to distribute the Programs as integrated or
bundled with the OEM Applications. OEM shall have the right to distribute the
programs through OEM's standard resellers, distributors or other channels
("Subdistributors") provided that each Subdistributor be a subdistributor which
OEM uses for distributing its own similar level products and that the terms and
conditions of distribution of the Programs shall be consistent with the terms
under which OEM's products are distributed and not less protective of Marimba
than such terms are protective of OEM.
c. This license grant is non-exclusive and, except as expressly set
forth herein, non-transferable and non-sublicensable. Marimba may not revoke
this license grant prior to termination of the Agreement except upon a finding
by a court (or arbitrator, mediator or similar party empowered by mutual
agreement of the parties) that OEM is in material breach of the Agreement.
Nothing in this Agreement shall be construed as limiting in any manner Marimba's
marketing or distribution activities or its appointment of other OEMs, dealers,
resellers, licensees or agents in general or in the Territory.
d. Notwithstanding anything else, Marimba and its licensors retain (i)
all title to, and, except as expressly and unambiguously licensed herein, all
rights to the Programs, all copies thereof (by whomever produced) and all
related documentation and materials, (ii) all of their service marks,
trademarks, trade names or any other designations, and (iii) all copyrights,
patent rights, trade secret rights and other proprietary rights in the Programs.
Except as set forth in Section 15 and on Attachment I, OEM will have no right to
receive or license any source code with respect to the Programs.
1
<PAGE> 2
2. Delivery of the Programs and Promotional Material.
Marimba shall deliver masters of the Programs to OEM within 10 days of the
Effective Date ("Program Masters"). The Program Masters shall create copies
which are required to be enabled on a per copy basis with an enabling key or
password (an "Enabling Key"). Marimba shall make Enabling Keys available to OEM
on a per transaction basis or on such other basis as the parties shall mutually
agree; provided that any mechanism which permits OEM to directly create Enabling
Keys (including by Marimba providing OEM with an Enabling Key "tool") shall
require an automatic email notification to Marimba as each Enabling Key is
issued. (In the event Marimba provides OEM with such an Enabling Key tool, then
OEM shall have a license hereunder to use such tool for the purpose of issuing
Enabling Keys pursuant to this Agreement; any such Enabling Key tool will
require completion of information substantially similar to that set forth on
Attachment D). Any end-user documentation, manuals and/or marketing materials
for the Programs shall be made available to OEM (at Marimba's election) in
either electronic or printed form. Printed copies of the material may be made by
OEM at OEM's expense. If at any time during this Agreement Marimba notifies OEM
of a replacement version of any Program Master or documentation, OEM shall use
reasonable commercial efforts to cease use and/or distribution of the prior
version as soon as commercially practicable after Marimba makes the replacement
version available to OEM (but in any event shall cease use of the prior version
as of OEM's next release (or, if the next release is less than 3 months from the
date of receipt of the new Program Master, a corresponding commercially
reasonable period of time but in no event later than the next following
release)).
3. End-User Restrictions. No distribution or license of a
copy of a Program by OEM shall be made except pursuant to an enforceable end
user license agreement at least as protective of Marimba and its suppliers as
the terms set forth in Marimba's then-current end-user license agreement for
such Program (the "Standard License Terms"; a current copy of which is attached
hereto as Attachment C) or such OEM end-user license agreement which is
substantially similar thereto and approved in advance by Marimba. Furthermore,
except for copies for demonstration or evaluation purposes for a limited period
of time (not to exceed 60 days), no license of a Program may be made or copy of
a Transmitter may be distributed except pursuant to access license restrictions
materially equivalent to one of the User Access License terms set forth on
Attachment A ("Access License Terms"). Marimba shall have the right to revise
the Standard License Terms and Access License terms upon the release of an
Update or in order to comply with government regulations or third-party code
requirements; any such revised terms shall be consistent with the Standard
License Terms and Access License Terms generally provided by Marimba to its
customers, resellers and distributors and Marimba shall provide OEM with notice
of any such change as far in advance as commercially reasonably practicable. OEM
shall be obligated to implement any new Access License Terms or Standard License
Terms as soon as commercially practicable after receipt of the new terms,
provided that OEM shall have until its next release (or, if the next release is
less than 3 months from the date of receipt of the new terms, a corresponding
commercially reasonable period of time but in no event later than the next
following release) to implement such changes. In the event that any new Standard
License Terms or Access License Terms would cause OEM a substantial material
administrative or financial burden to implement, then OEM and Marimba agree to
meet and negotiate in good faith regarding the manner in which OEM will
implement such revised terms. OEM acknowledges that Marimba may be required to
include certain Standard License Terms or Access License Terms to comply with
government and/or third-party supplier requirements or the like and OEM further
acknowledges that certain Programs and/or Updates may not be distributed except
pursuant to such terms.
4. Customer Support; Training.
a. End-user Support Obligations. OEM shall be
responsible for all front-line support for the Programs. For purposes of this
Agreement, the term Support Service is defined as the service provided when a
customer identifies an error or has a question regarding installation or use of
a Program. There are three levels: "Level 1" is the Support Service provided in
response to the customer's initial contact identifying an error or need for
basic assistance regarding installation or use. "Level 2" is the Support Service
provided to reproduce and attempt to correct any error, to find that the service
provider cannot reproduce such error, or for more advanced questions regarding
installation or use. "Level 3" is the Support Service provided to isolate the
error at the component level of the Programs. OEM shall be responsible for all
Level 1 and Level 2 Support Service and Marimba shall be responsible for all
Level 3 Support Service for copies of Programs distributed by OEM hereunder
(which support shall be provided by Marimba directly to OEM's designated support
managers only). As soon as
2
<PAGE> 3
reasonably practicable after general release (but in no event later than with
respect to Marimba's other resellers or distributors), Marimba shall provide
Updates at no charge directly to OEM for use and distribution pursuant to the
license grants set forth in Section 1 of this Agreement.; notwithstanding the
foregoing, Updates may be distributed by OEM only to end-user customers for
which OEM has paid Marimba an annual support and maintenance fee in accordance
with Section 5.a. below. Marimba will use commercially reasonable efforts to
provide advance notice to OEM of each Update.
b. Backline Support. During the term of the Agreement,
Marimba shall provide reasonable backline support for the Programs (i.e.,
support that requires access and manipulation of any part of the Programs'
source code) during normal business hours directly to one or more designated
support managers of OEM; OEM shall designate at least one support manager within
30 days of the Effective Date. As soon as commercially practical thereafter,
such support manager shall attend and pass all courses required to become a
Marimba Certified Consultant. Marimba's sole obligation with respect to the
Programs or documentation errors will be to use commercially reasonable efforts
to correct, at its expense, any reproducible error about which it receives
written notice. The obligations contained in this Section 4 are contingent upon
proper use of the Programs and shall not apply if the Programs are (i) modified
by any party other than Marimba and in Marimba's reasonable judgment such
modification caused the error or (ii) used on or with a version of a platform
which Marimba does not support at the time of such use. As of the Effective
Date, the supported platforms are Microsoft Windows NT, Microsoft Windows 95 and
Sun Solaris. Upon termination of this Agreement, at the request of OEM, Marimba
shall continue the service set forth in this Section 4.b. at its then standard
rates for a period not to exceed 12 months from the date of termination. OEM
shall also receive partner support consisting of: (i) access to senior Marimba
support engineers, (ii) partner-level priority routing of hotline support
inquiries, and (iii) access to the Marimba Partner Knowledge Exchange Program
for one senior engineer of OEM. Partner service is provided by Marimba directly
to OEM and may not be transferred to an OEM customer or any other party. The
Marimba Partner Knowledge Exchange Program permits a senior OEM engineer to
spend a designated period of time (not to exceed four (4) weeks) on-site at
Marimba working with Marimba's support engineers. All exchanges are subject to
Marimba's standard terms for visiting engineers and shall be held at a date and
time as mutually agreed upon by the parties; travel, lodging and related
expenses are the obligation of OEM. Marimba agrees to continue hotline support
for each release of a Program for at least 12 months from release of the
successor or replacement.
c. End-User Warranty Claims. In the event OEM receives a
warranty claim with respect to the Program component of an OEM Application
within 90 days of purchase by the end-user customer, then OEM shall, as soon as
commercially practicable (but in no event more than 10 days) thereafter, notify
Marimba of such claim in writing and shall cooperate with Marimba to remedy the
situation in accordance with the support procedures set forth in this Section 4.
In the event that neither OEM nor Marimba is able to remedy the situation to the
end-user customer's satisfaction, then Marimba shall credit OEM hereunder an
amount equal to the amount actually paid by OEM to Marimba with respect to such
purchase, provided that: (i) OEM has accepted a return of the OEM Application
and refunded full payment to the end-user customer, (ii) a refund would have
been due pursuant to Marimba's then-current standard end-user limited warranty
(as if such limited warranty were for a 90 day period) (a copy of which is
included in the Standard Terms attached hereto as Attachment C) and (iii) the
problem was caused by the Program as delivered by Marimba. This Section 4.c.
sets forth OEM's sole remedy from Marimba in the event of a warranty claim with
respect to a Program and Marimba shall have no liability with respect to any
warranty claim not received within 90 days of purchase by an end-user customer.
5. Fees.
a. For each copy of a Program distributed, OEM shall pay
Marimba (i) the associated User Access License fee (in U.S. dollars) set forth
on Marimba's then-current published Worldwide Price List (the current version of
which is included as Attachment B), less the discount described in Attachment A
and (ii) a first year support and maintenance fee as calculated according to
Attachment A; and, in addition, if an end user customer elects to purchase from
OEM maintenance and support for Programs for additional years, OEM will pay
Marimba the same fee for such maintenance and support for any subsequent year.
Marimba shall have the right, in
3
<PAGE> 4
its sole discretion, from time to time or at any time, to establish, change,
alter, or amend such prices with 30 days written notice.
b. OEM shall deliver to Marimba within 30 business days
after the end of each month a report (the "OEM Report") (i) setting forth the
number of copies of the Program and associated User Access Licenses distributed
(which shall include the same information as set forth in Attachment D), (ii)
detailing support and maintenance due for new customers and annual renewals of
existing customers and (iii) calculating all fees due to Marimba with respect to
the preceding month. The OEM Report shall contain all sales information of which
OEM is aware as of the issuance of such OEM Report; any sales information
received by OEM after the issuance of an OEM Report shall be included by OEM in
the next subsequent OEM Report. OEM shall remit to Marimba the amount due
pursuant to the report within 30 calendar days of the end of such month. OEM
shall pay all amounts due hereunder in U.S. dollars in the U.S. Marimba shall
have the right to invoice OEM at the end of each month for all Enabling Keys
issued during such month and for all new and recurring support and maintenance
fees in the event OEM has not issued its complete required report to Marimba.
Either party shall have the right to conduct a reconciliation of any payments,
invoices and reports from the other party against such party's own records and
each party agrees to negotiate in good faith towards a resolution of any
disagreement regarding amounts owed. OEM shall pay a late fee on any amount not
paid when due under this Agreement equal to the lower of [***]* for such amount
for the period such payment is delinquent; provided that the late fee shall not
apply to any outstanding amount which is reasonably disputed and documented by
OEM.
c. OEM shall not have a fee payment obligation pursuant
to Section 5.b. above with respect to copies of the Program: (A) used by OEM or
its agents pursuant to Section 1.a.(ii) for demonstration, testing and training
purposes, (B) used by the IBU pursuant to Section 1.a. (iii), (C) used by OEM
internally solely for integration purposes pursuant to Section 1.a.(i), and (D)
distributed by OEM solely for evaluation purposes for a period not to exceed 60
days.
d. OEM shall have the right at its election to credit
towards fees due hereunder any or all of the unused portion of the Initial
Commitment Amount under the Reseller Agreement by and between OEM and Marimba
dated as of August 14, 1997. Any balance of such Initial Commitment Amount
existing as of the termination of the Reseller Agreement shall be automatically
credited by Marimba to OEM hereunder. Any amount of the Initial Commitment
Amount under the Reseller Agreement credited to Reseller hereunder shall be
referred to hereunder as the "Remaining Reseller Initial Commitment Amount". Any
surviving rights Reseller may have under the terms of the Reseller Agreement
with respect to any portion of the Remaining Reseller Initial Commitment Amount
actually credited from the Reseller Agreement to this Agreement shall not
terminate under such Reseller Agreement until such time as such dollars are
consumed by OEM hereunder.
e. OEM shall pay Marimba the OEM Initial Commitment
Amount in two payments on the dates specified Attachment A. Such Initial OEM
Commitment Amount is non-refundable except as otherwise expressly specified in
Sections 12 and 13 of this Agreement. OEM may distribute the number of User
Access Licenses which corresponds to the then-paid portion of the Initial OEM
Commitment Amount (as determined according to the methodology set forth in
Attachment A) without payment of any further royalties to Marimba.
f. Other than as set forth in Section 5.c. with respect
to the OEM Initial Commitment Amount and in Section 12 with respect to extension
of the initial term of this Agreement, this Agreement shall not be construed as
a commitment or obligation, express or implied, on the part of OEM to pay any
minimum fees or to market, license, or distribute any copies or related User
Access Licenses.
- ------------------
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
4
<PAGE> 5
6. Other OEM Obligations. OEM agrees:
a. not to contest the application or registration of, or
use, ownership or licensing by Marimba of the trademarks set forth on Attachment
E (the "Marks") during the term of this Agreement; provided, however, that
nothing herein prohibits or precludes OEM from using Marks as permitted by law,
and provided further that with respect to "UpdateNow," nothing in this Agreement
will prohibit or preclude OEM from (i) continuing to make use of the trademark
or a similar mark, if such trademark or similar mark is currently in use; or
(ii) making a fair use of such trademark or using the term in a descriptive
manner in connection with its ordinary meaning. Marimba may request that
Attachment E be amended to add additional Marks in the event it also offers to
add new Programs for which such Marks are used to Attachment B. Any such request
must be sent to the attention of OEM's legal department and will only be
effective if agreed to in writing by OEM's counsel. OEM acknowledges that if it
does not agree to the addition of such marks, Marimba may elect not to add such
additional Programs to Attachment B. For purposes of this Section 6.a., the
parties agree that "OEM" specifically does not include IBM.
b. in any distribution, marketing and promotional
material in connection with distribution of the Programs, to (i) use the Marks
or such other marks designated by Marimba in writing, (ii) comply with Marimba's
then current commercially reasonable quality control trademark guidelines and
(iii) represent the Programs in a manner consistent with Marimba's
representation of the Programs. Marimba shall have the right to suspend OEM's
use of the Marks upon 30 days advance written notice for failure to comply with
such guidelines (unless OEM cures such failure within such notice period). In
addition to the above, OEM agrees to make commercially reasonable efforts to
provide Marimba with all market statements, market positions and Program
descriptions ("Marketing Materials") relating to Marimba or the Programs as soon
as commercially practicable prior to their being issued. Marimba agrees to
provide OEM with its approval, or with its comments if it does not approve them,
within 7 business days. If Marimba does not respond within such 7 day period,
Marimba is deemed to have approved such Marketing Materials. If OEM does not
provide Marimba with such Marketing Materials prior to their being issued, and
Marimba has a good faith belief that such Marketing Materials misrepresent the
Programs or are inconsistent with Marimba's representation of the Programs,
Marimba will provide OEM with a description of the misrepresentation or
inconsistency, and OEM will modify, reissue, or withdraw such Marketing
Materials as soon as commercially practical. The parties agree that any press
releases regarding this relationship must be pre-approved by both parties;
provided, however, that the parties agree to include the language set forth in
Attachment G in the first press release issued by the parties regarding this
Agreement.
c. to comply with the Branding Guidelines set forth on
Attachment G.
d. to use reasonable efforts to keep Marimba informed as
to any problems encountered with the Programs and any resolutions arrived at for
those problems. OEM further agrees (i) that Marimba shall have any and all
right, title and interest in and to any such proposed resolutions without the
payment of any additional consideration therefor either to OEM, or its
employees, agents or customers and (ii) that it will use reasonable efforts to
cooperate with Marimba in this regard.
e. to maintain, for a period of 1 year from the date of
the related payment, a record of the name and address of such person or entity
to which it distributes a copy of a Program and related User Access License, and
relevant records to support payments made to Marimba. OEM agrees to permit an
independent certified public accounting firm or auditor designated and paid by
Marimba to examine and audit such records (and such other records directly
related to the payments due by OEM hereunder) during reasonable business hours
upon ten business days prior written notice with respect to OEM's compliance
with the payment terms of this Agreement; if such an audit uncovers a deficiency
in reporting or payments, OEM shall immediately pay Marimba all amounts
5
<PAGE> 6
due plus interest calculated at [***]*, and, if such deficiency is greater than
[***]*, shall bear the audit expenses. Marimba shall have the right to audit
OEM's records no more than once in any 12 month period unless Marimba has
demonstrable evidence that OEM is not in compliance with its payment obligations
hereunder. Further, any such accounting firm or auditor must be under a
confidentiality agreement acceptable to OEM, and will only disclose to Marimba
any amounts overpaid or underpaid for the period examined as well as sufficient
information to substantiate such auditor's determination of over- or
under-payments.
f. to comply with all applicable export laws and
regulations (including, without limitation all applicable export laws and
restrictions and regulations of the Department of Commerce, the United States
Department of Treasury Office of Foreign Assets Control or other United States
or foreign agency or authority), not to export or authorize the export or
re-export of any Copies or Program in violation of any such law or regulations,
and to include language to the effect that the end user must comply with all
applicable export laws and regulations in any OEM end-user license used in
connection with the Programs.
g. to use reasonable commercial efforts to notify
Marimba if OEM becomes aware of any non-compliance by any of its end-user
customers of the terms of such customer's end-user license agreement and to
provide reasonable assistance to Marimba (at Marimba's expense) with respect to
enforcement of such terms.
7. Other Marimba Obligations: Marimba agrees:
a. to make the Programs which are available to OEM under this Agreement
always the most current release or version of such Programs available to
Marimba's customers. Marimba shall do this by assuring that "Updates" under this
Agreement includes any and all updates generally commercially released by
Marimba under its standard maintenance program for the Programs during the term
of this Agreement. Marimba further agrees that if during the term of this
Agreement a replacement for a Program is offered by Marimba, then Marimba shall
include such replacement product as a "Program" under this Agreement.
b. Marimba's current estimated release schedule and related obligations
for Version 3.0 of the Program are set forth on Attachment I; Marimba agrees to
provide Updates (including Version 3.0) and beta releases (subject to the terms
set forth on Attachment I) to OEM no latter than such Updates are generally made
available by Marimba. Attachment I sets forth OEM's sole and exclusive remedy
for any breach by Marimba of any obligation set forth on Attachment I`.
c. to provide OEM with a Certificate of Originality in the form attached
as Attachment H upon initial delivery of the Program Masters and again as
necessary during the term of the Agreement in the event of a change of any
information set forth therein due to a release of an Update.
d. to provide feedback, comments and commercially reasonable general
assistance to OEM with respect to any testing of the Programs or any Update
conducted by OEM.
e. to offer Implementation Services to OEM at a rate of [$***]* per
person-day during the term of the Agreement, subject to Marimba standard terms
for such services (as set forth on Attachment J) and excluding cost of travel
and related expenses (which shall be borne by OEM). The [$***]* rate shall be
subject to increase on an annual basis by Marimba in accordance with the U.S.
government cost of living index. OEM estimates that OEM shall require 8 or more
hours per week of Implementation Services (to be provided by phone and email
from Marimba) from the Effective Date through the date of OEM's initial release
of an OEM Application; provided, that OEM shall not be obligated to purchase any
minimum number of days of Implementation Services.
- ------------------
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
6
<PAGE> 7
f. to ensure continued compatibility and support of any application
programming interfaces (API) generally published by Marimba applicable to the
Programs or provided by Marimba to OEM for at least one year from the date of
release of such API and to use reasonable commercial efforts to notify OEM in
advance of any change of any API.
8. Confidentiality. Neither party shall disclose the terms of
this Agreement except as required by law or regulation, to advisors,
consultants, potential investors and/or other agents bound to confidentiality,
or as mutually agreed by the parties. Any confidential or proprietary
information disclosed by either party in the performance of this Agreement shall
be subject to the Mutual Confidentiality Agreement executed by the parties on
the Effective Date and attached hereto for reference as Attachment F.
9. Limited Liability. NOTWITHSTANDING ANYTHING ELSE IN THIS
AGREEMENT OR OTHERWISE, EXCEPT FOR A CLAIM ARISING UNDER SECTIONS 13,
"INDEMNIFICATION," OR 14, "WARRANTIES," NEITHER PARTY WILL BE LIABLE WITH
RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE,
STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY (I) FOR ANY AMOUNTS IN
EXCESS, IN THE AGGREGATE, OF THE AMOUNTS DUE TO MARIMBA BY OEM DURING THE TWELVE
MONTH PERIOD PRIOR TO THE DATE SUCH CLAIM AROSE (OR THE UNUSED PORTION OF THE
OEM INITIAL COMMITMENT AMOUNT, WHICHEVER IS GREATER) OR (II) FOR ANY INCIDENTAL
OR CONSEQUENTIAL DAMAGES OR LOST DATA OR (III) FOR COST OF PROCUREMENT OF
SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES.
10. Relationship of Parties.
a. The parties hereto expressly understand and agree
that each party hereto is an independent contractor in the performance of each
and every part of this Agreement, and is solely responsible for all of its
employees and agents and its labor costs and expenses arising in connection
therewith.
b. Except as expressly provided herein, Marimba is in no
manner associated with or otherwise connected with the actual performance of
this Agreement on the part of OEM, nor with OEM's employment of other persons or
incurring of other expenses. Except as expressly provided herein, Marimba shall
have no right to exercise any control whatsoever over the activities or
operations of OEM.
c. Neither party guarantees the success of any marketing
effort it engages in for the Programs.
d. Each party is responsible for all its own costs in
connection with its performance hereunder, including all business, travel and
living expenses.
e. Each party is responsible for complying with the
collection, payment, and reporting of all taxes imposed by any governmental
authority applicable to its activities in connection with the marketing,
distribution, delivery or license of the Copies under this Agreement. Neither
party is responsible for taxes that may be imposed on the other party.
11. Assignment. This Agreement and the rights hereunder are
not transferable or assignable by OEM without the prior written consent of
Marimba except to a person or entity who acquires all or substantially all of
the assets or business of OEM or to IBM pursuant to a reorganization of OEM
within IBM. Marimba may assign this Agreement without the consent of OEM.
12. Term and Termination. Unless terminated earlier as
provided herein, this Agreement shall continue in effect for a period of 36
months extending from the Effective Date. The Agreement shall automatically
extend for an additional 12 month term ("Year 4") if during the third year of
the Agreement OEM purchases the Year 3 License Purchase Minimum (as set forth in
Attachment A); the Agreement shall then
7
<PAGE> 8
automatically extend for an additional 12 month term ("Year 5") if during the
fourth year of the Agreement OEM purchases the Year 4 License Purchase Minimum
(as set forth in Attachment A); and the Agreement thereafter shall extend for
one final 12 month term ("Year 6") if during the fifth year of the Agreement OEM
purchases the Year 5 License Purchase Minimum (as set forth in Attachment A).
The renewals for Year 4, Year 5 and Year 6 of the Agreement shall be automatic
and shall not be contingent upon any further action or inaction of either party
other than meeting the applicable License Purchase Minimum. OEM shall have the
right at its election to a wind-down period commencing at the end of the term of
this Agreement and ending no more than 12 months thereafter (the "Wind-down
Period") in which OEM shall have the right to continue to distribute the
Programs pursuant to the terms of this Agreement (including with respect to
payment of fees) provided that: (i) Licensee may only distribute Programs as
integrated into or bundled with OEM Applications released prior to the
commencement of the Wind-down Period and (ii) OEM shall use reasonable
commercial efforts to cease all distribution of the Programs as soon as
commercially reasonably practicable from the commencement of such Wind-down
period. Thereafter, either party may provide written notice to the other of its
desire to renew the Agreement. Upon such request, the parties will enter into
good faith negotiations regarding any renewal terms, but neither party shall
have any obligation to extend the Agreement. For the avoidance of doubt, in no
event shall this Agreement (including any Wind-down Period) continue for more
than 7 years from the Effective Date.
a. This Agreement may be terminated by a party for cause
immediately upon the occurrence of any of the following events:
1. If the other ceases to do business, or
otherwise terminates its business operations; or
2. if the other materially breaches any material
provision of this Agreement and fails to cure such breach within 30 days.
However, if the breach by its nature, cannot be remedied in 30 days, but can be
remedied in a reasonable time thereafter, and the breaching party is taking
reasonable and diligent steps to remedy it and is acting in good faith, then the
notice period will be suspended while the breaching party takes these actions;
or
3. If the other shall seek protection under any
bankruptcy, receivership, trust deed, creditors arrangement, composition or
comparable proceeding, or if any such proceeding is instituted against the other
(and not dismissed within 120 days).
b. In the event OEM terminates this Agreement based on a
material breach of this Agreement by Marimba, then Marimba shall refund any
then-unused portion of the OEM Initial Commitment Amount to OEM. Except with
respect to the obligation set forth in this clause, neither party shall incur
any liability whatsoever for any damage, loss or expenses of any kind suffered
or incurred by the other (or for any compensation to the other) arising from or
incident to any termination of this Agreement by such party which complies with
the terms of the Agreement whether or not such party is aware of any such
damage, loss or expenses; provided, however, that this shall not be construed as
limiting either party's obligation of indemnification hereunder.
c. Upon termination of this Agreement by either party or
naturally at the end of the term (i) as soon as commercially practical, OEM will
return to Marimba or destroy all Program Masters, Proprietary Information,
catalogues and literature in its possession, custody or control in whichever
form held (including all copies or embodiments thereof) and will cease using any
trademarks, service marks and other designations of Marimba, and (ii) the
provisions of this Agreement shall terminate except for Sections 9, "Limited
Liability," 13, "Indemnification," 14.d, disclaimer of "Warranties," and 16,
"General," and any accrued right to payment which shall survive any termination
of this Agreement. Notwithstanding the foregoing, any end-user licenses granted
to customers in accordance with this Agreement will remain in effect in
accordance with their terms.
d. Termination is not the sole remedy under this
Agreement and, whether or not termination is effected, all other remedies will
remain available.
8
<PAGE> 9
13. Indemnification.
a. By OEM. If any claim is made against Marimba by a
third party based upon OEM's distribution of the Programs, including without
limitation, providing unauthorized representations or warranties (or failing to
effectively disclaim all warranties and liabilities on behalf of Marimba) to its
customers, OEM will be responsible for and will indemnify Marimba from any and
all claims, liabilities, damages, settlements, costs, expenses and liabilities
of any type whatsoever regarding such third party claim, with the exception of
those activities for which Marimba bears responsibility under Section 13(b) of
this Agreement, and provided Marimba gives OEM prompt written notice of any such
claim, together with the full authority for and reasonable cooperation with such
a defense.
b. By Marimba. For purposes of this indemnification, the
term "OEM" includes IBM. If any claim of infringement of any patent, copyright,
trademark or trade secret is asserted against OEM by a third party based upon
the Programs which are the subject of this Agreement, Marimba will indemnify OEM
against any amounts finally awarded in a settlement or by a court to such party
(and reasonable attorneys' fees in connection therewith), provided that Marimba
shall have (i) received prompt written notice from OEM of said claim; (ii)
received from OEM the exclusive right to control and direct the investigation,
defense, or settlement of such claims; and (iii) received the reasonable
cooperation of OEM. In the event an infringement is determined or, if required
by settlement, Marimba may substitute for the Programs and documentation
substantially similar Programs and documentation, or, alternatively, Marimba may
procure for OEM the right to continue using the Programs and distributing the
Copies, or Marimba may terminate the Agreement upon 30 days advance written
notice (a "Special Termination"). Upon a Special Termination, or upon OEM being
otherwise enjoined by a court of competent jurisdiction from shipping Programs,
Marimba agrees to refund to OEM any then-unused portion of the OEM Initial
Commitment Amount. However, this obligation of refund shall not be construed as
limiting Marimba's obligation of indemnification hereunder. The foregoing
obligation of Marimba does not apply with respect to those portions of the
Programs (i) (if any) which are modified after shipment by OEM or IBM, or an
agent acting under OEM's or IBM's direction, if the alleged infringement would
not have been caused but for such modification, or (ii) combined with any
non-Marimba Programs, processes or materials if such infringement could have
been avoided but for such combination. This Section 13 sets forth OEM's sole and
exclusive remedy with respect to any claim of intellectual property
infringement.
Notwithstanding the foregoing, with respect to claims based on intellectual
property rights in countries other than the United States, Canada, Japan, and
the countries in the European Union ("Other Country(ies"), Marimba's entire
liability per claim to OEM for indemnification under this Section 13 shall be
limited to [$***]* per claim. In the event that Marimba becomes aware of a claim
or reasonably believes a claim of infringement is likely pertaining to
distribution in an Other Country, then Marimba may, upon written notice to OEM,
require OEM and Subdistributors to cease distributing the Programs in such Other
Country within 30 days of such notice (or 90 days in the case of any firm
written orders made prior to receipt of such notice); provided that in the event
any country is excluded from OEM's Territory pursuant to the foregoing at such
time as a balance of the OEM Initial Commitment Amount is remaining, then
Marimba shall provide OEM with an accommodation (including, but not limited to,
attempting to provide OEM with a version of the Program which may be distributed
in such Territory) commensurate with the respective loss of opportunity (if any)
associated therewith on terms to be mutually agreed upon by the parties.
14. Warranties.
a. By Both Parties. Each party warrants to the other
that it has the resources to perform its obligations under this Agreement, and
that it will comply with any applicable laws, rules or regulations.
- ------------------
* = CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
9
<PAGE> 10
b. By Marimba. Marimba warrants that (i) it has
sufficient rights to the Programs (including associated marks and names) to
grant OEM the rights specified in this Agreement (including the right to
distribute the Programs under the trademarks for such Programs), and to grant
customers the rights specified in its end user license or OEM's license
agreement; (ii) the Programs and Copies do not infringe any copyright or trade
secret, (iii) to the best of Marimba's knowledge as of the Effective Date,
Marimba is not aware of any claim for U.S. or Canadian patent infringement with
respect to the Programs other than with regard to United States patent number
5,581,764 with respect to which a claim of infringement concerning the Programs
has been filed by Novadigm, Inc. against Marimba (number CV-97-20194), or that
there is a basis for any such claim; (iv) none of the Programs has been the
basis of any claim of infringement of the copyright or trade secret rights of
any third party threatened or asserted against Marimba or, to Marimba's
knowledge, any other party; and (v) the Programs, when used in accordance with
their associated documentation, are capable of correctly processing, providing
and/or receiving date data within and between the twentieth and twenty-first
centuries, provided that all Programs (for example, hardware, software and
firmware) used with the Programs properly exchange accurate date data with the
Programs.
c. By OEM. OEM warrants that (i) except as expressly
permitted herein, it will not modify, create any derivative work of, or include
in any other software the Programs or copies or any portion thereof, and (ii) it
will not reverse assemble, decompile, reverse engineer or otherwise attempt to
derive source code from the Programs or copies.
d. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION,
NEITHER PARTY MAKES ANY WARRANTIES TO ANY PERSON WITH RESPECT TO THE PROGRAMS,
OR ANY RELATED SERVICES OR LICENSES, AND EACH PARTY DISCLAIMS ALL IMPLIED
WARRANTIES, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
15. Source Code Escrow.
a. Within sixty (60) days after the Effective Date, Marimba shall
add OEM as a beneficiary to the existing Escrow Agreement between Marimba and
Fort Knox Escrow Services, Inc. ("Escrow Agreement") for the term of this
Agreement. OEM may continue to be a beneficiary of the Escrow Agreement for up
to one year thereafter upon receipt by Marimba of a $1000 annual escrow fee. In
the event that the escrow fee is not received by the expiration of the term of
this Agreement, OEM will cease to be a beneficiary without further notice and
without liability of Marimba or Fort Knox Escrow Services, Inc. ("Fort Knox").
