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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ACCRUE SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7372 94-3238684
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
48634 MILMONT DRIVE
FREMONT, CALIFORNIA 94538-7353
(510) 580-4500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RICHARD D. KREYSAR
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ACCRUE SOFTWARE, INC.
48634 MILMONT DRIVE
FREMONT, CALIFORNIA 94538-7353
(510) 580-4500
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
COPIES TO:
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JOHN V. BAUTISTA NORA L. GIBSON
FRANCES JOHNSTON LINDSAY C. FREEMAN
C. HOWARD KORRELL ANGELA C. HILT
VENTURE LAW GROUP BROBECK, PHLEGER & HARRISON LLP
A PROFESSIONAL CORPORATION ONE MARKET
2800 SAND HILL ROAD SPEAR STREET TOWER
MENLO PARK, CA 94025 SAN FRANCISCO, CA 94105
</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, 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. [ ]
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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. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AGGREGATE
TO BE REGISTERED OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE
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Common Stock, par value $0.001............ 41,400,000 $11,510
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(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(0) under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
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 OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 27, 1999
LOGO
SHARES
COMMON STOCK
Accrue Software, Inc. is offering shares of its common stock.
This is our initial public offering, and no public market currently exists for
our shares. We have applied to have the shares we are offering approved for
quotation on the Nasdaq National Market under the symbol "ACRU." We anticipate
that the initial public offering price will be between $ and $ per
share.
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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PER SHARE TOTAL
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Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to Accrue.......................................... $ $
</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.
We have granted the underwriters a 30-day option to purchase up to
additional shares of our common stock. BancBoston Robertson Stephens
Inc. expects to deliver the shares of common stock to purchasers on
, 1999.
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BANCBOSTON ROBERTSON STEPHENS THOMAS WEISEL PARTNERS LLC
The date of this prospectus is , 1999.
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[COLOR ARTWORK]
[INSIDE FRONT COVER/OUTSIDE GATE FOLD]
SLIDE 1
[Shows path of visitor from computer through the internet to and from three
locations -- Tokyo, London and San Francisco, each depicted by an oval picture.
A diagram overlaying each picture depicts the path of information through
different configurations of routers, switches and servers.]
Accrue's network collector technology has the differentiated ability to collect
up to 50 million hits per day of Web site customer activity data from thousands
of globally distributed Web sites consisting of various types of Web sites, such
as content servers (information), mirror servers (copies of information), secure
servers (encrypted transactions) and dynamic servers (constantly changing
information). Additionally, our network collector may be installed in concert
with existing customer network equipment, such as routers, switches and hubs,
and software, such as load balancing applications. Accrue provides insight into
this ever expanding world of complexity and volume of data allowing the Web site
designer to answer the question: "How effective is my Web site?"
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[COLOR ARTWORK]
[INSIDE FRONT COVER/INSIDE GATE FOLD]
SLIDE 2 SITE EFFECTIVENESS
[Shows the path a visitor took through a Web site's content areas (represented
by oval shaped bars containing the address of each content area, arranged from
top to bottom by number of visits and in columns by referral or by request).]
Accrue's special Navigational Graph feature provides a graphical view of the
path visitors take through the Web site. For example, Accrue can graphically
display the path a new visitor takes versus a returning visitor, the path an
Amazon.com visitor takes versus an AOL visitor, or the path of a visitor who
purchased over $1,000 of goods versus the path of a buyer of less than $1,000 of
goods. Accrue allows the Web site merchandising director to answer the question
"Is my Web site efficiently converting lookers into buyers?"
SLIDE 3 CONTENT EFFECTIVENESS
[Shows a sample report which presents visitor data, in three columns, on resets,
% resets and time spent for nineteen different site addresses.]
With our unique network collector we can capture resets, which indicates when a
visitor hits the stop button on his browser. This provides an integral piece of
information indicating whether the content on a Web site is effective. Consider
a report that tells you 1,000 people downloaded a new product information
sheet -- the Website merchandising director would likely believe this
information is useful and may base important decisions on it. Accrue's
additional detail and accuracy may also show that 999 of those visitors hit the
stop button before the download was completed, thereby allowing the director to
truly determine, "How effective is the content of my Web site?"
SLIDE 4 CAMPAIGN EFFECTIVENESS
[Shows a sample report which presents visitor data in four columns indicating
number of visitors, pages visited, time spent and pages per visit for fifteen
different Web sites.]
The Internet provides a new vehicle for marketing and advertising campaigns.
With the help of advanced analysis technology, it also provides for immediate
effectiveness feedback. The effectiveness question is based on metrics which
determine how many new quality visitors came to a Web site as a result of a
campaign. Quality is usually a subjective opinion -- with Accrue it can become
quantitative. Accrue can determine quality based on how long visitors stayed at
the Web site and how many or which different pages they looked at. For example,
if an email campaign drew a 10% response rate, the Web merchandising director
might believe her marketing campaign was a success. However, Accrue Insight
analysis might indicate that all of those visitors exited at the home page, or
first page, of the Web site. Accrue thereby adds considerable value by
indicating a lack of true campaign effectiveness.
<PAGE> 5
TABLE OF CONTENTS
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Summary..................................................... 1
Risk Factors................................................ 5
Risks related to our business............................. 5
Risks related to our industry............................. 15
Risks related to the offering............................. 16
You Should Not Rely on Forward-Looking Statements Because
They Are Inherently Uncertain............................. 20
How We Intend to Use the Proceeds from this Offering........ 20
Dividend Policy............................................. 20
Other Information........................................... 20
Capitalization.............................................. 22
Dilution.................................................... 23
Selected Financial Data..................................... 24
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 25
Business.................................................... 35
Management.................................................. 53
Related Party Transactions with Directors, Officers and 5%
Stockholders.............................................. 66
Principal Stockholders...................................... 69
Description of Capital Stock................................ 71
Shares Eligible for Future Sale............................. 73
Underwriting................................................ 76
Legal Matters............................................... 78
Experts..................................................... 78
Additional Information Available to You..................... 78
Index to Financial Statements............................... F-1
</TABLE>
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We own or have rights to trademarks or tradenames that we use in
conjunction with the sale of our products and services. Accrue is a registered
trademark owned by us. Accrue Insight, Report Wizard and MyAccrue are trademarks
that are owned by us. This prospectus also makes reference to trademarks of
other companies.
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SUMMARY
Because this is only a summary, it does not contain all the information
that may be important to you. You should read the entire prospectus, especially
"Risk Factors" and the financial statements and notes, before deciding to invest
in shares of our common stock. Our fiscal year ends on March 31st of each year
and is named for the subsequent calendar year. For example, our fiscal year
ended March 31, 1999 is called "fiscal year 1999."
OUR COMPANY
Accrue is a leading provider of Internet data collection and analysis
software which enables business decision makers to address critical marketing
and merchandising questions concerning the effectiveness of their Web sites. Our
flagship product, Accrue Insight, is a comprehensive and scalable solution that
we believe helps Internet businesses increase numbers of visitors, customer
loyalty and sales by collecting, storing, analyzing and reporting Web site
activity data at a level of detail and accuracy that distinguishes our
technology from others. Merchandising managers traditionally depend on analysis
of marketing metrics like campaign effectiveness, shopping patterns or price
elasticity, and the quantity of that data has increased dramatically as the
information age has extended the number of methods and reach for marketing
communications. Conducting traditional marketing analysis has therefore become
more complicated. In addition, the Internet has now emerged as the fastest
growing communication and commerce medium in history, creating new challenges
which further compound the complexity of collecting and analyzing valuable
merchandising information. As a result, businesses are demanding analysis that
provides a measure of return on investment for their Internet initiatives.
Despite the need for a detailed, flexible, robust and easy-to-use approach to
Internet merchandising analysis, we believe Accrue Insight is the only product
available that delivers an integrated solution addressing all of these
requirements.
The Internet is a global medium enabling millions of people worldwide to
communicate and conduct business electronically. The number of Web sites
detected by the Netcraft Web Server Survey increased from approximately 1.0
million in April 1997 to approximately 2.2 million in April 1998, and to over
5.0 million in April 1999, reflecting annual growth exceeding 100%. Many
organizations are implementing Web-based business initiatives to automate
business processes, transact sales, and manage customer service, commonly
referred to as conducting "e-business." The growing adoption of the Web
represents a significant opportunity for businesses to effectively conduct
commercial transactions over the Internet, such as the sale of goods and
services, commonly referred to as "e-commerce." According to International Data
Corporation, the total value of e-commerce revenue is expected to increase from
approximately $32.0 billion in 1998 to approximately $426 billion in 2002.
Organizations must support their e-business initiatives by investing heavily in
Internet technology, content, and infrastructure software. Forrester Research
estimates that spending on software and services to support e-commerce alone
exceeded $5.6 billion in 1998 and will grow to $35 billion by 2002.
Accrue Insight enables Web site effectiveness assessment by collecting,
storing, analyzing and reporting comprehensive detailed Web site traffic
information and visitor activity data. The most precise way to analyze Web
traffic is to collect data directly from the network by deciphering the content
of, and indicators embedded in, data packets as they move across the network,
analysis referred to as "packet sniffing." This network-based analysis provides
a factual and complete picture of a visitor's activity at a Web site beyond that
which can be achieved through more common log file based approaches. Our packet
sniffing technology summarizes the details of each interaction to prepare the
data for storage and analysis. The benefits of our packet sniffing analysis
include the ability to collect data pertaining to:
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- Visitors -- understanding who Web site visitors are, where they came
from, and how long they stayed.
- Visits -- exploring behavioral (duration and page depth) patterns of
visitors over repeat visits.
- Content -- measuring the effectiveness of content, including the actual
delivered content, the most popular content, and the stickiness, or
duration of viewing, of content.
- Navigation -- determining the flow of visitors through a Web site to
measure the effectiveness of site layout, and the most common path to
purchase for each market segment.
Increasing numbers of Web sites receive millions of hits per day and this
traffic is growing exponentially. To enable effective e-business analysis,
companies must collect, process, store and make available for analysis the data
generated from these millions of hits. Accrue Insight is designed to operate
effectively across Web sites with the following characteristics:
- 50 million hits per day;
- hundreds of Web servers supporting over 2,000 Web sites;
- generation of thousands of unique reports per day;
- storage of hundreds of gigabytes of historical activity data; and
- complex, globally-distributed content.
We also provide professional services to assist customers at every stage of
Accrue Insight deployment, from identification of specific business needs
through enterprise integration and customization of e-business analysis
reporting, to delivering a rapid and effective implementation.
Our objective is to extend our position as a leading provider of
enterprise-class e-business analysis software. To achieve this objective, our
strategy includes the following key elements: extend leadership in high-end
e-business analysis, maintain technological leadership in e-business analysis
software, leverage Web data platform, leverage and expand blue chip customer
base, continue developing strategic alliances, expand sales and distribution
channels, and pursue strategic acquisitions.
Accrue was incorporated in Delaware under the name "Plumb, Inc." in
February 1996 and changed our name to "Gauge Technologies, Inc." in April 1996.
In October 1996 we changed our name from "Gauge Technologies, Inc." to "Accrue
Software, Inc." Our principal executive offices are located at 48634 Milmont
Drive, Fremont, California 94538-7353, and our telephone number is (510)
580-4500. The address of our Web site is http://www.accrue.com. Information
contained on our Web site shall not be deemed to be a part of this prospectus.
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Unless otherwise indicated, the information in this prospectus,
irrespective of the date referenced, assumes:
- the automatic conversion of each outstanding share of preferred stock
into shares of common stock upon the closing of this offering;
- no exercise of the underwriters' option to purchase additional shares;
and
- the filing of an amendment to our certificate of incorporation upon
completion of this offering.
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THE OFFERING
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Common stock offered by Accrue..................... shares
Common stock to be outstanding after the
offering......................................... shares
Use of proceeds.................................... Working capital and general corporate
purposes
Proposed Nasdaq National Market symbol............. ACRU
</TABLE>
The common stock to be outstanding after the offering is based on the
number of shares outstanding as of March 31, 1999. This number excludes:
- 1,868,072 shares subject to outstanding options as of March 31, 1999 at a
weighted average exercise price of $0.24 per share;
- 1,517,784 additional shares available for grant under our stock plan as
of March 31, 1999;
- 1,226,279 shares issued between March 31, 1999 and May 25, 1999 pursuant
to the exercise of options and restricted stock grants; and
- 350,000 shares subject to outstanding warrants at an exercise price of
$0.70 per share and 14,000 shares subject to outstanding warrants at an
exercise price equal to the initial public offering price.
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SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
In the following summary financial data, the statement of operations data
for the years ended March 31, 1997, 1998 and 1999 and balance sheet data as of
March 31, 1999 are derived from and qualified in their entirety by our audited
financial statements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." See also note 2 to the notes of our
audited financial statements included in this prospectus for a description of
how pro forma net loss per share is computed.
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YEAR ENDED MARCH 31,
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1997 1998 1999
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STATEMENT OF OPERATIONS DATA:
Total revenue........................................... $ 182 $ 1,120 $ 2,952
Gross profit............................................ 160 979 2,725
Loss from operations.................................... (2,035) (3,986) (6,678)
Net loss................................................ (1,927) (3,921) (6,643)
Pro forma net loss per share, basic and diluted
(unaudited).......................................... $ (0.59)
Shares used in computing pro forma net loss per share,
basic and diluted (unaudited)........................ 11,299
</TABLE>
The As Adjusted column gives effect to the sale of the shares of common
stock in this offering at an assumed initial public offering price of
$ per share, after deducting estimated underwriting discounts and
commissions and estimated offering expenses. Please see "How We Intend to Use
the Proceeds from this Offering" and "Capitalization."
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MARCH 31, 1999
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AS
ACTUAL ADJUSTED
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BALANCE SHEET DATA:
Cash and cash equivalents................................. $1,600
Working capital........................................... 1,334
Total assets.............................................. 4,204
Long-term debt, net of current portion.................... 169
Total stockholders' equity................................ 1,989
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RISK FACTORS
You should carefully consider the following risks before making an
investment in our company. In addition, you should keep in mind that the risks
described below are not the only risks that we face. The risks described below
are all the risks that we currently believe are material risks of this offering.