In any event, OEM shall permanently cease to be a beneficiary of the Escrow
Agreement one (1) year after termination of this Agreement (or immediately upon
termination by Marimba due to material breach by OEM). Pursuant to the Escrow
Agreement, Marimba has delivered source code and documentation of the Programs
to Fort Knox. Marimba also agrees to deliver to Fort Knox source code and
documentation for Updates and any related tools, APIs or other code required by
a programmer possessing standard skill in the applicable field to operate such
Updates, as soon as practicable after the Updates have been developed by
Marimba.
b. The Escrow Agreement provides for the release of the deposited
materials, relating to the Programs licensed under this Agreement, only in the
event that (i) Marimba has sought protection under any bankruptcy, receivership,
creditors arrangement, composition or comparable proceeding, or if any such
proceeding has been instituted against Marimba and not dismissed within 120
days; or (ii) Marimba, voluntarily or involuntarily, ceases to do business, or
otherwise terminates its business operations and a successor does not assume
Marimba's rights and obligations under this Agreement; or (iii) Marimba or Fort
Knox receives a written notice from Marimba's trustee in bankruptcy, or an order
of a court, directing Fort Knox to release the source code and documentation to
OEM; (iv) Marimba ceases to offer support for the then-current version of the
Programs without making an update or successor version or product available;
provided that OEM is then under contract for support and in good standing under
this Agreement. Marimba has thirty (30) days to object to the release of such
documents. OEM may use the released materials solely for the purpose of
maintaining and supporting the Programs for the duration of this Agreement and
shall maintain the confidentiality of the released materials and technology with
the same standard of care OEM applies to its most confidential information;
provided, that in the event of a
10
<PAGE> 11
release prior to completion of the Initial Feature Enhancements set forth as of
the Effective Date on Attachment I, then the materials may be used by OEM to
create Derivative Works of the Programs consisting of such features. In the
event of a dispute as to when this section applies, such dispute will be settled
by arbitration, pursuant to the terms of the Escrow Agreement
16. General.
a. No Guarantee of Marketing Success. Neither party
guarantees the success of any marketing effort it engages in for the Programs.
Either party may independently develop, acquire, and market materials, equipment
or programs that may be competitive with (despite any similarity to) the
Programs.
b. Amendment and Waiver-Except as otherwise expressly
provided herein, any provision of this Agreement may be amended and the
observance of any provision of this Agreement may be waived only with the
written consent of the parties. However, it is the intention of the parties that
this Agreement be controlling over additional or different terms of any purchase
order, confirmation, invoice or similar document, and that waivers and
amendments shall be effective only if made in a writing signed by both parties.
c. Governing Law and Legal Actions - This Agreement
shall be governed by and construed under the laws of the State of California and
the United States without regard to conflicts of laws provisions thereof and
without regard to the United Nations Convention on Contracts for the
International Sale of Goods Neither party will bring a legal action against the
other more than two years after the cause of action arose. In any action or
proceeding to enforce rights under this Agreement, the prevailing party shall be
entitled to recover costs and attorneys' fees.
d. Headings - Headings and captions are for convenience
only and are not to be used in the interpretation of this Agreement.
e. Notices - Notices under this Agreement shall be
sufficient only if (i) personally delivered, (ii) delivered by a major
commercial rapid delivery courier service, (iii) mailed by certified or
registered mail, return receipt requested or (iv) sent by confirmed facsimile to
a party at its addresses or number as set forth below or as amended by notice
pursuant to this subsection. Notice shall be effective upon receipt as
demonstrated by reliable written confirmation (e.g., certified mail receipt or
courier receipt).
f. Entire Agreement - This Agreement supersedes all
proposals, oral or written, all negotiations, conversations, or discussions
between or among parties relating to the subject matter of this Agreement and
all past dealing or industry custom.
g. No Reliance - Neither party has relied on any
promises, inducements or representations by the other, except those expressly
stated in this Agreement.
h. Severability - If any provision of this Agreement is
held to be illegal or unenforceable, that provision shall be limited or
eliminated to the minimum extent necessary so that this Agreement shall
otherwise remain in full force and effect and enforceable.
i. Counterparts - This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on their respective behalf, by their respective officers thereunto duly
authorized, all as of the day and year first written above.
OEM: MARIMBA, INC.:
By /s/ F.H. CLOUDMAN By /s/ KIM POLESE
Name F. H. Cloudman Name Kim Polese
Title SVP, Operations Title President and Chief Executive
Officer
OEM Notice Information: Marimba Notice Information:
9442 Capital of Texas Highway 440 Clyde Avenue
North Arboretum Plaza One, Suite 500 Mountain View, California 94043
Austin, Texas 78759 Fax: (650) 930-5605
445 Sherman Avenue Phone: (650) 930-5282
Fax: (512) 794-9070 Attn: Legal Department
Phone: (512) 794-9070
Attn:
OEM Counsel Notice Information:
IBM Corporation
11400 Burnet Drive, MD 9452
Austin, Texas 78759
Fax: (512) 838-0354
Attention: Bryce Johnson
12
<PAGE> 13
ATTACHMENT A
[SUBSEQUENTLY AMENDED]
13
<PAGE> 14
ATTACHMENT B
MARIMBA WORLDWIDE PRICE LIST
[Subsequently Amended]
<PAGE> 15
ATTACHMENT C
END USER LICENSE AGREEMENT
[Subsequently Amended]
<PAGE> 16
ATTACHMENT D
REQUIRED INFORMATION FOR ENABLING KEY
Identification
- --------------
Customer Name:
Customer Address:
Contact Information
- -------------------
Customer email:
Customer Phone:
Customer Fax:
Technical Contact Name:
Technical Contact Address:
Technical Contact email:
Technical Contact Phone:
Technical Contact Fax:
Configuration
- -------------
User Access Licenses purchased: (number and type)
Platform (Sun Solaris, WinNT 4.0, Win95, Mac)
Number of Channels (Unlimited/Standard):
Number of Users purchased (Intranet):
Host IP address:
Host Ethernet address:
Language (English, Japanese):
Version (International, US):
Year of Support/Maintenance Purchased: _____
LIMITATION: Notwithstanding anything to the contrary in this Agreement, except
pursuant to a warranty claim under Section 4.c. or in the event Marimba is
issuing an Enabling Key on behalf of OEM, OEM may elect to provide Marimba with
only the following information:
Customer Name
City, State and Country
User Access Licenses purchased (number and type)
<PAGE> 17
ATTACHMENT E
TRADEMARKS
[subsequently amended]
<PAGE> 18
ATTACHMENT F
MUTUAL CONFIDENTIAL DISCLOSURE AGREEMENT
CONFIDENTIAL DISCLOSURE AGREEMENT
Between
Tivoli Systems Inc. ("Tivoli"), a Texas corporation, located at
9442 Capital of Texas Highway North Arboretum Plaza, One Suite 500, Austin,
Texas 78759 and Marimba, Inc., ("Participant"), located at 445 Sherman Avenue,
Palo Alto, CA 94306
The parties hereby establish these terms and conditions
governing the use and protection of certain confidential information
("Confidential Information") one party ("the Disclosing Party") may disclose to
the other party ("the Receiving Party").
1. Each party's designated representative for coordinating disclosure or
receipt of Confidential Information is:
<TABLE>
<S> <C>
For Tivoli: Valerie Luessenhop, Counsel
---------------------------------
For Participant: Todd Smithline, Corporate Counsel
---------------------------------
</TABLE>
2. The following is a description of the Confidential Information which may
be disclosed under this Agreement: (a) for Tivoli, Business plans, forecasts,
projections and analyses, software, hardware or systems designs, specifications,
documentation, code, architecture, structure, protocols, product materials,
notes, slides, or ideas, including but not limited to, Tivoli's business and
product, (b) for Participant, Business plans, forecasts, projections and
analyses, software, hardware or systems designs, specifications, documentation,
code, architecture, structure, protocols, product materials, notes, slides, or
ideas, including but not limited to, Participant's business and product.
3. This Agreement will only apply to disclosures made within one (1) year
of the date of this Agreement, and this Agreement shall expire on the same date,
unless extended in writing by mutual agreement of the parties. The Recipient's
duty to hold Confidential Information in confidence expires five (5) years after
execution of this Agreement, which duty shall survive the earlier expiration or
termination of this Agreement. The "Recipient" is defined as the party receiving
Confidential Information under this Agreement.
Either party may terminate this Agreement for material breach
thereof upon ten (10) days written notice. Notwithstanding termination, the
obligations set forth under Paragraphs 4 and 5 hereof shall survive such
termination.
4. Use of Confidential Information. The Receiving Party shall not make use
whatsoever at any time of the Confidential Information except for the purpose of
effectuating the existing relationship and evaluating potential business
opportunities.
5. The parties agree to hold the Disclosing Party's Confidential
Information in strict confidence and to take all reasonable precautions to
protect such Confidential Information, including without limitation, using the
same degree of care, as the Receiving Party uses to protect is own Confidential
Information of a similar nature. The Receiving Party agrees not to copy or
reverse engineer any such Confidential information of the Disclosing Party. The
Receiving Party shall limit its internal disclosure of Confidential Information
to those employees having a strict need to know such information and only for
the purpose set forth in Paragraph 4 above.
<PAGE> 19
6. The Receiving Party shall have a duty to protect only that Confidential
Information which is: (a) first disclosed by the Disclosing Party in tangible
form and is conspicuously marked as "Confidential," or the like at the time of
disclosure; or (b) disclosed by the Disclosing Party in nontangible form and
orally identified as confidential at the time of disclosure, and is summarized
in tangible form conspicuously marked as "Confidential," or the like and
delivered to the Receiving Party's representative named in Paragraph 1 above
within thirty (30) days of the original disclosure.
7. This Agreement imposes no obligation upon the Receiving Party with
respect to Confidential Information which The Receiving Party can establish by
legally sufficient evidence: (a) was in The Receiving Party's possession before
receipt from The Disclosing Party; (b) is or becomes known to the general public
without improper action or inaction by The Receiving Party; (c) was rightfully
disclosed to it by a third party provided the Receiving Party complies with any
restrictions imposed by the third party (e) is independently developed by the
Receiving Party without the use of the Confidential Information provided by the
Disclosing Party; (f) is disclosed pursuant to a court order provided the
Receiving Party uses reasonable efforts to limit disclosure and has allowed the
Disclosing Party to participate in the proceeding or; (g) is disclosed by the
Receiving Party with the Disclosing Party's prior written approval.
8. Within one (1) month following expiration, or termination of this
Agreement, or upon written request, the Receiving Party shall return to the
disclosing Party, or destroy at The Disclosing Party's option, all Confidential
Information in tangible form in its possession.
9. Neither party acquires any rights in the Confidential Information under
this Agreement, except the limited right to use the Confidential Information for
the purposes set out in Paragraph 4 above. Neither party has an obligation under
this Agreement to purchase any service or item from the other party. Neither
party has an obligation under this Agreement to commercially offer any products
using or incorporating Confidential Information. This Agreement grants no
license by either party to the other, either directly or by implication,
estoppel or otherwise.
10. The Receiving Party shall adhere to the U.S. Export Administration laws
and regulations and shall not export or re-export any Confidential Information
or technical data or products received from the Disclosing Party or the direct
product of such Confidential Information or technical data to any prescribed
country listed in the U.S. Export Administration Regulations unless properly
authorized by the U.S. Government.
11. Each Disclosing Party represents that it has the right to make the
disclosures under this Agreement. The Confidential Information disclosed under
this Agreement is delivered "as is" and the Disclosing Party makes no
representation of any kind with respect to the accuracy of such Confidential
Information or its suitability for any particular use.
12. Either party shall be free to use the Residuals from any such
Confidential Information, or any ideas, concepts and/or techniques contained
therein for any purpose, including the use of such Information in the
development, manufacture, and maintenance of its products and services. The term
"Residuals" means that Information which may be retained in non-tangible form in
the minds by those employees of a party who have had access to the Confidential
Information.
13. Nothing in this Agreement shall preclude either party from using,
marketing, licensing and/or selling, any independently developed technology,
software or data processing information and/or material that is similar or
related to the Confidential Information disclosed under this Agreement, provided
the party has not done so in breach of this Agreement.
14. The relationship of the parties is that of independent contractors. This
Agreement does not create an agency, partnership or similar relationship between
the parties. Neither party acquires any rights to use in
<PAGE> 20
advertising, publicity or other marketing activities, any name, trade name,
trademark or other designation of either party.
15. All additions and modifications to this Agreement must be made in
writing referencing this Agreement and must be signed by both parties.
16. This Agreement may not be assigned by either party without the express
written consent of the other party and any purported assignment without such
written consent shall be void.
17. THIS AGREEMENT IS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH
THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS.
18. This Agreement supersedes all prior discussions and writings and
constitutes the entire agreement with respect to the subject matter thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
TIVOLI Systems Inc. Marimba, Inc.
Name: /s/ HOWARD J. NICHOLAS Name: /s/ STEVE WILLIAMS
----------------------------- -------------------------------
By: Howard J. Nicholas By: Steve Williams
------------------------------- ---------------------------------
Title: Mgr. Contract Services Title: VP, Sales
----------------------------- ------------------------------
Date: August 21, 1997 Date: August 20, 1997
----------------------------- -------------------------------
<PAGE> 21
ATTACHMENT G
MARKETING; BRANDING GUIDELINES; PRESS RELEASE LANGUAGE
[subsequently amended]
<PAGE> 22
ATTACHMENT H
CERTIFICATE OF ORIGINALITY
RESPONSES TO ATTACHMENT H - CERTIFICATE OF ORIGINALITY
1 -- Castanet 2.0 (Castanet Enterprise Transmitter, Castanet Tuner, Castanet
Publisher)
2A -- Answer is NO except as follows:
Castanet 2.0 contains code under license from the following vendors:
RSA Data Security, Inc. - Encryption modules
100 Marine Parkway, Suite 500
Redwood City, CA 94065
Netscape Communications Corporation - SSL Reference Implementation 3.0
501 East Middlefield Road
Mountain View, CA 94043.
2B -- Marimba acquired rights to distribute the code pursuant to a license
agreement.
3 -- The programs contain standard copyright notices and attributions for
Marimba and its suppliers (as required)
4 -- No material portion
5 -- No
6 -- None except as set forth in 2A above.
<PAGE> 23
ATTACHMENT I
CASTANET FUTURE RELEASE TARGET DATES
1. Description.
Castanet 3.0 is projected to consist of the following:
Castanet Enterprise Transmitter
- Controller
Castanet Tuner
- Installer
Castanet Publisher
2. Estimated Release Schedule.
The current estimated release schedule for Castanet 3.0 is set forth
below:
<TABLE>
<CAPTION>
General
Deliverable Alpha Beta Availability
- ----------- ----- ---- ------------
<S> <C> <C> <C>
Tuner 3/30 4/30 7/30
Transmitter 3/30 5/30 7/30
Publisher 3/30 5/30 7/30
</TABLE>
3. Initial Feature Enhancements
The feature enhancements which Marimba intends to include in Castanet
3.0 are set forth below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Item Description Status
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
HTTP Daemon and Castanet Marimba to provide a gateway to Netscape Servers: Currently
Transmitter to support allow rerouting from the Tivoli supported on Solaris and NT.
same port and IP. Cross-Site Server implementation to
the Transmitter. Microsoft IIS: Currently
supported on NT.
- --------------------------------------------------------------------------------------------------
Support for non-Verisign Castanet currently requires a Marimba agrees to provide
CA for the transmitter and Verisign certificate to operate. support.
publisher. The root certificate is hardwired.
Work scoped at 8 weeks at
Marimba to externalize certificate Implementation Services rate.
thereby allowing (offline)
configuration of root certificate Work to be completed and
on both client and server side. included in GA release.
- --------------------------------------------------------------------------------------------------
Transmitter . Exposes all Transmitter management Marimba agrees to provide a
Controller API. function through a programmatic non-public version of an API.
API. This API may not
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
Item Description Status
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
be exposed by
OEM to any third-party.
This allows installation and
configuration throughout the Tivoli Alpha version of API to be
Cross-Site console. provided with Alpha code
delivery.
Marimba agrees to provide
support to OEM for the
API.
- --------------------------------------------------------------------------------------------------
Switch as part of Marimba agrees to provide a The works is scoped at 2
the Transmitter switch, as part of the weeks at Implementation
Control API Transmitter Control API, that Services rate.
will disallow access from
remote machines.
- --------------------------------------------------------------------------------------------------
</TABLE>
4. Marimba Obligations. Marimba agrees to use reasonable commercial
efforts to release Castanet 3.0 in accordance with the projected release dates
set forth in Section 2 above and to include the Initial Feature Enhancements set
forth in Section 3 in Castanet 3.0 prior to the General Availability date set
forth in Section 2 above.
5. Remedies. OEM agrees that Marimba shall not be deemed to be in
breach of the Agreement for any failure to meet any obligation under this
Attachment I unless Marimba has failed to deliver Castanet 3.0 with the Initial
Feature Enhancements more than 4 months from the General Availability date set
forth in Section 2 above (a "4 Month Delay"). In the event of a 4 Month Delay,
then OEM's sole remedy shall be, at its written election with 10 days advance
notice, to either: (i) extend the Agreement one day for each day of delay beyond
the General Availability date set forth in Section 2 above or (ii) terminate the
Agreement and receive a refund of the portion of the OEM Initial Commitment
Amount actually paid and unused by OEM as of such date. FOR THE AVOIDANCE OF
DOUBT, IN NO EVENT SHALL MARIMBA'S AGGREGATE LIABILITY FOR A BREACH OF ANY
PROVISION OF SECTION 7b OF THE AGREEMENT OR THIS ATTACHMENT I EXCEED THE THEN
PAID AND UNUSED PORTION OF THE OEM INITIAL COMMITMENT AMOUNT (WHICH SHALL NOT
EXCEED [$***]*).
6. Alpha and Beta Release code: OEM acknowledges that any Alpha or
Beta code provided hereunder is provided "AS IS" only and that such code
constitutes highly confidential information of Marimba. OEM agrees not to use
any Alpha or Beta code for any purpose other than evaluation and testing. For
avoidance of doubt, OEM may not distribute any portion of any Alpha or Beta
release code. Notwithstanding the foregoing, OEM may release Beta code as part
of an OEM beta release of an integrated OEM Application provided that the Beta
code being released by OEM has been released as part of a public beta by Marimba
and provided further that Marimba has approved in advance the OEM beta agreement
pursuant to which the code is to be released (which approval shall not be
unreasonably withheld) and has advance notice of such release. Marimba also
agrees to reasonably cooperate with OEM with respect to any request to release
Beta code prior to Marimba public release as part of a private OEM beta release,
provided that any such agreement for such a release must be in a writing signed
by an officer of Marimba.
7. Payment for Creation of Initial Feature Enhancements. OEM agrees
to pay Marimba at the Implementation Services rate for Marimba's creation the
two Initial Feature Enhancements for which payment is designated in Section 3
above. OEM acknowledges that the Initial Feature Enhancements shall be
incorporated into the Programs for general release by Marimba. OEM agrees that
its sole right with respect to the Initial Feature
- ----------------------
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 25
Enhancements shall be pursuant to its license to the Programs, that all right,
title and interest in and to the Initial Feature Enhancements shall remain in
Marimba and that nothing created by Marimba or any of its agents under this
Agreement shall constitute a work made for hire. Fees for Initial Feature
Enhancements shall be invoiced on a monthly basis and payments shall be due 30
days from receipt of invoice; in no event shall the first invoice for such work
be payable prior to April 1, 1998.
8. Source Code License for Gateway Code. Marimba grants OEM a
non-exclusive, non-transferable license during the term of this Agreement to
use, modify and create Derivative Works of the "Gateway" source code and any
related source code provided by Marimba to OEM (the "Gateway Source Code"), but
only in a manner consistent with and in furtherance of the licenses granted to
OEM in Sections 1.a.(i) and (ii) of this Agreement. OEM acknowledges that any
source code provided by Marimba to OEM is highly confidential information of
Marimba. OEM agrees not to release any source code (or any portion thereof) to
any third-party. Marimba grants OEM a non-exclusive right to distribute the
Gateway Source Code, but only as compiled into object code form and integrated
into an OEM Application, and subject to the license terms set forth for
distribution of the Programs in Section 1 of this Agreement. OEM grants Marimba
a worldwide, perpetual, royalty-free, irrevocable, non-exclusive license to use,
modify, distribute, create derivative works of and otherwise fully exploit any
Gateway Source Code modified by OEM which has general applicability to the
Programs and which is generally released by OEM in object code form (or which
OEM otherwise elects to provide to Marimba). OEM shall have no support, warranty
or other obligation hereunder with respect to any Gateway Source Code or any
Derivative Work thereof create by OEM.
9. Long Term Feature Enhancements. Marimba agrees to use reasonable
commercial efforts to accomplish the following listed feature enhancements to
the general release version of the Programs. Failure by Marimba to accomplish
any or all of the foregoing shall not constitute a breach of this Agreement.
Notwithstanding the foregoing, in the event Marimba fails to release Client Side
Certificates (as described below) within 12 months of the Effective Date, then
OEM shall have the right as its sole remedy to extend the Agreement for one day
for each day of delay beyond such date.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Item Description Status
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Client Side Certificates Authentication/Authorization of Marimba agrees to provide 12
clients to be performed through months after Effective Date
Certificates rather than via with a beta release 9 months
password encryption. after Effective Date.
- ----------------------------------------------------------------------------------------------------
Certificate Management Long term direction on how to Marimba and Tivoli agree to
manage certificates for collaborate to provide common
applications management mechanism across Marimba and
Cross-Site in response to
customer related issues.
- ----------------------------------------------------------------------------------------------------
Internationalization Multi-byte support allowing Marimba agrees to provide
Internationalization of product. Internationalized version 4
weeks after GA of new releases.
- ----------------------------------------------------------------------------------------------------
Java VM Strategy Eventual support for additional VM. Marimba to work with Tivoli on
providing VM support when
required for strategic partners.
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 26
ATTACHMENT J
IMPLEMENTATION SERVICES TERMS
PERFORMANCE OF SERVICES. Marimba (or an agent acting on its behalf) shall
provide the number of person-days of professional implementation support
services ("Implementation Services") arranged for hereunder. Marimba warrants
that the Implementation Services shall be performed in a professional and
workmanlike manner. The parties acknowledge that the scope of the Implementation
Services provided hereunder consist solely of delivery of: (i) Program
installation and deployment assistance and/or (ii) additional related Marimba
copyrighted interface software or code. In addition, Implementation Services
designated as "Architectural" services shall also include assistance with
respect to planning and designing the implementation of the Program. Licensee
shall have a perpetual, royalty-free, irrevocable right to use and distribute
anything delivered as part of the Implementation Services subject to the terms
of its license for the Programs, but Marimba shall retain all right, title and
interest in and to such work product, code or Programs and any derivative,
enhancement or modification thereof created by Marimba (or its agents). The term
"royalty-free" as used hereunder means that OEM shall not be obligated to pay
any amounts in addition to that already required for distribution of the
Programs in order to distribute the work product of the Implementation Services.
The date and time for all Implementation Services shall be as mutually
reasonably agreed upon by the parties; provided, however, that any days not used
by Licensee within one-hundred twenty (120) days of payment for such days shall
expire and become void. Licensee shall be responsible for reasonable travel and
related expenses. Licensee may purchase additional Implementation Service days
at Marimba's standard rates for such services. A "person-day" of Implementation
Services consists of an eight-hour day; overtime shall be available only in
minimum one-half day increments. Implementation Services shall be invoiced on a
monthly basis and payment shall be due within 30 days of receipt of invoice.
<PAGE> 1
EXHIBIT 10.8
AMENDMENT NO. 1 TO OEM AGREEMENT BETWEEN MARIMBA, INC. AND TIVOLI SYSTEMS, INC.
MARIMBA NAME AND ADDRESS: OEM NAME AND ADDRESS:
Marimba, Inc. ("Marimba") Tivoli Systems, Inc. ("OEM")
440 Clyde Avenue 9442 Capital of Texas Highway North
Mountain View, CA 94043 Austin, TX 78759
MARIMBA COMPANY CONTACT: OEM COMPANY CONTACT:
Todd Smithline Bryce Johnson
General Counsel General Counsel
Phone: (650) 930-5233 Phone: (512) 436-1372
Fax: (650) 930-5605 Fax: (512) 436-1767
WHEREAS, the parties desire for the first time to amend the OEM Agreement by and
between Marimba and OEM dated as of March 6, 1998 (the "OEM Agreement") as set
forth herein;
NOW THEREFORE, in consideration of agreements reached between the parties, the
OEM Agreement is hereby amended as follows (this "Amendment"):
1. Definitions. All capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to them in the OEM Agreement.
2. Section 1.a(i). License Grant. The license grant set forth in Section
1.a.(i) of the Agreement is hereby amended to add the following after the
existing last sentence:
"Notwithstanding the provisions of the Standard License terms, Marimba hereby
grants OEM the right to allow its first-tier customers (Channel Masters) to
distribute the Application Management Server and the Application Client to
second-tier customers (Trading Partners) subject to the following conditions:
1. Each of the Application Client and the Application Management Server may
only be distributed by the Channel Master to the Trading Partner in
accordance with terms materially equivalent to the Access License terms set
forth in this Attachment C.
2. Trading Partners may not distribute either the Application Management Server
or the Application Client to any other party.
3. Channel Masters must purchase all Application Management Server and
Application Client licenses for all Trading Partners receiving the
Application Management Server or the Application Client from the Channel
Master. OEM may permit Application Client licenses purchased by a Channel
Master to access multiple Application Management Servers purchased by such
Channel Master without payment of additional Application Clients fees by OEM
to Marimba provided that OEM does not charge any such fees itself.
4. Tivoli Cross-Site for Deployment: The Trading Partners may not use the
Tivoli Cross-Site for Deployment component to publish or transmit any data
or application other than in connection with the data or application
provided by the Channel Master. Furthermore, no Application Management
Server may be used to transmit to or otherwise operate with any Application
Client except for an Application Client for which the Channel Master has
purchased an Application Client license.
5. The parties acknowledge that OEM has no ability to ensure that Application
Management Servers and Application Clients are used in conformance with
provision 4. To the extent that OEM has included these restrictions in its
license terms with the Channel Master and required the Channel Master to
include substantially similar restrictions in its license terms with its
Trading Partners, and provided OEM has used reasonable commercial efforts to
enforce such license terms to the extent OEM has notice of non-compliance
with such terms, OEM shall have no liability for fees to Marimba for usage
of the Application Management Server and Application Clients by Channel
Masters and Trading Partners which are not in compliance with this
restriction."
1
<PAGE> 2
3. Section 5.a. Fees. The first sentence of Section 5.a. is hereby replaced in
its entirety with the following:
For each copy of a Program distributed, OEM shall pay Marimba (i) the associated
license fee to Marimba (in U.S. dollars) as set forth in the Fee Chart on
Attachment B and (ii) a first year support and maintenance fee as calculated
according to Attachment A; and, in addition, if an end user customer elects to
purchase from OEM maintenance and support for Programs for additional years, OEM
will pay Marimba the same fee for such maintenance and support for any
subsequent year.
4. Section 5.b, 5.e. and 5.f. Reference to "User Access License". Each
reference to "User Access License(s)" in Section 5.b., 5.e. and 5.f. is
hereby replaced with a reference to "OEM Application license(s)".
5. Section 6.a. Reference to "Attachment B". Each reference to "Attachment B"
in Section 6.a. is hereby replaced with a reference to "Attachment A".
6. Attachments A, B, C, E and G of the Agreement: Each of Attachment A, B, C, E
and G of the Agreement is hereby replaced in its entirety by the new version
of such Attachment attached hereto.
7. Attachment K. The new Attachment K attached hereto is hereby added to and
incorporated into the Agreement.
The parties acknowledge that they have read this Amendment, understand it, and
agree to be bound by its terms and conditions. Further, they agree that this
Amendment and the referenced OEM Agreement are the complete and exclusive
statement of the agreement between the parties, superseding all proposals or
communications between the parties relating to this subject. Any reproduction of
this Amendment by reliable means will be considered an original of this
document.
This Amendment No.1 to OEM Agreement shall be deemed effective as of the date
executed below.
TIVOLI SYSTEMS, INC. MARIMBA, INC.
By: /s/ HOWARD NICHOLAS By: /s/ STEVEN WILLIAMS
------------------------------ -------------------------------------
Name: Howard Nicholas Name: Steven Williams
---------------------------- -----------------------------------
Title: Mgr. Contract Services Title: Vice President
--------------------------- ----------------------------------
Date: February 8, 1999 Date: February 8, 1999
--------------------------- -----------------------------------
2
<PAGE> 3
ATTACHMENT A
<TABLE>
<S> <C>
Discount from Worldwide Price List [***]+
Annual Support and Maintenance [***]+ of all license fees due to
Fee Marimba by OEM
Territory Worldwide
Initial OEM Commitment Amount Any remaining balance of the Initial
Commitment Amount paid by OEM
License Purchase Minimum Year 3 - [***]*+
Year 4 - [***]*+
Year 5 - [***]*+
*total license fees paid to Marimba
during applicable year with respect
to all OEM Applications
</TABLE>
Programs:
For purposes of the Agreement, "Program" shall mean the Programs
listed below, together with the documentation provided therewith by Marimba
expressly for distribution to end-users. Any update, enhancement, or new release
of a Program which is made generally available by Marimba, which is
substantially similar thereto and which is marketed under the same Program
number and nomenclature (each, an "Update") shall be added to this Attachment A
as a new Program. Updates provided under this Agreement shall be consistent with
updates provided by Marimba pursuant to its general maintenance program for the
Programs. Marimba reserves the right to change, modify or discontinue any
Program at any time with 30 days prior notice provided such is generally
applicable to customers and resellers of Marimba and not than specifically
applicable to OEM.
List of Programs:
Castanet Infrastructure Suite
Additional Marimba Programs not currently used in any OEM Application:
Castanet Production Suite
Castanet Management Suite
OEM may not distribute either the Castanet Production Suite or the
Castanet Management Suite (each, an "Additional Program") except pursuant to the
then-current Marimba Access License terms for such product (as provided upon
request by Marimba) and pursuant to a fee to Marimba equal to the then-current
Marimba Worldwide Price List price for such product less the discount set forth
in Attachment A. OEM shall notify Marimba at least thirty (30) days in advance
of any shipment of any Additional Program.
- ----------
+ CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
3
<PAGE> 4
OEM Applications: means the currently existing Tivoli Internet Business Unit
products listed below and any subsequent releases or versions of such products
(provided, however, that a subsequent release of a product shall not be deemed
to continue to be an OEM Application in the event such product represents a
separate line item from any Program in the sale, is installed separately from
any Program, does not run as a Castanet channel, does not contain any code of
any Program, and is not published, deployed or updated with any Program):
Tivoli Cross-Site for Deployment
Tivoli Cross-Site for Security
Tivoli Cross-Site for Availability
Implemented with:
Tivoli Cross-Site for Deployment Application Management Server
Tivoli Cross-Site for Deployment Application Client
Tivoli Cross-Site for Availability Application Management Server
Tivoli Cross-Site for Availability Application Client
Tivoli Cross-Site for Security Application Management Sever
Tivoli Cross-Site for Security Application Client
- Description of Cross-Site: The Cross Site Application Management
Server ("Application Management Server") is the server component of
the Cross-Site product line. The Cross-Site Application Client
("Application Client") is the endpoint client component of the
Cross-Site product line. The Cross-Site product line is currently
sold by OEM as a system with a separate charge for the Application
Management Server and for each Application Client.
- Right to Change Names: All names listed above are current product
names subject to change by OEM.
- Additional OEM Applications: OEM shall have the right to include as
an OEM Application under this Agreement any additional products
generally commercially released by the IBU during the term of this
Agreement which use or rely upon the Programs in a manner which is
substantially similar to that of Tivoli Cross-Site for Security
and/or Tivoli Cross-Site for Availability as of first commercial
shipment (i.e., to deploy and update the OEM Application itself, but
which does not expose to the user any deployment functionality of the
Programs) (the "Non-Deployment Applications"). The license terms for
any such additional OEM Application shall be as mutually agreed upon
by the parties at least 30 days in advance of release and the fee due
to Marimba for any such additional OEM Application shall be the same
as the fee due to Marimba for such Non-Deployment Applications
hereunder.
Additional Definitions:
Derivative Work: means a work that is based on an underlying work that would be
a copyright infringement if prepared without the authorization of the copyright
owners of the underlying work. Derivative Works are subject to the ownership
rights and licenses of a party or of others in the underlying work.
Externals: means pictorial, graphical and audio-visual works such as icons,
screens, sounds and characters generated by execution of the Programs (excluding
any Marks).
Transmitter: means a Marimba Castanet Enterprise Transmitter licensed hereunder
as a "Program".
Updates: is defined above.
Access License: is defined on Attachment C.
4
<PAGE> 5
ATTACHMENT B
FEE CHART AND MARIMBA WORLDWIDE PRICE LIST
FEE CHART:
<TABLE>
<CAPTION>
OEM Application: Current Fee due to Marimba: Determination of fee:
<S> <C> <C>
Tivoli Cross-Site for
Deployment [***]+ for each Application Price list for User Access
Application Client Client on a client computer* License less discount set
forth in Attachment A
[***]+ for each Application Price list for Server
Client on a server computer* Access License less
discount set forth in
Attachment A
Tivoli Cross-Site for [***]+ per Application Agreed price
Security Application Client Client
Tivoli Cross-Site for [***]+ per Application Agreed price
Availability Application Client
Client
Tivoli Cross-Site Application
Management Server
- Deployment component [***]+ per server* Price list for Repeater
Redistribution License
less discount set forth in
Attachment A
- Security component [***]+ per server Agreed price
- Availability component [***]+ per server Agreed price
Optional:
Customization License: right [***]+ for each license* Price list for Custom
to permit customer to Redistribution License
customize user interface of less discount set forth in
Application Client Attachment A
</TABLE>
- - Current Marimba Worldwide Price List is attached. As indicated above fees
determined according to the Marimba Price List are less the discount
specified in Attachment A; fees designated as "Agreed price" are not
subject to the discount. The dollar amount of prices determined according
to the Price List (marked with "*" above) are subject to change upon
change of the Price List. For the avoidance of doubt, a license fee
determined as set forth above or as later mutually agreed upon by the
parties in advance shall be incurred upon the distribution of any
Program.
- - Pricing for the Cross-Site Application Management Server is cumulative.
For example, the fee due to Marimba for an Application Management Server
with Deployment and Security would be the fee specified for Deployment
plus the fee specified for Security.
- ---------
+ CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
5
<PAGE> 6
PRICE LIST: Current Worldwide Price List is attached.
6
<PAGE> 7
MARIMBA, INC.
CASTANET 3.2
WORLDWIDE PRICE LIST AND NOTES
FOR TIVOLI SYSTEMS, INC.
OEM AGREEMENT
================================================================================
7
<PAGE> 8
================================================================================
INFRASTRUCTURE SUITE
================================================================================
CASTANET INFRASTRUCTURE SUITE - USER ACCESS LICENSE (CIS-UAL-3.2-U) AND SEVER
ACCESS LICENSE (CIS-SAL-3.2-U)
Components include:
o Castanet Enterprise Transmitter
o Castanet Tuner
o Transmitter Administrator
o Publisher
o Channel Copier
o License Installer
o Certificate Manager
o Gateway
o Proxy
SUPPORTED PLATFORMS: Windows 95 (except for Proxy and Gateway), Windows NT 4.0,
and Solaris 2.6 and 2.5.1, HP-UX, AIX
PRODUCT STATUS: Shipping.
PRE-REQUISITES: None
================================================================================
REDISTRIBUTION LICENSES
================================================================================
CASTANET CUSTOM REDISTRIBUTION LICENSE (CRL-3.2-U):
Includes:
o Tuner Customization Guide
o Channel Manager software component
o License to modify the Castanet-branded UI and redistribute a customized or
packaged Tuner to Endpoints who are not employees.
o For 3 year term only
NOTE: Licensee must adhere to certain important branding and end-user licensing
guidelines when redistributing customized Tuners.
SUPPORTED PLATFORMS: N/A
PRODUCT STATUS: shipping
PRE-REQUISITES: Must have purchased a Castanet Infrastructure Suite and a
Castanet Management Suite.
CASTANET REPEATER REDISTRIBUTION LICENSE (RRL-3.0-U):
o Paper redistribution license for Castanet Transmitter component of
Infrastructure Suite.
o Subject to RRL license terms.
SUPPORTED PLATFORMS: Same as Castanet Infrastructure Suite.
PRODUCT STATUS: Shipping.
PRE-REQUISITES: Must have purchased a Castanet Infrastructure Suite
8
<PAGE> 9
================================================================================
ADDITIONAL PROGRAMS
================================================================================
CASTANET MANAGEMENT SUITE (CMS-3.2-U):
Components include:
o Tuner Packager
o Channel Copier
o Transmitter Administrator Pro
o Transmitter Reporter
NOTE: This Suite is licensed on a per "User" basis; any employee with access to
the software is a "User". Administrators who wish to package Tuners, copy
channels, create administrative reports or perform administration of a
Transmitter would each use one Suite. IMPORTANT: The Tuner Packager may only be
used to package Tuners for distribution to Licensee's employees. (A Custom
Redistribution License would be needed to distribute a packaged Tuner to third
parties)
SUPPORTED PLATFORMS: Windows 95, Windows NT 4.0, and Solaris 2.6 and 2.5.1,
HP-UX, AIX
PRODUCT STATUS: Licensee must accept partial shipments.
PRE-REQUISITES: Must have purchased a Castanet Infrastructure Suite
CASTANET PRODUCTION SUITE (CPS-3.2-U):
Components include:
o Publisher
o Application Packager
o Application Packager for Microsoft Windows(TM) Applications
o Application Packager for Microsoft Visual Basic(TM) Applications
o File Packager
NOTE: This Suite is licensed on a per "User" basis; any employee with access to
the software is a "User". Developers who wish to create and publish Channels for
either Java or native code would each use one Suite.
SUPPORTED PLATFORMS: Windows 95, Windows NT 4.0, and Solaris 2.6 and 2.5.1,
HP-UX, AIX (except for the Packager for Windows(tm) and Visual Basic(tm)
Applications)
PRODUCT STATUS: Licensee must accept partial shipments.
PRE-REQUISITES: Must have purchased a Castanet Infrastructure Suite
9
<PAGE> 10
WORLD WIDE PRICE LIST
10
<PAGE> 11
<TABLE>
<CAPTION>
PRICE LIST VERSION 3.2 A EFFECTIVE NOVEMBER 23, 1998 TIVOLI MARIMBA, INC
- -------------------------------------------------------------------------------------------------------------------------
VERSION PART NUMBER PRICE
DOMESTIC
PROGRAMS
<S> <C> <C> <C>
CASTANET INFRASTRUCTURE SUITE-USER ACCESS LICENSE
Castanet Infrastructure Suite-User Access License 3.2 CIS-UAL-3.2-U $ [***]+
-----
CASTANET INFRASTRUCTURE SUITE-SERVER ACCESS LICENSE
Castanet Infrastructure Suite-Server Access License 3.2 CIS-SAL-3.2-U $ [***]+
-----
CASTANET REDISTRIBUTION LICENSE
Custom Redistribution License 3.2 CRL-3.2-U $ [***]+
-----
CASTANET REPEATER REDISTRIBUTION LICENSE
Castanet Repeater Redistribution License 3.2 RRL-3.2-U $ [***]+
-----
ADDITIONAL PROGRAMS
CASTANET MANAGEMENT SUITE
Castanet Management Suite 3.2 CMS-3.2-U $ [***]+
-----
CASTANET PRODUCTION SUITE
Castanet Production Suite 3.2 CPS-3.2-U $ [***]+
-----
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL (NON-U.S.) PART NUMBER PRICE
PROGRAMS
<S> <C> <C> <C>
CASTANET INFRASTRUCTURE SUITE-USER ACCESS LICENSE
(INTL VERSION)
Castanet Infrastructure Suite-User Access License
(Intl Version) 3.2 CIS-UAL-3.2-I $ [***]+
-----
CASTANET INFRASTRUCTURE SUITE-SERVER ACCESS LICENSE
(INTL VERSION)
Castanet Server Access License (Intl Version) 3.2 CIS-SAL-3.2-I $ [***]+
-----
CASTANET REDISTRIBUTION LICENSE (INTL VERSION)
Castanet Custom Redistribution License (Intl Version) 3.2 CRL-3.2-I $ [***]+
-----
CASTANET REPEATER REDISTRIBUTION LICENSE (INTL VERSION)
Castanet Repeater Redistribution License (Intl Version) 3.2 RRL-3.2-I $ [***]+
-----
ADDITIONAL PROGRAMS
CASTANET MANAGEMENT SUITE-(INTL VERSION)
Castanet Management Suite-(Intl Version) 3.2 CMS-3.2-I $ [***]+
-----
CASTANET PRODUCTION SUITE-(INTL VERSION)
Castanet Production Suite-(Intl Version) 3.2 CPS-3.2-I $ [***]+
-----
</TABLE>
- ----------
+ CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
11
<PAGE> 12
ATTACHMENT C
LICENSE TERMS
Standard License Terms (Boilerplate): Each OEM Application must be licensed
pursuant to terms materially equivalent to the Standard License Terms attached
as Attachment C-1.
Access License Terms: Each OEM Application must also be licensed pursuant to
terms materially equivalent to the Access License Terms indicated below and
attached as Attachment C-2.
ACCESS LICENSE TERMS
<TABLE>
<CAPTION>
OEM Application: Applicable Access License Terms:
<S> <C>
Tivoli Cross-Site for User Access License or Server Access License
Deployment
- Application Management
Server and Application Client
Tivoli Cross-Site for To be provided to Marimba for review (but not approval)
Availability in advance; must include a separate charge for each
- - Application Management separate client computer
Server and Application Client
Tivoli Cross-Site for Security To be provided to Marimba for review (but not approval)
- - Application Management in advance; must include a separate charge for each
Server and Application Client separate client computer
Customization License Custom Redistribution License
Distribution of Application Repeater Redistribution License
Management Server from
Channel Master to Trading
Partner *
Distribution of Application Custom Redistribution License**
Client from Channel Master to
Trading Partner*
</TABLE>
* Redistribution rights are only as set forth in the new language added by this
Amendment to the end of Section 1.a.(i) of the Agreement
** Rights and restrictions regarding the right to make any changes to the user
interface are not required to be included in the event OEM is not providing such
right to make changes to the user interface to the Channel Master or its Trading
Partners
- OEM shall have the right to request Marimba to review and (as
appropriate) approve any license terms to be used by OEM for the OEM
Applications as being in compliance with the terms of this Agreement. OEM agrees
to provide Marimba with advance notice and an appropriate period of time to
review and provide any comments regarding such licenses. Marimba agrees to be
prompt and reasonable in its review.
12
<PAGE> 13
ATTACHMENT C-1
STANDARD LICENSE TERMS (BOILERPLATE)
MARIMBA CASTANET(TM) INFRASTRUCTURE SUITE END USER LICENSE AGREEMENT
IMPORTANT -- READ CAREFULLY.
BY CLICKING ACCEPT OR INSTALLING THE SOFTWARE, YOU ARE AGREEING TO ALL OF THE
TERMS AND CONDITIONS OF THIS LICENSE AGREEMENT. LICENSOR IS WILLING TO MAKE THE
SOFTWARE AVAILABLE TO YOU ONLY UPON THE CONDITION THAT YOU ACCEPT THIS LICENSE
AGREEMENT.
IF YOU DO NOT AGREE TO ALL OF THE TERMS OF THIS AGREEMENT, CLICK DECLINE AND THE
INSTALLATION PROCESS WILL NOT CONTINUE. IF YOU CLICK DECLINE, CONTACT LICENSOR
FOR REFUND INFORMATION (IF APPLICABLE).
IF YOU RECEIVED THE SOFTWARE PURSUANT TO A SIGNED PRINTED LICENSE AGREEMENT AND
THE TERMS OF THAT AGREEMENT VARY FROM THIS AGREEMENT, THEN THE PRINTED AGREEMENT
GOVERNS YOUR USE OF THE SOFTWARE.
IF YOU RECEIVED THE SOFTWARE FOR EVALUATION PURPOSES, THEN THIS SOFTWARE MAY
CEASE FUNCTIONING EITHER AT OR BEFORE THE END OF THE STATED EVALUATION PERIOD
(WHICH MAY BE AS SHORT AS 30 DAYS) AND ANY USE OF THE SOFTWARE AFTER THE END OF
THE EVALUATION PERIOD WITHOUT PURCHASE OF A LICENSE IS STRICTLY PROHIBITED.
This Marimba Castanet(tm) Infrastructure Suite End User License Agreement
(Agreement) is between you (either an individual or entity) (Licensee) and
Licensor. Licensor means either Marimba, Inc. or, if Licensee has acquired a
third-party product or service which includes this software, such third party.
This Agreement applies to the object code copy of the Marimba Castanet(tm)
Infrastructure Suite software which Licensee has elected to install (Software),
together with any related documentation provided by Licensor (Documentation).
The Software and Documentation are referred to collectively herein as Software.
1. GRANT OF LICENSE: [INTENTIONALLY OMITTED - SEE ACCESS LICENSE TERMS]
2. RESTRICTIONS. Unless otherwise specified in the Grant of License (Section 1),
Licensee may not copy the Software except for one copy made solely for back-up
purposes. To the extent copying is permitted, Licensee must include the
copyright notice and any other notices that appear on the original Software on
any copies and any media therefor. Licensee shall not (and shall not allow any
third party to) (i) decompile, disassemble, or otherwise reverse engineer the
Software (except solely to the extent that applicable law prohibits reverse
engineering restrictions) or attempt to reconstruct or discover any source code,
underlying ideas, algorithms, file formats or programming interfaces of the
Software by any means whatsoever, (ii) remove any product identification,
proprietary, copyright or other notices, (iii) provide, lease, lend, grant a
security interest in, use for timesharing, hosting or service bureau purposes or
otherwise transfer or use or allow others to transfer or use the Software to or
for the benefit of third parties, (iv) modify, translate, incorporate into or
with other software or create a derivative work of any part of the Software, or
(v) disseminate performance information or analysis (including, without
limitation, benchmarks) from any source relating to the Software.
Licensee acknowledges that the Software is not designed or licensed for use in
hazardous or high risk environments such as operation of nuclear facilities,
direct life support, air or space travel or police, rescue or military
operations and Licensor shall have no liability in connection with any use of
the Software in such situations.
3. TITLE. Notwithstanding anything to the contrary herein, Marimba, Inc. retains
all title to, and, except as expressly and unambiguously licensed herein, all
rights to the Software, all copies and derivative works thereof (by whomever
produced) and all related documentation and materials.
4. TERMINATION. The Agreement is effective until terminated. The Agreement will
terminate automatically if Licensee fails to cure any material breach of this
Agreement within thirty (30) days after such breach first occurs. Upon
termination, Licensee shall immediately cease all use of the Software and return
or destroy all copies of the Software and all portions thereof and so certify to
Licensor. Except for the Grant of License (Section 1) and except as otherwise
expressly provided herein, the terms of the Agreement shall survive termination.
Termination is not an exclusive remedy and all other remedies (including,
without limitation, equitable relief) will be available whether or not the
License is terminated.
13
<PAGE> 14
5. PAYMENT. Licensee will pay for the Software in accordance with the terms
specified when the Software was ordered. Any late payments shall be subject to a
service charge equal to [***]+ of the amount due (calculated on a monthly basis)
or the maximum amount allowed by law, whichever is less.
6. LIMITED WARRANTY. Licensor warrants to Licensee, for a period of thirty (30)
days from the date of purchase of the Software by Licensee, that: (i) the
Software, if operated as directed, will substantially achieve the functionality
described in the Documentation, and (ii) the media containing the Software, if
provided by Licensor, will be free from defects in material and workmanship.
Licensor does not warrant, however, that Licensee's use of the Software will be
uninterrupted or that the operation of the Software will be error-free or
secure. In addition, the security mechanisms implemented by the Software have
inherent limitations, and Licensee must determine that the Software sufficiently
meets Licensee's requirements. Licensor's sole liability (and Licensee's
exclusive remedy) for any breach of the warranties set forth in this Section 6
shall be, in Licensor's sole discretion, to use commercially reasonable efforts:
(i) to replace Licensee's defective media or Software; or (ii) to advise
Licensee how to achieve substantially the same functionality with the Software
as described in the Documentation through a procedure different from that set
forth in the Documentation; or (iii) if the above remedies are impracticable, to
refund the license fee paid for the Software. Licensor shall have no obligation
with respect to a warranty claim unless notified of such claim and provided
evidence of the license purchase within the applicable warranty period. Licensor
will use reasonable commercial efforts to repair, replace, advise or (at
Licensor's election) refund pursuant to the foregoing warranties within thirty
(30) days of being so notified.
The above warranties shall not apply: (i) if the Software is used on or in
conjunction with hardware or software other than the unmodified version of the
hardware and software with which the Software was designed to be used as
described in the Documentation, (ii) if any modifications are made to the
Software by Licensee during the warranty period, (iii) if the media of Software
is subjected to accident, abuse, or improper use, (iv) if Licensee violates the
terms of this Agreement or (v) if Licensee received the Software on a free or
evaluation basis.
THIS IS A LIMITED WARRANTY, AND IT IS THE ONLY WARRANTY MADE BY LICENSOR or its
suppliers or resellers. NEITHER LICENSOR NOR ITS SUPPLIERS OR RESELLERS MAKES
ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NONINFRINGEMENT OF THIRD PARTIES' RIGHTS. YOU MAY HAVE OTHER STATUTORY RIGHTS.
HOWEVER, TO THE FULL EXTENT PERMITTED BY LAW, THE DURATION OF STATUTORILY
REQUIRED WARRANTIES, IF ANY, SHALL BE LIMITED TO THE ABOVE LIMITED WARRANTY
PERIOD. MOREOVER, IN NO EVENT WILL WARRANTIES PROVIDED BY LAW, IF ANY, APPLY
UNLESS THEY ARE REQUIRED TO APPLY BY STATUTE. NO DEALER, AGENT, OR EMPLOYEE OF
LICENSOR IS AUTHORIZED TO MAKE ANY MODIFICATIONS, EXTENSIONS, OR ADDITIONS TO
THIS LIMITED WARRANTY.
NEITHER LICENSOR NOR ANY SUPPLIER OR RESELLER OF LICENSOR SHALL HAVE ANY
LIABILITY WITH RESPECT TO ANY DATA TRANSMITTED WITH USE OF THE SOFTWARE. YOU ARE
SOLELY RESPONSIBLE FOR AND SHALL BEAR ALL RISK ASSOCIATED WITH USE OF THE
SOFTWARE TO TRANSMIT DATA, INCLUDING, BUT NOT LIMITED TO, LOSS OR CORRUPTION OF
DATA OR ANY LACK OF SECURITY.
7. SUPPORT AND MAINTENANCE. Licensee is not entitled to any support or
maintenance (including, without limitation, updates, upgrades, or enhancements
of the Software) under this Agreement.
8. LIMITATION OF REMEDIES AND LIABILITY. NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, EXCEPT FOR DEATH OR PERSONAL INJURY, NEITHER LICENSOR
NOR ITS SUPPLIERS OR RESELLERS SHALL BE LIABLE WITH RESPECT TO ANY SUBJECT
MATTER OF THIS AGREEMENT OR UNDER CONTRACT, NEGLIGENCE, STRICT LIABILITY OR ANY
OTHER LEGAL OR EQUITABLE THEORY (I) FOR ANY AMOUNTS IN EXCESS IN THE AGGREGATE
OF THE FEES PAID TO LICENSOR BY LICENSEE WITH RESPECT TO THE COPIES OF SOFTWARE
THAT ARE THE SUBJECT OF THE CLAIM DURING THE TWELVE MONTH PERIOD PRIOR TO THE
CAUSE OF ACTION, (II) FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, FOR ANY COST OF PROCUREMENT OF SUBSTITUTE GOODS,
TECHNOLOGY, SERVICES OR RIGHTS); (III) FOR INTERRUPTION OF USE OR LOSS OR
CORRUPTION OF DATA; OR (IV) FOR ANY FAILURE OF THE SOFTWARE TO PROVIDE SECURITY,
EVEN IF SUCH PARTY HAS BEEN MADE AWARE OF THE POSSIBILITY OF SUCH DAMAGES. SOME
STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL
DAMAGES, SO THE ABOVE LIMITATIONS AND EXCLUSIONS MAY NOT APPLY TO YOU.
- ----------
+ CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
14
<PAGE> 15
9. ENCRYPTION AND AUTHENTICATION. If the Software contains cryptographic or
authentication features, then Licensee must obtain a signed digital certificate
from a certificate authority or a certificate server in order to utilize the
cryptographic or authentication features. Licensee may be charged additional
fees for certification services. Following successful installation of a digital
certificate, Licensee's use of the Software's cryptographic or authentication
features will be enabled. Licensee is responsible for maintaining the security
of the environment in which the Software is used and the integrity of the
private key file used with the Software. In addition, the use of digital
certificates is subject to the terms specified by the certificate provider, and
there are inherent limitations in the capabilities of digital certificates. If
Licensee is sending or receiving digital certificates, Licensee is responsible
for familiarizing itself with and evaluating such terms and limitations.
10. EXPORT COMPLIANCE. Licensee shall not, and shall not allow any third-party
to, remove or export from the United States or allow the export or re-export of
any part of the Software or any direct product thereof: (i) into (or to a
national or resident of ) Cuba, Iran, Iraq, Libya, North Korea, Sudan or Syria,
(ii) to anyone on the U.S. Commerce Department's Table of Denial Orders or U.S.
Treasury Department's list of Specially Designated Nationals or (iii) otherwise
in violation of any restrictions, laws or regulations of any United States or
foreign agency or authority. Licensee agrees to the foregoing and warrants that
it is not located in, under the control of, or a national or resident of any
such prohibited country or on any such prohibited party list. The Software is
restricted from being used for the design or development of nuclear, chemical,
or biological weapons or missile technology without the prior permission of the
United States government. If the Software is identified by Licensor (e.g., in
the product, packaging, documentation or during the delivery process) as a
not-for-export product, then the following also applies: EXCEPT FOR EXPORT TO
CANADA FOR USE IN CANADA BY CANADIAN CITIZENS, THE SOFTWARE AND ANY UNDERLYING
TECHNOLOGY MAY NOT BE EXPORTED OUTSIDE THE UNITED STATES OR TO ANY FOREIGN
ENTITY OR FOREIGN PERSON AS DEFINED BY U.S. GOVERNMENT REGULATIONS, INCLUDING
WITHOUT LIMITATION, ANYONE WHO IS NOT A CITIZEN, NATIONAL OR LAWFUL PERMANENT
RESIDENT OF THE UNITED STATES. BY DOWNLOADING OR USING THE SOFTWARE, YOU ARE
AGREEING TO THE FOREGOING AND YOU ARE WARRANTING THAT YOU ARE NOT A FOREIGN
PERSON OR UNDER THE CONTROL OF A FOREIGN PERSON.
11. GOVERNMENT END-USERS. As defined in Federal Acquisition Regulations (FAR)
section 2.101 and Department of Defense Federal Acquisition Regulations (DFARs)
section 252.227-7014(a)(1) and DFAR section 252.227-7014(a)(5)(or otherwise),
the Software and accompanying documentation licensed in this Agreement are
deemed to be "commercial items" and "commercial computer software" and
"commercial computer software documentation." Consistent with DFAR section
227.7202 and FAR section 12.212, any use, modification, reproduction, release,
performance, display, or disclosure of such commercial software or commercial
software documentation by the U.S. Government shall be governed solely by the
terms of this Agreement and shall be prohibited except to the extent expressly
permitted by the terms of this Agreement.
12. MISCELLANEOUS. Licensee acknowledges and agrees that Marimba, Inc. shall
have the right to directly enforce any and all provisions of this Agreement
without respect to whether the Licensor as defined above is Marimba, Inc. or
another party. Neither this Agreement nor the License granted herein is
assignable or transferable by Licensee without the prior written consent of
Licensor; any attempt to do so shall be void. Any amendment, waiver, notice,
report, approval or consent required or permitted hereunder shall be made in
advance in writing. No failure or delay in exercising any right hereunder will
operate as a waiver thereof, nor will any partial exercise of any right or power
hereunder preclude further exercise. If any provision of this Agreement shall be
adjudged by any court of competent jurisdiction to be unenforceable or invalid,
that provision shall be limited or eliminated to the minimum extent necessary so
that this Agreement shall otherwise remain in full force and effect and
enforceable. This Agreement shall be deemed to have been made in, and shall be
construed pursuant to the laws of the State of California and the United States
without regard to conflicts of laws provisions thereof, and without regard to
the United Nations Convention on the International Sale of Goods. Unless waived
in its sole discretion by Licensor, the sole jurisdiction and venue for actions
related to the subject matter hereof shall be the California state and federal
courts having within their jurisdiction Santa Clara County, California and both
parties consent to the jurisdiction of such courts. Except as expressly set
forth in an agreement executed by the parties which incorporates this Agreement
by reference, this Agreement is the complete and exclusive statement of the
mutual understanding of the parties and supersedes and cancels all previous
written and oral agreements and communications relating to the subject matter of
this Agreement. The prevailing party in any action to enforce this Agreement
will be entitled to recover its attorneys' fees and costs in connection with
such action. All software and documentation Copyright (c) 1997-98, Marimba, Inc.
All Rights Reserved.
15
<PAGE> 16
ATTACHMENT C-2
ACCESS LICENSE TERMS
USER ACCESS LICENSE AND SERVER ACCESS LICENSE - CASTANET INFRASTRUCTURE SUITE
Scope of Use: Each Castanet Infrastructure Suite may only be used to
transmit to or otherwise operate with Endpoints for which Licensee has purchased
an Access License. "Endpoint" means any computer or other device executing a
Castanet Tuner or other software capable of operating with a Castanet Enterprise
Transmitter. A separate Access License is required for each individual user of
an Endpoint.
User Access License (UAL): A User Access License permits use of the Castanet
Infrastructure Suite to deploy and manage applications or other data for use by
one user on one Endpoint.
Server Access License (SAL): A Server Access License permits use of the Castanet
Infrastructure Suite to deploy and manage applications or other data on one
Endpoint computer server. An Endpoint computer server licensed with an SAL may
not deploy or manage applications or other data on Endpoints for which Licensee
has not purchased an Access License.
REPEATER REDISTRIBUTION LICENSE (RRL)
Each Castanet Repeater ("Repeater") may be installed and used on one of
Licensee's customer's premises to support Endpoints for which Licensee has
purchased a Castanet Infrastructure Suite Access License hereunder. Each
Repeater may be used solely to repeat or re-publish data or applications
received by that Transmitter directly from Licensee ("Use Restriction"). Each
Repeater may be provided only subject to an executed license agreement which
contains provisions materially equivalent to the terms of the end-user license
contained within the Repeater and which limits use of the Repeater in accordance
with the Use Restriction; Licensee shall be responsible for compliance by the
user of the Repeater with the terms of the license. A "Repeater" is a Castanet
Enterprise Transmitter in the version and form provided by Marimba to Licensee
expressly for use as a Repeater; at Marimba's discretion, Repeaters may each be
enabled for a set number of Endpoints. Within thirty (30) days after
installation of a Repeater, Licensee shall provide Marimba with the name and
contact information of each Licensee customer which has control over or access
to a Repeater. Licensee shall indemnify and hold Marimba harmless from and
against any damages, claims, or losses arising from any such deployment of a
Repeater.
CUSTOM REDISTRIBUTION LICENSE (CRL)
CUSTOM REDISTRIBUTION LICENSE ATTACHMENT (RESELLER VERSION)
The following terms (this "Attachment") are incorporated into the license
agreement (the "Agreement") pursuant to which you ("Licensee") have licensed
Marimba Castanet software from a Marimba reseller (the "Licensor"). All
references herein to "Marimba" are to Marimba, Inc. located at 440 Clyde Avenue,
Mountain View, CA 94043, supplier of the Castanet software and a third-party
beneficiary of this Attachment.
1. LICENSE GRANTS. Subject to all of the terms and conditions of the Agreement
and this Attachment, Licensor hereby grants Licensee the following
non-exclusive, non-sublicensable rights:
A. CREATION OF A LICENSEE CLIENT. Licensee may use the Tuner
Customization Guide and, if Licensee is a licensee of the Castanet Management
Suite, the Tuner Packager component of the Management Suite, to customize in
object code form only the user interface of one or more Tuners for use and
distribution in accordance with the terms of this Attachment and the Tuner
Customization Guide (as customized, a "Licensee Client"). Licensee may not
create or develop a Licensee Client on behalf of any third-party. The Licensee
Client may only be used or distributed to receive a Castanet channel (or series
of channels) from Licensee which add significant and substantial value and
functionality to the Castanet Tuner. Licensee acknowledges that Marimba and its
suppliers own all right, title and interest in and to the Castanet Tuner
(including its user interface) and the Tuner Customization Guide and that
nothing hereunder shall be deemed to grant or convey any ownership right therein
to Licensee or any third-party.
16
<PAGE> 17
B. INTERNAL USE OF A LICENSEE CLIENT. Licensee may permit any employee
of Licensee to use a Licensee Client on any Licensed Endpoint. "Licensed
Endpoint" means any Endpoint for which Licensee has purchased the applicable
Castanet Infrastructure Suite Access License.
C. DISTRIBUTION OF LICENSEE CLIENT TO THIRD-PARTIES. Subject to the
additional restrictions set forth in Section 3 of this Attachment, Licensee may
distribute the Licensee Client in object code form directly to third-parties,
but only (a) to Licensed Endpoints and (b) for use solely to receive Castanet
channels provided by Licensee.
D. DUPLICATION OF A LICENSEE CLIENT. Licensee may duplicate the Licensee
Client as necessary to support the use and distribution permitted hereunder.
2. TERM: Notwithstanding anything to the contrary in the Agreement, this
Attachment shall terminate on the earlier to occur of three (3) years from the
Effective Date or termination of the Agreement. The following provisions shall
survive termination of this Attachment: (a) Section 3.A.-C. of this Attachment
and (b) except in the event of termination for breach by Licensee, (i) the use
license granted in Section 1.B. above and (ii) any third-party end-user
sublicense for use of a Licensee Client actually distributed to such end-user
prior to termination of this Attachment (provided such users comply with the
terms of the end user license required under Section 3.A.).
3. THIRD PARTY DISTRIBUTION REQUIREMENTS. No Licensee Client may be distributed
to a third-party except in accordance with the provisions of this Section 3.
A. END USER LICENSE. No distribution of any Licensee Client shall be
made to any third-party except pursuant to an enforceable end-user license
agreement equally as protective of Licensor and its suppliers (including
Marimba) as the Marimba Castanet Tuner End User License Agreement (Tuner EULA),
a copy of which is contained within the Tuner. Licensee agrees not to remove the
Tuner EULA from any copy of the Licensee Client it distributes unless Licensee
has replaced the Tuner EULA with, or separately entered into, a written license
agreement in conformance with the requirements of this Section 3.A. Licensee
shall use reasonable commercial efforts to notify Licensor of any uncured breach
of any end-user license for a Licensee Client of which it becomes aware and to
enforce or assist Licensor in the enforcement of such end-use license terms.