However, additional risks not presently known to us, or risks that we currently
believe are immaterial, may also impair our business operations. You should also
refer to the other information set forth in this prospectus, including the
discussions set forth in "Special Note Regarding Forward-Looking Statements,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as our financial statements and the related
notes. You should rely only on the information contained in this document. We
have not authorized anyone to provide you with information that is different.
The information in this document may only be accurate on the date of this
document.
Our business, financial condition, or results of operations could be
adversely affected by any of the following risks. If we are adversely affected
by such risks, then the trading of our common stock could decline, and you could
lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED OPERATING HISTORY, MAKING IT DIFFICULT FOR YOU TO EVALUATE OUR
BUSINESS AND YOUR INVESTMENT
Accrue was formed in February 1996, and we introduced Accrue Insight 1.0,
our first software product, in January 1997. For the fiscal year ended March 31,
1998, we generated $1.1 million in revenue, and for the fiscal year ended March
31, 1999, we generated $3.0 million in revenue. Thus, we have a limited
operating history upon which you can evaluate our business and prospects. Due to
our limited operating history, it is difficult or impossible for us to predict
future results of operations. For example, we cannot forecast operating expenses
based on our historical results because they are limited, and we are required to
forecast expenses in part on future revenue projections. Most of our expenses
are fixed in the short term and we may not be able to quickly reduce spending if
our revenue is lower than we had projected, therefore net losses in a given
quarter would be greater than expected. In addition, our ability to forecast
accurately our quarterly revenue is limited due to a number of factors described
in detail below, making it difficult to predict the quarter in which sales will
occur. Moreover, due to our limited operating history, any evaluation of our
business and prospects must be made in light of the risks and uncertainties
often encountered by early-stage companies in Internet-related products and
services markets, which is new and rapidly evolving. Many of these risks are
discussed under the sub-headings below. We may not be able to successfully
address any or all of these risks and our business strategy may not be
successful. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for more detailed information on our
historical results of operations.
FLUCTUATIONS IN OUR OPERATING RESULTS MAKE IT DIFFICULT TO PREDICT OUR FUTURE
PERFORMANCE AND MAY RESULT IN VOLATILITY IN THE MARKET PRICE OF OUR COMMON STOCK
Our annual and quarterly operating results have fluctuated in the past and
may fluctuate significantly in the future due to a variety of factors, many of
which are outside
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of our control. Factors that may harm our business or cause our operating
results to fluctuate include the following:
- demand for our products and services;
- our history of achieving a significant portion of our orders in the last
month of each fiscal quarter in order to achieve our revenue objectives;
- changes in the amount and timing of our revenue because of the
lengthiness and unpredictability of our sales cycle;
- the amount of revenue associated with particular customers, which varies
significantly based on the number of products that are licensed and the
size of the customer installation;
- changes in the mix of revenue generated from product sales and services;
- delays we may encounter in introducing new versions of our products and
services;
- changes in the mix of sales channels through which our products and
services are sold;
- the ability of our competitors to offer new or enhanced products or
services;
- changes in our pricing policies and the pricing policies of our
competitors;
- decreases in the level of growth, use of or acceptance of the Internet;
and
- economic conditions specific to the Internet, e-commerce and the software
industry.
Because our operating results are volatile and difficult to predict, you
should not rely on the results of one quarter as an indication of future
performance. It is likely that in some future quarter our operating results will
fall below the expectations of securities analysts and investors. In this event,
the trading price of our common stock may fall significantly. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Selected Quarterly Operating Results."
WE HAD AN ACCUMULATED DEFICIT OF $12.5 MILLION AS OF MARCH 31, 1999 AND OUR
HISTORY OF LOSSES WILL CONTINUE IN THE FUTURE
We have not achieved profitability and we expect to incur net losses for
the foreseeable future. We incurred net losses of $1.9 million for the fiscal
year ended March 31, 1997, $3.9 million for the fiscal year ended March 31,
1998, and $6.6 million for the fiscal year ended March 31, 1999. As of March 31,
1999, we had an accumulated deficit of $12.5 million. To date, we have funded
our operations primarily from the sale of equity securities. As we grow our
business we expect operating expenses to increase significantly, and as a
result, we will need to generate increased quarterly revenue to achieve and
maintain profitability. In particular, we expect to incur additional costs and
expenses related to:
- the expansion of our sales force and distribution channels;
- the expansion of our product and services offerings;
- development of relationships with strategic business partners;
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- the expansion of management and infrastructure; and
- brand development, marketing and other promotional activities.
We do not believe that our prior growth rates are sustainable or indicative
of future growth rates. If we do achieve profitability, we cannot be certain
that we can sustain or increase profitability on a quarterly or annual basis in
the future, or at all. Please see "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
more detailed information on our historical results of operations.
THE LOSS OF KEY MANAGEMENT PERSONNEL COULD HARM OUR BUSINESS AND DECREASE THE
VALUE OF YOUR INVESTMENT
Our success depends largely upon the continued services of our key
management and technical personnel, the loss of which could seriously harm our
business. In particular, we rely on Richard Kreysar, President, Chief Executive
Officer and a director, and Bob Page, Vice President of Product Development and
Chief Technology Officer. Messrs. Kreysar and Page do not have employment or
non-competition agreements and could therefore terminate their employment with
us at any time without penalty. We do not maintain key person life insurance
policies on any of our employees.
WE FACE INTENSE COMPETITION WHICH COULD MAKE IT DIFFICULT TO ACQUIRE AND RETAIN
CUSTOMERS NOW AND IN THE FUTURE
The market for e-business analysis solutions is intensely competitive,
evolving and subject to rapid technological change. We expect the intensity of
competition to increase in the future. Competitors vary in size and in the scope
and breadth of the products and services they offer. Our principal competitors
today include:
- vendors of software that target e-business customer data collection and
analysis markets such as Andromedia, Inc., net.Genesis Corporation and
WebTrends Corporation;
- developers of software that address only certain technology components of
our products; and
- in-house development efforts by potential customers or partners.
We expect that if we are successful in our strategy to expand the scope of
our products and services, we may encounter many additional, market-specific
competitors. In addition, because there are relatively low barriers to entry in
the software market, we expect additional competition from traditional business
intelligence and enterprise software vendors as the Internet software market
continues to develop and expand. Some of these companies, as well as some other
competitors, have longer operating histories, significantly greater financial,
technical, marketing and other resources, significantly greater name recognition
and a larger installed base of customers than we have. In addition, many of our
competitors have well-established relationships with current and potential
customers of ours, have extensive knowledge of our industry and are capable of
offering a single-vendor solution. As a result, our competitors may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements, devote greater resources to the development, promotion and sale of
their products, or adopt more aggressive pricing policies to gain market share.
In addition, current and potential competitors have
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established or may establish cooperative relationships among themselves or with
third parties to increase the ability of their products to address customer
needs. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. We also
expect that competition will increase as a result of software industry
consolidations.
Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share, any of which could seriously harm our
business, financial condition and results of operations. We may not be able to
compete successfully against current and future competitors, in which case our
business could suffer. See "Business -- Competition."
WE HAVE RELIED AND EXPECT TO CONTINUE TO RELY ON SALES OF ACCRUE INSIGHT FOR OUR
REVENUE
We currently derive all of our revenue from the license and related
upgrades, professional services and support of our Accrue Insight product. We
expect that we will continue to depend on revenue related to new and enhanced
versions of our Accrue Insight product for at least the next several quarters.
We cannot be certain that we will be successful in upgrading and marketing our
products and services or that we will successfully develop and market new
products and services. If we do not continue to increase revenue related to our
existing products and services or generate revenue from new products and
services, our business would be seriously harmed.
IF WE ARE UNABLE TO MEET THE RAPID CHANGES IN E-COMMERCE TECHNOLOGY, OUR
EXISTING PRODUCTS COULD BECOME OBSOLETE
The market for our products is marked by rapid technological change,
frequent new product introductions, Internet-related technology enhancements,
uncertain product life cycles, changes in client demands and evolving industry
standards. We cannot be certain that we will successfully develop and market new
products, new product enhancements or new products compliant with present or
emerging Internet technology standards. In developing our products, we have
made, and will continue to make, assumptions with respect to which standards
will be adopted by the industry, our customers and competitors. If the standards
adopted are different from those which we have chosen to support, market
acceptance of our products may be significantly reduced or delayed and our
business will be seriously harmed. In addition, we may be required to make
significant expenditures to adapt our products to changing or emerging
technologies. 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 developments related to Internet technology and to satisfy the
increasingly sophisticated requirements of our clients. E-business analysis
technology is complex and new products and product enhancements can require long
development and testing periods. Any delays in developing and releasing enhanced
or new products could harm our business, operating results and financial
condition.
THE FAILURE TO RETAIN AND ATTRACT KEY TECHNICAL PERSONNEL COULD HARM OUR
BUSINESS AND DECREASE THE VALUE OF YOUR INVESTMENT
Because of the complexity of our products and technologies, we are
substantially dependent upon the continued service of our existing product
development personnel. In addition, we intend to hire a number of engineers with
high levels of experience in
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designing and developing software and Internet-related products in
time-pressured environments. The competition in Silicon Valley for qualified
engineers in the computer software and Internet markets is intense. New
personnel will require training and education and take time to reach full
productivity. Our future success depends on our ability to attract, train and
retain these key personnel.
FAILURE TO EXPAND OUR SALES OPERATIONS AND CHANNELS OF DISTRIBUTION WOULD LIMIT
OUR GROWTH
In order to maintain and increase our market share and revenue, we will
need to expand our direct and indirect sales operations and channels of
distribution. We have recently expanded our direct sales force and plan to hire
additional sales personnel. As of April 30, 1999, our direct sales and support
organization consisted of 30 employees. Competition for qualified sales
personnel is intense, and we might not be able to hire the kind and number of
sales personnel we are targeting. New hires will require extensive training and
typically take several months to achieve productivity. In addition, we need to
expand our relationships with domestic and international channel partners,
distributors, value-added resellers, systems integrators, online and other
resellers, Internet service providers, original equipment manufacturers, and
other partners to build our indirect sales channel.
WE MAY BE UNABLE TO ADEQUATELY DEVELOP A PROFITABLE PROFESSIONAL SERVICES
ORGANIZATION, WHICH COULD NEGATIVELY AFFECT BOTH OUR OPERATING RESULTS AND OUR
ABILITY TO ASSIST OUR CUSTOMERS WITH THE IMPLEMENTATION OF OUR PRODUCTS
Customers that license our software typically engage our professional
services organization to assist with support, training, consulting and
implementation of their e-business analysis solutions. 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 on how to use our products. We
expect our services revenue to increase in absolute dollars as we continue to
provide consulting and training services that complement our products and as our
installed base of customers grows. We generally bill our clients for our
services on a fixed-price basis; however, from time to time we bill our clients
on a time-and-materials basis. Failure to estimate accurately the resources and
time required for an engagement, to manage our customers' expectations
effectively regarding the scope of services to be delivered for an estimated
price or to complete fixed-price engagements within budget, on time and to the
customer's satisfaction could expose us to risks associated with cost overruns,
and in some cases, penalties, and may harm our business. Although we plan to
expand our services in order to address our customers' needs, we cannot be
certain that this organization will ever achieve profitability.
OUR PLANNED INTERNATIONAL EXPANSION MAY BE AFFECTED BY FACTORS BEYOND OUR
CONTROL
Licenses and services sold to clients located outside of the United States
were less than 5% of our total revenue in fiscal year 1999. We expect
international revenue to account for an increasing percentage of total revenue
in the future. We believe that we must expand our international sales activities
in order to be successful. We expect to initiate operations in selected
international markets in the first quarter of fiscal year 2000. Expansion into
international markets will require management attention and resources. We also
intend to enter into a number of international alliances as part of our
international strategy and rely extensively on these business partners to
conduct operations, coordinate
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sales and marketing efforts, and provide software localization services. To
date, we have non-exclusive alliances with Sumisho Electronics Company, Ltd., a
subsidiary of Sumitomo Corporation, and Itochu Techno-Science Corporation for
distribution of our products in Japan, and Scientific Computers GmbH for
distribution of our products in Europe. These alliances are not subject to
binding agreements, have no specified performance requirements by us or our
alliance partners, and may be terminated by either party at any time. Our
success in international markets will depend on the success of our business
partners and their willingness to dedicate sufficient resources to our
relationships. We cannot assure you that we will be successful in expanding
internationally. International operations are subject to other inherent risks,
including:
- protectionist laws and business practices that favor local competition;
- difficulties and costs of staffing and managing foreign operations;
- dependence on local vendors;
- multiple, conflicting and changing governmental laws and regulations;
- longer sales and collection cycles;
- foreign currency exchange rate fluctuations;
- political and economic instability;
- reduced protection for intellectual property rights in some countries;
- seasonal reductions in business activity; and
- expenses associated with localizing products for foreign countries.
If we fail to address these risks adequately our business may be seriously
harmed.
OUR GROWTH STRATEGY DEPENDS ON OUR ABILITY TO SUCCESSFULLY IDENTIFY AND
INTEGRATE POTENTIAL ACQUISITIONS AND INVESTMENTS
Due to the intensely competitive nature of the e-business analysis market,
we believe that our success will depend on our ability to attain significant
market share, which will depend in part on our ability to successfully identify
and acquire businesses, products and technologies from third parties that are
complementary to our existing products and services. We do not have any present
understanding, nor are we having any discussions relating to any acquisition or
investment. We cannot be certain that we will be able to rapidly expand our
product and services offerings through these acquisitions or investments. Some
of the risks we may encounter include:
- complementary products and services may not be available on commercially
reasonable terms;
- we may be unable to compete for acquisitions of products and services
with many of our competitors who have greater financial resources than we
do;
- acquired products and services may not meet the needs of our customers;
- we may incur difficulties associated with the integration of the
personnel and operations of an acquired company with our personnel and
operations;
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- we may incur difficulties in assimilating acquired products, services or
technologies, with our existing products, services and technologies; and
- integration of acquired and existing products and services may result in
decreases in revenue from existing products and services.