B. EXPORT CONTROL REQUIREMENTS. Licensee shall comply with all import
and/or export laws and restrictions and regulations of the Department of
Commerce, the United States Department of Treasury Office of Foreign Assets
Control ("OFAC"), or other United States or foreign agency or authority, and not
import, export, or allow the import, export or re-export of any Licensee Client
(or any other Marimba product) in violation of any such restrictions, laws or
regulations (including, without limitation, export or re-export to destinations
prohibited in the U.S. Export Administration Regulations (or any successor
supplement or regulations), or the OFAC regulations found at 31 C.F.R. 500 et
seq.). Licensee shall obtain and bear all expenses relating to any necessary
licenses and/or exemptions with respect to the export from the U.S. and import
into any foreign country of any Licensee Client. License acknowledges that the
Castanet Tuner contained within the Licensee Client contains encryption
technology, export of which is restricted by U.S. and certain foreign laws. A
notice describing the Castanet Tuners' current encryption and export status is
available upon request to the Marimba Legal Department ([email protected]).
C. INDEMNIFICATION. Licensee will indemnify Licensor and its suppliers
(including Marimba) from any and all third-party claims, liabilities, damages or
expenses (including reasonable attorneys' fees) arising on account of Licensee's
modification or customization of the Tuner or distribution or marketing of a
Licensee Client (excluding any claim to the extent based on the Castanet Tuner
in unmodified, stand-alone form), provided that Licensee shall have (i) received
from Licensor notice of said claim within twenty (20) days of the assertion
thereof (however, failure to give such notice shall void the indemnification
only if the delay beyond the twenty (20) day period materially prejudiced
Licensee); (ii) have received from Licensor the exclusive right to control and
direct the investigation, defense, or settlement of such claims; and (iii)
received the reasonable cooperation and assistance of Licensor.
D. USER INTERFACE REQUIREMENTS. Each Licensee Client must comply with the
user interface requirements set forth in the attached User Interface
Requirements. Except as set forth in the User Interface Requirements, Licensee
shall not use any Marimba trade name or trademark without prior written consent
of Marimba. Licensee will comply with Marimba's then-current quality control
trademark guidelines and Licensor and/or Marimba shall have the right to suspend
Licensee's use of the trade name and trademarks upon thirty (30) days advance
written notice for failure to comply with Marimba's guidelines (unless Licensee
cures such failure within such notice period).
E. REGISTRATION AND REVIEW. At least ten (10) days prior to first
distribution to any third-party, Licensee shall, at no charge provide Marimba
with one (1) copy of the Licensee Client (or UI of the Licensee Client) for use
by Marimba solely for license and branding compliance verification purposes.
Licensee shall provide the Licensee Client to Marimba by an email to
[email protected].
17
<PAGE> 18
F. SUPPORT. Licensee shall be responsible for all end-user support for
the Licensee Client.
CUSTOM REDISTRIBUTION LICENSE - USER INTERFACE GUIDELINES
A. User Interface Requirements. Each Licensee Client distributed by Licensee to
any third-party pursuant to the Custom Redistribution License must be in
compliance with the user interface ("UI") requirements set forth below. These
requirements reference the standard UI of the Castanet Tuner which is customized
by Licensee to create the UI of the Licensee Client.
Required removal. The following elements must be removed or changed in the
Licensee Client UI:
<TABLE>
<CAPTION>
ITEM IN CASTANET TUNER UI: REQUIREMENT IN LICENSEE CLIENT UI:
<S> <C>
Browse Button Must remove Browse Button
and related browse page; may
replace with alternative
functionality created by Licensee
Window title Must change to non-Marimba branding
Window icon (including taskbar icon) Must change to non-Marimba branding
Product icon (expanded and collapsed views) Must change to non-Marimba branding
Taskbar indicator icon and tooltip Must change to non-Marimba branding
Startup screen Must change to non-Marimba branding
Download progress indicator bar Must change to non-Marimba branding
Channel Guide Must remove button and remove/replace
channel
Intro Channel Must remove button and channel
Help Channel Must remove or replace with non-Marimba
content
Program group name ("Castanet Tuner") under Must change to non-Marimba branding
Start Menu, Programs
Any reference to "Marimba" "Castanet" or Must remove, except for as required below
"Tuner"
</TABLE>
No Change Permitted. The following elements may not be changed or modified in
any way in the Licensee Client UI:
<TABLE>
<CAPTION>
ITEM IN CASTANET TUNER UI: REQUIREMENT IN LICENSEE CLIENT UI:
<S> <C>
"Tuner" About Box Must leave access and window unchanged
"Castanet Kernel" About Box Must leave access window unchanged
Transmitter listing icon Must not change in any way
Program item ("Castanet Tuner" and Tuner Must not change in any way
logo) under Start Menu, Programs, Program
group name
</TABLE>
Required Inclusion.
The following elements must be included in the UI of each Licensee Client:
1. "Powered by Marimba" icon must be displayed in full size in the bottom left
hand corner of the UI of the Licensee Client in the position designated in the
Tuner Customization Guide. The Powered by Marimba icon is included within the
Castanet Tuner UI and is available separately upon request to Marimba
([email protected]).
2. The following copyright notice acknowledgement must appear in the UI of
Licensee Client and in any documentation and collateral relating to the Licensee
Client in a size and placement which is legible and noticeable and no less
prominent than any other copyright notice:
Contains Castanet(TM) technology from Marimba, Inc. Copyright(C) 1996-1999
Marimba, Inc. All rights reserved.
B. General. Licensee's trademarks, product or service names, or company name
must be the more prominent mark on materials bearing the Powered by Marimba
logo. Licensee may not represent (or use the Powered by Marimba logo in such a
manner as to represent) that the Licensee Client or any Licensee software is
produced, endorsed, sponsored by, or otherwise affiliated with Marimba, Inc,
except to acknowledge the inclusion of Marimba software as a component
technology in Licensee's offering.
All materials bearing the Powered by Marimba logo must credit ownership of the
logo to Marimba, Inc. The following credit line should be used: "The Powered by
Marimba logo is a trademark of Marimba, Inc."
18
<PAGE> 19
Marimba may amend or change the logos or trademarks referenced herein upon
thirty (30) days advance written notice to Licensee, provided that Licensee
shall have a commercially reasonable period of time thereafter in which to
implement any such changes.
19
<PAGE> 20
ATTACHMENT E
TRADEMARKS
Marimba
Castanet
UpdateNow
Powered by Marimba
20
<PAGE> 21
ATTACHMENT G
MARKETING; BRANDING GUIDELINES; PRESS RELEASE LANGUAGE; PRESS/ANALYST ACTIVITY
a. Branding. The "Powered by Marimba" logo and related Marimba, Inc.
copyright notice (e.g., "Contains Castanet software Copyright (C) 1996-1999
Marimba, Inc. All rights reserved.") will be branded in each Splash Screen,
Installation Screen, About Box and Progress Indicator Screen on each component
of each OEM Application. The "Powered by Marimba" logo shall appear on the
screen for a commercially reasonable period of time. In addition, OEM shall not
remove any attributions to any third-party supplier of Marimba which Marimba is
required to include in a Program. Notwithstanding the foregoing, in the event
OEM provides any other licensor, partner or other third-party any branding in
any OEM Application in excess of that required for Marimba in this section, then
OEM shall be required to provide the same or greater branding for Marimba as
well.
b. Product Collateral. The "Powered by Marimba" logo and Marimba, Inc.
copyright notice (as appropriate), as well as Castanet technical information and
reference to Castanet technology as the underlying application distribution and
management infrastructure will be included in all presentations and product
collateral used to describe the OEM Application. Product collateral may include,
but is not limited to, a wide variety of materials, such as brochures, data
sheets, white papers, and booklets. In collateral, the preferred placement of
the "Powered by Marimba" logo is in the lower right-hand corner. If this
location is not available, placement in any free corner is acceptable. The logo
size should exceed one inch in length and text should not be wrapped around the
logo. The number of pages in which the Marimba logo and/or appropriate reference
is included will be as agreed upon by the parties but shall include any page in
which a feature or benefit of the technology provided by the Programs is
discussed.
c. Product Documentation. The "Powered by Marimba" logo and Marimba,
Inc. copyright notice, as well as Castanet technical information and reference
to Castanet technology as the underlying application distribution and management
infrastructure will be included in all product documentation for each OEM
Application. In all documentation, the preferred placement of the "Powered by
Marimba" logo is in the lower right-hand corner. If this location is not
available, placement in any free corner is acceptable. The logo size should
exceed one inch in length and text should not be wrapped around the logo. The
number of pages in which the Marimba logo and/or appropriate reference is
included will be as agreed upon by the parties but shall include any page in
which a feature or benefit of the technology provided by the Programs is
discussed.
d.Product Packaging. The "Powered by Marimba" logo will be included on
all packaging materials for the OEM Application. The " Powered by Marimba" logo
should appear in two places: 1) on the front, in the lower right-hand corner, of
the product package. If this location is not available, placement on the front
of the package, in any free corner of the box, is acceptable as long as the logo
is prominent, proper clear space is maintained, and margin specifications are
met; and 2) at the base of the spine of the product package. If the logo cannot
be placed at the base of the spine, any free corner on the spine is acceptable
as long as the logo is prominent, proper clear space is maintained, and margin
specifications are met. In the case of a CD-ROM, the placement shall be in the
lower right corner of the cover page of the jewel box but not on the spine of
the jewel box itself. Whether on the front of the product package or on the
spine, the logo's distance from the edge of the product package should always be
equal to the logo's height while maintaining the proper clear space surrounding
the logo. The logo should never be obstructed by a sticker or packaging tape.
All logo usage and placement shall be in conformance with Marimba's standard
trademark and logo guidelines as previously provided to OEM. Marimba may revise
and update the guidelines during the term of this Agreement upon advance written
notice to OEM; provided that OEM shall have a commercially reasonable time to
comply with any such revised guidelines (but in any event no later than OEM's
next release).
e. Tradeshows. Marimba will be invited to participate in tradeshows, in
support of the OEM Application, when appropriate. At any tradeshow or event, use
of Marimba's technology will be referenced when demonstrating the OEM
Application. Reference may be in the form of the "Powered by Marimba" logo on
banners or signs. The preferred placement of the "Powered by Marimba" logo on
event signage or vertical banners is the lower right-hand corner. If this
location is not available, placement in any free corner is acceptable as long as
the logo is prominent, correct proportions and proper clear space are
maintained, and margin specifications are met.
21
<PAGE> 22
f Advertising. The "Powered by Marimba" logo and Marimba, Inc. copyright
information will be included in all advertising for each OEM Application. In
advertising, the "Powered by Marimba" logo is always placed in the lower
right-hand corner of the page. If this location is not available, placement in
any free corner is acceptable as long as the logo is prominent, correct
proportions and proper clear space is maintained, and margin specifications are
met. Do not wrap text around or incorporate the logo into advertising headlines.
g. Website. The "Powered by Marimba" logo will be prominently displayed
and Castanet technical information as well as reference to Castanet technology
as the underlying application distribution and management infrastructure will be
featured in the Cross-site website (or other OEM Application website, as
applicable). The "Powered by Marimba" logo and any other mention of Marimba or
Castanet will include links back to the Marimba website
(http://www.marimba.com), or such successor site designated by Marimba.
h. Web Advertising Banners. For Web banners, the "Powered by Marimba"
logo should appear to the right of the OEM company and product names within a
horizontal web-advertising banner. In a vertical web advertising banner, the
"Powered by Marimba" logo should appear in the lower right hand corner.
i. Press Release. Incorporated into the press release(s) announcing the
launch and availability of any OEM Application, Marimba will be described as the
partner providing the technology for such OEM Application (including Cross-Site
for Deployment) and as the application distribution and management
infrastructure for all OEM Application modules. Marimba will be invited to
participate in joint press and industry analyst calls and events supporting such
press releases and product launches. Marimba and OEM will jointly create a
"frequently asked questions" document to describe and position the relationship
to insure that the spokespeople from both companies provide one consistent
message. OEM shall pass press inquiries to Marimba as appropriate.
j. Sales and Technical Training. Marimba will, when appropriate, support
the OEM sales team in sales and technical training activities.
k. Ongoing Activities: OEM agrees to negotiate in good faith with
Marimba regarding Marimba involvement in press releases, briefings and
announcements for any subsequent releases of OEM Applications during the term of
the Agreement and to permit Marimba participation in any such activities in a
manner materially similar to the terms set forth herein for the initial OEM
Application release.
l. Review of OEM Applications. OEM shall provide Marimba with one copy
of each OEM Application to be bundled or integrated with a Program as soon as
reasonably practicable (including, for example, at the development or beta
stage), but in any event at least 10 days before general release. Marimba may
use such programs solely for trademark and branding guideline verification
purposes only.
m. Updated Trademarks and Logos. OEM acknowledges that Marimba's name
and logos for the Programs may change and evolve during the term of the
Agreement. The terms "Marimba", "Castanet" and "Powered by Marimba" as used
herein refer to such existing name and logo and any successor or replacement
name or logo. Marimba shall provide OEM with advance notice of any changed or
new name or logo and OEM shall implement such new name or logo as soon as
reasonably commercially practicable thereafter (but in any event no later than
OEM's next release, or, if the next release is less than 3 months from the date
of receipt of the notice of the new marks, a corresponding commercially
reasonable period of time but in no event later than the next following
release)). Each name or logo referred to on this Schedule G shall be deemed a
"Mark" pursuant to the terms of Section 6 of this Agreement.
22
<PAGE> 23
ATTACHMENT K
1. PARTNERSHIP COMMUNICATION:
Each party agrees to identify one employee as a designated "Point
Person" under the Agreement. The Point Person shall be responsible for keeping
up to date on any issues arising between the parties on all levels, including
engineering, support, marketing, finance, and sales. Each Point Person shall be
available to the other Point Person to discuss issues arising between the
parties and, if necessary, to further escalate any issues to the appropriate
member of senior management. Furthermore, each party will have a defined path of
escalation of issues which shall include the Point Person as well as members of
senior management senior to the Point Person.
The parties agree to make all reasonable efforts to have an in person
meeting at least once per calendar quarter to discuss issues relating to the
Agreement and the relationship of the parties. Each Point Person and at least
one member of senior management of each party shall attend each meeting. Unless
otherwise agreed to the meetings will rotate between each party's headquarters.
The initial Point Person for Marimba is: Steve Ackley
650-930-5271(phone)
650-930-5603 (fax)
The initial Point Person for OEM is: Kristin Burkland
512-436-8860 (phone)
512-436-1193 (fax)
2. MARKETING: OEM agrees to establish a process with Marimba for regular
communication and advance review by Marimba of sample product screens,
collateral and documentation referencing Marimba. The Point Person shall be
available as a point of contact for any issues arising regarding
implementation of the requirements of Attachment G.
3. PROJECT ENGINEER: Marimba shall make available an engineer with a high level
of development expertise in the Programs (Project Engineer) and who is
reasonably agreeable to OEM for on-site support at Tivoli's Austin, Texas
facility for an average of one week per month. OEM shall pay Marimba a set
fee of $[***]+ in advance per year for the Project Engineer and shall
reimburse Marimba for all reasonable travel, housing and related expenses in
accordance with OEM's standard reimbursement policies (provided Marimba has
the opportunity to review and approve such policy in advance). The terms for
Implementation Services set forth in Attachment J of the Agreement shall
govern the services provided by the Project Engineer. The parties shall
agree in advance as to any additional hours to be provided in excess of the
set fee and any such additional hours shall be provided as billable hours
under the provision of Section 7(e) of the Agreement.
4. REQUEST FOR FEATURE ENHANCEMENTS: Marimba shall identify one or more points
of contact for feature enhancement requests from OEM. A "feature
enhancement" is a request for a change, enhancement or extension, which is
not an Error, to a Program. Marimba shall promptly provide OEM with a notice
of whether Marimba intends to implement such request and, if so, in what
projected timeframe. All feature enhancement requests will be logged in a
central database at Marimba and in the event Marimba agrees to implement a
request it shall provide regular status reports as to progress to OEM. This
provision shall only be applicable for so long as OEM retains a Project
Engineer. The Point Person shall be available as a point of contact for any
issues arising with respect to feature enhancement requests.
5. BACKLINE SUPPORT OBLIGATIONS:
a) In connection with the obligations of Marimba set forth in Section 4 of the
Agreement, Marimba agrees to use reasonable commercial efforts to respond to
reported errors in accordance with the Error Correction Target
- ----------
+ CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
23
<PAGE> 24
Response Times set forth below. An "error" is defined as a defect in the
code of the Program itself which prohibits the Program from operating in
material accordance with the documentation. Marimba shall not be deemed to
be in breach of its obligations with respect to resolution of any error if
Marimba is using reasonable commercial efforts to fix the error.
b) OEM agrees to provide Marimba with access to the OEM Applications and
sufficient training in the OEM Applications to permit Marimba to diagnose
errors reported by OEM in the Programs. OEM shall also designate one or more
support managers as the sole points of contact for reporting errors to
Marimba. Each OEM manager shall have a demonstrated high level of knowledge
in all relevant facets of both the Programs and the OEM Applications; this
requirement shall replace the requirement regarding each manager becoming a
Marimba Certified Consultant as set forth in Section 4b of the Agreement.
OEM shall have the right in its sole discretion to extend its support
coverage under Section 4 of the Agreement to 7X24 backline support for an
increase of the Annual Support and Maintenance Fee set forth in Attachment A
to [***]+.
ERROR CORRECTION TARGET RESPONSE TIMES:
Error Correction Times: the objectives that Marimba should attempt to achieve
using reasonable commercial efforts for resolution of errors in systems in
production and distribution of the correction to Tivoli.
a. "SEVERITY 1" requires maximum effort support until an emergency
fix or bypass is developed and available for shipment to OEM.
The objective will be to provide relief to OEM within 24 hours
and provide a final solution or fix within 7 calendar days;
b. "SEVERITY 2" resolved within 14 calendar days;
c. "SEVERITY 3" resolved within 28 calendar days; and
d. "SEVERITY 4" resolved as agreed by Marimba in its discretion.
The calendar days begin when Marimba receives the error and sufficient
supporting documentation (during support hours) and ends when the error
correction or other resolution (e.g., an acceptable workaround) is
provided to OEM. Upon request or as otherwise agreed by the parties,
Marimba shall provide OEM with notice of the calendar start time for
each error. OEM will consider exceptions from these objectives when
warranted by technical or business considerations. The objectives shall
also be adjusted if Marimba is delayed in its ability to resolve the
problem due to failure by OEM to provide the necessary information or
support.
Error Severity Levels: designations assigned by OEM (and agreed to by Marimba)
to errors to indicate the seriousness of the error based on the impact that the
error has on the customer's operation:
a. SEVERITY 1 is a critical problem. The customer cannot use the
Program or there is a critical impact on the customer's
operations which requires an immediate solution;
b. SEVERITY 2 is a major problem. The customer can use the Program,
but an important function is not available or the customer's
operations are severely impacted;
c. SEVERITY 3 is a minor problem. The customer can use the Program
with some functional restrictions, but it does not have a severe
or critical impact on the customer's operations; and
d. SEVERITY 4 is a minor problem that is not significant to the
customer's operations. The customer may be able to circumvent
the problem.
- ----------
+ CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
24
<PAGE> 1
EXHIBIT 10.9
MARIMBA, INC.
RESELLER AGREEMENT
This Reseller Agreement ("Agreement") is entered as of August 14,
1997 (the "Effective Date") by and between Marimba, Inc. ("Marimba"), a Delaware
corporation, and Tivoli Systems Subsidiary, Inc.("Reseller"), a Texas
corporation and a wholly-owned subsidiary of International Business Machines
Corporation ("IBM"), a New York corporation.
1. License Grant.
a. Subject to all the terms of this Agreement, to enable
Reseller to effectively market the Products (as defined in Attachment B) through
its (including IBM's) sales force, Marimba grants to Reseller the right (i) to
market and distribute Copies (as defined in Attachment B) of the Products, but
only directly to end-user customers within the Territory (as defined in
Attachment A), (ii) to make Copies solely for the purpose of such marketing and
distribution and (iii) to use, display and perform the Demonstration Copies (as
defined in Section 4.d) solely for the purpose of demonstration, testing and
training. Reseller may not use subdistributors or resellers to distribute the
Products.
b. This license grant is non-exclusive and, except as
expressly set forth herein, non-transferable and non-sublicensable. Nothing in
this Agreement shall be construed as limiting in any manner Marimba's marketing
or distribution activities or its appointment of other dealers, resellers,
licensees or agents in general or in the Territory.
c. Notwithstanding anything else, Marimba and its
licensors retain (i) all title to, and, except as expressly and unambiguously
licensed herein, all rights to the Products, all Copies thereof (by whomever
produced) and all related documentation and materials, (ii) all of their service
marks, trademarks, trade names or any other designations, and (iii) all
copyrights, patent rights, trade secret rights and other proprietary rights in
the Products. Reseller will have no right to receive or license any source code
with respect to the Products.
2. Delivery of the Products and Promotional Material. Reseller
may either distribute Copies to end-user customers or have Marimba distribute
such Copies in connection with the issuance of Enabling Keys (as defined below).
Upon Reseller's request, Marimba will use reasonable commercial efforts to
electronically transmit a production master containing the object code of each
Product to Reseller (the "Production Masters") within 15 days of Reseller's
request. Any Copies produced from a Production Master or by Marimba at the
request of Reseller will produce Copies which need to be individually enabled by
an electronic or written password (an "Enabling Key") which Marimba will provide
on a per transaction basis. Prior to providing the Enabling Key, Reseller must
have authorized Marimba to issue the Enabling Key by delivery of the end-user
customer and configuration information set forth on Attachment D (or as Marimba
shall reasonably require in the future). Any end-user documentation, manuals
and/or marketing materials for the Products shall be made available to Reseller
(at Marimba's election) in either electronic or printed form. Printed copies of
the material may be made by Reseller at Reseller's expense. If at any time
during this Agreement Marimba notifies Reseller
1
<PAGE> 2
of a replacement version of any Production Master or documentation, Reseller
shall use reasonable commercial efforts to cease use and/or distribution of the
existing version within 30 days after Marimba makes the replacement version
available to Reseller.
3. End-User Restrictions. No distribution or license of a Copy by
Reseller shall be made except pursuant to Marimba's then-current end-user
license agreement for such Product as embedded within the Product (the current
version of which for each Product is set forth in Attachment C). Reseller
acknowledges that Marimba may require the end-user to acknowledge acceptance of
the license in connection with the downloading and/or installation of each Copy
and/or Enabling Key. If a shrink-wrap agreement is used, Reseller will accept
returns (where the shrink-wrap is not broken) in accordance with the procedure
specified in the shrink-wrap package and in such event Marimba will credit
Reseller for any properly returned Products. Reseller agrees to reasonably
cooperate with Marimba regarding implementation of Marimba's license process
with Reseller's end-user customers and at the request of Marimba or any end-user
customer to provide a copy of the applicable Marimba license or Marimba provided
summary sheet to such end-user customer(s). Upon mutual written agreement of the
parties, Reseller may license the Products under an end-user license of either
Reseller or IBM.
4. Reseller Training; Customer Support; Marketing.
a. Marimba agrees to provide four standard initial
training programs for employees of Reseller at no charge. The programs shall be
given at four sites in the United States at a location and time reasonably
acceptable to Marimba but commencing no later than 45 days after Reseller's
written request. Marimba shall bear the cost of providing the training and all
training materials and Reseller shall bear all its costs in connection with
attending the program including, without limitation, travel, room and board.
b. For purposes of this Agreement, the term Support
Service is defined as the service provided when a customer identifies an error
or has a question regarding installation or use of a Product. There are three
levels: "Level 1" is the Service provided in response to the customer's initial
contact identifying an error or need for basic assistance regarding installation
or use. "Level 2" is the Service provided to reproduce and attempt to correct
any error, to find that the service provider cannot reproduce such error, or for
more advanced questions regarding installation or use. "Level 3" is the Service
provided to isolate the error at the component level of the Products. Reseller
shall be responsible for all Level One end-user support, and Marimba shall be
responsible for all Level Two and Level Three end-user support for Copies
provided hereunder. As soon as reasonably practicable after general release (but
in no event later than with respect to Marimba's other resellers or
distributors), Marimba shall provide Updates at no charge directly to (i) the
end-user customers of Reseller to which Marimba has distributed Copies and (ii)
Reseller for redistribution and internal use as Demonstration Copies;
notwithstanding the foregoing, Updates may be distributed by Reseller or Marimba
only to end-user customers for which Reseller has paid Marimba an annual support
and maintenance fee in accordance with Section 5.a. below. Marimba will use
commercially reasonable efforts to provide advance notice to Reseller of each
Update.
2
<PAGE> 3
c. During the term of the Agreement, Marimba shall provide
reasonable backline support for the Products (i.e., support that requires access
and manipulation of any part of the Products' source code) during normal
business hours directly to one or more designated support managers of Reseller;
Reseller shall designate at least one support manager within 30 days of the
Effective Date. As soon as commercially practical thereafter, such support
manager shall attend and pass all courses required to become a Marimba Certified
Consultant. Marimba's sole obligation with respect to the Products or
documentation errors will be to use commercially reasonable efforts to correct,
at its expense, any reproducible error about which it receives written notice.
The obligations contained in this Section 4 are contingent upon proper use of
the Products and shall not apply if the Products are (i) modified by any party
other than Marimba and in Marimba's reasonable judgment such modification caused
the error or (ii) used on or with a version of a platform which Marimba does not
support at the time of such use. As of the Effective Date, the supported
platforms are Microsoft Windows NT, Microsoft Windows 95 and Sun Solaris. Upon
termination of this Agreement, at the request of Reseller, Marimba shall
continue the service set forth in this Section 4.c. at its then standard rates
for a period not to exceed 12 months from the date of termination.
d. Reseller may use a reasonable number of Copies at no
charge for demonstration, testing and training purposes only (the "Demonstration
Copies"). Such copies may not be used for resale or for any purpose other than
the purposes set forth above. Such Products shall be returned or destroyed at
the conclusion of this Agreement.
5. Fees.
a. Reseller shall pay Marimba for each Copy of a Product
distributed: (i) the suggested end-user fee (in U.S. dollars) set forth on
Marimba's then-current published U.S. Price List (the current version of which
is included as Attachment B), less the discount described in Attachment A and
(ii) if an end user customer elects to purchase maintenance and support, a first
year support and maintenance fee as calculated according to Attachment A; and,
in addition, if an end user customer elects to purchase from Reseller
maintenance and support for Products for additional years, Reseller will pay
Marimba the same fee for such maintenance and support for any subsequent year.
After the first year, Marimba shall make annual maintenance and support
available to end users of Products at its then current and generally available
rates, terms and conditions. Marimba shall have the right, in its sole
discretion, from time to time or at any time, to establish, change, alter, or
amend such prices with 30 days written notice. In addition, Reseller will pay
all transportation charges for the Copies it distributes.
b. Reseller shall deliver to Marimba within 10 business
days after the end of each month a report (i) setting forth the number of Copies
distributed (which shall include the same information as set forth in Attachment
D) and (ii) calculating all fees due to Marimba for the number of Copies
distributed with respect to the preceding month. Reseller shall pay Marimba in
U.S. dollars in the U.S. all amounts due hereunder with respect to each month
within 30 days after receipt of an invoice issued by Marimba. Marimba shall have
the right to invoice Reseller at the end of each month for all Copies for which
Reseller has authorized Marimba via the release authorization form to issue an
Enabling Key during such month, provided Marimba
3
<PAGE> 4
has issued such an Enabling Key (even if Reseller has not reported such Copies
as distributed as of the date of such invoice). Reseller shall pay a late fee on
any amount not paid when due under this Agreement equal to [***]* for such
amount for the period such payment is delinquent.
c. Reseller shall pay the Initial Commitment Amount set
forth on Attachment A within 30 days of the Effective Date. Such Initial
Commitment Amount is non-refundable except as otherwise expressly specified in
Sections 12 and 13 of this Agreement. Reseller may distribute the number of
Copies which corresponds to the then-paid portion of the Initial Commitment
Amount (as determined according to the methodology set forth in Attachment A)
without payment of any further royalties to Marimba.
d. Other than as set forth in Section 5.c. with respect to
the Initial Commitment Amount, this Agreement shall not be construed as a
commitment or obligation, express or implied, on the part of Reseller to pay any
minimum fees or to market, license, or distribute any Copies.
6. Other Reseller Obligations. Reseller agrees:
a. not to contest the application or registration of, or
use, ownership or licensing by Marimba of the trademarks set forth on Exhibit E
(the "Marks") during the term of this Agreement; provided, however, that nothing
herein prohibits or precludes Reseller from using Marks as permitted by law, and
provided further that with respect to "UpdateNow," nothing in this Agreement
will prohibit or preclude Reseller from (i) continuing to make use of the
trademark or a similar mark, if such trademark or similar mark is currently in
use; or (ii) making a fair use of such trademark or using the term in a
descriptive manner in connection with its ordinary meaning. Marimba may request
that Exhibit E be amended to add additional Marks in the event it also offers to
add new products for which such Marks are used to Attachment B. Any such request
must be sent to the attention of Reseller's legal department and will only be
effective if agreed to in writing by Reseller's counsel. Reseller acknowledges
that if it does not agree to the addition of such marks, Marimba may elect not
to add such additional products to Attachment B. For purposes of this Section
6.a., the parties agree that "Reseller" specifically does not include IBM.
b. in any distribution, marketing and promotional material
in connection with distribution of the Products, to (i) use the Marks or such
other marks designated by Marimba in writing, (ii) comply with Marimba's then
current commercially reasonable quality control trademark guidelines and (iii)
represent the Products in a manner consistent with Marimba's representation of
the Products. Marimba shall have the right to suspend Reseller's use of the
Marks upon 30 days advance written notice for failure to comply with such
guidelines (unless Reseller cures such failure within such notice period). In
addition to the above, Reseller agrees to make commercially reasonable efforts
to provide Marimba with all market statements, market positions and product
descriptions ("Marketing Materials") relating to Marimba or the Products as soon
as commercially practicable prior to their being issued. Marimba agrees to
- --------
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
4
<PAGE> 5
provide Reseller with its approval, or with its comments if it does not approve
them, within 7 business days. If Marimba does not respond within such 7 day
period, Marimba is deemed to have approved such Marketing Materials. If Reseller
does not provide Marimba with such Marketing Materials prior to their being
issued, and Marimba has a good faith belief that such Marketing Materials
misrepresent the Products or are inconsistent with Marimba's representation of
the Products, Marimba will provide Reseller with a description of the
misrepresentation or inconsistency, and Reseller will modify, reissue, or
withdraw such Marketing Materials as soon as commercially practical. The parties
agree that any press releases regarding this relationship must be pre-approved
by both parties; provided, however, that the parties agree to include the
language set forth in Attachment G in the first press release issued by the
parties regarding this
c. Agreement.
d. represents, and warrants that it will not delete,
alter, add to or fail to reproduce in and on any Copy and media it distributes
the name of the Product and any other notices appearing in or on any Production
Master, packaging or other materials provided by Marimba or which may be
reasonably required by Marimba from time to time.
e. to use reasonable efforts to keep Marimba informed as
to any problems encountered with the Products and any resolutions arrived at for
those problems. Reseller further agrees (i) that Marimba shall have any and all
right, title and interest in and to any such proposed resolutions without the
payment of any additional consideration therefor either to Reseller, or its
employees, agents or customers and (ii) that it will use reasonable efforts to
cooperate with Marimba in this regard.
f. to maintain, for a period of 1 year from the date of
the related payment, a record of the name and address of such person or entity
to which it distributes a Copy, and relevant records to support payments made to
Marimba. For Copies directly distributed by Reseller (if any), Reseller will
also provide the serial number designation of the Copy, the date of delivery of
the Copy, and the type of license agreement therefor. Reseller agrees to permit
an independent certified public accounting firm or auditor designated and paid
by Marimba to examine and audit such records (and such other records directly
related to the payments due by Reseller hereunder) during reasonable business
hours upon ten business days prior written notice with respect to Reseller's
compliance with the payment terms of this Agreement; if such an audit uncovers a
deficiency in reporting or payments, Reseller shall immediately pay Marimba all
amounts due plus interest calculated at [***]*, and, if such deficiency is
greater than [***]*, shall bear the audit expenses. Marimba shall have the right
to audit Reseller's records no more than once in any 12 month period unless
Marimba has demonstrable evidence that Reseller is not in compliance with its
payment obligations hereunder. Further, any such accounting firm or auditor must
be under a confidentiality agreement acceptable to Reseller, and will only
disclose to Marimba any amounts overpaid or underpaid for
- --------
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
5
<PAGE> 6
the period examined as well as sufficient information to substantiate such
auditor's determination of over- or under-payments.
g. to comply with all applicable export laws and
regulations (including, without limitation all applicable export laws and
restrictions and regulations of the Department of Commerce, the United States
Department of Treasury Office of Foreign Assets Control or other United States
or foreign agency or authority), not to export or authorize the export or
re-export of any Copies or Product in violation of any such law or regulations,
and to include language to the effect that the end user must comply with all
applicable export laws and regulations in any Reseller end-user license used in
connection with the Products.
h. to use reasonable commercial efforts to notify Marimba
if Reseller becomes aware of any non-compliance by any of its end-user customers
of the terms of such customer's end-user license agreement and to provide
reasonable assistance to Marimba (at Marimba's expense) with respect to
enforcement of such terms.