These difficulties could disrupt our ongoing business, distract our
management and employees and increase our expenses. Furthermore, we may have to
issue equity securities to pay for any future acquisition which could be
dilutive to our existing stockholders. We may also have to incur debt which
could contain covenants that restrict our operations. In addition, acquisitions
and investments may have negative effect on our reported results of operations
from acquisition-related charges and amortization of acquired technology and
other intangibles. Any of these acquisition-related risks could harm our
business.
OUR VARIED SALES CYCLES MAKE IT DIFFICULT TO PREDICT OUR QUARTERLY RESULTS
We have varied sales cycles because we generally need to educate potential
clients regarding the use and benefits of our product applications. The
stability of our sales cycle continues to evolve as our products mature. Our
sales cycles make it difficult to predict the quarter in which sales may fall.
In addition, a significant portion of our sales fall within the last month of a
quarter, making it difficult to predict revenue until late in the quarter and to
adjust expenses accordingly.
OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY SMALL DELAYS IN CUSTOMER
ORDERS OR PRODUCT INSTALLATIONS
Small delays in customer orders can cause significant variability in our
license revenue and operating results for any particular period. We derive a
substantial portion of our revenue from the sale of software products and
related services. Our revenue recognition policy requires us to deliver the
software prior to recognizing any revenue for the product and to substantially
complete the implementation of our product before we can recognize service
revenue. Any end of quarter delays in orders for delivery or product
installation schedules could harm operating results for that quarter.
IF THIRD-PARTY SOFTWARE INCORPORATED IN OUR PRODUCTS IS NO LONGER AVAILABLE, OUR
BUSINESS COULD BE HARMED
We integrate third-party software as a component of our software. For
example, we rely on Red Brick database technology licensed to us by Informix
Software, Inc. to maintain data stored in our Accrue Insight product. This
agreement terminates in March 2000, and we cannot be certain that Informix will
renew this agreement. If Informix does not renew this agreement, we will be
required to obtain similar technology from other parties, which may not be
available to us on commercially reasonable terms. Although we plan to integrate
additional database technology in our products prior to March 2000, we cannot be
certain that we will be able to successfully integrate this technology prior to
this date. We also incorporate graphic generation tools from VI/Visualize, Inc.
in Accrue Insight. This agreement terminates in July 2000. If we cannot maintain
licenses to key third-party software, shipments of our products could be delayed
until equivalent software could be developed or licensed and integrated into our
products, which could seriously harm our business, financial results and results
of operations.
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IF WE FAIL TO GENERATE REPEAT OR EXPANDED BUSINESS FROM OUR CURRENT AND FUTURE
CUSTOMERS, OUR BUSINESS WILL BE SERIOUSLY HARMED
Our success is dependent on the continued growth of our customer base and
the retention of our customers. For the fiscal year ended March 31, 1999,
approximately 20% of our revenue was derived from sales of products and services
to existing customers. We expect to continue to derive a significant amount of
revenue from our existing customers. If we fail to generate repeat and expanded
business from our current and future customers, particularly from maintenance
contract renewals, our operating results would be seriously harmed. Our ability
to attract new customers will depend on a variety of factors, including the
accuracy, scalability, reliability and cost-effectiveness of our products and
services and our ability to effectively market our products and services. In the
past, we have lost potential customers to competitors for various reasons,
including lower prices and other incentives not matched by us. Many of our
current customers initially purchase a license for our products and services for
installation on a limited number of servers. If an installation is successful,
the customer may purchase additional licenses to expand the use of our products
in its organization, license additional products and services from us, or renew
maintenance fees.
OUR SUCCESS DEPENDS ON INCREASING MARKET AWARENESS OF THE ACCRUE BRAND
If we fail to successfully promote our brand name or if we incur
significant expenses promoting and maintaining our brand name, our business
could be harmed. Due in part to the emerging nature of the market for e-business
analysis solutions and the substantial resources available to many of our
competitors, there may be a time-limited opportunity for us to achieve and
maintain a significant market share. Developing and maintaining awareness of the
Accrue brand name is critical to achieving widespread acceptance of our
e-business analysis solutions. Furthermore, the importance of brand recognition
will increase as competition in the market for our products increases.
Successfully promoting and positioning the Accrue brand will depend largely on
the effectiveness of our marketing efforts and our ability to develop reliable
and useful products at competitive prices. Therefore, we may need to increase
our financial commitment to creating and maintaining brand awareness among
potential customers.
THE STRAIN THAT OUR GROWTH RATE PLACES UPON OUR SYSTEMS AND MANAGEMENT RESOURCES
MAY ADVERSELY AFFECT OUR BUSINESS AND DECREASE THE VALUE OF YOUR INVESTMENT
We have recently experienced a period of significant expansion of our
operations that has placed a significant strain on our management,
administrative and operational resources. In addition, we have recently hired a
significant number of employees and plan to further increase our total
headcount. Our headcount has increased from 22 at March 31, 1997, to 38 at March
31, 1998, to 59 at March 31, 1999. Furthermore, our Chief Financial Officer
joined us in April 1999 and has had limited exposure to our prior operations. In
addition, we intend to further expand our finance, administrative and operations
staff. Any failure to properly manage our growth could have a material adverse
effect on our business, results of operations, and financial condition. To
properly manage this growth, we must, among other things, implement and improve
additional and existing administrative, financial, and operational systems,
procedures, and controls on a timely basis. We may not be able to complete the
necessary improvements to our systems, procedures, and controls necessary to
support our future operations in a timely manner. Management may not be able to
hire, train, retain, motivate, and manage required personnel and may not be able
to
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successfully identify, manage, and exploit existing and potential market
opportunities. In connection with our expansion, we plan to increase our
operating expenses to expand our sales and marketing operations, develop new
distribution channels, fund greater levels of research and development, broaden
professional services and support, and improve operational and financial
systems. Failure of our revenue to increase along with these expenses during any
fiscal period could have a materially adverse impact on our financial results
for that period.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY WHICH COULD HARM OUR
BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION
We regard substantial elements of our e-business analysis solutions as
proprietary and attempt to protect them by relying on patent, trademark, service
mark, trade dress, copyright, and trade secret laws and restrictions, as well as
confidentiality procedures and contractual provisions. Any steps we take to
protect our intellectual property may be inadequate, time consuming, and
expensive. Furthermore, despite our efforts, we may be unable to prevent third
parties from infringing upon or misappropriating our intellectual property,
which could have a material adverse effect on our business. We currently have no
issued U.S. or foreign patents, we have applied for one U.S. patent, and we have
no pending foreign patent applications. It is possible that no patents will
issue from our currently pending patent application. Moreover, new patent
applications may not result in issued patents and may not provide us with any
competitive advantages, or may be challenged by third parties. Legal standards
relating to the validity, enforceability, and scope of protection of
intellectual property rights in Internet-related industries are uncertain and
still evolving, and the future viability or value of any of our intellectual
property rights is uncertain. Effective trademark, copyright, and trade secret
protection may not be available in every country in which our products are
distributed or made available through the Internet. Furthermore, our competitors
may independently develop similar technology that substantially limits the value
of our intellectual property or design around patents issued to us. See
"Business -- Intellectual Property and Other Proprietary Rights."
OTHERS MAY BRING INFRINGEMENT CLAIMS AGAINST US WHICH COULD HARM OUR BUSINESS,
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
In addition to the technology we have developed internally, we also use
code libraries developed and maintained by third parties and have acquired or
licensed technologies from other companies. Our internally developed technology,
the code libraries, or the technology we acquired or licensed may infringe a
third party's intellectual property rights who may bring claims against us
alleging infringement of their intellectual property rights. Any infringement or
claim of infringement could have a material adverse effect on our business. In
recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. We are not currently
involved in any intellectual property litigation. However, as the number of
entrants into our market increases, the possibility of an intellectual property
claim against us grows and we may be a party to litigation in the future to
protect our intellectual property or as a result of an alleged infringement of
others' intellectual property. These claims and any resulting litigation could
subject us to significant liability for damages and invalidation of our
proprietary rights, would likely be time-consuming and expensive to defend and
would divert management
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time and attention. Any potential intellectual property litigation could also
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, or at all; and
- redesign those products or services that incorporate infringing
technology.
Any of these results could seriously harm our business.
PRODUCT DEFECTS COULD LEAD TO LOSS OF CUSTOMERS WHICH COULD HARM OUR BUSINESS,
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Despite internal testing and testing by current and potential customers,
our current and future products may contain serious defects, including Year 2000
errors, the occurrence of which could result in adverse publicity, loss of or
delay in market acceptance, or claims by customers against us, any of which
could harm our business, results of operations, and financial condition. In
addition, our products and product enhancements are very complex and may from
time to time contain errors or result in failures that we did not detect or
anticipate when introducing our products or enhancements to the market. The
computer hardware environment is characterized by a wide variety of non-standard
configurations that make pre-release testing for programming or compatibility
errors very difficult and time consuming. Despite our testing, errors may still
be discovered in some new products or enhancements after the products or
enhancements are delivered to customers. See "Business -- Products and
Services."
WE ARE SUBJECT TO POTENTIAL PRODUCT LIABILITY CLAIMS THAT COULD REQUIRE
CONSIDERABLE EFFORT AND EXPENSE TO DEFEND AND WHICH COULD HARM OUR BUSINESS
Our products are used to monitor the traffic data of our customers' Web
sites, and to segment, analyze and report this data. These and other functions
that our products provide are often critical to our customers, especially in
light of the considerable resources many organizations spend on the development
and maintenance of their Web sites. Our end-user licenses contain provisions
that limit our exposure to product liability claims, but these provisions may
not be enforceable in all jurisdictions. Additionally, we maintain limited
product liability insurance. To the extent our contractual limitations are
unenforceable or these claims are not covered by insurance, a successful product
liability claim could harm our business.
WE FACE A NUMBER OF UNKNOWN RISKS ASSOCIATED WITH TRYING TO BECOME YEAR 2000
COMPLIANT
Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates. We have just begun to identify measures to
address the issues arising from these Year 2000 requirements and therefore the
risks associated with being Year 2000 compliant are not fully known. We are
assessing our material internal information systems, including both
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our own software products and third-party software and hardware technology, but
we have not initiated an assessment of our non-information technology systems.
We do not currently have any information concerning the Year 2000 compliance
status of our customers and have not yet fully developed a contingency plan to
address situations that may result if we are unable to achieve Year 2000
readiness of our critical operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Year 2000 Readiness" for
more information on our Year 2000 compliance plans. Failure to become Year 2000
compliant could harm our business and could require us to make material
expenditures which could also harm our business.
RISKS RELATED TO OUR INDUSTRY
EVOLVING REGULATION OF THE INTERNET MAY HARM OUR BUSINESS
As e-commerce continues to evolve, increasing regulation by federal, state,
or foreign agencies becomes more likely. This regulation is likely in the areas
of user privacy, pricing, content, quality of products and services, taxation,
advertising, intellectual property rights, and information security. In
particular, laws and regulations applying to the solicitation, collection, or
processing of personal or consumer information could negatively affect our
activities. Typically, our products capture traffic data when consumers,
business customers or employees visit a Web site. The perception of security and
privacy concerns, whether or not valid, may indirectly inhibit market acceptance
of our products. In addition, legislative or regulatory requirements may
heighten these concerns if businesses must notify Web site users that the data
captured after visiting Web sites may be used by marketing entities to
unilaterally direct product promotion and advertising to that user. We are not
aware of any similar legislation or regulatory requirements currently in effect
in the United States. Other countries and political entities, such as the
European Economic Community, have adopted legislation or regulatory
requirements. The United States may adopt similar legislation or regulatory
requirements. If consumer privacy concerns are not adequately addressed, our
business could be harmed. Moreover, the applicability to the Internet of
existing laws governing issues such as intellectual property ownership and
infringement, copyright, trademark, trade secret, obscenity and libel is
uncertain and developing. Furthermore, any regulation imposing fees or assessing
taxes for Internet use could result in a decline in the use of the Internet and
the viability of e-commerce. Any new legislation or regulation, or the
application or interpretation of existing laws or regulations, may decrease the
growth in the use of the Internet, may impose additional burdens on e-commerce
or may require us to alter how we conduct our business. This could decrease the
demand for our products and services, increase our cost of doing business,
increase the costs of products sold through the Internet or otherwise have a
negative effect on our business, results of operations and financial condition.
OUR SUCCESS DEPENDS ON CONTINUED USE AND EXPANSION OF THE INTERNET
Continued expansion in the sales of our e-business analysis solutions will
depend upon the continued growth of the Internet as a widely used medium for
commerce and communication. Rapid growth in the use of the Internet is a recent
phenomenon. Acceptance and use may not continue to develop at historical rates
and a sufficiently broad base of customers may not adopt or continue to use the
Internet and online services as a medium of commerce and communication. Demand
and market acceptance for recently introduced products and services relating to
the Internet are subject to a high level of
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uncertainty and few proven products and services exist. If the Internet does not
continue to grow as a widespread communications medium and commercial
marketplace, the demand for our e-business analysis solutions could be
significantly reduced. The Internet may not prove to be a viable commercial
marketplace because of inadequate development of the necessary infrastructure,
such as a reliable network backbone, or timely development of complementary
products, such as high speed modems. The Internet infrastructure may not be able
to support the demands placed on it by continued growth. Additionally, the
Internet could lose its viability due to delays in the development or adoption
of new standards and protocols to handle increased levels of Internet activity,
security, reliability, cost, ease of use, accessibility, and quality of service.
RISKS RELATED TO THE OFFERING
MANAGEMENT MAY APPLY THE PROCEEDS OF THIS OFFERING TO USES THAT DO NOT INCREASE
OUR OPERATING RESULTS OR MARKET VALUE
The net proceeds from the sale of the common stock we are offering for sale
will be added to our general working capital upon completion of this offering.
We have not reserved or allocated the proceeds for any specific purpose, and we
cannot specify with certainty how we will use the net proceeds. Accordingly, our
management will have considerable discretion in the application of the net
proceeds, and you will not have the opportunity, as part of your investment
decision, to assess whether the proceeds are being used appropriately. The net
proceeds may be used for corporate purposes that do not increase our operating
results or market value. Pending application of the proceeds, they may be placed
in investments that do not produce income or that lose value. See "How We Intend
to Use the Proceeds from this Offering."