7. Other Marimba Obligations: Marimba agrees:
a. to use reasonable commercial efforts to deliver the
Products to end user customers within 15 days after receipt of a release
authorization form from Reseller.
b. to make the Products which are available to Reseller
under this Agreement always the most current release or version of such Products
available to Marimba's customers. Subject to Section 6.a., if during the term of
this Agreement Marimba makes any new products generally available to end-user
customers through its distributors or resellers, Marimba will offer such new
Products to Reseller under the terms of this Agreement.
8. Confidentiality. Neither party shall disclose the terms of
this Agreement except as required by law or regulation, to advisors,
consultants, potential investors and/or other agents bound to confidentiality,
or as mutually agreed by the parties. Any confidential or proprietary
information disclosed by either party in the performance of this Agreement shall
be subject to the Mutual Confidentiality Agreement executed by the parties on
the Effective Date and attached hereto for reference as Attachment F.
9. Limited Liability. NOTWITHSTANDING ANYTHING ELSE IN THIS
AGREEMENT OR OTHERWISE, EXCEPT FOR A CLAIM ARISING UNDER SECTIONS 13,
"INDEMNIFICATION," OR 14, "WARRANTIES," NEITHER PARTY WILL BE LIABLE WITH
RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE,
STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY (I) FOR ANY AMOUNTS IN
EXCESS, IN THE AGGREGATE, OF THE AMOUNTS DUE TO MARIMBA BY RESELLER DURING THE
TWELVE MONTH PERIOD PRIOR TO THE DATE SUCH CLAIM AROSE OR (II) FOR ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST DATA OR (III) FOR COST OF
PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES.
10. Relationship of Parties.
6
<PAGE> 7
a. The parties hereto expressly understand and agree that
each party hereto is an independent contractor in the performance of each and
every part of this Agreement, and is solely responsible for all of its employees
and agents and its labor costs and expenses arising in connection therewith.
b. Except as expressly provided herein, Marimba is in no
manner associated with or otherwise connected with the actual performance of
this Agreement on the part of Reseller, nor with Reseller's employment of other
persons or incurring of other expenses. Except as expressly provided herein,
Marimba shall have no right to exercise any control whatsoever over the
activities or operations of Reseller.
c. Neither party guarantees the success of any marketing
effort it engages in for the Products.
d. Each party is responsible for all its own costs in
connection with its performance hereunder, including all business, travel and
living expenses.
e. Each party is responsible for complying with the
collection, payment, and reporting of all taxes imposed by any governmental
authority applicable to its activities in connection with the marketing,
distribution, delivery or license of the Copies under this Agreement. Neither
party is responsible for taxes that may be imposed on the other party.
11. Assignment. This Agreement and the rights hereunder are not
transferable or assignable by Reseller without the prior written consent of
Marimba except to a person or entity who acquires all or substantially all of
the assets or business of Reseller or to IBM pursuant to a reorganization of
Reseller within IBM. Marimba may assign this Agreement without the consent of
Reseller.
12. Term and Termination. Unless terminated earlier as provided
herein, this Agreement shall continue in effect for a period of 12 months
extending from the Effective Date. Thereafter, either party may provide written
notice to the other of its desire to renew the Agreement. Upon such request, the
parties will enter into good faith negotiations regarding any renewal terms.
a. This Agreement may be terminated by a party for cause
immediately upon the occurrence of any of the following events:
1. If the other ceases to do business, or
otherwise terminates its business operations; or
2. if the other materially breaches any material
provision of this Agreement and fails to cure such breach within 30 days.
However, if the breach by its nature, cannot be remedied in 30 days, but can be
remedied in a reasonable time thereafter, and the breaching party is taking
reasonable and diligent steps to remedy it and is acting in good faith, then the
notice period will be suspended while the breaching party takes these actions;
or
7
<PAGE> 8
3. If the other shall seek protection under any
bankruptcy, receivership, trust deed, creditors arrangement, composition or
comparable proceeding, or if any such proceeding is instituted against the other
(and not dismissed within 120 days).
b. In the event Reseller terminates this Agreement based
on a material breach of this Agreement by Marimba, then Marimba shall refund any
then-unused portion of the Initial Commitment Amount to Reseller. Except with
respect to the obligation set forth in this clause, neither party shall incur
any liability whatsoever for any damage, loss or expenses of any kind suffered
or incurred by the other (or for any compensation to the other) arising from or
incident to any termination of this Agreement by such party which complies with
the terms of the Agreement whether or not such party is aware of any such
damage, loss or expenses; provided, however, that this shall not be construed as
limiting either party's obligation of indemnification hereunder.
c. Upon termination of this Agreement by either party or
naturally at the end of the term (i) as soon as commercially practical, Reseller
will return to Marimba or destroy all Production Masters, Proprietary
Information, catalogues and literature in its possession, custody or control in
whichever form held (including all Copies or embodiments thereof) and will cease
using any trademarks, service marks and other designations of Marimba, and (ii)
the provisions of this Agreement shall terminate except for Sections 9, "Limited
Liability," 13, "Indemnification," 14.d, disclaimer of "Warranties," and 16,
"General," and any accrued right to payment which shall survive any termination
of this Agreement. Notwithstanding the foregoing, any end-user licenses granted
to customers in accordance with this Agreement will remain in effect in
accordance with their terms.
d. Termination is not the sole remedy under this Agreement
and, whether or not termination is effected, all other remedies will remain
available.
13. Indemnification.
a. By Reseller. If any claim is made against Marimba by a
third party based upon Reseller's distribution of the Products, including
without limitation, providing unauthorized representations or warranties (or
failing to effectively disclaim all warranties and liabilities on behalf of
Marimba, if licensing Products under Reseller's end user license agreement) to
its customers, Reseller will be responsible for and will indemnify Marimba from
any and all claims, liabilities, damages, settlements, costs, expenses and
liabilities of any type whatsoever regarding such third party claim, with the
exception of those activities for which Marimba bears responsibility under
Section 13(b) of this Agreement, and provided Marimba gives Reseller prompt
written notice of any such claim, together with the full authority for and
reasonable cooperation with such a defense.
b. By Marimba. For purposes of this indemnification, the
term "Reseller" includes IBM. If any claim of infringement of any U.S. or
Canadian patent, copyright, trademark or trade secret is asserted against
Reseller by a third party based upon the Products which are the subject of this
Agreement, Marimba will indemnify Reseller against any amounts finally awarded
in a settlement or by a court to such party (and reasonable attorneys' fees in
8
<PAGE> 9
connection therewith), provided that Marimba shall have (i) received prompt
written notice from Reseller of said claim; (ii) received from Reseller the
exclusive right to control and direct the investigation, defense, or settlement
of such claims; and (iii) received the reasonable cooperation of Reseller. In
the event an infringement is determined or, if required by settlement, Marimba
may substitute for the Products and documentation substantially similar Products
and documentation, or, alternatively, Marimba may procure for Reseller the right
to continue using the Products and distributing the Copies, or Marimba may
terminate the Agreement upon 30 days advance written notice (a "Special
Termination"). Upon a Special Termination, or upon Reseller being otherwise
enjoined by a court of competent jurisdiction from shipping Products, Marimba
agrees to refund to Reseller any then-unused portion of the Initial Commitment
Amount. However, this obligation of refund shall not be construed as limiting
Marimba's obligation of indemnification hereunder. The foregoing obligation of
Marimba does not apply with respect to those portions of the Products (i) (if
any) which are modified after shipment by Reseller or IBM, or an agent acting
under Reseller's or IBM's direction, if the alleged infringement would not have
been caused but for such modification, or (ii) combined with any non-Marimba
products, processes or materials if such infringement could have been avoided
but for such combination. This Section 13 sets forth Reseller's sole and
exclusive remedy with respect to any claim of intellectual property
infringement.
14. Warranties.
a. By Both Parties. Each party warrants to the other that
it has the resources to perform its obligations under this Agreement, and that
it will comply with any applicable laws, rules or regulations.
b. By Marimba. Marimba warrants that (i) it has sufficient
rights to the Products (including associated marks and names) to grant Reseller
the rights specified in this Agreement (including the right to distribute the
Products under the trademarks for such Products), and to grant customers the
rights specified in its end user license or Reseller's license agreement; (ii)
the Products and Copies do not infringe any copyright or trade secret, (iii) to
the best of Marimba's knowledge as of the Effective Date, Marimba is not aware
of any claim for U.S. or Canadian patent infringement with respect to the
Products other than with regard to United States patent number 5,581,764 with
respect to which a claim of infringement concerning the Products has been filed
by Novadigm, Inc. against Marimba (number CV-97-20194), or that there is a basis
for any such claim; (iv) none of the Products has been the basis of any claim of
infringement of the copyright or trade secret rights of any third party
threatened or asserted against Marimba or, to Marimba's knowledge, any other
party; and (v) the Products, when used in accordance with their associated
documentation, are capable of correctly processing, providing and/or receiving
date data within and between the twentieth and twenty-first centuries, provided
that all products (for example, hardware, software and firmware) used with the
Products properly exchange accurate date data with the Products.
c. By Reseller. Reseller warrants that (i) it will not
modify, create any derivative work of, or include in any other software the
Products or Copies or any portion
9
<PAGE> 10
thereof, and (ii) it will not reverse assemble, decompile, reverse engineer or
otherwise attempt to derive source code from the Products or Copies.
d. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION, NEITHER
PARTY MAKES ANY WARRANTIES TO ANY PERSON WITH RESPECT TO THE PRODUCTS, OR ANY
RELATED SERVICES OR LICENSES, AND EACH PARTY DISCLAIMS ALL IMPLIED WARRANTIES,
INCLUDING WITHOUT LIMITATION THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. RESELLER WILL HANDLE AND BE RESPONSIBLE FOR ALL WARRANTY
RETURNS FROM ITS DIRECT AND INDIRECT CUSTOMERS AND WILL BE ENTITLED TO (AND ONLY
TO) CREDIT FOR AMOUNTS PAID TO MARIMBA FOR PROPERLY RETURNED COPIES THAT ARE NOT
REPLACED.
15. Special Terms.
a. The parties acknowledge that in entering into this
Agreement, both parties are making significant investments in an effort to
achieve success in selling the Products within the systems management arena and
specifically in support of Reseller's TME 10 suite, including investing in
training of a systems management sales force to exploit capabilities of the
Products with systems management products, and investing funds in promoting and
marketing the Products for use in the systems management arena,. To better
enable success, the parties agree that for a period of 270 days from the
Effective Date
1) Reseller will not announce a product which
provides functionality substantially similar to any Product; and
2) Marimba will not announce that it has entered
into a distribution, reseller or similar relationship with Computer Associates,
Inc.
b. If within one year of the Effective Date the parties
enter into an OEM agreement which by its terms supersedes this Agreement (the
"Replacement Agreement"), then Reseller shall have the right to apply any
then-unused portion of the Initial Commitment Amount towards any amount due by
Reseller to Marimba upon execution of the Replacement Agreement.
16. General.
a. No Guarantee of Marketing Success. Neither party
guarantees the success of any marketing effort it engages in for the Products.
Either party may independently develop, acquire, and market materials, equipment
or programs that may be competitive with (despite any similarity to) the
Products. Each party is responsible for its own costs, including all business,
travel and living expenses incurred by the performance of this Agreement.
b. Amendment and Waiver-Except as otherwise expressly
provided herein, any provision of this Agreement may be amended and the
observance of any provision of
10
<PAGE> 11
this Agreement may be waived only with the written consent of the parties.
However, it is the intention of the parties that this Agreement be controlling
over additional or different terms of any purchase order, confirmation, invoice
or similar document, and that waivers and amendments shall be effective only if
made in a writing signed by both parties.
c. Governing Law and Legal Actions - This Agreement shall
be governed by and construed under the laws of the State of California and the
United States without regard to conflicts of laws provisions thereof and without
regard to the United Nations Convention on Contracts for the International Sale
of Goods Neither party will bring a legal action against the other more than two
years after the cause of action arose. In any action or proceeding to enforce
rights under this Agreement, the prevailing party shall be entitled to recover
costs and attorneys' fees.
d. Headings - Headings and captions are for convenience
only and are not to be used in the interpretation of this Agreement.
e. Notices - Notices under this Agreement shall be
sufficient only if personally delivered, delivered by a major commercial rapid
delivery courier service or mailed by certified or registered mail, return
receipt requested to a party at its addresses set forth below or as amended by
notice pursuant to this subsection. Notice shall be effective upon receipt as
demonstrated by reliable written confirmation (e.g., certified mail receipt or
courier receipt).
f. Entire Agreement - This Agreement supersedes all
proposals, oral or written, all negotiations, conversations, or discussions
between or among parties relating to the subject matter of this Agreement and
all past dealing or industry custom.
g. No Reliance - Neither party has relied on any promises,
inducements or representations by the other, except those expressly stated in
this Agreement.
h. Severability - If any provision of this Agreement is
held to be illegal or unenforceable, that provision shall be limited or
eliminated to the minimum extent necessary so that this Agreement shall
otherwise remain in full force and effect and enforceable.
i. Counterparts - This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on their respective behalf, by their respective officers thereunto duly
authorized, all as of the day and year first written above.
RESELLER: MARIMBA, INC.:
By /s/ SCOTT BLEAKLEY By /s/ STEVE WILLIAMS
Name Scott Bleakley Name Steve Williams
Title V.P. Business Development Title V.P. Sales
Reseller Notice Information: Marimba Notice Information:
9442 Capital of Texas Highway 445 Sherman Avenue
North Arboretum Plaza One, Suite 500 Palo Alto, California 94306
Austin, Texas 78759 Fax: (415) 328-5394
445 Sherman Avenue Phone: (415) 328-5282
Fax: (512) 794-9070 Attn: Legal Department
Phone: (512) 794-9070
Attn:
Reseller Counsel Notice Information:
IBM Corporation
11400 Burnet Drive, MD 9452
Austin, Texas 78759
Fax: (512) 838-0354
Attention: Valerie J. Luessenhop
12
<PAGE> 13
ATTACHMENT A
<TABLE>
<S> <C>
Discount from U.S. Price List - [***]+ - standard discount
effective until Reseller has consumed
all of the Initial Commitment
Amount* [***]+ - standard discount for any
single list price order from one customer
in excess of [***]+
[***]+ - standard discount for any
single list price order from one customer
in excess of [***]+
Discount from U.S. Price List - [***]+ - standard discount
effective after Reseller has consumed
all of the Initial Commitment Amount
Annual Support and Maintenance Fee [***]+ of fee due to Marimba by
Reseller for each Copy of a Product
Territory United States and Canada
Initial Commitment Amount [***]+
</TABLE>
- --------
+ CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
13
<PAGE> 14
* - Reseller shall be deemed to have "consumed" all of the Initial Commitment
Amount on the date on which it has distributed hereunder in the aggregate such
number of Copies for which the fee payable to Marimba would equal the Initial
Commitment Amount
Note: Any other special enterprise licensing terms shall be on a case by case
basis upon mutual agreement of the parties. In addition, Marimba may prepare and
offer to Reseller special bundle packs of the Products for distribution by
Reseller which may include first year maintenance and support.
14
<PAGE> 15
ATTACHMENT B
MARIMBA U.S. PRICE LIST
[Subsequently Amended]
<PAGE> 16
ATTACHMENT C
END USER LICENSE AGREEMENTS
[SUBSEQUENTLY AMENDED]
<PAGE> 17
ATTACHMENT D
REQUIRED INFORMATION FOR ENABLING KEY
Customer Name:
Customer Address:
Customer email:
Customer Phone:
Customer Fax:
Technical Contact Name:
Technical Contact Address:
Technical Contact email:
Technical Contact Phone:
Technical Contact Fax:
Product SKUs purchased:
Transmitter type (Intranet/Extranet):
Extensions Purchased (i.e. Backchannel, Plug-in, etc.):
Platform (Sun Solaris, WinNT 4.0, Win95, Mac)
Number of Channels (Unlimited/Standard):
Number of Users purchased (Intranet):
Host IP address:
Host Ethernet address:
Language (English, Japanese):
Version (International, US):
1st Year Support/Maintenance Purchased: _____ Yes ______ No
<PAGE> 18
ATTACHMENT E
TRADEMARKS
[SUBSEQUENTLY AMENDED]
<PAGE> 19
ATTACHMENT F
MUTUAL CONFIDENTIALITY AGREEMENT
CONFIDENTIAL DISCLOSURE AGREEMENT
Between
Tivoli Systems Inc. ("Tivoli"), a Texas corporation, located at
9442 Capital of Texas Highway North Arboretum Plaza, One Suite 500, Austin,
Texas 78759 and Marimba, Inc., ("Participant"), located at 445 Sherman Avenue,
Palo Alto, CA 94306
The parties hereby establish these terms and conditions governing
the use and protection of certain confidential information ("Confidential
Information") one party ("the Disclosing Party") may disclose to the other party
("the Receiving Party").
6. Each party's designated representative for coordinating disclosure or receipt
of Confidential Information is:
For Tivoli: Valerie Luessenhop, Counsel
--------------------------------------------
For Participant: Todd Smithline, Corporate Counsel
--------------------------------------------
7. The following is a description of the Confidential Information which may be
disclosed under this Agreement: (a) for Tivoli, Business plans, forecasts,
projections and analyses, software, hardware or systems designs, specifications,
documentation, code, architecture, structure, protocols, product materials,
notes, slides, or ideas, including but not limited to, Tivoli's business and
product, (b) for Participant, Business plans, forecasts, projections and
analyses, software, hardware or systems designs, specifications, documentation,
code, architecture, structure, protocols, product materials, notes, slides, or
ideas, including but not limited to, Participant's business and product.
8. This Agreement will only apply to disclosures made within one (1) year of the
date of this Agreement, and this Agreement shall expire on the same date, unless
extended in writing by mutual agreement of the parties. The Recipient's duty to
hold Confidential Information in confidence expires five (5) years after
execution of this Agreement, which duty shall survive the earlier expiration or
termination of this Agreement. The "Recipient" is defined as the party receiving
Confidential Information under this Agreement.
Either party may terminate this Agreement for material breach
thereof upon ten (10) days written notice. Notwithstanding termination, the
obligations set forth under Paragraphs 4 and 5 hereof shall survive such
termination.
<PAGE> 20
9. Use of Confidential Information. The Receiving Party shall not make use
whatsoever at any time of the Confidential Information except for the purpose of
effectuating the existing relationship and evaluating potential business
opportunities.
10. The parties agree to hold the Disclosing Party's Confidential Information in
strict confidence and to take all reasonable precautions to protect such
Confidential Information, including without limitation, using the same degree of
care, as the Receiving Party uses to protect is own Confidential Information of
a similar nature. The Receiving Party agrees not to copy or reverse engineer any
such Confidential information of the Disclosing Party. The Receiving Party shall
limit its internal disclosure of Confidential Information to those employees
having a strict need to know such information and only for the purpose set forth
in Paragraph 4 above.
11. The Receiving Party shall have a duty to protect only that Confidential
Information which is: (a) first disclosed by the Disclosing Party in tangible
form and is conspicuously marked as "Confidential," or the like at the time of
disclosure; or (b) disclosed by the Disclosing Party in nontangible form and
orally identified as confidential at the time of disclosure, and is summarized
in tangible form conspicuously marked as "Confidential," or the like and
delivered to the Receiving Party's representative named in Paragraph 1 above
within thirty (30) days of the original disclosure.
12. This Agreement imposes no obligation upon the Receiving Party with respect
to Confidential Information which The Receiving Party can establish by legally
sufficient evidence: (a) was in The Receiving Party's possession before receipt
from The Disclosing Party; (b) is or becomes known to the general public without
improper action or inaction by The Receiving Party; (c) was rightfully disclosed
to it by a third party provided the Receiving Party complies with any
restrictions imposed by the third party (e) is independently developed by the
Receiving Party without the use of the Confidential Information provided by the
Disclosing Party; (f) is disclosed pursuant to a court order provided the
Receiving Party uses reasonable efforts to limit disclosure and has allowed the
Disclosing Party to participate in the proceeding or; (g) is disclosed by the
Receiving Party with the Disclosing Party's prior written approval.
13. Within one (1) month following expiration, or termination of this Agreement,
or upon written request, the Receiving Party shall return to the disclosing
Party, or destroy at The Disclosing Party's option, all Confidential Information
in tangible form in its possession.
14. Neither party acquires any rights in the Confidential Information under this
Agreement, except the limited right to use the Confidential Information for the
purposes set out in Paragraph 4 above. Neither party has an obligation under
this Agreement to purchase any service or item from the other party. Neither
party has an obligation under this Agreement to commercially offer any products
using or incorporating Confidential Information. This Agreement grants no
license by either party to the other, either directly or by implication,
estoppel or otherwise.
15. The Receiving Party shall adhere to the U.S. Export Administration laws and
regulations and shall not export or re-export any Confidential Information or
technical data or products
<PAGE> 21
received from the Disclosing Party or the direct product of such Confidential
Information or technical data to any prescribed country listed in the U.S.
Export Administration Regulations unless properly authorized by the U.S.
Government.
16. Each Disclosing Party represents that it has the right to make the
disclosures under this Agreement. The Confidential Information disclosed under
this Agreement is delivered "as is" and the Disclosing Party makes no
representation of any kind with respect to the accuracy of such Confidential
Information or its suitability for any particular use.
17. Either party shall be free to use the Residuals from any such Confidential
Information, or any ideas, concepts and/or techniques contained therein for any
purpose, including the use of such Information in the development, manufacture,
and maintenance of its products and services. The term "Residuals" means that
Information which may be retained in non-tangible form in the minds by those
employees of a party who have had access to the Confidential Information.
18. Nothing in this Agreement shall preclude either party from using, marketing,
licensing and/or selling, any independently developed technology, software or
data processing information and/or material that is similar or related to the
Confidential Information disclosed under this Agreement, provided the party has
not done so in breach of this Agreement.
19. The relationship of the parties is that of independent contractors. This
Agreement does not create an agency, partnership or similar relationship between
the parties. Neither party acquires any rights to use in advertising, publicity
or other marketing activities, any name, trade name, trademark or other
designation of either party.
20. All additions and modifications to this Agreement must be made in writing
referencing this Agreement and must be signed by both parties.
21. This Agreement may not be assigned by either party without the express
written consent of the other party and any purported assignment without such
written consent shall be void.
22. THIS AGREEMENT IS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE
SUBSTANTIVE LAWS OF THE STATE OF TEXAS.
23. This Agreement supersedes all prior discussions and writings and constitutes
the entire agreement with respect to the subject matter thereof.
<PAGE> 22
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
TIVOLI Systems Inc. Marimba, Inc.
Name: /s/ HOWARD J. NICHOLAS Name: /s/ STEVE WILLIAMS
By: Howard J. Nicholas By: Steve Williams
Title: Mgr. Contract Services Title: V.P. Sales
Date: August 21, 1997 Date: August 20, 1997
<PAGE> 23
ATTACHMENT G
PRESS RELEASE LANGUAGE
<PAGE> 24
HEADLINE:
Tivoli and Marimba Join Forces to Streamline Applications Deployment Across the
Internet
KEY POINTS:
o Tivoli will resell Marimba Castanet products
WHY IS THIS IMPORTANT?
o Tivoli and Marimba provide complimentary product offerings to:
- integrate 800,000 Castanet users into the Tivoli Management
Environment
- allow systems managers to extend beyond the enterprise, penetrate
the firewall and distribute applications to internet clients
- allow easier deployment for users outside the enterprise, system can
be up and running in days
* Marimba will work with Tivoli to make AMS an industry standard. Both
Companies will work together to extend the AMS specification to include
Internet interfaces which will be open to everyone.
<PAGE> 1
EXHIBIT 10.10
AMENDMENT TO RESELLER AGREEMENT BETWEEN MARIMBA, INC. AND TIVOLI SYSTEMS, INC.
REFERENCE AGREEMENT NUMBER: RES9700332 AMENDMENT NO: 01
MARIMBA NAME AND ADDRESS: RESELLER NAME AND ADDRESS:
Marimba, Inc. ("Marimba") Tivoli Systems, Inc. ("Reseller")
440 Clyde Avenue 9442 Capital of Texas Highway North
Mountain View, CA 94043 Austin, TX 78792
MARIMBA COMPANY CONTACT: RESELLER COMPANY CONTACT:
Todd Smithline Howard J Nicholas
Legal Counsel Manager, Contract Services,
Phone: (650) 930-5233 Business Operations
Fax: (650) 930-5605 Phone: (512) 436-8616
Fax: (512) 436-8461
WHEREAS, since the Reseller Agreement by and between Marimba and Reseller dated
as of August 14, 1997 (the "Reseller Agreement") was originally signed, Reseller
and Marimba have agreed to modify the terms under which Reseller resells the
Marimba Products;
NOW THEREFORE, in consideration of agreements reached between the parties, the
Reseller Agreement is hereby amended as follows (this "Amendment"):
1. Definitions. All capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to them in the Reseller Agreement.
2. Section 2. Delivery of the Products and Promotional Material. Add the
following provisions:
Reseller and Marimba agree that a hot link to Reseller's web site will be
established for distribution of Marimba's demonstration Product software
download.
Distribution of the Product by Reseller will be delivered in the following
manner, but not be limited to:
1) Order is placed by the Reseller sales force
2) If order exceeds [***]* and Marimba and Reseller have agreed
to a special discount, discount must be authorized in advance in
writing by VP of Sales of Marimba
3) Order and associated licensing paperwork is delivered to Tivoli
Business Operations for processing
4) Reseller places an order with Marimba including the following
information:
a. Enabling Key request per Attachment D - 1 of the
Reseller Agreement
b. Reseller License Fee for the Product
c. Unique customer identifier, customer location, User
Access Licenses purchased (number and type)
5) Marimba issues the electronic license keys to Reseller
6) Reseller provides the electronic license keys to the Reseller
customer along with the Product download information to the
customer (customer can download off Tivoli's cross-site.com web
site.
7) Marimba invoices Reseller monthly based upon the number of
license keys given to Reseller and Reseller's reports to
Marimba.
Marimba agrees to reconcile the monthly reports it receives from Reseller with
Marimba's records of the total number of electronic keys distributed each month
within thirty (30) days following the end of the calendar month in which the
keys were distributed.
TIVOLI - MARIMBA RESELLER AGREEMENT AMENDMENT
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 2
3. Section 3. Section 3 is deleted in its entirety and replaced by the
following:
"3. End-User Restrictions. No distribution or license of a Copy by Reseller
shall be made except pursuant to Marimba's then-current end-user license
agreement for such Product (the "Marimba Product License")(the current version
of which for each Product is set forth in the Reseller License Guide attached as
Attachment C). Reseller may also license the Products under an enforceable
end-user license of either Reseller or IBM (a "Reseller License"), provided that
such Reseller License: (a) is consistent with and not less protective of Marimba
than the terms of the Marimba Product License (including, but not limited to,
with respect to limitation of liability, copying, reverse engineering,
redistribution, export, government end users, copyright and intellectual
property right protection (including reservation of rights and prohibition of
removal of copyright notices)); (b) does not contain any representation or
warranty made on behalf of Marimba or its suppliers not contained in the Marimba
Product License and (c) contains in all material respects the same terms and
restrictions in the Marimba Product License regarding permitted use, users and
duplication (i.e., access and user license terms). Reseller shall obtain the
advance written consent of the Marimba Legal Department before issuing any
license not in compliance with this Section 3. Reseller shall use reasonable
commercial efforts to enforce or cooperate with Marimba in the enforcement of
the end-user license for each Copy distributed by Reseller."
3. Section 12. Term and Termination. Add the following provision:
"The parties agree that this Reseller Agreement will be superseded at its
expiration by the OEM Agreement between Reseller and Marimba dated March 6,
1998. However, the General Availability date of the bundled OEM Application
known as "Cross Site" may not occur until after such time as the Reseller
Agreement expires. As a result, the parties agree that the Reseller Agreement
will be extended automatically when it reaches its present expiration date of
August 16, 1998 until the product Cross-Site is generally available or for a
period not to exceed one hundred eighty (180) days, whichever first occurs.
This action provides Reseller the opportunity to complete the sales cycle on any
outstanding proposals for the sale of Product under the Reseller Agreement and
provides some overlap time between the Reseller Agreement and the OEM Agreement
in the event of delays in the release of Cross Site."
4. Attachment A. Attachment A of the Reseller Agreement is deleted in its
entirety and is replaced by Attachment A-1 attached to this Amendment.
5. Attachment C. Attachment C of the Reseller Agreement is deleted in its
entirety and is replaced by Attachment C-1 attached to this Amendment.
6. Attachment D. Attachment D of the Reseller Agreement is deleted in its
entirety and is replaced by Attachment D-1 attached to this Amendment.
The parties acknowledge that they have read this Amendment, understand it, and
agree to be bound by its terms and conditions. Further, they agree that this
Amendment and the referenced Reseller Agreement are the complete and exclusive
statement of the agreement between the parties, superseding all proposals or
communications between the parties relating to this subject. Any reproduction of
this Amendment by reliable means will be considered an original of this
document. This Amendment shall be effective as of the date last executed below.
<PAGE> 3
TIVOLI SYSTEMS, INC. MARIMBA, INC.
By: /s/ HOWARD J. NICHOLAS By: /s/ STEVE WILLIAMS
Name: Howard J. Nicholas Name: Steve Williams
Title: Mgr. Contract Services Title: V.P. Sales
Date: June 1, 1998 Date: May 27, 1998
<PAGE> 4
ATTACHMENT A - 1
<TABLE>
<S> <C>
Discount from U.S. Price List [***]+ - Standard Discount
Discount from U.S. Price List for Reseller and Marimba will
any single list price order in consider each sale on a case by
excess of [$***]+ case basis; must be approved by
written agreement of VP of Sales
of Marimba
Annual Support and Maintenance Fee [***]+ of fee due to Marimba by
Reseller for each Copy of
Product
Territory Worldwide
Initial Commitment Amount* [$***]+**
</TABLE>
* - Reseller shall be deemed to have "consumed" all of the Initial Commitment
Amount on the date on which it has distributed either hereunder, or under the
OEM Agreement, in the aggregate, such number of Copies for which the fee payable
to Marimba would equal the Initial Commitment Amount.
** Reflects balance as of August 14, 1997 (Effective Date of Reseller Agreement)
only
Note: Any other special enterprise licensing terms shall be on a case by case
basis upon mutual agreement of the parties. In addition, Marimba may prepare and
offer to Reseller special bundle packs of the Products for distribution by
Reseller which may include first year maintenance and support.
- --------
+ CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 5
ATTACHMENT C - 1
RESELLER LICENSE GUIDE
[SUBSEQUENTLY AMENDED]
<PAGE> 6
ATTACHMENT D - 1
INFORMATION FOR ENABLING KEY
Identification
Customer Name:
Customer Address:
Contact Information
Customer email:
Customer Phone:
Customer Fax:
Technical Contact Name:
Technical Contact Address:
Technical Contact email:
Technical Contact Phone:
Technical Contact Fax:
Configuration
User Access Licenses purchased: (number and type)
Platform (Sun Solaris, WinNT 4.0, Win95, Mac)
Number of Channels (Unlimited/Standard):
Number of Users purchased (Intranet):
Host IP address:
Host Ethernet address:
Language (English, Japanese):
Version (International, US):
Year of Support/Maintenance Purchased: _____ Yes ______ No
<PAGE> 1
EXHIBIT 10.11
AMENDMENT NO. 2 TO RESELLER AGREEMENT BETWEEN MARIMBA, INC.
AND TIVOLI SYSTEMS, INC.
REFERENCE AGREEMENT NUMBER: RES9700332 AMENDMENT NO: 2
EFFECTIVE DATE OF AMENDMENT NO. 2 - JUNE 30, 1998
MARIMBA NAME AND ADDRESS: RESELLER NAME AND ADDRESS:
Marimba, Inc. ("Marimba") Tivoli Systems, Inc. ("Reseller")
440 Clyde Avenue 9442 Capital of Texas Highway North
Mountain View, CA 94043 Austin, TX 78792
MARIMBA COMPANY CONTACT: RESELLER COMPANY CONTACT:
Todd Smithline Howard J Nicholas
General Counsel Manager, Contract Services,
Business Operations
Phone: (650) 930-5233 Phone: (512) 436-8616
Fax: (650) 930-5605 Fax: (512) 436-8461
WHEREAS, the parties desire to amend the Reseller Agreement by and between
Marimba and Reseller dated as of August 14, 1997 (the "Reseller Agreement") for
a second time to permit Reseller to resell Marimba products as set forth herein;
NOW THEREFORE, in consideration of agreements reached between the parties, the
Reseller Agreement is hereby amended as follows (this "Amendment"):
1. Definitions. All capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to them in the Reseller Agreement.
2. Section 1.a. License Grant. Add the following provisions:
Marimba hereby grants Reseller the right to distribute the Products to the DISA,
an agency of the United States government, through Logicon, a Prime Contractor
to DISA. For reference, the Logicon Prime Contract from DISA is BOA No. 810013.
The parties acknowledge that they have read this Amendment, understand it, and
agree to be bound by its terms and conditions. Further, they agree that this
Amendment and the referenced Reseller Agreement are the complete and exclusive
statement of the agreement between the parties, superseding all proposals or
communications between the parties relating to this subject. Any reproduction of
this Amendment by reliable means will be considered an original of this
document.
This Amendment No.2 to Reseller Agreement shall be deemed effective as of June
30, 1998.
TIVOLI SYSTEMS, INC. MARIMBA, INC.
By: /s/ HOWARD J. NICHOLAS By: /s/ FRED GERSON
--------------------------------- -------------------------------------
Name: Howard J. Nicholas Name: Fred Gerson
------------------------------- -----------------------------------
Title: Mgr. Contract Services Title: V.P./Chief Financial Officer
------------------------------ ----------------------------------
Date: July 16, 1998 Date: June 30, 1998
-------------------------------- -----------------------------------
<PAGE> 1
EXHIBIT 10.12
[MARIMBA LOGO]
RESELLER LICENSE GUIDE
FOR
MARIMBA, INC. PRODUCTS
VERSION 3.2 (AND SUBSEQUENT VERSIONS UNTIL FURTHER NOTICE)
EFFECTIVE 11/23/98
REPLACES ATTACHMENT C (END USER LICENSE) OF THE MARIMBA, INC. RESELLER AGREEMENT
COVERED PRODUCTS:
VERSION 3.2:
Castanet Infrastructure Suite
Castanet Management Suite
Castanet Production Suite
Castanet Infrastructure Suite - Internet Edition
Castanet Infrastructure Suite - Internet
Single Application Edition
Castanet QuickStart Pak
Castanet UpdateNow SDK Developer Pak and SDK
Access Licenses
Castanet Custom Redistribution License
Castanet Redistributable Repeater License
COVERED MARIMBA SERVICES:
Marimba Support and Maintenance
Marimba Implementation Services
Marimba Training
Confidential and Proprietary Information of Marimba, Inc.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Marimba Product Licensing Instructions.........................................3
Castanet Infrastructure Suite Product Usage Terms..............................5
Castanet Management Suite Product Usage Terms..................................7
Castanet Production Suite Product Usage Terms..................................8
Castanet Infrastructure Suite - Internet Edition Product Usage Terms...........9
Castanet Infrastructure Suite - Internet
Single Application Edition Product Usage Terms................................10
Castanet QuickStart Pak Product Usage Terms...................................11
Marimba End User License Agreement Standard Terms and Conditions
for all Marimba Software Products.............................................12
Marimba Support and Implementation Services...................................15
</TABLE>
Confidential and Proprietary Information of Marimba, Inc.
2
<PAGE> 3
II. OPTIONS FOR LICENSING MARIMBA PRODUCTS
Each Marimba software program may only be distributed pursuant to a
license agreement with the end-user customer. There are two options for
implementing these licenses. The first (Option 1) is to utilize the screen
license contained within the product as supplemented by additional Product Usage
Terms presented by the Reseller (Note: this option is not available if
"shrink-wrap" or "click-on" licenses are not enforceable in the Territory in
which you distribute the products). The second (Option 2) is to have the
end-user sign a complete written license agreement which consists of both the
Product Usage Terms and the Marimba, Inc. Standard Terms and Conditions. These
Options are further explained below:
Option 1: Click-on Screen License with Additional Terms
Each Marimba software program contains a "click-on" or "screen" license.
To rely on the click-on license to meet its end-user license obligations, the
Reseller must expressly refer to the license in a written document executed by
the end-user (this can be a Reseller order form, quote form or other type of
agreement and is referred to herein as the "Order Form"). The reference to the
license in the Order Form must state the following: "USE OF EACH MARIMBA
SOFTWARE PRODUCT IS SUBJECT TO THE TERMS AND CONDITIONS OF THIS ORDER FORM AND
THE END-USER LICENSE CONTAINED WITHIN THE SOFTWARE AND LICENSEE CONSENTS TO SUCH
LICENSE BY ITS EXECUTION HEREOF. THE END-USER LICENSE CONTAINS, AMONG OTHER
THINGS, WARRANTY DISCLAIMERS, LIABILITY LIMITATIONS, EXPORT CONTROL PROVISIONS,
AND USE RESTRICTIONS." In addition, the Order Form must also contain the related
Product Usage Terms for the product.
Option 2: Written License Agreement
Marimba products may also be licensed pursuant to a written end-user
license agreement. For all products, the end user must be presented with and
agree in writing to the Standard Terms and Conditions plus the Product Usage
Terms specific to the product(s) purchased. The Standard Terms and Conditions
follow the attached Product Usage Terms.
Exception: There is one exception to the rules above: if "shrink-wrap"
licenses are enforceable in the Territory in which you distribute the QuickStart
Pak, a Reseller may rely upon the screen license in the QuickStart Pak to sell
the QuickStart Pak, and therefore, the end-user does not need to execute a
written agreement for the Quickstart Pak. Please also note that the maintenance
terms for the QuickStart Pak can never be changed or supplemented.
III. MARIMBA SUPPORT AND CONSULTING SERVICES
Customers of Marimba support or implementation services must enter into
an agreement directly with Marimba. These customers must sign a copy of the
then-current Marimba Services Agreement. The current version of the Services
Agreement is attached.
IV. DISTRIBUTION OF MATERIALS
The attached Product Usage Terms, Standard Terms and Conditions, and
Marimba Services Agreement may be distributed by Reseller only to customers and
potential customers of the Marimba products or services. These materials may not
be modified in any way.
V. QUESTIONS?
If you have any questions regarding implementation of the licenses,
please contact Erika Varga, Legal Counsel at (650) 930-5258 or Todd Smithline,
General Counsel at (650) 930-5233.
Copyright @ 1996-1998 by Marimba, Inc. All rights reserved.
Marimba, the Marimba logo, Castanet and UpdateNow are trademarks of Marimba,
Inc. Windows, Visual Basic and Microsoft are trademarks or registered trademarks
of Microsoft Corporation.
4
<PAGE> 4
MARIMBA, INC.
CASTANET(TM) INFRASTRUCTURE SUITE
PRODUCT USAGE TERMS
This Marimba Castanet(TM) Infrastructure Suite End User License Agreement
(Agreement) is between you (either an individual or entity) (Licensee) and
Licensor. Licensor means either Marimba, Inc. or, if Licensee has acquired a
Marimba-authorized third-party product or service which includes this software,
such third party. This Agreement applies to the object code copy of the Marimba
Castanet(TM) Infrastructure Suite software which Licensee has elected to install
(Software), together with any related documentation provided by Licensor
(Documentation). The Software and Documentation are referred to collectively
herein as Software.
1. GRANT OF LICENSE. Subject to the terms of this Agreement, Licensor grants
Licensee a non-exclusive, non-transferable, and non-sublicensable license (the
License) to use the Software, but only (i) in accordance with the terms and
specifications set forth in the applicable Documentation and (ii) subject to the
following restrictions:
Scope of Use: The Software (the Castanet Infrastructure Suite) consists
of a Castanet Enterprise Transmitter, a Castanet Tuner, and other designated
Castanet software components. The Software may only be used to transmit to or
otherwise operate with Endpoints for which Licensee has purchased an Access
License. Endpoint means any computer or other device executing a Castanet Tuner
or other software capable of operating with a Castanet Transmitter. A separate
Access License is required for each individual user of an Endpoint.
Installation and Copies: Licensee may copy and install on Licensee's
computers for use only by Licensee's employees as many copies of the components
of the Software as is necessary to support Endpoints for which Licensee has
purchased Access Licenses. Licensee may not resell or distribute to any
third-party the Tuner or any other component of the Software.
Types of Access Licenses:
User Access License (UAL): A User Access License permits use of the
Castanet Infrastructure Suite to deploy and manage applications or other data
for use by one user on one Endpoint.
Server Access License (SAL): A Server Access License permits use of the
Castanet Infrastructure Suite to deploy and manage applications or other data on
one Endpoint computer server. An Endpoint computer server licensed with an SAL
may not deploy or manage applications or other data on Endpoints for which
Licensee has not purchased an Access License.
Application Access License (AAL): An Application Access License permits
use of the Castanet Infrastructure Suite to deploy and manage a Single
Application for use by one user on one Endpoint. A "Single Application" is one
Castanet channel containing data or an application with one specific purpose or
related set of functionality. By way of example only, a word-processor and a
spreadsheet program would not constitute a Single Application even if both were
run as a single Castanet channel or were incorporated into the same general
suite of applications. The name of each Single Application and its primary
function must be designated by Licensee below:
Name of Single Application: _________________ Primary
Function:________________
Server Application Access License (SAAL): A Server Application Access
License permits use of the Castanet Infrastructure Suite to deploy and manage a
Single Application on one Endpoint computer server. An Endpoint computer server
licensed with an SAAL may not deploy or manage applications or other data on
Endpoints for which Licensee has not purchased an Access License. A "Single
Application" is one Castanet channel containing data or an application with one
specific purpose or related set of functionality. By way of example only, a
word-processor and a spreadsheet program would not constitute a Single
Application even if both were run as a single Castanet channel or were
incorporated into the same
5
<PAGE> 5
general suite of applications. The name of each Single Application and its
primary function must be designated by Licensee below:
Name of Single Application:___________________ Primary Function:
___________________
2. STANDARD TERMS AND CONDITIONS. The Marimba, Inc. End User License Agreement
Standard Terms and Conditions for all Marimba Software Products is hereby
incorporated by reference as though fully set forth herein. The Standard Terms
and Conditions contain, among other things, warranty provisions, liability
limitations, export control provisions, and use restrictions. A copy of the
Standard Terms and Conditions is attached. If no such copy is attached, Licensee
agrees to the screen license terms contained within the Software. Licensee
acknowledges and agrees that Marimba, Inc. shall have the right to directly
enforce any and all provisions of this Agreement without respect to whether the
Licensor as defined above is Marimba, Inc. or another party.
Copyright @ 1996-1998 by Marimba, Inc. All rights reserved.
Marimba, the Marimba logo, Castanet and UpdateNow are trademarks of Marimba,
Inc.
6
<PAGE> 6
MARIMBA, INC.
CASTANET(TM) MANAGEMENT SUITE
PRODUCT USAGE TERMS
This Marimba Castanet(tm) Management Suite End User License Agreement
(Agreement) is between you (either an individual or entity) (Licensee) and
Licensor. Licensor means either Marimba, Inc. or, if Licensee has acquired a
Marimba-authorized third-party product or service which includes this software,
such third party. This Agreement applies to the object code copy of the Marimba
Castanet(tm) Management Suite software which Licensee has elected to install
(Software), together with any related documentation provided by Licensor
(Documentation). The Software and Documentation are referred to collectively
herein as Software.
1. GRANT OF LICENSE. Subject to the terms of this Agreement, Licensor
grants Licensee a non-exclusive, non-transferable, and non-sublicensable license
(the License) to use the Software, but only (i) in accordance with the terms and
specifications set forth in the applicable Documentation and (ii) subject to the
following restrictions:
Scope of Use: The Software may only be used: (i) on a single computer
and (ii) by one User. A User is any employee with access to or the right to use
any component of the Software. As a further restriction, the Software (including
the Tuner Packager and any other component) may only be used to configure or
otherwise package a Tuner: (i) for which Licensee has purchased a Castanet
Infrastructure Suite Access License and (ii) which is installed on a Licensee
computer for use by a Licensee employee.
Installation and Copies: Licensee may copy and install on a Licensee
computer one copy of the Software. Licensee may make a reasonable number of
copies of the Software solely for back-up purposes in accordance with Licensee's
standard back-up procedures. Licensee may not distribute to any third-party any
portion or component of the Software (including, without limitation, any Tuner
configured by the Tuner Packager). A separate license is available from Marimba
for the right to distribute Tuners to third-parties.
2. STANDARD TERMS AND CONDITIONS. The Marimba, Inc. End User License Agreement
Standard Terms and Conditions for all Marimba Software Products is hereby
incorporated by reference as though fully set forth herein. The Standard Terms
and Conditions contain, among other things, warranty provisions, liability
limitations, export control provisions, and use restrictions. A copy of the
Standard Terms and Conditions is attached. If no such copy is attached, Licensee
agrees to the screen license terms contained within the Software. Licensee
acknowledges and agrees that Marimba, Inc. shall have the right to directly
enforce any and all provisions of this Agreement without respect to whether the
Licensor as defined above is Marimba, Inc. or another party.
Copyright @ 1996-1998 by Marimba, Inc. All rights reserved.
Marimba, the Marimba logo, Castanet and UpdateNow are trademarks of Marimba,
Inc. Windows, Visual Basic and Microsoft are trademarks or registered trademarks
of Microsoft Corporation.
7
<PAGE> 7
MARIMBA, INC.
CASTANET(TM) PRODUCTION SUITE
PRODUCT USAGE TERMS
This Marimba Castanet(tm) Production Suite End User License Agreement
(Agreement) is between you (either an individual or entity) (Licensee) and
Licensor. Licensor means either Marimba, Inc. or, if Licensee has acquired a
third-party product or service which includes this software, such third party.
This Agreement applies to the object code copy of the Marimba Castanet(tm)
Production Suite software which Licensee has elected to install (Software),
together with any related documentation provided by Licensor (Documentation).
The Software and Documentation are referred to collectively herein as Software.
1. GRANT OF LICENSE. Subject to the terms of this Agreement, Licensor grants
Licensee a non-exclusive, non-transferable, and non-sublicensable license (the
License) to use the Software, but only (i) in accordance with the terms and
specifications set forth in the applicable Documentation and (ii) subject to the
following restrictions:
Scope of Use: The Software may only be used: (i) on a single computer and (ii)
by one User. A User is any employee with access to or the right to use any
component of the Software.
Installation and Copies: Licensee may copy and install on a Licensee computer
one copy of the Software. Licensee may make a reasonable number of copies of the
Software solely for back-up purposes in accordance with Licensee's standard
back-up procedures. Licensee may not distribute to any third party any portion
or component of the Software.
2. STANDARD TERMS AND CONDITIONS. The Marimba, Inc. End User License Agreement
Standard Terms and Conditions for all Marimba Software Products is hereby
incorporated by reference as though fully set forth herein. The Standard Terms
and Conditions contain, among other things, warranty provisions, liability
limitations, export control provisions, and use restrictions. A copy of the
Standard Terms and Conditions is attached. If no such copy is attached, Licensee
agrees to the screen license terms contained within the Software. Licensee
acknowledges and agrees that Marimba, Inc. shall have the right to directly
enforce any and all provisions of this Agreement without respect to whether the
Licensor as defined above is Marimba, Inc. or another party.
Copyright @ 1996-1998 by Marimba, Inc. All rights reserved.
Marimba, the Marimba logo, Castanet and UpdateNow are trademarks of Marimba,
Inc.
8
<PAGE> 8
MARIMBA, INC.
CASTANET(TM) INFRASTRUCTURE SUITE - INTERNET EDITION
PRODUCT USAGE TERMS
This Marimba Castanet(tm) Infrastructure Suite - Internet Edition End User
License Agreement (Agreement) is between you (either an individual or entity)
(Licensee) and Licensor. Licensor means either Marimba, Inc. or, if Licensee has
acquired a Marimba-authorized third-party product or service which includes this
software, such third party. This Agreement applies to the object code copy of
the Marimba Castanet(tm) Infrastructure Suite software which Licensee has
elected to install (Software), together with any related documentation provided
by Licensor (Documentation). The Software and Documentation are referred to
collectively herein as Software.
1. GRANT OF LICENSE. Subject to the terms of this Agreement, Licensor grants
Licensee a non-exclusive, non-transferable, and non-sublicensable license (the
License) to use the Software, but only (i) in accordance with the terms and
specifications set forth in the applicable Documentation and (ii) subject to the
following restrictions:
Scope of Use: The Castanet Infrastructure Suite - Internet Edition
consists of a single Castanet Internet Edition Transmitter, a Castanet Tuner,
and related software components. The Castanet Internet Edition Transmitter may
only be used: (i) on a single computer containing no more than two (2) central
processing units and (ii) to make data Generally Available through the Internet
or similar public computer network. "Generally Available" means available to the
public without charge, registration or access restriction at an Internet address
reported to Marimba at [email protected].
Installation and Copies: Licensee may copy and install on Licensee's
computers for use only by Licensee's employees one copy of the Castanet
Infrastructure Suite - Internet Edition software, except that Licensee may make
as many copies of the Gateway and Proxy components as is necessary to support
use of the Castanet Internet Edition Transmitter. Licensee may make a reasonable
number of copies of the components of the Castanet Infrastructure Suite-Internet
Edition solely for back-up purposes in accordance with Licensee's standard
back-up procedures. Licensee may not resell or distribute to any third-party the
Castanet Tuner or any other component of the Castanet Infrastructure Suite
Internet Edition.
2. STANDARD TERMS AND CONDITIONS. The Marimba, Inc. End User License Agreement
Standard Terms and Conditions for all Marimba Software Products is hereby
incorporated by reference as though fully set forth herein. The Standard Terms
and Conditions contain, among other things, warranty provisions, liability
limitations, export control provisions, and use restrictions. A copy of the
Standard Terms and Conditions is attached. If no such copy is attached, Licensee
agrees to the screen license terms contained within the Software. Licensee
acknowledges and agrees that Marimba, Inc. shall have the right to directly
enforce any and all provisions of this Agreement without respect to whether the
Licensor as defined above is Marimba, Inc. or another party.
Copyright @ 1996-1998 by Marimba, Inc. All rights reserved.
Marimba, the Marimba logo, Castanet and UpdateNow are trademarks of Marimba,
Inc.
9
<PAGE> 9
MARIMBA, INC.
CASTANET(TM) INFRASTRUCTURE SUITE - INTERNET SINGLE APPLICATION EDITION
PRODUCT USAGE TERMS
This Marimba Castanet(tm) Infrastructure Suite - Internet Single Application
Edition End User License Agreement (Agreement) is between you (either an
individual or entity) (Licensee) and Licensor. Licensor means either Marimba,
Inc. or, if Licensee has acquired a Marimba-authorized third-party product or
service which includes this software, such third party. This Agreement applies
to the object code copy of the Marimba Castanet(tm) Infrastructure Suite
software which Licensee has elected to install (Software), together with any
related documentation provided by Licensor (Documentation). The Software and
Documentation are referred to collectively herein as Software.
1. GRANT OF LICENSE. Subject to the terms of this Agreement, Licensor grants
Licensee a non-exclusive, non-transferable, and non-sublicensable license (the
License) to use the Software, but only (i) in accordance with the terms and
specifications set forth in the applicable Documentation and (ii) subject to the
following restrictions:
SCOPE OF USE: The Castanet Infrastructure Suite - Internet Single Application
Edition consists of a single Castanet Internet Edition Transmitter, a Castanet
Tuner, and related software components. The Castanet Internet Edition
Transmitter may only be used: (i) on a single computer containing no more than
two (2) central processing units and (ii) to make the Single Application
Generally Available through the Internet or similar public computer network.
"Generally Available" means available to the public without charge, registration
or access restriction at an Internet address reported to Marimba at
[email protected]. A "Single Application" is one Castanet channel containing
data or an application with one specific purpose or related set of
functionality. By way of example only, a word-processor and a spreadsheet
program would not constitute a Single Application even if both were run as a
single Castanet channel or were incorporated into the same general suite of
applications. The name of each Single Application and its primary function must
be designated by Licensee below:
Name of Single Application: _______________ Primary Function: __________________
INSTALLATION AND COPIES: Licensee may copy and install on Licensee's computers
for use only by Licensee's employees one copy of the Castanet Infrastructure
Suite - Internet Single Application Edition software, except that Licensee may
make as many copies of the Gateway and Proxy components as is necessary to
support use of the Castanet Internet Edition Transmitter. Licensee may make a
reasonable number of copies of the components of the Castanet Infrastructure
Suite-Internet Single Application Edition solely for back-up purposes in
accordance with Licensee's standard back-up procedures. Licensee may not resell
or distribute to any third-party the Castanet Tuner or any other component of
the Castanet Infrastructure Suite - Internet Single Application Edition.
2. STANDARD TERMS AND CONDITIONS. The Marimba, Inc. End User License Agreement
Standard Terms and Conditions for all Marimba Software Products is hereby
incorporated by reference as though fully set forth herein. The Standard Terms
and Conditions contain, among other things, warranty provisions, liability
limitations, export control provisions, and use restrictions. A copy of the
Standard Terms and Conditions is attached. If no such copy is attached, Licensee
agrees to the screen license terms contained within the Software. Licensee
acknowledges and agrees that Marimba, Inc. shall have the right to directly
enforce any and all provisions of this Agreement without respect to whether the
Licensor as defined above is Marimba, Inc. or another party.
Copyright @ 1996-1998 by Marimba, Inc. All rights reserved.
Marimba, the Marimba logo, Castanet and UpdateNow are trademarks of Marimba,
Inc.
10
<PAGE> 10
MARIMBA, INC.
CASTANET(TM) QUICKSTART PAK
PRODUCT USAGE TERMS
This Marimba(TM) Castanet(TM) QuickStart Pak End User License Agreement
(Agreement) is between you (either an individual or entity) (Licensee) and
Licensor. Licensor means either Marimba, Inc. or, if Licensee has acquired a
Marimba-authorized third-party product or service which includes this software,
such third party. This Agreement applies to the object code copy of the Marimba
Castanet(TM) QuickStart Pak software which Licensee has elected to install
(Software), together with any related documentation provided by Licensor
(Documentation). The Software and Documentation are referred to collectively
herein as Software.
1. GRANT OF LICENSE. Subject to the terms of this Agreement, Licensor grants
Licensee a non-exclusive, non-transferable, and non-sublicensable license (the
License) to use the Software, but only (i) for one (1) year, (ii) for internal
developmental and pre-production purposes, (iii) in accordance with the terms
and specifications set forth in the applicable Documentation and (iv) subject to
the following restrictions:
Scope of Use: The Software (the Castanet QuickStart Pak) consists of one
Castanet Infrastructure Suite, one Castanet Management Suite and one Castanet
Production Suite.
Castanet Infrastructure Suite: The Castanet Infrastructure Suite may only be
used to transmit to or otherwise operate with no more than ten (10) Endpoints.
Endpoint means any computer or other device executing a Castanet Tuner or other
software capable of operating with a Castanet Enterprise Transmitter. Each
Endpoint licensed hereunder must be a Licensee computer used by a Licensee
employee.
Castanet Production Suite and Castanet Management Suite: The Castanet Production
Suite and the Castanet Management Suite may only used to support or manage the
ten (10) Endpoints licensed hereunder. The Tuner Packager component of the
Castanet Management Suite may only be used to configure or package Tuners for
installation on no more than the ten (10) Endpoints licensed hereunder.
Installation and Copies: Licensee may copy and install on a Licensee computer
(which may contain no more than two (2) central processing units) for use only
by one Licensee employee one (1) copy of each of the Castanet Management Suite,
Castanet Production Suite and Castanet Infrastructure Suite (except for the
Tuner component of the Castanet Infrastructure Suite, which Licensee may install
on ten (10) Licensee Endpoints). Licensee may not resell or distribute to any
third-party the Tuner or any other component of the Software.
No Upgrades: The Software may not be upgraded to any other Marimba software
product.
2. SUPPORT. Notwithstanding anything in the agreement to the contrary, Marimba
will use reasonable commercial efforts to provide Licensee with support services
consisting of telephone and/or email support from 6:00 a.m. to 5:00 p.m. PST on
Monday through Friday (excluding Marimba holidays) for no more than five (5)
inquiries requiring technical engineering support during the twelve (12) month
term of the Agreement. Licensee is not entitled to any maintenance releases
(including, without limitation, updates, upgrades, or enhancements of the
Software) under this Agreement.
3. STANDARD TERMS AND CONDITIONS. The Marimba, Inc. End User License Agreement
Standard Terms and Conditions for all Marimba Software Products is hereby
incorporated by reference as though fully set forth herein. The Standard Terms
and Conditions contain, among other things, warranty provisions, liability
limitations, export control provisions, and use restrictions. A copy of the
Standard Terms and Conditions is attached. If no such copy is attached, Licensee
agrees to the screen license terms contained within the Software. Licensee
acknowledges and agrees that Marimba, Inc. shall have the right to directly
enforce any and all provisions of this Agreement without respect to whether the
Licensor as defined above is Marimba, Inc. or another party.
Copyright @ 1996-1998 by Marimba, Inc. All rights reserved.
Marimba, the Marimba logo, Castanet and UpdateNow are trademarks of Marimba,
Inc.
11
<PAGE> 11
MARIMBA, INC.
END USER LICENSE AGREEMENT
STANDARD TERMS AND CONDITIONS
FOR ALL MARIMBA SOFTWARE PRODUCTS
This Marimba Castanet(tm) End User License Agreement (Agreement) is between you
(either an individual or entity) (Licensee) and Licensor. Licensor means either
Marimba, Inc. or, if Licensee has acquired a Marimba-authorized third-party
product or service which includes this software, such third party. This
Agreement applies to the object code copy of the Marimba Castanet(tm) software
which Licensee has elected to install (Software), together with any related
documentation provided by Licensor (Documentation). The Software and
Documentation are referred to collectively herein as Software.
1. GRANT OF LICENSE. The Grant of License is set forth in the attached
applicable Product Usage Terms.
2. RESTRICTIONS. Unless otherwise specified, Licensee may not copy the Software
except for one copy made solely for back-up purposes. To the extent copying is
permitted, Licensee must include the copyright notice and any other notices that
appear on the original Software on any copies and any media therefor. Licensee
shall not (and shall not allow any third party to) (i) decompile, disassemble,
or otherwise reverse engineer the Software (except solely to the extent that
applicable law prohibits reverse engineering restrictions) or attempt to
reconstruct or discover any source code, underlying ideas, algorithms, file
formats or programming interfaces of the Software by any means whatsoever, (ii)
remove any product identification, proprietary, copyright or other notices,
(iii) provide, lease, lend, grant a security interest in, use for timesharing,
hosting or service bureau purposes or otherwise transfer or use or allow others
to transfer or use the Software to or for the benefit of third parties, (iv)
modify, translate, incorporate into or with other software or create a
derivative work of any part of the Software, or (v) disseminate performance
information or analysis (including, without limitation, benchmarks) from any
source relating to the Software.
Licensee acknowledges that the Software is not designed or licensed for use in
hazardous or high risk environments such as operation of nuclear facilities,
direct life support, air or space travel or police, rescue or military
operations and Licensor shall have no liability in connection with any use of
the Software in such situations.
3. TITLE. Notwithstanding anything to the contrary herein, Marimba, Inc. retains
all title to, and, except as expressly and unambiguously licensed herein, all
rights to the Software, all copies and derivative works thereof (by whomever
produced) and all related documentation and materials.
4. TERMINATION. The Agreement is effective until terminated. The Agreement will
terminate automatically if Licensee fails to cure any material breach of this
Agreement within thirty (30) days after such breach first occurs. Upon
termination, Licensee shall immediately cease all use of the Software and return
or destroy all copies of the Software and all portions thereof and so certify to
Licensor. Except for any Grant of License and except as otherwise expressly
provided herein, the terms of the Agreement shall survive termination.
Termination is not an exclusive remedy and all other remedies (including,
without limitation, equitable relief) will be available whether or not the
License is terminated.
5. PAYMENT. Licensee will pay for the Software in accordance with the terms
specified when the Software was ordered. Any late payments shall be subject to a
service charge equal to 1.5% of the amount due (calculated on a monthly basis)
or the maximum amount allowed by law, whichever is less.
6. LIMITED WARRANTY. Licensor warrants to Licensee, for a period of thirty (30)
days from the date of purchase of the Software by Licensee, that: (i) the
Software, if operated as directed, will substantially achieve the functionality
described in the Documentation, and (ii) the media containing the Software, if
provided by Licensor, will be free from defects in material and workmanship.
Licensor does not warrant, however, that Licensee's use of the Software will be
uninterrupted or that the operation of the Software will be error-free or
secure. In addition, the security mechanisms implemented by the Software have
inherent limitations, and Licensee must determine that the Software sufficiently
meets Licensee's requirements. Licensor's sole liability (and Licensee's
exclusive remedy) for any breach of the warranties set forth in this Section 6
shall be, in
12
<PAGE> 12
Licensor's sole discretion, to use commercially reasonable efforts: (i) to
replace Licensee's defective media or Software; or (ii) to advise Licensee how
to achieve substantially the same functionality with the Software as described
in the Documentation through a procedure different from that set forth in the
Documentation; or (iii) if the above remedies are impracticable, to refund the
license fee paid for the Software. Licensor shall have no obligation with
respect to a warranty claim unless notified of such claim and provided evidence
of the license purchase within the applicable warranty period. Licensor will use
reasonable commercial efforts to repair, replace, advise or (at Licensor's
election) refund pursuant to the foregoing warranties within thirty (30) days of
being so notified.
The above warranties shall not apply: (i) if the Software is used on or in
conjunction with hardware or software other than the unmodified version of the
hardware and software with which the Software was designed to be used as
described in the Documentation, (ii) if any modifications are made to the
Software by Licensee during the warranty period, (iii) if the media of Software
is subjected to accident, abuse, or improper use, or (iv) if Licensee violates
the terms of this Agreement.
THIS IS A LIMITED WARRANTY, AND IT IS THE ONLY WARRANTY MADE BY LICENSOR or its
suppliers or resellers. NEITHER LICENSOR NOR ITS SUPPLIERS OR RESELLERS MAKES
ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NONINFRINGEMENT OF THIRD PARTIES' RIGHTS. YOU MAY HAVE OTHER STATUTORY RIGHTS.