BECAUSE OWNERSHIP IS CONCENTRATED, YOU AND OTHER INVESTORS WILL HAVE MINIMAL
INFLUENCE ON STOCKHOLDER DECISIONS
Our officers and directors will beneficially own at least % and
possibly as much as % of the outstanding common stock after this offering,
depending on whether and to what extent the underwriters exercise in full their
option to purchase additional shares. As a result, they will be able to exercise
significant influence over all matters requiring stockholder approval, and you
and other investors will have minimal influence over the election of directors
or other stockholder actions. As a result, these stockholders could approve or
cause Accrue to take actions which you disapprove or that are contrary to your
interests and those of other investors. Our certificate of incorporation and
bylaws do not provide for cumulative voting; therefore, our controlling
stockholders will have the ability to elect all of our directors. The
controlling stockholders will also have the ability to approve or disapprove
significant corporate transactions without further vote by the investors who
purchase common stock pursuant to this offering. This ability to exercise
influence over all matters requiring stockholder approval could prevent or
significantly delay another company or person from acquiring or merging with us.
See "Management" and "Principal Stockholders."
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THE EFFECTS OF ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND IN DELAWARE
LAW COULD PREVENT A CHANGE IN CONTROL OF ACCRUE WHICH MAY REDUCE THE MARKET
PRICE OF OUR COMMON STOCK
Provisions of our certificate of incorporation and bylaws may have the
effect of delaying or preventing a merger or sale of Accrue, or making a merger
or acquisition less desirable to a potential acquiror, even where stockholders
may consider the acquisition or merger favorable. See "Description of Capital
Stock -- Delaware Law and the Effect of Certain Certificate of Incorporation and
Bylaw Provisions." The issuance of preferred stock may have the effect of
delaying, deferring, or preventing a change in control without further action by
the stockholders. Any issuance of preferred stock may harm the market price of
the common stock. The issuance of preferred stock may also result in the loss of
the voting control of holders of common stock to the holders of the preferred
stock. See "Description of Capital Stock -- Preferred Stock." Provisions of the
Delaware law also may delay, prevent, or discourage someone from acquiring or
merging with us. See "Description of Capital Stock -- Delaware Law and the
Effect of Certain Certificate of Incorporation and Bylaw Provisions."
TRADING IN OUR COMMON STOCK MAY BE LIMITED SO NEW INVESTORS MUST BE ABLE TO
WITHSTAND A POSSIBLE LOSS OF THEIR INVESTMENT
A public market for trading our common stock has not existed prior to this
offering. Although this offering will result in a trading market for our common
stock, we do not know how liquid that market might be. The initial public
offering price for the common stock will be determined through negotiations
between the underwriters and us. If you purchase shares of common stock, you may
not be able to resell those shares at or above the initial public offering
price. See "Underwriting."
THE MARKET PRICE FOR OUR COMMON STOCK, LIKE OTHER TECHNOLOGY STOCKS, MAY BE
VOLATILE
The value of your investment in our common stock could decline due to the
impact of any of the following factors upon the market price of our common
stock:
- variations in quarterly operating results;
- changes in financial estimates by public market securities analysts;
- failure in one or more future quarter of our operating results to meet
the expectations of public market securities analyst or investors;
- changes in market valuations of Internet software companies;
- announcements by us of significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;
- additions or departures of key personnel;
- announcements of technological innovations;
- introduction of new products or services by us or our competitors;
- developments with respect to intellectual property rights;
- loss of a major customer or failure to complete significant license
transactions;
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- sales of common stock in the future; and
- fluctuations in stock market price and volume, which are particularly
common among highly volatile securities of Internet and software
companies.
The stock markets have, in general, and with respect to Internet companies
in particular, recently experienced extreme stock price and volume volatility
that has affected companies' stock prices. The stock markets may continue to
experience volatility that may adversely affect the market price of our common
stock. Stock prices for many companies in the technology and emerging growth
sector have experienced wide fluctuations that have often been unrelated to the
operating performance of these companies. Fluctuations such as these may affect
the market price of our common stock.
SIGNIFICANT FLUCTUATIONS IN THE MARKET PRICE OF OUR COMMON STOCK COULD RESULT IN
SECURITIES CLASS ACTION CLAIMS AGAINST US
Securities class action claims have been brought against companies in the
past where volatility in the market price of that company's securities have
taken place. This kind of litigation could be very costly and divert our
management's attention and resources, and any adverse determination in this
litigation could also subject us to significant liabilities, any or all of which
could seriously harm our business.
IF WE CANNOT RAISE FUNDS, IF NEEDED, ON ACCEPTABLE TERMS, WE MAY NOT BE ABLE TO
DEVELOP OR ENHANCE OUR PRODUCTS AND SERVICES, TAKE ADVANTAGE OF FUTURE
OPPORTUNITIES OR RESPOND TO COMPETITIVE PRESSURES OR UNANTICIPATED CAPITAL
REQUIREMENTS WHICH COULD HARM OUR BUSINESS
We expect the net proceeds from this offering, cash on hand, cash
equivalents and commercial credit facilities to meet our working capital and
capital expenditure needs for at least the next 12 months. We expect that we
will continue to experience negative operating cash flow in the near term.
Accordingly, we may need to raise additional funds and we cannot be certain that
we would be able to obtain additional financing on favorable terms, if at all.
Further, if we issue equity securities, stockholders may experience additional
dilution or the new equity securities may have rights, preferences or privileges
senior to those of existing holders of common stock. If we incur indebtedness to
help us meet our future capital requirements, this debt could contain covenants
which restrict our operations. If we cannot raise funds, if needed, on
acceptable terms, we may not be able to develop or enhance our products and
services, take advantage of future opportunities or respond to competitive
pressures or unanticipated capital requirements, which could harm our business,
operating results and financial condition. See "How We Intend to Use the
Proceeds from this Offering," "Dilution" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" for more information on our capital needs.
SUBSTANTIAL SALES OF OUR COMMON STOCK COULD CAUSE OUR STOCK PRICE TO DECLINE
Sales of a substantial number of shares of common stock in the public
market after the offering, or the perception that these sales may occur, could
adversely affect the market price of the common stock by potentially introducing
a large number of sellers of our common stock into a market in which the common
stock price is already volatile, thus driving the common stock price down. In
addition, the sale of these shares could impair
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our ability to raise capital through the sale of additional equity securities.
On completion of this offering, based on the number of shares outstanding as of
May 25, 1999, we will have shares of common stock outstanding or
shares if the underwriter's option to purchase additional shares is
exercised in full. The shares sold in this offering, or
shares if the underwriters' option to purchase additional shares is exercised in
full, will be freely tradable without restriction or further registration under
the Federal securities laws unless purchased by our "affiliates" as that term is
defined in Rule 144. The remaining 16,936,325 shares of common stock outstanding
on completion of the offering will be "restricted securities" as that term is
defined in Rule 144. Our directors, executive officers, and other stockholders
have executed lock-up agreements that limit their ability to sell common stock.
These stockholders have agreed not to sell or otherwise dispose of any shares of
common stock for a period of at least 180 days after the date of this prospectus
without the prior written approval of BancBoston Robertson Stephens Inc. When
the lock-up agreements expire, these shares and shares underlying outstanding
options will become eligible for sale, in some cases only subject to the volume,
manner of sale and notice requirements of Rule 144. See "Shares Eligible for
Future Sale," for information on shares available for future sale.
THE BOOK VALUE OF THE COMMON STOCK WILL BE SUBSTANTIALLY LOWER THAN THE OFFERING
PRICE
The initial public offering price is expected to be substantially higher
than the book value per share of the outstanding common stock immediately after
the offering. Accordingly, if you purchase common stock in the offering, you
will incur immediate and substantial dilution of approximately $ in the book
value per share of the common stock from the price you pay for the common stock.
This calculation assumes that you purchased the common stock for $ per
share.
19
<PAGE> 25
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS
BECAUSE THEY ARE INHERENTLY UNCERTAIN
This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future" "intends" and similar expressions to identify
forward-looking statements. This prospectus also contains forward-looking
statements attributed to third parties relating to their estimates regarding the
growth of Internet use. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
Our actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us and
described in the preceding pages and elsewhere in this prospectus.
HOW WE INTEND TO USE THE PROCEEDS FROM THIS OFFERING
Our net proceeds from the sale of the shares of common stock we
are offering are estimated to be $ million, or $ million if the
underwriters' option to purchase additional shares is exercised in full, based
on an assumed initial public offering price of $ per share and after
deducting underwriting discounts and commissions and estimated offering
expenses. We currently expect to use the net proceeds primarily for working
capital and general corporate purposes, including funding product development
and expanding our sales and marketing organization. We have not yet determined
the actual expected expenditures and thus cannot estimate the amounts to be used
for each of these purposes. The amounts and timing of these expenditures will
vary depending on a number of factors, including the amount of cash generated by
our operations, competitive and technological developments and the rate of
growth, if any, of our business. In addition, we may use a portion of the net
proceeds for further development of our product lines through acquisitions of
products, technologies and businesses. Accordingly, although we have no present
commitments or agreements with respect to any such acquisitions, management will
have significant discretion in applying the net proceeds of this offering.
Pending such uses, we will invest the net proceeds in short-term, investment
grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock or
preferred stock and anticipate that all future earnings, if any, will be
retained for development of our business. The payment of dividends will be at
the discretion of our board of directors and will depend upon factors such as
future earnings, capital requirements, the financial condition of Accrue, and
general business conditions. Additionally, our loan and security agreement with
our current lender limits our ability to pay dividends.
OTHER INFORMATION
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
20
<PAGE> 26
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of our common stock.
This prospectus includes statistical data regarding the Internet industry.
The statistical data that we used was taken or derived from information
published by sources including Netcraft Web Server Survey, a media research firm
that focuses on the Internet industry, and International Data Corporation and
Forrester Research, firms that provide market and strategic information to the
information technology industry. Although we believe that the statistical data
we used was generally indicative of the matters for which we used it,
statistical data is inherently imprecise, and you are cautioned not to place
undue reliance on the statistical data regarding the Internet industry that we
used in this prospectus.
21
<PAGE> 27
CAPITALIZATION
The Actual column in the following table sets forth Accrue's actual
capitalization as of March 31, 1999. The Pro Forma column in the following table
gives effect to:
- the filing of an amendment to our certificate of incorporation to provide
for authorized capital stock of 75,000,000 shares of common stock and
5,000,000 shares of undesignated preferred stock, and
- the automatic conversion of all outstanding shares of preferred stock
into shares of common stock upon the closing of this offering.
The Pro Forma As Adjusted column gives effect to the sale of shares of
common stock in this offering at an assumed initial public offering price of
$ per share, after deducting underwriting discounts and commissions and
estimated offering expenses. Please see "How We Intend to Use the Proceeds from
this Offering" and notes to our financial statements. The Pro Forma and Pro
Forma As Adjusted information set forth below is unaudited and should be read in
conjunction with our financial statements and notes.
<TABLE>
<CAPTION>
MARCH 31, 1999
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ----------- -----------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Total long term debt, net of current
portion..................................... $ 169 $ 169 $
Stockholders' equity:
Preferred stock, $0.001 par value;
10,000,000 shares authorized actual,
9,032,534 shares issued and
outstanding, actual; 5,000,000
shares authorized, no shares issued
or outstanding pro forma and pro
forma as adjusted................... 12,876 --
Common stock, $0.001 par value,
20,000,000 shares authorized actual,
75,000,000 shares authorized pro forma
and pro forma as adjusted; 5,429,858
shares issued and outstanding actual;
15,710,046 shares issued and
outstanding pro forma and
shares issued and
outstanding pro forma as adjusted...... 5 14
Additional paid-in capital............... 6,538 19,405
Notes receivable from stockholders....... (213) (213)
Unearned compensation.................... (4,726) (4,726)
Accumulated deficit...................... (12,491) (12,491)
-------- -------- --------
Total stockholders' equity.......... 1,989 1,989
-------- -------- --------
Total capitalization.............. $ 2,158 $ 2,158 $
======== ======== ========
</TABLE>
The information in the table above excludes:
- - 1,868,072 shares subject to outstanding options as of March 31, 1999 at a
weighted average exercise price of $0.24 per share;
- - 1,517,784 additional shares available for grant under our stock plan as of
March 31, 1999;
- - 1,226,279 shares issued between March 31, 1999 and May 25, 1999 pursuant to
the exercise of options and restricted stock grants; and
- - 350,000 shares subject to outstanding warrants at an exercise price of $0.70
per share and 14,000 shares subject to outstanding warrants at an exercise
price equal to the initial public offering price.
22
<PAGE> 28
DILUTION
Accrue's pro forma net tangible book value as of March 31, 1999 was
approximately $2.0 million or $0.13 per share of common stock. "Net tangible
book value" per share represents the amount of our total tangible assets reduced
by the amount of our total liabilities and divided by the total number of shares
of common stock outstanding, assuming conversion of our outstanding convertible
preferred stock into common stock. After giving effect to the sale of the
shares of common stock offered by us at an assumed initial public
offering price of $ per share and after deducting underwriting discounts
and commissions and estimated offering expenses, and the adjustments set forth
above, our pro forma, as adjusted, net tangible book value as of March 31, 1999
would have been $ million or $ per share of common stock. This
represents an immediate increase in net tangible book value of $ per share
to existing stockholders and an immediate dilution of $ per share to new
investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
-----
Pro forma, as adjusted, net tangible book value per share
before the offering.................................... $0.13
-----
Increase attributable to new investors.................... $
-----
Pro forma net tangible book value after the offering........
-----
Dilution per share to new investors......................... $
=====
</TABLE>
The following table summarizes on a pro forma basis, as of March 31, 1999,
the differences between the existing stockholders, as adjusted, and new
investors with respect to the number of shares of common stock purchased from
us, the total consideration paid to us, and the average price per share paid.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 15,710,046 % $13,090,000 % $0.83
New investors...........