HOWEVER, TO THE FULL EXTENT PERMITTED BY LAW, THE DURATION OF STATUTORILY
REQUIRED WARRANTIES, IF ANY, SHALL BE LIMITED TO THE ABOVE LIMITED WARRANTY
PERIOD. MOREOVER, IN NO EVENT WILL WARRANTIES PROVIDED BY LAW, IF ANY, APPLY
UNLESS THEY ARE REQUIRED TO APPLY BY STATUTE. NO DEALER, AGENT, OR EMPLOYEE OF
LICENSOR IS AUTHORIZED TO MAKE ANY MODIFICATIONS, EXTENSIONS, OR ADDITIONS TO
THIS LIMITED WARRANTY.
NEITHER LICENSOR NOR ANY SUPPLIER OR RESELLER OF LICENSOR SHALL HAVE ANY
LIABILITY WITH RESPECT TO ANY DATA TRANSMITTED WITH USE OF THE SOFTWARE. YOU ARE
SOLELY RESPONSIBLE FOR AND SHALL BEAR ALL RISK ASSOCIATED WITH USE OF THE
SOFTWARE TO TRANSMIT DATA, INCLUDING, BUT NOT LIMITED TO, LOSS OR CORRUPTION OF
DATA OR ANY LACK OF SECURITY.
7. SUPPORT AND MAINTENANCE. Licensee is not entitled to any support or
maintenance (including, without limitation, updates, upgrades, or enhancements
of the Software) under this Agreement.
8. LIMITATION OF REMEDIES AND LIABILITY. NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, EXCEPT FOR DEATH OR PERSONAL INJURY, NEITHER LICENSOR
NOR ITS SUPPLIERS OR RESELLERS SHALL BE LIABLE WITH RESPECT TO ANY SUBJECT
MATTER OF THIS AGREEMENT OR UNDER CONTRACT, NEGLIGENCE, STRICT LIABILITY OR ANY
OTHER LEGAL OR EQUITABLE THEORY (I) FOR ANY AMOUNTS IN EXCESS IN THE AGGREGATE
OF THE FEES PAID TO LICENSOR BY LICENSEE WITH RESPECT TO THE COPIES OF SOFTWARE
THAT ARE THE SUBJECT OF THE CLAIM DURING THE TWELVE MONTH PERIOD PRIOR TO THE
CAUSE OF ACTION, (II) FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, FOR ANY COST OF PROCUREMENT OF SUBSTITUTE GOODS,
TECHNOLOGY, SERVICES OR RIGHTS); (III) FOR INTERRUPTION OF USE OR LOSS OR
CORRUPTION OF DATA; OR (IV) FOR ANY FAILURE OF THE SOFTWARE TO PROVIDE SECURITY,
EVEN IF SUCH PARTY HAS BEEN MADE AWARE OF THE POSSIBILITY OF SUCH DAMAGES. SOME
STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL
DAMAGES, SO THE ABOVE LIMITATIONS AND EXCLUSIONS MAY NOT APPLY TO YOU.
9. ENCRYPTION AND AUTHENTICATION. If the Software contains cryptographic or
authentication features, then Licensee must obtain a signed digital certificate
from a certificate authority or a certificate server in order to utilize the
cryptographic or authentication features. Licensee may be charged additional
fees for certification services. Following successful installation of a digital
certificate, Licensee's use of the Software's
13
<PAGE> 13
cryptographic or authentication features will be enabled. Licensee is
responsible for maintaining the security of the environment in which the
Software is used and the integrity of the private key file used with the
Software. In addition, the use of digital certificates is subject to the terms
specified by the certificate provider, and there are inherent limitations in the
capabilities of digital certificates. If Licensee is sending or receiving
digital certificates, Licensee is responsible for familiarizing itself with and
evaluating such terms and limitations.
10. EXPORT COMPLIANCE. Licensee shall not, and shall not allow any third-party
to, remove or export from the United States or allow the export or re-export of
any part of the Software or any direct product thereof: (i) into (or to a
national or resident of) Cuba, Iran, Iraq, Libya, North Korea, Sudan or Syria,
(ii) to anyone on the U.S. Commerce Department's Table of Denial Orders or U.S.
Treasury Department's list of Specially Designated Nationals or (iii) otherwise
in violation of any restrictions, laws or regulations of any United States or
foreign agency or authority. Licensee agrees to the foregoing and warrants that
it is not located in, under the control of, or a national or resident of any
such prohibited country or on any such prohibited party list. The Software is
restricted from being used for the design or development of nuclear, chemical,
or biological weapons or missile technology without the prior permission of the
United States government. If the Software is identified by Licensor (e.g., in
the product, packaging, documentation or during the delivery process) as a
not-for-export product, then the following also applies: EXCEPT FOR EXPORT TO
CANADA FOR USE IN CANADA BY CANADIAN CITIZENS, THE SOFTWARE AND ANY UNDERLYING
TECHNOLOGY MAY NOT BE EXPORTED OUTSIDE THE UNITED STATES OR TO ANY FOREIGN
ENTITY OR FOREIGN PERSON AS DEFINED BY U.S. GOVERNMENT REGULATIONS, INCLUDING
WITHOUT LIMITATION, ANYONE WHO IS NOT A CITIZEN, NATIONAL OR LAWFUL PERMANENT
RESIDENT OF THE UNITED STATES. BY DOWNLOADING OR USING THE SOFTWARE, YOU ARE
AGREEING TO THE FOREGOING AND YOU ARE WARRANTING THAT YOU ARE NOT A FOREIGN
PERSON OR UNDER THE CONTROL OF A FOREIGN PERSON.
11. GOVERNMENT END-USERS. As defined in Federal Acquisition Regulations (FAR)
section 2.101 and Department of Defense Federal Acquisition Regulations (DFARs)
section 252.227-7014(a)(1) and DFAR section 252.227-7014(a)(5)(or otherwise),
the Software and accompanying documentation licensed in this Agreement are
deemed to be "commercial items" and "commercial computer software" and
"commercial computer software documentation." Consistent with DFAR section
227.7202 and FAR section 12.212, any use, modification, reproduction, release,
performance, display, or disclosure of such commercial software or commercial
software documentation by the U.S. Government shall be governed solely by the
terms of this Agreement and shall be prohibited except to the extent expressly
permitted by the terms of this Agreement.
12. MISCELLANEOUS. Licensee acknowledges and agrees that Marimba, Inc. shall
have the right to directly enforce any and all provisions of this Agreement
without respect to whether the Licensor as defined above is Marimba, Inc. or
another party. Neither this Agreement nor the License granted herein is
assignable or transferable by Licensee without the prior written consent of
Licensor; any attempt to do so shall be void. Any amendment, waiver, notice,
report, approval or consent required or permitted hereunder shall be made in
advance in writing. No failure or delay in exercising any right hereunder will
operate as a waiver thereof, nor will any partial exercise of any right or power
hereunder preclude further exercise. If any provision of this Agreement shall be
adjudged by any court of competent jurisdiction to be unenforceable or invalid,
that provision shall be limited or eliminated to the minimum extent necessary so
that this Agreement shall otherwise remain in full force and effect and
enforceable. This Agreement shall be deemed to have been made in, and shall be
construed pursuant to the laws of the State of California and the United States
without regard to conflicts of laws provisions thereof, and without regard to
the United Nations Convention on the International Sale of Goods. Unless waived
in its sole discretion by Licensor, the sole jurisdiction and venue for actions
related to the subject matter hereof shall be the California state and federal
courts having within their jurisdiction Santa Clara County, California and both
parties consent to the jurisdiction of such courts. Except as expressly set
forth in an agreement executed by the parties which incorporates this Agreement
by reference, this Agreement is the complete and exclusive statement of the
mutual understanding of the parties and supersedes and cancels all previous
written and oral agreements and communications relating to the subject matter of
this Agreement. The prevailing party in any action to enforce this Agreement
will be entitled to recover its attorneys' fees and costs in connection with
such action.
Copyright @ 1996-1998 by Marimba, Inc. All rights reserved.
Marimba, the Marimba logo, Castanet and UpdateNow are trademarks of Marimba,
Inc.
14
<PAGE> 14
MARIMBA SUPPORT AND MAINTENANCE SERVICES
Reseller has the option of selling Support and Maintenance,
Implementation Services, and Training to be provided by Marimba directly to a
Reseller customer. To purchase any of these services, Reseller customers must
execute the attached form. Each sale of any Implementation Services or Training
must be approved in advance in writing by Marimba.
Please note that the maintenance terms for the QuickStart Pak cannot be
changed or supplemented.
15
<PAGE> 15
End-User License Agreement: ________________________________("Client Agreement")
with ________________________________________("Client")
dated: __________________
SERVICES AGREEMENT WITH MARIMBA, INC.
Any consulting, engineering, support, training or other services performed by
Marimba, Inc., a Delaware corporation located at 440 Clyde Avenue, Mountain
View, California 94043 or agents acting on its behalf ("Marimba") in conjunction
with the above referenced agreement ("Client Agreement") for the license of
Marimba software ("Software") on behalf of Client (as identified above) shall be
provided subject to the following terms and conditions:
1. SUPPORT AND MAINTENANCE.
1.1 Bronze Level. During the one-year period extending from the
effective date and provided Client has paid the applicable annual support and
maintenance fee as specified in the Client Agreement, Marimba will provide
Client with "Bronze Level Support" consisting of the following: (i) telephone
and/or email support regarding use and deployment of the Software from 6:00 a.m.
to 5:00 p.m. PST on Monday through Friday (excluding Marimba holidays) ("Hotline
Support") to up to two (2) designated employees of Client ("Designated Client
Contacts") and (ii) generally commercially released code corrections, patches
and updates of the same Software product (excluding any new or different
features or products) ("Maintenance"). Hotline Support is provided for the
current release of the Software and the previous sequential release for a period
of twelve (12) months from the date of the current release; maintenance is
provided for the current release of the Software only. Hotline Support excludes
any general questions regarding JAVA or any other computer language.
1.2 Silver and Gold Level Support. Payment for Silver Level Support
entitles Client to Bronze Level Support plus Hotline Support on a twenty-four
(24) hours per day, seven (7) days per week basis ("7X24 Support"). Payment for
Gold Level Support entitles Client to Silver Level Support plus: (i) a
designated Marimba support engineer point of contact for Client (a "Technical
Account Manager"), (ii) a two (2) day on-site visit by the Technical Account
Manager (U.S. only; travel and related expenses are obligation of Client) to
become familiar with Client's systems and personnel, (iii) monthly Client
support status reports and (iv) access to Marimba's early release program
(subject to the terms of such program). Client shall be entitled to any
additional Designated Client Contacts or Technical Account Managers for which it
has paid the applicable fee to Marimba. Client must contract for the same level
of support and maintenance for all Software licensed by Client. 7X24 Support
during non-standard Hotline Support hours shall be limited to support for
production down systems only.
1.3 Subscription Service. Subscription Service entitles Client to
generally commercially released code corrections, patches and updates of the
same Software product (excluding any new or different features or products) for
which Client has purchased Subscription Service. Subscription Service is for one
(1) year from the date of purchase. Subscription Service does not include any
telephone, hotline, email or other type of customer support from Marimba of any
kind.
1.4 Renewals. Marimba's obligation to provide the above-described
support and maintenance and Client's obligation to pay the then-current
applicable annual support and maintenance fee shall renew automatically upon
each anniversary of the effective date (or such other consolidated software
purchase date agreed to by the parties in writing), unless either Client or
Marimba has given the other party
16
<PAGE> 16
prior written notice of cancellation. If Client elects not to renew support and
maintenance for successive terms, Client may reenroll only upon payment of the
applicable annual fee plus twice the amount of the fees which would have been
paid had Client not terminated support and maintenance.
1.5 The Software provided to Client as maintenance in accordance with
the terms of this Agreement shall be governed by the terms of the Client
Agreement between Licensor and Client.
2. IMPLEMENTATION SERVICES.
2.1 Performance of Services. Marimba (or an agent acting on its behalf)
shall provide the number of person-days of professional implementation support
services ("Implementation Services") set forth in the Client Agreement or as set
forth herein. Marimba warrants that the Implementation Services shall be
performed in a professional and workmanlike manner. The parties acknowledge that
the scope of the Implementation Services provided hereunder consist solely of
delivery of: (i) Software installation and deployment assistance and/or (ii)
additional related Marimba copyrighted interface software or code. In addition,
Implementation Services designated as "Architectural" services shall also
include assistance with respect to planning and designing the implementation of
the Software. Client shall have the right to use anything delivered as part of
the Implementation Services subject to the terms of its license to use the
Software, but Marimba shall retain all right, title and interest in and to such
work product, code or Software and any derivative, enhancement or modification
thereof created by Marimba (or its agents). The date and time for all
Implementation Services shall be as mutually reasonably agreed upon by the
parties; provided, however, that any days not used by Client within one-hundred
twenty (120) days of payment for such days shall expire and become void. Client
shall be responsible for reasonable travel and related expenses. Client may
purchase additional Implementation Service days at Marimba's standard rates for
such services. A "person-day" of Implementation Services consists of an
eight-hour day; overtime shall be available only in minimum one-half day
increments.
2.2 Proprietary Information. Each party agrees that all code,
inventions, algorithms, know-how and ideas it obtains from the disclosing party
and all other business, technical and financial information it obtains from the
disclosing party are the confidential property of the disclosing party
("Proprietary Information"), provided that it is marked "confidential" at the
time of disclosure if disclosed in tangible form or summarized in writing within
thirty (30) days after disclosure if disclosed in intangible form; any software
or documentation provided by Marimba (or its agents) shall be deemed Proprietary
Information of Marimba without any such marking or designation. Except as
expressly and unambiguously allowed herein, the receiving party will hold in
confidence and not use or disclose any Proprietary Information and shall
similarly bind its employees in writing. The receiving party's nondisclosure
obligation shall not apply to information which: (i) the receiving party can
document was already known to it before it receives the Proprietary Information
from the disclosing party; (ii) is or has become public knowledge through no
fault of the receiving party; (iii) is rightfully obtained by the receiving
party from a third party without any confidentiality obligation; (iv) is
independently developed by the receiving party with no access to such
information; or (v) is required to be disclosed pursuant to a regulation, law or
court order (but only to the minimum extent required to comply with such
regulation or order).
3. TRAINING. Each Training Day Credit shall entitle one (1) employee of
Client to attend one (1) day of a standard Marimba product training session held
at an authorized Marimba Training Center; training classes have minimum day
number requirements per attendee. Any days not used by Client within one-hundred
twenty (120) days of payment for such days shall expire and become void.
4. WARRANTY DISCLAIMER. EXCEPT AS PROVIDED HEREIN, MARIMBA MAKES NO
WARRANTIES TO ANY PERSON WITH RESPECT TO THE SERVICES AND DISCLAIMS ALL IMPLIED
WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.
5. LIMITATION OF LIABILITY. IN NO EVENT SHALL MARIMBA BE LIABLE FOR ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS, LOST BUSINESS
17
<PAGE> 17
OR INDIRECT DAMAGES) OR LOST DATA OR FOR COST OF PROCUREMENT OF SUBSTITUTE
GOODS, TECHNOLOGY OR SERVICES ARISING OUT OF OR IN CONNECTION WITH THE SERVICES.
MARIMBA WILL NOT BE LIABLE UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR
OTHER LEGAL OR EQUITABLE THEORY FOR ANY AMOUNTS IN EXCESS IN THE AGGREGATE OF
THE FEES PAID TO MARIMBA FOR THE SERVICES.
ACCEPTED AND AGREED TO:
CLIENT:
-----------------------------------
- ------------------------------------------
Name:
Title:
Date:
Address:
Phone:
Fax:
E-mail:
Copyright @ 1996-1998 by Marimba, Inc. All rights reserved.
Marimba, the Marimba logo, Castanet and UpdateNow are trademarks of Marimba,
Inc.
18
<PAGE> 1
EXHIBIT 10.13
PRICING INTRODUCTION
The following pricing guide is intended to help select the correct product,
configuration, and pricing to meet the different needs of your customer.
Marimba uses a concept called value based pricing. A Licensee who receives more
value from Castanet will pay more than those where the value of Castanet is
less. "Value" is determined by the number of Applications, the number of
Endpoints deployed, and whether the Tuner is customized to the Licensee's
specific needs.
For the Infrastructure Suite, there are two primary pricing models to work from:
Enterprise pricing and Internet pricing.
INFRASTRUCTURE SUITE PRICING MODELS
ENTERPRISE PRICING: The Enterprise pricing model refers to any use of Castanet
in a business to business application. The Endpoints for distribution are known
to the Licensee and can include employees, customers, business partners, etc.
Examples include all intra-company uses and other business to business uses such
as car manufacturer to supplier or car dealer, or an airline to its travel
agents.
Most sales opportunities will be priced based on Enterprise pricing; thus this
pricing should be discussed first as a matter of practice. While there are many
indexes upon which to determine value for the Enterprise, Marimba has chosen
scalability and the ability to customize as the value indexes for pricing for
the Enterprise. Enterprise pricing is based first on the number of access
licenses required, and second, on whether the Licensee will customize the Tuner
for use by third-parties.
Scalability:
Access licenses are the basic building block for determining pricing. Any
computer ("Endpoint") receiving updates from Castanet must be licensed with an
access license. One benefit of this pricing is that there is no pricing impact
of architecture decisions on how to install Castanet Enterprise Transmitters.
These servers (Transmitters) do not receive Castanet updates as Endpoints and
thus are not charged for. The cost is placed on the Endpoint access license and
not the support infrastructure. There are two primary categories of access
licenses: User Access License (UAL) and Application Access License (AAL).
User Access Licenses: A User Access License permits use of the Castanet
Infrastructure Suite to deploy and manage applications or other data for
use by one user on one Endpoint.
Application Access Licenses: An Application Access License permits use
of the Castanet Infrastructure Suite to deploy and manage a Single
Application for use by one user on one Endpoint. A "Single Application"
is one Castanet channel containing data or an application with one
specific purpose or related set of functionality. By way of example
only, a word-processor and a spreadsheet program would not constitute a
Single Application even if both were run as a single Castanet channel or
were incorporated into the same general suite of applications. The name
and primary function of each Single Application must be designated in
the Order Form.
Marimba, Inc.
Private and Confidential
Page 1
<PAGE> 2
With both UALs and AALs, an additional license is required for each
individual user of an Endpoint.
The concept of Access Licenses also applies to computer servers which act as
Endpoints.
Castanet Server Access License (SAL): A Server Access License permits
use of the Castanet Infrastructure Suite to deploy and manage
applications or other data on one Endpoint computer server. An Endpoint
computer server licensed with an SAL may not deploy or manage
applications or other data on Endpoints for which Licensee has not
purchased an Access License. Some examples of Endpoint computer servers
are Database Servers, Web Servers, Production Line Servers, File Servers
and Point of Sale Servers.
Castanet Server Application Access License (SAAL): A Server Application
Access License permits use of the Castanet Infrastructure Suite to
deploy and manage a Single Application on one Endpoint computer server.
An Endpoint computer server licensed with an SAAL may not deploy or
manage applications or other data on Endpoints for which Licensee has
not purchased an Access License. A "Single Application" is defined
above.
The Ability to Customize:
There is significant value in customizing the Tuner and thereafter distributing
the customized Tuner to employees or third parties, and therefore, the Licensee
must pay a premium for such usage. If the Licensee has a need to customize the
Tuner for internal deployment, they must purchase a Tuner Customization Kit. If
the deployment will be external, the Licensee is required to customize the Tuner
and must purchase a Custom Redistribution License. Page 3 of this guide provides
examples of when you would need either of these licenses.
INTERNET PRICING: The Internet pricing model may only be used when the Endpoint
is unknown and uncontrolled by the Licensee. Examples include a news service and
its readers or a stock price tracker and its users.
To qualify for an Internet Edition Transmitter, a channel:
1. Must be on a publicly available Transmitter. That is, any Internet user can
access the Transmitter and its channels.
2. Must not require identification or registration of any kind.
3. Must not require payment for access to or use of the channels.
Infrastructure Suite - Internet Edition (NET): Internet pricing is based
upon the number of Castanet Internet Edition Transmitters required to
serve the user base. An Internet Edition Transmitter is governed by the
computing hardware and the bandwidth of the network connection and not
limited by the Transmitter software.
Infrastructure Suite - Internet Single Application Edition (ISA): This
is similar to the Infrastructure Suite - Internet Single Edition except
that the Internet Single Application Edition Transmitter may make only
one Single Application available through the Internet.
MANAGEMENT AND PRODUCTION SUITE PRICING MODEL:
Marimba, Inc.
Private and Confidential
Page 2
<PAGE> 3
MANAGEMENT SUITE PRICING: The Management Suite pricing model is per "User". Each
"User" who has any access to any of the components of the Management Suite must
have a separate license.
PRODUCTION SUITE PRICING: The Production Suite pricing model is per "User". Each
"User" who has any access to any of the components of the Production Suite must
have a separate license.
Marimba, Inc.
Private and Confidential
Page 3
<PAGE> 4
ISSUE #1 SELLING REQUIREMENTS
What products are required when selling a Castanet solution?
Employee/Non-Employee
REQUIRED:
Infrastructure Suite and
Management Suite
A Management Suite (CMS) must be part of every CIS order. This is because the
Tuner Packager (part of the CMS) is required to generate a Tuner that updates
from the Licensee's own Transmitter, thus providing full control of when updates
occur.
ISSUE #2 DISTRIBUTING TUNERS
What does the Licensee need in order to distribute Tuners?
To: Employee To: Non-Employee
REQUIRED: REQUIRED:
nothing CRL
(Custom Redistribution
License)
In other words, if your customer is going to be deploying Tuners outside of
their organization, they need a CRL. In addition, it is important to note that
the Licensee is required to re-brand the Tuner when deploying to non-employees
(see below for further explanation).
ISSUE #3 BRANDING TUNERS
To: Employee To: Non-Employee
REQUIRED: REQUIRED:
nothing CRL
(Custom Redistribution
OPTIONAL: License)
Tuner Customization Kit
Marimba, Inc.
Private and Confidential
Page 4
<PAGE> 5
What is the CUSTOM REDISTRIBUTION LICENSE or CRL?
The CRL consists of
A. a written CRL license which permits a customer to
redistribute a Tuner to non-employees (sometimes
referred to as "third-parties") and
B. the Tuner Customization Kit.
A. What is in the CRL license?
1. a license grant which permits distribution of customized
Tuners,
2. user interface branding guidelines
3. additional provisions which protect Marimba from any
liability which might arise from distribution of the
Tuner
For example, if the customer is a brokerage house
distributing a trading application as a channel in the
Tuner, we need to protect Marimba from any potential
liability arising from failure of that application, such
as if it fails to properly execute trades.
B. What is the Tuner Customization Kit?
1. a set of documentation which provides "how to" technical
guidance on how to customize or "brand" the user
interface of the Tuner.
2. additional Castanet software components which are used
when publishing the customized Tuner.
The Tuner Customization Kit is included with the CRL and is available for sale
separately to customers who do not need a CRL because they are deploying Tuners
only to employees.
Branding Guidelines are required with the CRL, what are they?
The CRL license contains user interface requirements (sometimes referred to as
"branding guidelines") which require that certain changes be made to the user
interface of the Tuner before it may be deployed to a non-employee. These user
interface requirements are necessary so that users of the Tuner know who
provided the software they are using and who to call when they have trouble with
their application. (For example, if the brokerage house customer has trouble
launching their application, that customer will know to call the brokerage house
and not Marimba.) In addition, the branding guidelines serve to protect
Marimba's own branding and user-interface quality.
Is the CRL a term license?
Yes. A CRL limits the time the licensee can redistribute tuners to third-party
endpoints for a three year term. After expiration of the term, the customer
either needs to renew the CRL or cease distribution of additional Tuners to
third-parties. Termination of the CRL will not affect any Tuners which have
already been deployed by the customer.
Marimba, Inc.
Private and Confidential
Page 5
<PAGE> 6
MARIMBA PRICE LIST NOTES
================================================================================
INFRASTRUCTURE SUITES
================================================================================
Enterprise Editions:
All business to business applications of Castanet are to be priced under the
Enterprise pricing model. Some examples of business to business applications
are: A supplier to a business customer, a car manufacturer to car dealer, and
all intra-company uses.
Internet Editions:
Use the Internet pricing model only if the Licensee's channel:
1. Is made publicly available (i.e., any Internet user can access the
Transmitter and its channels)
2. Does not require identification or registration of any kind
3. Does not require payment for access to or use of the channels
ENTERPRISE EDITIONS
CASTANET INFRASTRUCTURE SUITE - USER ACCESS LICENSE (CIS-UAL-3.2-U):
Components include:
o Castanet Enterprise Transmitter
o Castanet Tuner
o Transmitter Administrator
o Publisher
o Channel Copier
o License Installer
o Certificate Manager
o Gateway
o Proxy
NOTE: Includes the right to install and deploy as many copies of the Castanet
Infrastructure Suite components (for use only by Licensee's employees) as
necessary to support the purchased Access Licenses.
SUPPORTED PLATFORMS: Windows 95 (except for Proxy and Gateway), Windows NT 4.0,
and Solaris 2.6 and 2.5.1, HP-UX, AIX*
PRODUCT STATUS: Shipping, *Will ship when available.
PRE-REQUISITES: Castanet Management Suite
US MINIMUM ORDER REQUIREMENTS: First order must be for a minimum of 200 User
Access Licenses.
CASTANET INFRASTRUCTURE SUITE - APPLICATION ACCESS LICENSE (CIS-AAL-3.2-U):
Components include:
o Castanet Enterprise Transmitter
o Castanet Tuner
o Transmitter Administrator
o Publisher
o Channel Copier
o License Installer
o Certificate Manager
o Gateway
o Proxy
Marimba, Inc.
Private and Confidential
Page 6
<PAGE> 7
NOTE: Includes the right to install and deploy as many copies of the Castanet
Infrastructure Suite components (for use only by Licensee's employees) as
necessary to support the purchased Access Licenses.
SUPPORTED PLATFORMS: Windows 95 (except for Proxy and Gateway), Windows NT 4.0,
and Solaris 2.6 and 2.5.1, HP-UX, AIX*
PRODUCT STATUS: Shipping, *Will ship when available.
PRE-REQUISITES: Castanet Management Suite
US MINIMUM ORDER REQUIREMENTS: First order must be for a minimum of 500
Application Access Licenses.
CASTANET INFRASTRUCTURE SUITE - SERVER ACCESS LICENSE (CIS-SAL-3.2-U):
Components include:
o Castanet Enterprise Transmitter
o Castanet Tuner
o Transmitter Administrator
o Publisher
o Channel Copier
o License Installer
o Certificate Manager
o Gateway
o Proxy
NOTE: Includes the right to install and deploy as many copies of the Castanet
Infrastructure Suite components (for use only by Licensee's employees) as
necessary to support the purchased Access Licenses. A Server Access License
permits use of the Castanet Infrastructure Suite to deploy and manage
applications or other data to one Endpoint computer server. An Endpoint computer
server licensed with an SAL may not deploy or manage applications or other data
on Endpoints for which Licensee has not purchased an Access License. Some
examples of Endpoint computer servers are Database Servers, Web Servers,
Production Line Servers, File Servers and Point of Sale Servers.
SUPPORTED PLATFORMS: Windows 95 (except for Proxy and Gateway), Windows NT 4.0,
and Solaris 2.6 and 2.5.1, HP-UX, AIX*
PRODUCT STATUS: Shipping, *Will ship when available.
PRE-REQUISITES: Castanet Management Suite
US MINIMUM ORDER REQUIREMENTS: First order must be for a minimum of 20 Server
Access Licenses.
CASTANET INFRASTRUCTURE SUITE - SERVER APPLICATION ACCESS LICENSE
(CIS-SAAL-3.2-U):
Components include:
o Castanet Enterprise Transmitter
o Castanet Tuner
o Transmitter Administrator
o Publisher
o Channel Copier
o License Installer
o Certificate Manager
o Gateway
o Proxy
NOTE: Includes the right to install and deploy as many copies of the Castanet
Infrastructure Suite components (for use by Licensee's employees) as necessary
to support the purchased Access Licenses. A Server Access License permits use of
the Castanet Infrastructure Suite to deploy and manage a Single Application on
one Endpoint computer server. An Endpoint computer server licensed with an SAAL
may not deploy or manage applications or other data on Endpoints for which
Licensee has not purchased an Access License. Some examples of Endpoint computer
Marimba, Inc.
Private and Confidential
Page 7
<PAGE> 8
servers are Database Servers, Web Servers, Production Line Servers, File Servers
and Point of Sale Servers.
SUPPORTED PLATFORMS: Windows 95 (except for Proxy and Gateway), Windows NT 4.0,
and Solaris 2.6 and 2.5.1, HP-UX, AIX*
PRODUCT STATUS: Shipping, *Will ship when available.
PRE-REQUISITES: Castanet Management Suite
US MINIMUM ORDER REQUIREMENTS: First order must be for a minimum of 20 Server
Application Access Licenses.
INTERNET EDITIONS
CASTANET INFRASTRUCTURE SUITE - INTERNET EDITION (CIS-NET-3.2-U):
Components include;
o One Castanet Internet Edition Transmitter
o Castanet Tuner
o Transmitter Administrator
o Publisher
o Channel Copier
o License Installer
o Certificate Manager
o Gateway
o Proxy
NOTE: This Suite includes one Castanet Internet Edition Transmitter. However,
the Licensee may make as many copies of the Proxy and Gateway components as
necessary to support the use of the Internet Edition Transmitter. The users of
the application must be "unknown" and this must not represent a
business-to-business relationship. In addition, the Applications published on
this Transmitter must be publicly available, not require any kind of access
control, and be free to users. Reporting of the internet address to Marimba is
required.
SUPPORTED PLATFORMS: Windows 95 (except for Proxy and Gateway), Windows NT 4.0,
and Solaris 2.6 and 2.5.1, HP-UX, AIX*
PRODUCT STATUS: Shipping, *Will ship when available.
CASTANET INFRASTRUCTURE SUITE - INTERNET SINGLE APPLICATION EDITION
(CIS-ISA-3.2-U) includes:
Components include:
o One Castanet Internet Transmitter
o Transmitter Administrator
o Publisher
o Channel Copier
o License Installer
o Certificate Manager
o Gateway
o Proxy
NOTE: This Suite includes one Castanet Internet Edition Transmitter to serve the
Internet with respect to a Single Application; however, the Licensee may make as
many copies of the Proxy and Gateway components as necessary to support the use
of the Internet Single Application Edition Transmitter. The users of the
application must be "unknown" and this must not represent a business-to-business
relationship. In addition, the Application published on this Transmitter must be
publicly available, not require any kind of access control, and be free to
users. Reporting of the internet address to Marimba is required, and the name
and primary functionality of the Single Application must be designated in the
Order Form.
SUPPORTED PLATFORMS: Windows 95 (except for Proxy and Gateway), Windows NT 4.0,
and Solaris 2.6 and 2.5.1, HP-UX, AIX*
Marimba, Inc.
Private and Confidential
Page 8
<PAGE> 9
PRODUCT STATUS: Shipping, *Will ship when available.
Marimba, Inc.