---------- ----- ----------- ------ -----
Totals.................. 100.0% $100.0%
========== ===== =========== ======
</TABLE>
The information presented with respect to existing stockholders excludes:
- 1,868,072 shares subject to outstanding options as of March 31, 1999 at a
weighted average exercise price of $0.24 per share;
- 1,517,784 additional shares available for grant under our stock plan as
of March 31,1999;
- 1,226,279 shares issued between March 31, 1999 and May 25, 1999 pursuant
to the exercise of options and restricted stock grants; and
- 350,000 shares subject to outstanding warrants at an exercise price of
$0.70 per share and 14,000 shares subject to outstanding warrants at an
exercise price equal to the initial public offering price.
The issuance of common stock under these plans will result in further
dilution to new investors. See "Management -- Stock Plans" and the notes to our
consolidated financial statements. These figures also include 9,032,534 shares
of preferred stock (which will automatically be converted into 10,280,188 shares
of common stock upon the closing of this offering.)
23
<PAGE> 29
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
our financial statements and notes to our financial statements and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are included elsewhere in this prospectus. The statements of
operations data for the years ended March 31, 1997, 1998 and 1999, and the
balance sheet data as of March 31, 1998 and 1999, are derived from audited
financial statements included elsewhere in this prospectus. The balance sheet
data as of March 31, 1997 are derived from audited financial statements not
included in this prospectus. See Note 2 to the notes to our audited financial
statements included in this prospectus for a description of how pro forma net
loss per share is computed.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------
1997 1998 1999
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue:
Software license........................... $ 163 $ 978 $ 2,192
Maintenance and service.................... 19 142 760
------- ------- -------
Total revenue........................... 182 1,120 2,952
Cost of revenue:............................. 22 141 227
------- ------- -------
Gross profit............................ 160 979 2,725
------- ------- -------
Operating expenses:
Research and development................... 909 2,232 2,887
Sales and marketing........................ 670 1,961 3,896
General and administrative................. 616 772 1,326
Stock-based compensation expense........... -- -- 1,294
------- ------- -------
Total operating expenses................ 2,195 4,965 9,403
------- ------- -------
Loss from operations......................... (2,035) (3,986) (6,678)
Other income (expense), net.................. 108 65 35
------- ------- -------
Net loss..................................... $(1,927) $(3,921) $(6,643)
======= ======= =======
Net loss per share, basic and diluted........ $ (0.72) $ (1.37) $ (2.06)
======= ======= =======
Shares used in computing net loss per share,
basic and diluted.......................... 2,686 2,859 3,223
======= ======= =======
Pro forma net loss per share, basic and
diluted (unaudited)........................ $ (0.59)
=======
Shares used in computing pro forma net loss
per share, basic and diluted (unaudited)... 11,299
=======
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31,
--------------------------
1997 1998 1999
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................... $3,599 $ 217 $1,600
Working capital (deficit)........................... 3,506 (70) 1,334
Total assets........................................ 4,107 1,471 4,204
Long term debt, net of current portion.............. -- 312 169
Total stockholders' equity.......................... 3,933 100 1,989
</TABLE>
24
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of Accrue should be read in conjunction with "Selected
Financial Data" and our financial statements and notes thereto appearing
elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions.
Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors including, but not
limited to, those set forth under "Risk Factors" and elsewhere in this
prospectus.
OVERVIEW
Accrue Software is a leading provider of enterprise-class e-business
analysis solutions. Our flagship product, Accrue Insight, is a comprehensive,
scalable, e-business analysis solution that allows organizations to evaluate the
effectiveness of their e-business initiatives by providing data in a format that
facilitates strategic merchandising and marketing decisions. Accrue Insight
enables Web site effectiveness assessment by collecting, storing, analyzing and
reporting comprehensive detailed Web site traffic information and visitor
activity data. Web site managers and marketers can analyze this rich data to
make merchandising and marketing decisions which maximize revenue, new buyers
and customer loyalty. We also provide professional services to assist customers
at every stage of Accrue Insight deployment, from identification of specific
business needs through enterprise integration and customization of e-business
analysis reporting, to delivering a rapid and effective implementation.
From our inception through March 31, 1997, our operations consisted
primarily of start-up activities, such as raising capital, recruiting personnel,
conducting research and development, developing our initial product,
establishing the market for our initial product and purchasing operating assets.
During fiscal years 1998 and 1999, we continued to invest in research and
development, building sales channels, expanding marketing activities and
developing administrative operations. In January 1997 we began shipping our
initial product, Accrue Insight 1.0 for analyzing Web site traffic. In February
1998 we released Accrue Insight 2.0, which added scalability and functionality
to provide e-business analysis capabilities. In August 1998 we released Accrue
Insight 2.5, which added personalized Web pages and push technology for
distributing reports via email. From October 1998 through March 1999 we
continued to expand the functional capabilities of Accrue Insight through a
series of releases including an easy-to-use interface, a customized integration
bridge with Vignette StoryServer, and enhanced network collection technology. In
April 1999, we released Accrue Insight 3.0, which adds new features that enhance
Web data collection, analysis, storage and reporting, expands the amount and
types of information captured, provides new information access and report
distribution options, increases scalability, and improves manageability. The
Accrue Site Knowledge (ASK) Service, also introduced in April 1999, provides a
new application hosting service that enables customers to outsource system
administration responsibilities in connection with their purchase of Accrue
Insight.
Substantially all of our revenue through March 31, 1999 was attributable to
licensing Accrue Insight and related support services. We anticipate that
licensing of Accrue Insight and related support services will continue to
account for a substantial portion of our revenue in the future. Consequently, a
decline in the price of or demand for Accrue
25
<PAGE> 31
Insight, or its failure to achieve broad market acceptance, would seriously harm
our business, financial condition and results of operations.
We generally recognize license revenue, net of estimated returns allowance,
upon product shipment. Where multiple products or services are sold together
under one contract, we allocate revenue to each element based on their relative
fair value, with fair value being determined using the price charged when that
element is sold separately. We recognize maintenance service revenue ratably
over the term of the service agreement, and we recognize consulting service
revenue as services are performed.
We market our products, both domestically and internationally, through our
direct sales force. Sales derived through indirect channels, which consist
primarily of international resellers and system integrators, accounted for less
than 5% of our total revenue to date. We expect that sales derived through
indirect channels will increase as a percentage of total revenue as we expand
our international efforts. We license our products to our customers primarily on
a perpetual basis. We offer multiple pricing models from usage-based to
server-based and CPU-based, allowing for additional revenue as a customer's
e-business expands. Selling prices for our products have typically ranged from
ten to several hundred thousand dollars. Annual support and maintenance
contracts, which are purchased with initial product licenses, entitle customers
to telephone support and upgrades, when and if available. The price for our
support and maintenance program is based on a percentage of list price and is
paid in advance. Consulting fees for implementation services and training are
charged on a time-and-materials basis or a fixed-fee basis for package services.
We have recorded stock-based compensation related to stock options granted
below fair market value through March 31, 1999 of approximately $6.0 million. Of
this amount, we amortized approximately $1.3 million in fiscal year 1999. This
amount represents the difference between the exercise price of these stock
option grants and the deemed fair value of the common stock at the time of
grant. The remaining $4.7 million of stock-based compensation will be amortized
over the remaining vesting period of the options, generally four years or less.
As a result, the amortization of stock-based compensation will impact our
reported results of operations through fiscal 2003.
We have sustained losses on a quarterly and annual basis since inception.
As of our fiscal year ended March 31, 1999, we had an accumulated deficit of
$12.5 million. Our net loss was $1.9 million in fiscal year ended March 31,
1997, $3.9 million in fiscal year 1998, and $6.6 million in fiscal year 1999.
These losses resulted from significant costs incurred in the development and
sale of our products and services. We expect to experience significant growth in
our operating expenses in order to execute our business plan, particularly in
the areas of research and development, sales and marketing, and increased
international distribution. As a result, we anticipate that these operating
expenses, as well as planned capital expenditures, will constitute a material
use of our cash resources. We expect to incur additional losses and continued
negative cash flow from operations in the future. We cannot assure you that we
will achieve or sustain profitability.
Our limited operating history makes the prediction of future operating
results very difficult. You should not rely upon period-to-period comparisons of
our operating results as an indication of future performance. Our business
prospects must be considered in light of the risks and uncertainties often
encountered by early-stage companies in the Internet-related products and
services market. We may not be successful in addressing these risks and
uncertainties. We have experienced significant percentage growth in revenues in
recent
26
<PAGE> 32
periods; however, we do not believe that prior growth rates are sustainable or
indicative of future growth rates.
RESULTS OF OPERATIONS
The following tables set forth our historical operating information, as
well as the information as a percentage of our total revenue represented by each
item, for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------
1997 1998 1999
-------- ------- -------
(IN THOUSANDS, EXCEPT AS A
PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue:
Software license.......................... $ 163 $ 978 $ 2,192
Maintenance and service................... 19 142 760
-------- ------- -------
Total revenue.......................... 182 1,120 2,952
Cost of revenue............................. 22 141 227
-------- ------- -------
Gross profit................................ 160 979 2,725
-------- ------- -------
Operating expenses:
Research and development.................. 909 2,232 2,887
Sales and marketing....................... 670 1,961 3,896
General and administrative................ 616 772 1,326
Stock-based compensation expense.......... -- -- 1,294
-------- ------- -------
Total operating expenses............... 2,195 4,965 9,403
-------- ------- -------
Loss from operations........................ (2,035) (3,986) (6,678)
Other income (expense), net................. 108 65 35
-------- ------- -------
Net loss.................................... $ (1,927) $(3,921) $(6,643)
======== ======= =======
AS A PERCENTAGE OF TOTAL REVENUE:
Net revenue:
Software license.......................... 89.6% 87.3% 74.3%
Maintenance and service................... 10.4 12.7 25.7
-------- ------- -------
Total revenue.......................... 100.0 100.0 100.0
Cost of revenue............................. 12.1 12.6 7.7
-------- ------- -------
Gross profit................................ 87.9 87.4 92.3
-------- ------- -------
Operating expenses:
Research and development.................. 499.4 199.3 97.8
Sales and marketing....................... 368.1 175.1 132.0
General and administrative................ 338.5 68.9 44.9
Stock-based compensation expense.......... 0.0 0.0 43.8
-------- ------- -------
Total operating expenses............... 1,206.0 443.3 318.5
-------- ------- -------
Loss from operations........................ (1,118.1) (356.0) (226.2)
Other income (expense), net................. 59.3 5.8 1.2
-------- ------- -------
Net loss.................................... (1,058.8)% (350.2)% (225.0)%
======== ======= =======
</TABLE>
27
<PAGE> 33
FISCAL YEARS ENDED MARCH 31, 1997, 1998 AND 1999
Revenue. Total revenue increased from $0.2 million in fiscal year 1997 to
$1.1 million in fiscal year 1998 and $3.0 million in fiscal year 1999. These
increases reflect year-to-year revenue growth of 515% and 164%, respectively. No
customer accounted for more than 10% of our revenue in fiscal year 1998 or 1999.
Software license revenue. Revenue from software licenses was $0.2 million
in fiscal year 1997, $1.0 million in fiscal year 1998 and $2.2 million in fiscal
year 1999, representing increases of $0.8 million, or 500%, from fiscal year
1997 to fiscal year 1998 and $1.2 million, or 124% from fiscal year 1998 to
fiscal year 1999. The majority of the growth in product revenue was due to
higher unit sales volumes as a result of increased market awareness of our
products, introductions of new products, increases in both the size and
productivity of our sales force, and increased average dollar size of licenses.
We anticipate that revenue from product licenses will continue to represent a
substantial majority of our revenues in the future. We expect that because of
our small but increasing revenue base, our historical percentage growth rates of
our product revenue will not be sustainable in the future.
Maintenance and service revenue. Maintenance and service revenue was less
than $0.1 million in fiscal year 1997, $0.1 million in fiscal year 1998 and $0.8
million in fiscal year 1999, representing increases of 647% from fiscal year
1997 to fiscal year 1998, and 435% from fiscal year 1998 to fiscal year 1999.
This growth was primarily due to expanded service offerings, more proactive
sales of these offerings, and a higher proportion of renewals of maintenance
contracts by existing customers. We expect that our historical percentage growth
rates of our maintenance and service revenue will not be sustainable in the
future.
Cost of revenue. Cost of revenue consists primarily of royalties paid to
third parties for technology used in our products. These costs were less than
$0.1 million, or 12.1% of revenue, in fiscal year 1997, $0.1 million, or 12.6%
of revenue, in fiscal year 1998 and $0.2 million, or 7.7% of revenue, in fiscal
year 1999, representing increases of 541% from fiscal year 1997 to fiscal year
1998, and 61% from fiscal year 1998 to fiscal year 1999. These dollar amount
increases of cost of revenue reflect the higher volumes of product shipped and
related third-party royalties. The decrease in cost of revenue as a percentage
of revenue from fiscal year 1998 to fiscal year 1999 is primarily due to
economies of scale realized as a result of shipping greater quantities of
product in fiscal year 1999 and a substantial reduction in royalty rates
beginning in January 1999. Because all development costs incurred in the
research and development of software products and enhancements to existing
software products have been expensed as incurred, cost of revenue includes no
amortization of capitalized software development costs. Historically, cost of
maintenance and service revenue has been insignificant.
Gross profit. Gross profit remained nearly flat at 88% in fiscal year 1997
and 87% in fiscal year 1998, and increased to 92% in fiscal year 1999, primarily
as a result of increased product sales and sliding-scale royalty rates. In the
future, we expect that royalties paid to third parties will increase in absolute
dollars. In addition, we expect that sales derived through indirect channels
will increase as a percentage of total revenue. We also expect that maintenance
and service revenue will increase as a percentage of total revenue as we expand
our service offerings and maintain our maintenance contract renewal rates with
customers. Maintenance and service revenue has lower gross profit than product
revenue. For all of these reasons, we expect that our gross profit will decline.