Private and Confidential
Page 9
<PAGE> 10
================================================================================
MANAGEMENT AND PRODUCTION SUITES
================================================================================
CASTANET MANAGEMENT SUITE (CMS-3.2-U):
Components include:
o Tuner Packager
o Channel Copier
o Transmitter Administrator Pro
o Transmitter Reporter
NOTE: This Suite is licensed on a per "User" basis; any employee with access to
the software is a "User". Administrators who wish to package Tuners, copy
channels, create administrative reports or perform administration of a
Transmitter would each use one Suite. IMPORTANT: The Tuner Packager may only be
used to package Tuners for distribution to Licensee's employees. (A Custom
Redistribution License would be needed to distribute a packaged Tuner to third
parties)
SUPPORTED PLATFORMS: Windows 95, Windows NT 4.0, and Solaris 2.6 and 2.5.1,
HP-UX, AIX*
PRODUCT STATUS: Licensee must accept partial shipments. *Will ship when
available
PRE-REQUISITES: Must have purchased a Castanet Infrastructure Suite
CASTANET PRODUCTION SUITE (CPS-3.2-U):
Components include:
o Publisher
o Application Packager
o Application Packager for Microsoft Windows(TM) Applications
o Application Packager for Microsoft Visual Basic(TM) Applications
o File Packager
NOTE: This Suite is licensed on a per "User" basis; any employee with access to
the software is a "User". Developers who wish to create and publish Channels for
either Java or native code would each use one Suite.
SUPPORTED PLATFORMS: Windows 95, Windows NT 4.0, and Solaris 2.6 and 2.5.1,
HP-UX, AIX* (except for the Packager for Windows(TM) and Visual Basic(TM)
Applications)
PRODUCT STATUS: Licensee must accept partial shipments. *Will ship when
available
PRE-REQUISITES: Must have purchased a Castanet Infrastructure Suite
Marimba, Inc.
Private and Confidential
Page 10
<PAGE> 11
================================================================================
REDISTRIBUTION LICENSES
================================================================================
CASTANET CUSTOM REDISTRIBUTION LICENSE (CRL-3.2-U):
Includes:
o Tuner Customization Guide
o License to modify the Castanet-branded UI and redistribute a customized
or packaged Tuner to Endpoints who are not employees.
o Available only pursuant to a special separate written Marimba License
Agreement.
o For 3 year term only
NOTE: Licensee must adhere to certain important branding and end-user licensing
guidelines when redistributing customized Tuners.
SUPPORTED PLATFORMS: N/A
PRODUCT STATUS: Shipping
PRE-REQUISITES: Must have purchased a Castanet Infrastructure Suite, Castanet
Management Suite, and Maintenance.
CASTANET REPEATER REDISTRIBUTION LICENSE (RRL-3.2-U):
o Allows Licensee to redistribute one limited Transmitter outside its
firewall.
o Available only pursuant to a special separate written Marimba License
Agreement.
NOTE: This limited Transmitter is for use on third-party premises to replicate
Castanet channels from the Licensee's organization to Tuners within the
third-party domain. The RRL provides third-party control over deployed
applications and reduces third-party cross-firewall traffic. The Castanet
Repeater Redistribution License is not available for Internet Edition
Transmitters.
SUPPORTED PLATFORMS: Windows 95, Windows NT 4.0, and Solaris 2.6 and 2.5.1,
HP-UX, AIX*
PRODUCT STATUS: Shipping, *Will ship when available.
PRE-REQUISITES: Must have purchased a Castanet Infrastructure Suite
Marimba, Inc.
Private and Confidential
Page 11
<PAGE> 12
================================================================================
OTHER PRODUCTS
================================================================================
CASTANET TUNER CUSTOMIZATION KIT (TCK-3.2-U):
Includes:
o Tuner Customization Guide
o License to modify the Castanet-branded UI for internal use only.
o Available only pursuant to a special separate written Marimba License
Agreement.
NOTE: Licensee must adhere to certain important branding and end-user licensing
guidelines when redistributing customized Tuners.
SUPPORTED PLATFORMS: N/A
PRODUCT STATUS: Shipping
PRE-REQUISITES: Must have purchased a Castanet Infrastructure Suite, Castanet
Management Suite, and Bronze/Silver/Gold Maintenance.
CASTANET MEDIA KIT (MED-CAST-3.2-U):
o Media and documentation for Castanet
SUPPORTED PLATFORMS: Windows 95, Windows NT 4.0, and Solaris 2.6 and 2.5.1,
HP-UX, AIX*
PRODUCT STATUS: Shipping, *Will ship when available.
CASTANET QUICKSTART PAK (NON-PRODUCTION KIT) (QKS-3.2-U):
Components include:
o One Infrastructure Suite License
o License for One Developer and Ten User Access Licenses
(Non-production use only)
o One Production Suite License
o One Management Suite License
o Five Technical Support Incidents
o License term is for one year. No Maintenance or upgrades available.
NOTE: Licensee may use only for development (pre-production) purposes. The
Licensee cannot extend this license or upgrade it for use in full production.
SUPPORTED PLATFORMS: Windows 95, Windows NT 4.0, and Solaris 2.6 and 2.5.1,
HP-UX, AIX*
PRODUCT STATUS: Shipping, *Will ship when available.
US MINIMUM ORDER REQUIREMENT: None.
Marimba, Inc.
Private and Confidential
Page 12
<PAGE> 13
================================================================================
SDK
================================================================================
CASTANET UPDATENOW SDK (UPDSDK-3.2-U):
Components include:
o Technical documentation, examples, UpdateNow SDK libraries
o Unlimited number of developers
o Limit to embed SDK in only one application
o One year development only license for UpdateNow SDK for Java and
C implementations
o Includes Maintenance for one year
o One year term only for use of SDK and distribution of SDK enabled
copies to third parties
NOTE: Licensee may only use the UpdateNow SDK for development of one
application. Licensee must purchase Castanet UpdateNow SDK AALs (rather than
Infrastructure Suite - User Access Licenses or Application Access Licenses) in
order to distribute the application developed.
SUPPORTED PLATFORMS: Windows 95 and Windows NT 4.0 (Native and Java), and
Solaris 2.6 and 2.5.1(Java only), HP-UX, AIX*
PRODUCT STATUS: Shipping
PRE-REQUISITES: Must have purchased a QuickStart Pak (for Pilot use) or an SDK
AAL (as opposed to a regular AAL or UAL to distribute each program).
Marimba, Inc.
Private and Confidential
Page 13
<PAGE> 14
BELOW ARE THE MINIMUM ORDER GUIDELINES WHEN A CUSTOMER BUYS DIRECT FROM MARIMBA.
SHOULD YOUR CUSTOMER NEED TO PURCHASE LOWER QUANTITIES, PLEASE CALL YOUR MARIMBA
CHANNEL REP.
NOTES:
o Initial purchase of the Castanet Infrastructure Suite - User Access Licenses
must be purchased in blocks of 200 UALs at a time. Additional purchases must
be in blocks of 100 UALs.
o Initial purchase of the Castanet Infrastructure Suite - Server Access
Licenses must be purchased in blocks of 20 Licenses at a time. Additional
purchases must be in blocks of 5 Server Licenses.
o Initial minimum purchase requirements apply to the entire order and
therefore it is only necessary to fulfill one (i.e. Server or UAL) of the US
Minimum Order requirements per order.
o Initial purchase of the Castanet Infrastructure Suite - Application Access
Licenses must be purchased in of 500 Access Licenses at a time. Additional
purchases must be in blocks of 100 Application Access Licenses.
o Initial purchase of the Castanet Infrastructure Suite - Server Application
Access Licenses must be purchased in blocks of 20 SAALs at a time.
Additional purchases must be in blocks of 5 SAALs.
SHIPPING
Licensee must accept partial shipments and is responsible for all costs incurred
from shipping taxes and any customs fees.
Marimba, Inc.
Private and Confidential
Page 14
<PAGE> 15
GLOSSARY
Application Access License (AAL): An Application Access License permits use of
the Castanet Infrastructure Suite to deploy and manage a Single Application for
use by one user on one Endpoint. A separate AAL is required for each individual
user of an Endpoint computer.
Castanet Custom Redistribution License (CRL): The Castanet Custom Redistribution
License consists of three parts: (1) technical documentation which explains how
to configure the UI of the Tuner, and (2) a paper license which allows the
Licensee to redistribute modified or configured Tuners to Endpoints which are
not operated by employees, and (3) templates for Channel Manager and graphics.
Licensee must adhere to certain important branding and end-user licensing
guidelines when redistributing customized Tuners. Remember: the right to
redistribute a standard Tuner will expire in 3 years.
Castanet Tuner Customization Kit (TCK): The Tuner Customization Kit consists of
three parts: (1) technical documentation which explains how to configure the UI
of the Tuner, (2) a paper license which allows the Licensee to deploy modified
or configured Tuners to Endpoints which are operated by employees, and (3)
templates for Channel Manager and graphics. Licensee must adhere to certain
important branding and end-user licensing guidelines when deploying customized
Tuners.
Repeater Redistribution License (RRL): Repeaters are limited functionality
Transmitters which may be redistributed by Licensee. They are limited because
they may only be used to repeat or re-transmit data received by the Repeater
directly from Licensee. They are used to replicate and redirect Castanet
channels to Tuners as well as to allow Castanet to scale. Repeaters are not
available for Internet Edition Transmitters. Licensee needs a Repeater only when
they want to place a transmitter on some third-party's premises.
Castanet Gateway: The Castanet Transmitter Gateway allows a Transmitter and HTTP
web server to share the same port.
Castanet Infrastructure Suite: The Castanet Infrastructure Suite consists of a
Castanet Enterprise Transmitter, a Castanet Tuner, and other related Castanet
software components. Licensee may make as many copies (for use by employees
only) of the components of the Castanet Infrastructure Suite.
Castanet Management Suite (CMS): This Suite includes a set of components that
are licensed per "User". Administrators (aka "Users") who wish to package
Tuners, Copy Channels, Create Administrative Reports or perform administration
of a Transmitter would use this Suite.
Castanet Production Suite (CPS): This Suite includes a set of components that
are licensed per "User". Developers (aka "Users") who wish to publish and create
Channels in either Java or native code would use this Suite.
Castanet Proxy: The Castanet Proxy runs on a company's Internet firewall machine
and reduces the load on the firewall. The Proxy caches frequently requested
channel files while allowing Tuners within the company to continue communicating
with Transmitters.
Endpoint: "Endpoint" means any computer or other device executing a Castanet
Tuner or other software capable of operating with a Castanet Enterprise
Transmitter. Remember: A separate Access License is required for each individual
user of an Endpoint.
Enterprise Transmitter: The Castanet Enterprise Transmitter is software that
runs on a computer server and serves Castanet channels to Tuners.
Marimba, Inc.
Private and Confidential
Page 15
<PAGE> 16
Internet Edition Transmitter: The Castanet Internet Edition Transmitter is
software that runs on a computer server and serves Castanet channels to Tuners
on the general Internet. Such channels must be accessible by any Internet user,
not require identification or registration of any kind, and not require payment
for access to or use of the channels. Unlike the Enterprise Transmitter, the
Licensee must pay Marimba for each copy of the Castanet Internet Edition
Transmitter it needs to support its channels. If the Licensee purchases the
Castanet Infrastructure Suite-Internet Single Application Edition, then it may
only make a Single Application generally available through the Internet.
Castanet QuickStart Pak: QuickStart Pak is a non-production version of Castanet
that is geared toward developers looking for a supported evaluation experience.
Server Access License (SAL): A Server Access License permits use of the Castanet
Infrastructure Suite to deploy and manage applications or other data on one
Endpoint computer server. An Endpoint computer server licensed with an SAL may
not deploy or manage applications or other data on Endpoints for which Licensee
has not purchased an Access License. Examples of Endpoint computer servers
include factory process controllers, Point of Sale servers, database servers,
workgroup servers, etc.
Server Application Access License (SAAL): A Server Application Access License
permits use of the Castanet Infrastructure Suite to deploy and manage a Single
Application on one Endpoint computer server. An Endpoint computer server
licensed with an SAAL may not deploy or manage applications or other data on
Endpoints for which Licensee has not purchased an Access License.
Single Application: . A "Single Application" is one Castanet channel containing
data or an application with one specific purpose or related set of
functionality. By way of example only, a word-processor and a spreadsheet
program would not constitute a Single Application even if both were run as a
single Castanet channel or were incorporated into the same general suite of
applications. The name of each Single Application and its primary function must
be designated in the Order Form or ELA.
UpdateNow SDK: A Licensee who is interested in embedding Castanet capabilities
directly into their application should be directed to the UpdateNow SDK. The
UpdateNow SDK is a development kit which includes technical documentation,
examples, and an UpdateNow library. The library is available as Java class files
or as a Windows DLL (dynamic link library). Once the library is integrated into
a C/C++ or Java application, that program then inherits tuner-like functionality
and works directly with the Transmitters. (The same Transmitter can also
communicate with Castanet Tuners.) The UpdateNow SDK is available as a 32-bit
Windows DLL as well as a Java library. Memory and hard-disk requirements will
depend on the application. A Licensee must purchase a separate UpdateNow SDK for
each program into which the SDK is embedded. At the time of purchase in addition
to buying the UpdateNow SDK, a Licensee must purchase either a QuickStart Pak
(for Pilot use) or the minimum number of SDK AALs (as opposed to a regular AAL
or UAL) to distribute each program. A separate SDK AAL is required for each copy
of an SDK enabled application which is either being used by the Licensee or
distributed by the Licensee to third parties. The SDK is licensed on a one year
term basis only, which means the Licensee may not continue to use the SDK itself
or distribute the SDK enabled applications beyond the expiration of the term.
User Access License (UAL): A User Access License permits use of the Castanet
Infrastructure Suite to deploy and manage applications or other data for use by
one user on one Endpoint.
Marimba, Inc.
Private and Confidential
Page 16
<PAGE> 17
SUMMARY OF CHANGES IN THE MARIMBA 3.2 PRICE LIST
1. Effective with the Castanet 3.2 release, Bongo will no longer be offered as
part of the Production Suite, QuickStart Pak or as a standalone product.
Instead it will be publicly available at www.freebongo.org. This public site
will contain the source and object code for Bongo and its Widget Set. In
this way, Bongo will evolve according to the needs of the developer
community, making it an even more powerful GUI-building tool.
2. The Castanet Customization License name has been changed to the Tuner
Customization Kit The new part number is TCK-3.2. This change was made in
order to avoid confusion between the Customization License and the Custom
Redistribution License. In addition, the TCK is considered to be a "kit" not
a "license" and thus we felt a name change could best describe the product.
3. Given cost increases in providing top-quality services, the following prices
are in effect:
o Pricing for US Castanet Architectural Design Services has been
changed to [$***]+.
o Pricing for US Castanet Implementation Services has been changed
to [$***]+.
o Pricing for US Onsite Training has been changed to [$***]+.
4. To simplify the licensing of Castanet, the Standard Redistribution License
is no longer available as a product from Marimba, Inc.
- --------
+ CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Marimba, Inc.
Private and Confidential
Page 17
<PAGE> 18
<TABLE>
<CAPTION>
PRICE LIST VERSION 3.2 A EFFECTIVE NOVEMBER 23, 1998 WORLDWIDE RESELLERS MARIMBA, INC.
VERSION PART NUMBER PRICE*
DOMESTIC
<S> <C> <C> <C>
ENTERPRISE LICENSES
CASTANET INFRASTRUCTURE SUITE-USER ACCESS LICENSE
Castanet Infrastructure Suite-User Access License 3.2 CIS-UAL-3.2-U [$ ***]*
------
CASTANET INFRASTRUCTURE SUITE-SERVER ACCESS LICENSE
Castanet Infrastructure Suite-Server Access License 3.2 CIS-SAL-3.2-U [$ ***]*
------
CASTANET INFRASTRUCTURE SUITE-APPLICATION ACCESS LICENSE
Castanet Infrastructure Suite-Application Access License 3.2 CIS-AAL-3.2-U [$ ***]*
------
CASTANET INFRASTRUCTURE SUITE-SERVER APPLICATION ACCESS LICENSE
Castanet Infrastructure Suite-Server Application Access License 3.2 CIS-SAAL-3.2-U [$ ***]*
------
INTERNET LICENSES
Castanet Infrastructure Suite-Internet Edition 3.2 CIS-NET-3.2-U [$ ***]*
------
Castanet Infrastructure Suite- Internet Single Application Edition 3.2 CIS-ISA-3.2-U [$ ***]*
------
CASTANET MANAGEMENT SUITE
Castanet Management Suite 3.2 CMS-3.2-U [$ ***]*
------
CASTANET PRODUCTION SUITE
Castanet Production Suite 3.2 CPS-3.2-U [$ ***]*
------
CASTANET CUSTOMIZATION
Castanet Tuner Customization Kit 3.2 CRL-3.2-U [$ ***]* Must obtain a
------ signed Marimba
Enterprise
License
Agreement
Castanet Customization License 3.2 TCK-3.2-U [$ ***]* Must obtain a
------ signed Marimba
Enterprise
CASTANET QUICKSTART PAK License
Castanet QuickStart Pak 3.2 QKS-3.2-U [$ ***]* Agreement
------
CASTANET REPEATER REDISTRIBUTION LICENSE
Castanet Repeater Redistribution License 3.2 RRL-3.2-U [$ ***]* Must obtain a
------ signed Marimba
Enterprise
License
Agreement
CASTANET MEDIA KIT
Castanet Media Kit 3.2 MED-CAST-3.2-U [$ ***]*
------
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 19
<TABLE>
<CAPTION>
PRICE LIST VERSION 3.2 A EFFECTIVE NOVEMBER 23, 1998 WORLDWIDE RESELLERS MARIMBA, INC.
VERSION PART NUMBER PRICE*
<S> <C> <C> <C>
DOMESTIC MAINTENANCE
SUBSCRIPTION SERVICE
Subscription Service SUBSCRIPTION-U [$ ***]*
------
BRONZE SERVICE (MINIMUM $5,000)
Bronze Service BRONZE-U [$ ***]*
------
Bronze Extra Point of Contact BRZ-POC-U [$ ***]*
------
SILVER SERVICE (MINIMUM $25,000)
Silver Service SILVER-U [$ ***]*
------
Silver Extra Point of Contact SLV-POC-U [$ ***]*
------
GOLD SERVICE (MINIMUM $150,000)
Gold Service GOLD-U [$ ***]*
------
Gold Extra Point of Contact GLD-POC-U [$ ***]*
------
SUPPORT AND SERVICES
MARIMBA CONSULTING SERVICES
1 Day of Castanet Implementation Services CON-IMP-U [$ ***]* (Plus Expenses)
------
1 Day of Architectural Design Services CON-ARC-U [$ ***]* (Plus Expenses)
------
MARIMBA PAY PER CASE SUPPORT
Pay-Per-Case 10 Pak PPC-10-U [$ ***]*
------
Pay-Per-Case 1 Call for Tuner only PPC-TU-U [$ ***]*
------
Pay-Per-Case 1 Call PPC-1-U [$ ***]*
------
Pay-Per-Case 3 Call PPC-3-U [$ ***]*
------
TRAINING
Castanet 3.x Upgrade Training Kit UPG-TNG-3.2-U [$ ***]*
------
1 Day of Training TNG-U [$ ***]*
------
On-site Training Per day for up to 12 students TNG-ONSTE-U [$ ***]* (Plus Expenses)
------
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 20
<TABLE>
<CAPTION>
PRICE LIST VERSION 3.2 A EFFECTIVE NOVEMBER 23, 1998 WORLDWIDE RESELLERS MARIMBA, INC.
VERSION PART NUMBER PRICE*
<S> <C> <C> <C>
INTERNATIONAL (NON-U.S.)
CASTANET INFRASTRUCTURE SUITE-USER ACCESS LICENSE (INTL VERSION)
Castanet Infrastructure Suite-User Access License (Intl Version) 3.2 CIS-UAL-3.2-I [$ ***]*
------
CASTANET INFRASTRUCTURE SUITE-SERVER ACCESS LICENSE (INTL VERSION)
Castanet Server Access License (Intl Version) 3.2 CIS-SAL-3.2-I [$ ***]*
------
CASTANET INFRASTRUCTURE SUITE-APPLICATION ACCESS LICENSE
(INTL VERSION)
Castanet Infrastructure Suite-Application Access License
(Intl Version) 3.2 CIS-AAL-3.2-I [$ ***]*
------
CASTANET INFRASTRUCTURE SUITE-SERVER APPLICATION ACCESS LICENSE
(INTL VERSION)
Castanet Server Application Access License (Intl Version) 3.2 CIS-SAAL-3.2-I [$ ***]*
------
CASTANET INFRASTRUCTURE SUITE-INTERNET EDITION (INTL VERSION)
Castanet Infrastructure Suite-Internet Edition (Intl Version) 3.2 CIS-NET-3.2-I [$ ***]*
------
Castanet Infrastructure Suite-Internet Single Application
Edition (Intl Version) 3.2 CIS-ISA-3.2-I [$ ***]*
------
CASTANET MANAGEMENT SUITE-(INTL VERSION)
Castanet Management Suite-(Intl Version) 3.2 CMS-3.2-I [$ ***]*
------
CASTANET PRODUCTION SUITE-(INTL VERSION)
Castanet Production Suite-(Intl Version) 3.2 CPS-3.2-I [$ ***]*
------
CASTANET CUSTOMIZATION (INTL VERSION)
Castanet Custom Redistribution License (Intl Version) 3.2 CRL-3.2-I [$ ***]* Must obtain a
------ Marimba Enterprise
License Agreement
Castanet Tuner Customization Kit (Intl Version) 3.2 TCK-3.2-I [$ ***]* Must obtain a
------ Marimba Enterprise
License Agreement
CASTANET QUICKSTART PAK (INTL VERSION)
Castanet QuickStart Pak (Intl Version) 3.2 QKS-3.2-I [$ ***]*
------
CASTANET REPEATER REDISTRIBUTION LICENSE (INTL VERSION)
Castanet Repeater Redistribution License (Intl Version) 3.2 RRL-3.2-I [$ ***]* Must obtain a
------ Marimba Enterprise
License Agreement
CASTANET MEDIA KIT (INTL VERSION)
Castanet Media Kit (Intl Version) 3.2 MED-CAST-3.2-I [$ ***]*
------
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 21
<TABLE>
<CAPTION>
PRICE LIST VERSION 3.2 A EFFECTIVE NOVEMBER 23, 1998 WORLDWIDE RESELLERS MARIMBA, INC.
VERSION PART NUMBER PRICE*
<S> <C> <C> <C>
INTERNATIONAL MAINTENANCE
SUBSCRIPTION SERVICE
Subscription Service SUBSCRIPTION-I [$ ***]*
------
BRONZE SERVICE (MINIMUM $5,000)
Bronze Service BRONZE-I [$ ***]*
------
Bronze Extra Point of Contact BRZ-POC-I [$ ***]*
------
SILVER SERVICE (MINIMUM $25,000)
Silver Service SILVER-I [$ ***]*
------
Silver Extra Point of Contact SLV-POC-I [$ ***]*
------
GOLD SERVICE (MINIMUM $150,000)
Gold Service GOLD-I [$ ***]*
------
Gold Extra Point of Contact GLD-POC-I [$ ***]*
------
SUPPORT AND SERVICES
MARIMBA CONSULTING SERVICES
1 Day of Castanet Implementation Services CON-IMP-I [$ ***]* (Plus Expenses)
------
1 Day of Architectural Design Services CON-ARC-I [$ ***]* (Plus Expenses)
------
TRAINING
Castanet 3.0 Upgrade Training Kit UPG-TNG-3.2-I [$ ***]*
------
1 Day of Training TNG-I [$ ***]*
------
On-site Training Per day for up to 12 students TNG-ONSTE-I [$ ***]* (Plus Expenses)
------
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 22
<TABLE>
<CAPTION>
PRICE LIST VERSION 3.2 A EFFECTIVE NOVEMBER 23, 1998 WORLDWIDE RESELLERS MARIMBA, INC.
VERSION PART NUMBER PRICE*
<S> <C> <C> <C> <C>
SDK - SOLD BY SPECIAL AGREEMENT ONLY
CASTANET UPDATENOW SDK
Castanet UpdateNow SDK 3.2 UPDSDK-3.2-U Contact Marimba for Price
UPDATENOW SDK AAL
Castanet UpdateNow SDK AAL UNITS
10,000 to 14,999 3.2 UP-AAL-1-3.2-U Contact Marimba for Price
15,000 to 24,999 3.2 UP-AAL-2-3.2-U Contact Marimba for Price
25,000 to 49,999 3.2 UP-AAL-3-3.2-U Contact Marimba for Price
50,000 to 99,999 3.2 UP-AAL-4-3.2-U Contact Marimba for Price
100,000 to 249,999 3.2 UP-AAL-5-3.2-U Contact Marimba for Price
250,000 to 499,999 3.2 UP-AAL-6-3.2-U Contact Marimba for Price
500,000 to 749,999 3.2 UP-AAL-7-3.2-U Contact Marimba for Price
750,000 to 999,999 3.2 UP-AAL-8-3.2-U Contact Marimba for Price
1,000,000 to 4,999,999 3.2 UP-AAL-9-3.2-U Contact Marimba for Price
5,000,000 or more 3.2 UP-AAL-10-3.2-U Contact Marimba for Price
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 1
EXHIBIT 10.14
AMENDMENT TO RESELLER AGREEMENT BETWEEN MARIMBA, INC. AND TIVOLI SYSTEMS, INC.
REFERENCE AGREEMENT NUMBER: RES9700332 AMENDMENT NO: 03
MARIMBA NAME AND ADDRESS: RESELLER NAME AND ADDRESS:
Marimba, Inc. ("Marimba") Tivoli Systems, Inc. ("Reseller")
440 Clyde Avenue 9442 Capital of Texas Highway North
Mountain View, CA 94043 Austin, TX 78792
MARIMBA COMPANY CONTACT: RESELLER COMPANY CONTACT:
Todd Smithline Howard J Nicholas
Legal Counsel Manager, Contract Services,
Phone: (650) 930-5233 Business Operations
Fax: (650) 930-5605 Phone: (512) 436-8616
Fax: (512) 436-8461
WHEREAS, the parties desire to amendment the Reseller Agreement by and between
Marimba and Reseller dated as of August 14, 1997 (the "Reseller Agreement") for
a third time as set forth herein;
NOW THEREFORE, in consideration of agreements reached between the parties, the
Reseller Agreement is hereby amended as follows (this "Amendment"):
1. Definitions. All capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to them in the Reseller Agreement.
2. Section 12. Term and Termination. Add the following provision:
"The parties agree that the Reseller Agreement will be extended automatically
when it reaches its present expiration date until the earlier to occur of (i)
receipt of written notice by Marimba from Reseller of termination or (ii) May 1,
1999. Reseller agrees to use reasonable commercial efforts to notify Marimba in
advance of its intention to terminate if prior to May 1, 1999."
The parties acknowledge that they have read this Amendment, understand it, and
agree to be bound by its terms and conditions. Further, they agree that this
Amendment and the referenced Reseller Agreement are the complete and exclusive
statement of the agreement between the parties, superseding all proposals or
communications between the parties relating to this subject. Any reproduction of
this Amendment by reliable means will be considered an original of this
document. This Amendment shall be effective as of the date last executed below.
TIVOLI SYSTEMS, INC. MARIMBA, INC.
By: /s/ HOWARD NICHOLAS By: /s/ STEVEN P. WILLIAMS
------------------------------ -----------------------------------
Name: Howard Nicholas Name: Steven P. Williams
------------------------------ -----------------------------------
Title: Mgr. Contract Services Title: Vice President, Sales
------------------------------ -----------------------------------
Date: February 8, 1999 Date: February 8, 1999
------------------------------ -----------------------------------
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
January 13, 1999, in the Registration Statement (Form S-1) and related
Prospectus of Marimba, Inc. for the registration of shares of its common
stock.
/s/ Ernst & Young LLP
Palo Alto, California
February 11, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,700
<SECURITIES> 4,125
<RECEIVABLES> 3,691
<ALLOWANCES> 70
<INVENTORY> 0
<CURRENT-ASSETS> 11,817
<PP&E> 4,036
<DEPRECIATION> 1,289
<TOTAL-ASSETS> 14,862
<CURRENT-LIABILITIES> 8,905
<BONDS> 0
18,953
0
<COMMON> 2,183
<OTHER-SE> 15,926
<TOTAL-LIABILITY-AND-EQUITY> 14,862
<SALES> 13,901
<TOTAL-REVENUES> 17,085
<CGS> 75
<TOTAL-COSTS> 23,213
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> (5,640)
<INCOME-TAX> 41
<INCOME-CONTINUING> (5,681)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,681)
<EPS-PRIMARY> (0.59)<F1>
<EPS-DILUTED> (0.59)
<FN>
<F1>For purposes of this exhibit, primary means basic.
</FN>
</TABLE>
<PAGE> 1
Exhibit 99.1
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
NOVADIGM, INC., Plaintiff, NO. C-97-20194-JW
v.
MARIMBA, INC., Defendant. ORDER RE: CLAIM CONSTRUCTION(1)
On December 17, 1998, the Court conducted a hearing pursuant to
Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995), in order to
determine the meaning of language used in the claims of U.S. Patent No.
5,581,764 (the "'764 patent"). In Markman, the Federal Circuit Court held that
interpretation and construction of patent claims, which define the scope of the
patentee's rights under the patent, is a matter of law exclusively for the
court. Id. The court has the power and obligation to construe as a matter of law
the meaning of language used in the patent claim. Id. As such, "[a] patent
covers the invention or inventions which the court, in construing its
provisions, decides that it describes and claims." Id.
"To ascertain the meaning of claims, we consider three sources:
The claims, the specification, and the prosecution history." Id. (quoting Unique
Concepts, Inc. v. Brown, 939 F.2d 1558, 1561 (Fed. Circ. 1991)). "Expert
testimony, including evidence of how those skilled in the art would interpret
the claims, may also be used." Id. (quoting Fonar Corp. v. Johnson & Johnson,
821 F.2d 627, 631 (Fed. Circ. 1987)).
- --------
(1) This disposition is not appropriate for publication and may not be
cited.
<PAGE> 2
Based upon the claims, specifications and file history of the
patents, as well as the oral argument of counsel, the Court finds that the
following definitions shall apply to the terms contained in the patents:
1. "Already Have Information Units": Information units are identifiers or
descriptors of resources, or identifiers or descriptors of other
information units, which are associated with or linked to their
respective resources or information units. Information units are not the
resources themselves. The phrase "Already Have Information Units" is
self-explanatory and simply means the information units that identify
resources which a particular computer already has or already has access
to.
2. "Should Have Information Units": Information units are identifiers or
descriptors of resources, or identifiers or descriptors of other
information units, which are associated with or linked to their
respective resources or information units. Information units are not the
resources themselves. The phrase "Should Have Information Units" is also
self-explanatory and means the information units that identify resources
which have been designated for a particular computer.
3. "Already Have Information Structure": An "Already Have Information
Structure" is two or more already have information units that have been
linked together in a multi-level hierarchy.
4. "Should Have Information Structure": A "Should Have Information
Structure" is two or more should have information units that have been
linked together in a multi-level hierarchy.
2
<PAGE> 3
5. "Linkages": Link, linking or linkage all refer to a connection between
or among units.
6. "Multi-Level Hierarchy": A "Multi-Level Hierarchy" is an information
structure that has two or more levels with hierarchical relationships
among different levels.
7. "Structural Data": "Structural Data" is data associated with two or more
information units or their associated resources in an information
structure, that can be compared with the same type of data relating to
two or more information units or associated resources in another
information structure, to identify the differences between the
information structures, without comparing the information units or the
resources with each other.
At least two units of already have structural data and at least
two units of should have structural data must be "provided" and "related" to
particular information units.
8. "Comparing": Due to the above construction of "structural data," the
Court finds it unnecessary to construe the term "comparing . . . so as to
identify portions."
DATED: December 28, 1998
/s/ JAMES WARE
-------------------------------
JAMES WARE
United States District Judge
3
<PAGE> 4
This is to certify that copies of this order have been mailed to:
Matthew D. Powers
WEIL, GOTSHAL & MANGES
2882 Sand Hill Road, Suite 280
Menlo Park, CA 94025
Michael Barclay
WILSON, SONSINI, GOODRICH & ROSATI
650 Page Mill Road
Palo Alto, CA 94304
Dated: December 28, 1998 CLERK OF COURT
-------------------------------
By: /s/ RONALD L. DAVIS
-------------------------------
Ronald L. Davis
Deputy Clerk
4