28
<PAGE> 34
Operating expenses. Total operating expenses increased from $2.2 million in
fiscal year 1997, to $5.0 million in fiscal year 1998 and $9.4 million in fiscal
year 1999. The increases reflect year-to-year growth of 126% and 89%,
respectively. These increases were largely due to increased salaries and related
expenses associated with newly hired employees, including a stock-based
compensation expense of $1.3 million in fiscal year 1999.
Research and development expenses. Research and development expenses were
$0.9 million in fiscal year 1997, $2.2 million in fiscal year 1998 and $2.9
million in fiscal year 1999. The increases were primarily attributable to
increased staffing and associated support for software engineers required to
expand and enhance our product and services offerings. We believe that research
and development expenses will increase in dollar amount but decrease as a
percentage of total revenue in the future. Research and development expenditures
are charged to operations as incurred.
Sales and marketing expenses. Sales and marketing expenses consist
primarily of salaries, commissions and bonuses of sales and marketing personnel,
and promotional expenses. Sales and marketing expenses were $0.7 million in
fiscal year 1997, $2.0 million in fiscal year 1998 and $3.9 million in fiscal
year 1999. The increases were primarily due to increased headcount in our sales
and marketing departments, and increased marketing communications expenditures
associated with our products and services. We believe that sales and marketing
expenses will increase in dollar amount but decrease as a percentage of total
revenue in the future.
General and administrative expenses. General and administrative expenses
were $0.6 million in fiscal year 1997, $0.8 million in fiscal year 1998 and $1.3
million in fiscal year 1999. These increases were primarily the result of
increased staffing and associated expenses necessary to manage and support our
growth. We believe that general and administrative expenses will increase in
dollar amount as we continue to increase staffing to manage expanding operations
and facilities, and incur additional expenses associated with operating as a
public company. However, we believe that general and administrative expenses
will decrease as a percentage of total revenue in the future.
Stock-based compensation expense. Total stock-based compensation expense as
of March 31, 1999 amounted to $6.0 million, of which approximately $1.3 million
was amortized in fiscal year 1999.
Other income (expense), net. Other income (expense), net consists of
interest income, interest expense, other income and other expense. Other income
(expense), net was $0.1 million in fiscal year 1997, and less than $0.1 million
in each of fiscal years 1998 and 1999.
As of March 31, 1999 we had net federal and state operating loss
carryforwards of approximately $10.0 million and $10.3 million, respectively,
available to reduce future taxable income. In addition, as of March 31, 1999, we
had $0.4 million and $0.2 million of federal and state tax credit carryforwards,
respectively. These operating loss carryforwards and credits will expire between
fiscal year 2003 and fiscal year 2014. Under the provisions of the Internal
Revenue Code, certain substantial changes in our ownership may limit in the
future the amount of net operating loss and tax credit carryforwards that we
could utilize annually to offset future taxable income. We have recorded a
valuation allowance for the full amount of our net deferred tax assets, as the
future realization of the tax benefit is not currently likely.
29
<PAGE> 35
SELECTED QUARTERLY OPERATING RESULTS
The following tables set forth unaudited statement of operations data for
the four quarters ended March 31, 1999, as well as the percentage of our total
revenue represented by each item. The unaudited financial statements have been
prepared on the same basis as the audited financial statements contained in this
prospectus and include all adjustments, consisting only of normal recurring
adjustments, that we consider necessary for a fair presentation of such
information when read in conjunction with our annual audited financial
statements and notes thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
--------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1998 1998 1998 1999
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT AS A PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue:
Software license.............. $ 182.7 $ 286.3 $ 541.6 $ 1,181.2
Maintenance and service....... 97.9 197.9 200.9 263.0
--------- --------- --------- ---------
Total revenue.............. 280.6 484.2 742.5 1,444.2
Cost of revenue................. 36.1 60.3 73.8 56.8
--------- --------- --------- ---------
Gross profit............... 244.5 423.9 668.7 1,387.4
--------- --------- --------- ---------
Operating expenses:
Research and development...... 702.3 617.4 762.8 804.5
Sales and marketing........... 679.8 844.5 1,144.1 1,227.2
General and administrative.... 336.3 261.5 248.0 480.4
Stock-based compensation
expense.................... -- 172.8 447.4 673.5
--------- --------- --------- ---------
Total operating expenses... 1,718.5 1,896.2 2,602.3 3,185.6
--------- --------- --------- ---------
Loss from operations............ (1,474.0) (1,472.3) (1,933.6) (1,798.2)
Other income (expense), net..... (17.8) 16.4 26.3 9.9
--------- --------- --------- ---------
Net loss........................ $(1,491.8) $(1,455.9) $(1,907.3) $(1,788.3)
========= ========= ========= =========
AS A PERCENTAGE OF TOTAL
REVENUE:
Net revenue:
Software license.............. 65.1% 59.1% 72.9% 81.8%
Maintenance and service....... 34.9 40.9 27.1 18.2
--------- --------- --------- ---------
Total revenue.............. 100.0 100.0 100.0 100.0
Cost of revenue................. 12.8 12.4 9.9 3.9
--------- --------- --------- ---------
Gross profit............... 87.2 87.6 90.1 96.1
--------- --------- --------- ---------
Operating expenses:
Research and development...... 250.3 127.5 102.7 55.7
Sales and marketing........... 242.3 174.4 154.1 85.0
General and administrative.... 119.9 54.0 33.4 33.3
Stock-based compensation
expense.................... 0.0 35.7 60.3 46.6
--------- --------- --------- ---------
Total operating expenses... 612.5 391.6 350.5 220.6
--------- --------- --------- ---------
Loss from operations............ (525.3) (304.0) (260.4) (124.5)
Other income (expense), net..... (6.4) 3.4 3.5 0.7
--------- --------- --------- ---------
Net loss........................ (531.7)% (300.6)% (256.9)% (123.8)%
========= ========= ========= =========
</TABLE>
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Our quarterly operating results are expected to vary from quarter to
quarter and may fluctuate significantly in the future on a quarterly and annual
basis as a result of a combination of factors. These factors include:
- demand for our products and services;
- our history of achieving a significant portion of our orders in the last
month of each fiscal quarter in order to achieve our revenue objectives;
- changes in the amount and timing of our revenue because of the
lengthiness and unpredictability of our sales cycle;
- the amount of revenue associated with particular customers, which varies
significantly based on the number of products that are licensed and the
size of the customer installation;
- changes in the mix of revenue generated from our product sales and
services;
- delays we may encounter in introducing new versions of new products and
services;
- changes in the mix of sales channels through which our product and
services are sold;
- the ability of our competitors to offer new or enhanced products or
services;
- changes in our pricing policies and the pricing policies of our
competitors;
- decreases in the level of growth, use of or acceptance of the Internet;
and
- economic conditions specific to the Internet, e-commerce and the software
industry.
We establish our expenditure levels for product development, sales and
marketing and other operating expenses based, in large part, on our expected
future revenue. Our expectations regarding future revenue may not be accurate.
As a result, if revenue falls below expectations, our operating results are
likely to be adversely and disproportionately affected because only a small
portion of our expenses vary with revenue. Due to these factors, our operating
results are difficult to forecast. We believe that period-to-period comparisons
of our historical operating results are not meaningful and should not be relied
upon as an indication of future performance.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations principally through
private sales of preferred stock, with net proceeds of $12.9 million and bank
loans. We used $1.8 million of cash in operations in fiscal year 1997, $4.2
million in fiscal year 1998 and $4.7 million in fiscal year 1999. In fiscal
years 1997 and 1998, cash used by operating activities was primarily
attributable to our net losses from operations. In fiscal year 1999, cash used
by operating activities was primarily attributable to a net loss of $6.6 million
and an increase in accounts receivable of $1.1 million, offset in part by
stock-based compensation expense of $1.3 million. At March 31, 1999, we had $1.3
million in working capital. Cash provided by financing activities was $5.7
million in fiscal year 1997, $1.0 million in fiscal year 1998 and $6.5 million
in fiscal year 1999. We have a $2 million working capital line with Silicon
Valley Bank which expires in May 2000. Interest is payable monthly. There were
no amounts outstanding under the line as of May 25, 1999.
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Capital expenditures were $0.4 million in fiscal year 1997, $0.2 million in
fiscal year 1998 and $0.4 million in fiscal year 1999. Our capital expenditures
consist primarily of purchases of property and equipment, including computer
equipment and software. We expect that our capital expenditures will continue to
increase in the future. Since inception, we have generally funded the purchase
of property and equipment with an equipment line of credit with a major
financial institution. We expect to experience significant growth in our
operating expenses in the future in order to execute our business plan,
particularly research and development and sales and marketing expenses. As a
result, we anticipate that our operating expenses, as well as planned capital
expenditures, will constitute a material use of our cash resources. In addition,
we may utilize cash resources to fund acquisitions or investments in
complementary businesses, technologies or product lines. We believe that the net
proceeds from the sale of the common stock in this offering and the amounts
available under our working capital line will be sufficient to meet our working
capital and capital expenditure requirements for at least the next 12 months.
Thereafter, we may find it necessary to obtain additional equity or debt
financing. In the event additional financing is required, we may not be able to
raise it on acceptable terms or at all.
YEAR 2000 READINESS
"Year 2000 Issues" refer generally to the problems that some software may
have in determining the correct century for the year. For example, software with
date-sensitive functions that is not Year 2000 compliant may not be able to
distinguish whether "00" means 1900 or 2000, which may result in failures or the
creation of erroneous results.
We have defined Year 2000 compliance as the ability to:
- Correctly handle date information needed for the December 31, 1999 to
January 1, 2000 date change;
- Function according to the product documentation provided for this date
change, without changes in operation resulting from the advent of a new
century, assuming correct configuration;
- Respond to two-digit date input in a way that resolves the ambiguity as
to century in a disclosed, defined and predetermined manner; Store and
provide output of date information in ways that are unambiguous as to
century if the date elements in interfaces and data storage specify the
century; and
- Recognize the Year 2000 as a leap year.
We designed our current products to be Year 2000 compliant when configured
and used in accordance with the related documentation, and provided that the
underlying operating system of the host machine and any other software used with
or in the host machine or our products are Year 2000 compliant. We have tested
our products for Year 2000 compliance. We continue to respond to customer
questions about prior versions of our products on a case-by-case basis. We have
not tested software obtained from third parties. However, we are seeking
assurances from our vendors that licensed software is Year 2000 compliant.
Despite assurances from developers of products incorporated into our products,
our products may contain undetected errors or defects associated with Year 2000
date functions. Known or unknown errors or defects in our products could result
in delay or loss of revenues, diversion of development resources, damage to our
reputation, or increased service and warranty costs, any of which could
seriously harm our business, financial condition and results of operations. Some
commentators have predicted significant
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litigation regarding Year 2000 compliance issues, and we are aware of such
lawsuits against other software vendors. Because of the unprecedented nature of
such litigation, it is uncertain whether or to what extent we may be affected by
it.
We are assessing our material internal information technology systems,
including both our own software products and third-party software and hardware
technology, but we have not initiated an assessment of our non-information
technology systems. We expect to complete testing of our information technology
systems in 1999. To the extent that we are not able to test the technology
provided by third-party vendors, we are seeking assurances from such vendors
that their systems are Year 2000 compliant. We are not currently aware of any
significant operational issues or costs associated with preparing our internal
information technology and non-information technology systems for the Year 2000.
However, we may experience significant unanticipated problems and costs caused
by undetected errors or defects in the technology used in our internal
information technology and non-information technology systems.
We do not currently have any information concerning the Year 2000
compliance status of our customers. Our current or future customers may incur
significant expenses to achieve Year 2000 compliance. If our customers are not
Year 2000 compliant, they may experience material costs to remedy problems, they
may face litigation costs and they may delay purchases or implementation of our
products. Year 2000 issues could reduce or eliminate the budgets that current or
potential customers could have for purchases of our products and services. As a
result, our business, financial condition and results of operations could be
seriously harmed.
We have funded our Year 2000 plan from cash balances and such costs in the
past. To date, these costs have not been significant. We may incur additional
costs related to the Year 2000 plan for administrative personnel to manage the
project, outside contractor assistance, technical support for our products,
product engineering and customer satisfaction. In addition, we may experience
material problems and costs with Year 2000 compliance that could seriously harm
our business, financial condition and results of operations.
We have not yet fully developed a contingency plan to address situations
that may result if we are unable to achieve Year 2000 readiness of our critical
operations. The cost of developing and implementing such a plan may itself be
significant. Finally, we are also subject to external forces that might
generally affect industry and commerce, such as utility or transportation
company interruptions caused by Year 2000 compliance failures.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accounts, or
AICPA, issued Statement of Position 98-1, or SOP 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." SOP 98-1
establishes the accounting for costs of software products developed or purchased
for internal use, including when such costs should be capitalized. We do not
expect SOP 98-1, which is effective for financial statements for fiscal years
beginning after December 15, 1998, to have a significant effect on our financial
condition or results of operations.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 requires companies to expense the costs of
start-up activities and organization costs as incurred. In general, SOP 98-5 is
effective for fiscal years beginning
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after December 15, 1998. We believe the adoption of SOP 98-5 will not have a
material impact on our results of operations.
In June 1998, the Financial Accounting Standards Board on FASB, issued
Statement of Financial Accounting Standard No. 133, or SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and for hedging activities.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. We do not expect SFAS No. 133 to have a significant effect
on our financial condition or results of operations.
In December 1998, the Accounting Standards Executive Committee, or AcSEC,
issued SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With
Respect to Certain Transactions." SOP 98-9 amends SOP 97-2 to require that an
entity recognize revenue for multiple element arrangements by means of the
"residual method" when (1) there is vendor-specific objective evidence, or VSOE,
of the fair values of all the undelivered elements that are not accounted for by
means of long-term contract accounting, and (2) VSOE of fair value does not
exist for one or more of the delivered elements, and (3) all revenue recognition
criteria of SOP 97-2 and SOP 98-9 will be effective for transactions entered
into in fiscal years beginning after March 15, 1999. We do not expect SOP 98-9
to have any effect, on our results of operations.
INTEREST RATE RISK
Our exposure to market risk for changes in interest rates is limited to the
exposure related to our debt instruments and credit facilities which are tied to
market rates. We do not plan to use derivative financial instruments in our
investment portfolio. We plan to ensure the safety and preservation of our
invested principal funds by limiting default risks, market risk and reinvestment
risk. We plan to mitigate default risk by investing in high-credit quality
securities.
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BUSINESS
OVERVIEW
Accrue is a leading provider of Internet data collection and analysis
software which enables business decision makers to address critical marketing
and merchandising questions concerning the effectiveness of their Web sites. Our
flagship product, Accrue Insight, is a comprehensive and scalable solution that
we believe helps Internet businesses increase numbers of visitors, customer
loyalty and sales by collecting, storing, analyzing and reporting Web site
activity data at a level of detail and accuracy that distinguishes our
technology from others.
Merchandising managers traditionally depend on analysis of marketing
metrics like campaign effectiveness, shopping patterns or price elasticity, and
the quantity of that data has increased dramatically as the information age has
extended the number of methods and reach for marketing communications.
Conducting traditional marketing analysis has therefore become more complicated.
In addition, the Internet has now emerged as the fastest growing communication
and commerce medium in history, creating new challenges which further compound
the complexity of collecting and analyzing valuable merchandising information.
As a result, businesses are demanding analysis that provides a measure of return
on investment for their Internet initiatives. Despite the need for a detailed,
flexible, robust and easy-to-use approach to Internet merchandising analysis, we
believe Accrue Insight is the only product available that delivers an integrated
solution addressing all of these requirements.
INDUSTRY BACKGROUND
Traditional Merchandising and Marketing Analysis
Analysis of customer behavior and preferences is critical to the success of
all businesses. Analysis helps business managers make informed decisions and
understand the results of those decisions. Historically, retailers knew their
customers personally, enabling them to address the needs and preferences of
customers in their wholesale or distribution ordering practices. Product and
service providers have always tracked sales patterns and inventory turn rates to
determine which types of offerings should be emphasized to manage production
capacity. Sales patterns began to be used in determining marketing strategy as
businesses grew to recognize that similar products and services with
differentiated packaging, or other distinguishing features, could inspire
noticeably different levels of demand.
As mass media developed and businesses continued to evolve, managers became
increasingly concerned with monitoring the effectiveness of merchandising
methods employed to encourage purchases. Publishers and broadcasters responded
to this concern by providing managers with circulation or audience rankings,
such as Nielson Reports for television, and advertising response tracking
methods, such as code numbered coupons. This marketing reach and effectiveness
data has become so important that today the advertising industry primarily
prices its services based on quantitative analysis of this data. As the types
and accuracy of merchandising information expanded, managers grew to depend on
that information to drive answers to a growing number of questions, such as:
Where did my customers come from? How did my customers shop? Where in the store
should products be placed? How should products or services be packaged? Which
customer segments respond best to different types of products? What is my
customers' sensitivity to
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various price points? Informed responses to these and other related questions
have become critical to designing and maintaining successful sales and marketing
strategies.
The quantity, variety and complexity of marketing and merchandising
information continues to grow as the information age has driven an increase in
the number of methods and channels for disseminating marketing messages.
Merchandising managers have begun to turn to robust, or enterprise quality,
decision support software to help transform data gathered in traditional
marketing environments into business intelligence that can be used by various
constituencies within their organizations. In this context of increasing
complexity for conducting traditional merchandising and marketing analysis, the
Internet has emerged as the fastest growing and most expansive communication and
commerce medium in history.
Growth of the Internet and e-Commerce
The Internet is a global medium enabling millions of people worldwide to
communicate and conduct business electronically. International Data Corporation
estimates that the number of Web users will grow from approximately 97 million
worldwide in 1998 to approximately 320 million by the end of 2002. The U.S.
Department of Commerce estimates that Internet traffic doubles every 100 days.
The number of Web sites detected by the Netcraft Web Server Survey increased
from approximately 1.0 million in April 1997 to approximately 2.2 million in
April 1998, and to over 5.0 million in April 1999, reflecting annual growth
exceeding 100%.
The growth of the Internet is attributable to its value as a low-cost, open
and accessible platform for communications and commerce. As a result of these
attributes, organizations are increasingly embracing the Internet as a critical
platform for communicating with partners, customers and employees, and
conducting business. Many organizations are implementing Web-based business
initiatives to automate business processes, transact sales, and manage customer
service, commonly referred to as conducting "e-business." The growing adoption
of the Web represents a significant opportunity for businesses to conduct
commercial transactions over the Internet, such as the sale of goods and
services, commonly referred to as "e-commerce." According to International Data
Corporation, the total value of e-commerce revenue is expected to increase from
approximately $32 billion in 1998 to approximately $426 billion in 2002. The
Internet allows companies to develop one-to-one relationships with customers
worldwide without making significant incremental investments in traditional
infrastructure, such as retail outlets, distribution networks and sales
personnel. However, organizations must support their e-business initiatives by
investing heavily in Internet technology, content, and infrastructure software.
Forrester Research estimates that spending on software and services to support
e-commerce alone exceeded $5.6 billion in 1998 and will grow to $35 billion by
2002.
Internet interactions are two-way and entirely technology-based creating
exponentially expanded quantities and types of customer interaction data points,
compounding the complexity associated with collecting and analyzing this
valuable merchandising and marketing information. Because this information
drives critical business decisions, the need for e-commerce data collection and
analysis is emerging.
The Need for e-Business Analysis
As an increasing portion of existing businesses migrate some of their
activity to e-business platforms, advanced technologies are required to enable
the type of sophisticated merchandising and marketing analysis those managers
have grown to depend on in their
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traditional businesses. So too are entirely new businesses being formed to focus
on e-business alone. Both migrating and new Web-based businesses are demanding
data that provides a measure of the return on their investment in Internet
initiatives. This return is ultimately expressed in terms of increased customer
traffic, visitor loyalty and sales through their Web sites. With Internet
activity rates high and growing rapidly, e-businesses must collect and analyze
large volumes of data for use by various e-business units within their
organizations by finding robust enterprise-class solutions. An inherent
requirement of enterprise class e-business analysis solutions is the capability
to address the following needs:
- need for decisions based on facts
- need for scalable, robust solutions
- need for comprehensive, customer analysis
To date, e-commerce companies have purchased available network software
tools originally designed for purposes other than Web site effectiveness
analysis. Reporting and management tools originally designed for traditional
network management cannot analyze Internet-specific activity and therefore
cannot provide the level of detail and accuracy required to make strategic
e-business decisions. Further, these traditional tools are generally focused on
monitoring and maintaining network infrastructure areas such as traffic,
security, availability or quality of service. Some companies have internally
developed applications for tracking and evaluating Web traffic, but they are
limited in functionality and expensive to maintain. Web-centric tools that
simply track the Web pages visitors click on by sorting and counting log files,
fail to reflect all of the visitor's interactions during a Web site visit.
Traditional business intelligence tools, known as online analytical processing,
or OLAP, cannot access Web customer data, such as timing, resets and navigation
flows of visitors through the Web site. OLAP products also lack Web modeling
capabilities, such as those required to configure global Web networks and define
Web sites, including pages and hits. Comprehensive e-business analysis solutions
must be able to:
- handle large traffic volumes and scale to handle the exponential growth
expected in Internet usage on successful Web sites;
- collect accurate and complete customer activity information from complex
Web environments, comprised of mirrored content, switches, hubs, routers
and servers in multiple geographical locations;
- accommodate e-business requirements, such as security requirements or
business rules, and provide the specific information each business unit
manager needs;
- integrate customer activity information with data from multiple sources,
such as customer profile or demographic information, and transaction
data;
- recognize the amount of time a visitor spends on a particular Web site
activity or content, the paths taken through the site and when a visitor
resets a page instead of waiting to download the complete page;
- allow managers to easily drill down into reports and mine the data
interactively, with data filtering and segmentation capabilities, for a
more detailed understanding of customer activity; and
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- offer flexible distribution capabilities for reporting and analysis
throughout the enterprise.
Despite the critical need for comprehensive, scalable and easy-to-use
e-business analysis solutions, we believe current products other than Accrue
Insight fail to deliver an integrated solution that addresses all of these
competitive requirements.
THE ACCRUE SOLUTION
Accrue Software is a leading provider of enterprise-class e-business
analysis solutions. Our flagship product, Accrue Insight, is a comprehensive,
scalable, e-business analysis solution that allows organizations to evaluate the
effectiveness of their e-business initiatives by providing data in a format and
with a level of accuracy that facilitates strategic merchandising and marketing
decisions. Accrue Insight enables detailed Web site effectiveness assessment by
collecting, storing, analyzing and reporting comprehensive detailed Web site
traffic information and visitor activity data. Web site managers and marketers
can analyze this rich data to make merchandising and marketing decisions which
maximize revenue, new buyers and customer loyalty. We also provide professional
services to assist customers at every stage of Accrue Insight deployment, from
identification of specific business needs through enterprise integration and
customization of e-business analysis reporting, to delivering a rapid and
effective implementation. We believe customers can utilize Accrue Insight to
obtain the following results:
- Increase number of customers. Our solution provides insight into which
external Web sites send the more qualified prospects to a customer's Web
site, allowing our customers to more effectively spend marketing dollars
and increase the number of customers.
- Increase customer loyalty. Our solution permits customers to know
factually which content is important and appropriate, thereby enhancing
customer satisfaction and encouraging return visits.
- Increase sales. Our solution allows customers to determine how different
customer segments interact with their Web sites, enabling them to turn
more lookers into buyers.
Our solution provides the following enterprise-class e-business analysis
features:
Network-Based Measurement Mechanism. The most precise way to analyze Web
traffic is to collect data directly from the network by deciphering the content
of, and indicators embedded in, data packets as they move across the network,
analysis referred to as "packet sniffing." This network based analysis provides
a factual and complete picture of a visitor's activity at a Web site beyond that
which can be achieved through more common log file based approaches. Our packet
sniffing technology summarizes the details of each interaction to prepare the
data for storage and analysis. The benefits of our packet sniffing analysis
include the ability to collect data pertaining to:
- Visitors -- understanding who Web site visitors are, where they came
from, and how long they stayed.
- Visits -- exploring behavioral (duration and page depth) patterns of
visitors over repeat visits.
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- Content -- measuring the effectiveness of content, including the actual
delivered content, the most popular content, and the stickiness, or
duration of viewing, of content.
- Navigation -- determining the flow of visitors through a Web site to
measure the effectiveness of site layout, and the most common path to
purchase for each market segment.
Integrated Data Warehouse for Scalability. Increasing numbers of Web sites
receive millions of hits per day and this traffic is growing exponentially. To
enable effective e-business analysis, companies must collect, process, store and
make available for analysis the data generated from these millions of hits.
Accrue Insight is designed to operate effectively across Web sites with the
following characteristics:
- 50 million hits per day;
- hundreds of Web servers supporting over 2,000 Web sites;
- generation of thousands of unique reports per day;
- storage of hundreds of gigabytes of historical activity data; and
- complex, globally-distributed content.
High-Value Navigation Analysis. Integral to today's complex merchandising
decisions is understanding visitors' paths through Web sites, including where
they came from, what they looked at and where they went. Accrue Insight provides
a graphical view of customers' visits illustrating the following:
- the referring Web site links, such as ad banners, affiliate sites or
search engines;
- content viewed and sequence of interaction; and
- path taken from shopping to buying.
Open Architecture. Our solution is designed to accommodate enterprise
standards, corporate rules, and dynamically changing businesses. Accrue Insight
easily integrates into companies existing information systems and merges
existing corporate customer and transaction data with Web site visitor data,
thereby extending organizations' e-business analysis capabilities.
Comprehensive Analysis. Our solution provides powerful, easy to use,
comprehensive analysis capabilities through advanced data mining and flexible
report generation. An interactive Web-based interface allows users to select
pre-defined reports and specify parameters such as a date range and filters. Our
software performs complex queries and substantial post-processing to generate
targeted reports. These reports display the results of quantitative analysis,
showing counters, averages and trends of a wide variety of Web site visitor,
content and navigation activity.
Enterprise Report Distribution. All reports can be scheduled for daily,
weekly or monthly execution and emailed to a select corporate-wide distribution
list as both an hyper-text machine language, or HTML, page and spreadsheet-ready
format for additional processing.
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ACCRUE STRATEGY
Our objective is to extend our position as a leading provider of
enterprise-class e-business analysis software. To achieve this objective, our
strategy includes the following key elements:
Extend Leadership in High-End e-Business Analysis. We believe that we are a
leading provider of high-end, e-business analysis products and services as a
result of our advanced technologies for the collection and analysis of
comprehensive Web site activity data, and our broad base of global customers
across multiple industries. We plan to extend this leadership by continuing to
cater to business decision makers through our focus on enhancing analysis
functions for e-commerce, sales, marketing, advertising and Web site design. As
managers of e-business units develop new requirements and confront new
questions, we plan to anticipate and respond to those needs. We intend to do
this through internal product development, corporate partnering, and
acquisitions. We also intend to offer our customers consulting services to help
them analyze collected data in order to make more effective Web marketing and
merchandising decisions.
Maintain Technological Leadership in e-Business Analysis Software. Our
solutions are based on advanced proprietary technologies which provide the basis
for our leading high-end e-business analysis software. For example, our solution
utilizes non-intrusive, network-based measurement technology as the primary
mechanism for Web data collection. In combination with our robust data warehouse
architecture, we believe our technology has allowed us to develop the most
detailed, accurate and scalable commercial product currently available in our
market. Our product is capable of successfully tracking, collecting and storing
data generated by complex, multi-server Web sites that serve more than 50
million hits per day. These technologies were developed by our software
engineers who have a significant amount of experience designing enterprise
software applications. To maintain our technological leadership for the high-end
enterprise market, we plan to continue to invest in research and development and
to incorporate additional industry-leading components into our software.
Leverage Web Data Platform. Through the use of our software, our customers
collect comprehensive Web site visitor information and may leverage that
information by using it in business software applications provided by us now and
in the future as well as by other third party vendors. For example, we intend to
offer our customers expanded capabilities to contribute their Web site activity
data to their existing corporate applications. As a result, our customers will
be able to utilize this information in a variety of sophisticated ways,
including in combination with back office applications such as sales force
automation tools, such as those provided by Siebel Systems, Inc., call center
applications, such as those provided by Clarify, Inc., and e-business
applications, such as those provided by Vignette Corporation and Net
Perceptions, Inc., and traditional business intelligence tools, such as those
provided by MicroStrategy, Inc. We believe attractive incremental product and
service revenue opportunities exist for Accrue in helping our customers realize
this leverage.
Leverage and Expand Blue Chip Customer Base. We currently provide our
software and services to more than 75 leading companies across numerous
industries, including publishing, entertainment, media, high-technology,
financial services and retail. Our customers frequently purchase additional
software and services from us as they experience increases in Web site traffic,
higher levels of complexity in the scope of their e-business activities, and
more sophisticated needs for internal merchandising and marketing analysis.
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Our customer base also provides an accessible market for newly developed or
acquired products and services.
Continue Developing Strategic Alliances. We intend to continue developing
alliances with leading strategic platform providers, e-business application
providers, interactive agencies and Web hosting organizations, solution
providers, and business process applications vendors. We believe that these
partnerships will accelerate market penetration of our software by providing
additional marketing and distribution channels for our applications. We believe
that these alliances could also promote additional revenue opportunities, such
as partnered consulting service fees generated by our cooperation with partners
to help customers analyze collected data to make e-business decisions.
Expand Sales and Distribution Channels. By increasing the number of direct
sales professionals as well as utilizing systems integrators and resellers to
complement direct selling efforts we will be able to address a broader market
for our products. In addition, as use of the Internet increases internationally,
we believe that international markets will represent a significant market for
our products and services. We plan to establish an early marketing, sales and
support presence in selected international markets, including targeted European
and Asian countries, to enhance our long-term competitive advantage in these
regions. We also intend to utilize international distributors in international
markets generally and to implement localized versions of our applications.
Pursue Strategic Acquisitions. We intend to pursue acquisitions of
businesses, products, services, technologies, and distribution channels that are
complementary to our existing business to expand our position in the enterprise
e-business analysis software market. Although we have no present commitments or
agreements regarding any acquisitions, we believe that there are many
acquisition candidates that could enhance our position in this market.
PRODUCTS AND SERVICES
Accrue Insight 3.0
Our flagship product, Accrue Insight 3.0, provides our customers with
detailed information about visitors to their Web sites including the frequency
of visits by each visitor, content effectiveness, the external site from which a
visitor reached the Web site, the path taken by visitors within the Web site,
time spent by visitors at the Web site, and specific page resets. Accrue Insight
monitors traffic served from any Web server on all hardware platforms and is
capable of providing information to address the following questions:
- How many visitors are coming to the Web site?
- How many new versus repeat visitors are coming to the Web site?
- What are some of the demographics of visitors to the Web site?
- Which search engines and portals are referring qualified prospects to the
Web site?
- What was the point of reference for a specific visitor to access the Web
site?
- How are visitors traveling or progressing through the Web site?
- Which pages are most popular?
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- What changes can be made to the Web site to make the most popular pages
easy to find?
- How can the appearance of the Web site be improved in light of the most
frequently used browsers and access speeds of visitors?
- How many visits to the Web site result in sales transactions?
- What is the revenue generated by a particular page?
- How many times did visitors reach a particular page and then hit the stop
button to end the visit?
Accrue Insight consists of our network collector, analyzer and data
warehouse combined with powerful reporting and access options within an
integrated system architecture:
Network Collector. Our network collector software sits passively in the
customer's network configuration of Web servers, routers, switches and load
balancing products, and counts and records all click streams comprising visitor
activity to the customer's Web site. The network collector runs on the Sun
Solaris 2.5/2.6 and Microsoft NT 4.0 operating system platforms, and is
installed outside of the customer's firewall to achieve non-invasive
functionality. The network collector scales to handle millions of hits per day
on a 100Mbps ethernet network while recording all details from each visit.
Analyzer. Our analyzer software organizes the raw data gathered by the
network collector, analyzes Web site traffic and activity according to the
customer's specifications, filters out unneeded information, and adds a level of
intelligence to the data for optimal loading and storage. The analyzer organizes
and processes data so as to be able to answer questions from customers
concerning the flow of traffic to and from their Web sites.
Data Warehouse. Data that is processed by our analyzer is optimized for
bulk loading into our high-speed data warehouse. Our data warehouse enables
automated and efficient data management, including storage, consolidation and
archiving, batch reporting and interactive data mining. Our data warehouse runs
on the Sun Solaris 2.5/2.6 operating system platform. We currently employ the
Red Brick database technology licensed to us by Informix Software, Inc. to
maintain data stored in our data warehouse.
Report Wizard. Report Wizard is our software tool that allows customers to
design customized reports displaying data extracted from the data warehouse. The
reports can be saved, exported to spreadsheet programs like Microsoft Excel,
scheduled for automatic generation and delivery at a later time via email, or
posted to a restricted-access Web page.
MyAccrue. MyAccrue is our report personalization software which allows
end-users to design either standard or customized reports which are
automatically updated and distributed as scheduled on a daily, weekly or monthly
basis, via email to the end-user.
Application Access. Accrue Insight 3.0 allows customers to provide their
Web site data to third party applications that can take action on it, such as
those provided by Siebel Systems, Inc., Clarify, Inc., and eGain Communications
Corporation, or whose applications will be enhanced by our licensed software,
such as those provided by Vignette Corporation, NetGravity, Inc., and Net
Perceptions, Inc.
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Pricing of Accrue Insight 3.0 is determined by total number of CPUs
contained in the servers of the Web sites a customer wishes to analyze. Annual
maintenance fees (which include product upgrades) are priced as a percentage of
the list license fee. Additional services are billed either on a fixed-fee or
time-and-materials basis.
Professional Services and Customer Support.
Technical Support. We provide technical support to our customers through
telephone, email, our Web site, and on-site training. We offer toll-free
telephone assistance to our customers twenty-four hours a day, seven days a
week. Additionally, we offer monthly training sessions, called Tips &
Techniques, to our customers over the Web using a screen sharing product called
PictureTalk from Pixion, Inc. We have also established an online bulletin board
using software provided by eShare Technologies, Inc. for our customers to share
ideas and questions with each other and with us. Our Web site also provides
online documentation of historical trouble-shooting cases.
Training. We offer traditional on-site system administration training and
monthly end-user training over the Web using PictureTalk.
Consulting. We offer consulting services to customers on either a fixed-fee
or time-and-materials basis. Our current consulting services and applicable fees
include the following:
- QuickInsight -- installation and configuration of Accrue Insight in the
customer's network over a two-day period for a fixed fee.
- Vignette StoryServer Bridge -- consulting service and application to
convert Web addresses produced by Vignette StoryServer into descriptive
information suitable for analysis for a fixed fee per each deployed
Vignette license.
- Custom Data Integration and Reporting -- integration of data from a
separate customer database into the database created by Accrue Insight,
billed at a daily rate.
- Accrue Discovery Service -- strategic business consulting and analysis
based on information derived from data collected and analyzed by Accrue
Insight, billed at a fixed fee for a one-time evaluation.
Online Services -- Accrue Site Knowledge (ASK) Service. We offer customers
the opportunity to outsource system administration responsibilities in
connection with their purchase of Accrue Insight by subscribing to our Accrue
Site Knowledge (ASK) Service, a hosting service administered by Accrue in
cooperation with AboveNet Communications, Inc. ASK Service customers install the
network collectors at their site to collect their Web data, the data is
automatically transferred to a data warehouse hosted by Accrue. Using Accrue
Insight's flexible reporting options, customers receive daily, weekly or monthly
reports through email, or by accessing them through secure, personalized
MyAccrue Web pages on the Internet. By hosting the day-to-day management of
Accrue Insight for the customer, Accrue reduces the initial time and cost of
deployment and provides continuous and dependable application maintenance and
support. For the ASK Service customers pay Accrue's standard license and
maintenance fees for Accrue Insight plus a service fee and equipment leasing
costs.
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We have also established a number of informal alliances with solution
providers to supplement our internal service capacity to customers as required
to meet their deadlines and specifications. These alliances are not subject to
binding agreements, have no specified performance requirements by us or our
alliance partners, and may be terminated at any time. These solution providers
include Viant Corporation (Web site strategies), World Wide Web Associates
(training and consulting services with respect to our products), Cambridge
Technologies, Inc. (computer systems consulting and integration), Organic
Online, Inc.(online business builder) and AboveNet Communications, Inc. (Web
hosting services).
CUSTOMERS
As of April 30, 1999, we had licensed our products to over 75 customers and
no single customer accounted for more than 10% of our total revenue in either of
our fiscal years ending March 31, 1999 or March 31, 1998. Our customers
represent a broad spectrum of enterprises within diverse industries, including
publishing, entertainment and media, high technology, financial services, and
retail. The following is a representative list of our licensed customers to date
from which we continue to derive maintenance and service revenue:
<TABLE>
<CAPTION>
PUBLISHING, ENTERTAINMENT
AND MEDIA HIGH TECHNOLOGY FINANCIAL SERVICES
- ------------------------- --------------- ------------------
<S> <C> <C>
Bolt Media, Inc. AMP Incorporated Ameritrade Holding
Children's Television Apple Computer, Inc. Corporation
Workshop Ascend Communications, Investools, Inc.
Christian Science Monitor Inc. NationsBank Corporation
DreamWorks L.L.C. Check Point Software Standard & Poor's MMS
Family Education Company Technologies T. Rowe Price Associations, Inc.
Hearst New Media and Eastman Kodak Company TheStreet.com, Inc.
Technology Ford Motor Company Toronto Dominion Bank
Hollywood Online, Inc. Gateway Companies, Inc. Financial Group
Houston Chronicle General Motors Corporation
Interactive Hitachi America, Ltd. RETAIL
Los Angeles Times Iomega, Inc. Beyond.com
Meredith Corporation Lam Research Corporation CDNow
Miller Freeman, Inc. MathWorks, Inc. Costco Wholesale
News America Digital Merck, Inc. Corporation
Publishing, Inc. Motorola, Inc. DHL Worldwide Express
Philadelphia Newspapers, National Semiconductor Federal Express
Inc. Corporation Corporation
Salon Internet, Inc. NetObjects, Inc. Hasbro, Inc.
San Jose Mercury News Network Appliance, Inc. Micro Warehouse, Inc.
Seattle Times, Inc. Nokia, Inc. Mrs. Baird's Bakeries
Spinner Networking, Inc. Nortel (Northern Telecom MySimon, Inc.
(DBA Spnner.com) Limited) Preview Travel, Inc.
SportsLine, USA, Inc. Oracle Corporation Ralston Purina Company
Star Tribune Qualcomm, Inc.
Viacom Interactive SABRE Group, Inc.
Media-MTV Seagate Technology, Inc.
Silicon Graphics, Inc.
Sprint L.P.
Sun Microsystems, Inc.
Synopsys, Inc.
VeriSign, Inc.
</TABLE>
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SELECTED CUSTOMER CASE STUDIES
Some examples of the manner in which our products are used to address
e-business applications are set forth below.
TheStreet.com. TheStreet.com is a leading web-based provider of original,
timely, comprehensive, and trustworthy financial news, commentary and
information aimed at helping readers make informed investment decisions.
TheStreet.com chose Accrue Insight as its primary vehicle for tracking current
and potential subscriber usage on its Web site. This information is analyzed and
used as the foundation for marketing programs that allow for more targeted
prospecting of prospective subscribers while it continues to deliver valuable
news and commentary to existing subscribers. Currently, approximately 35
professionals at TheStreet.com, including business analysts, editors, and
executives in the company's technology, marketing, advertising, and financial
departments, use the information generated by Accrue Insight.
The Seattle Times. The Seattle Times newspaper is utilizing Accrue
Insight's rich data collection and reporting features to generate detailed
reports for the company's editorial, advertising and marketing staff. These
reports aid the development and positioning of online content and ad banners,
and provide feedback on the effectiveness of marketing campaigns to attract Web
site visitors. Accrue Insight's graphs of weekly Web site traffic highlights
entry and exit points on the Web site, showing how customers navigate the site's
pages and what pages receive the most attention. Analysis of such data helps
advertising personnel determine optimal advertising locations and pricing. The
Seattle Times' marketing personnel can look at which external URLs are driving
traffic to their Web site, and even to specific pages in the Web site, allowing
management to design media buying plans accordingly. Their editorial personnel
may also see which sections and stories receive the most attention in order to
match content placement to customers' preferences.
National Semiconductor Corporation. National Semiconductor Corporation, is
a leader in the design and manufacturing of analog and mixed signal
semiconductor products. National Semiconductor chose Accrue Insight for its
ability to provide an enriched view of online customers. This comprehensive view
of customer activity offers National Semiconductor the information necessary to
ensure that their Web site is constructed to provide customers the shortest path
to the content they seek. Before implementing Accrue Insight, engineers using
National Semiconductor's Web site went through an average of 7 screens to access
needed information. After implementing Accrue Insight, National Semiconductor
had the information necessary to rearchitect their Web site to reduce the
average number of screens to 2.2.
Net-Temps Inc. Net-Temps Inc. provides Web-based services to assist
placement firms and third-party recruiters in finding and placing temporary
employees, primarily in high-tech industries. Placement firms and recruiters
post job openings on their Web site and search their resume database for
appropriate candidates. With Accrue Insight, Net-Temps can monitor the traffic
generated by its partners to see which advertisers are delivering the greatest
return on investment to them. Net-Temps modified its media buying plan by using
Accrue Insight to identify the effectiveness of over 5 million banner
impressions per month.
The MathWorks, Inc. The MathWorks, Inc. develops, markets and supports a
computational engine, a block-diagram environment and a family of data analysis
toolboxes
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for engineer, scientists, and technical professionals. The MathWorks chose
Accrue Insight for its complex analysis functionality and scalability as well as
its reporting features. Accrue Insight's sophisticated reports are used
company-wide by site designers, marketers, information technology and executive
management. In particular, The MathWorks uses Accrue's navigation graph to
determine that a large number of visitors ran online product demonstration while
viewing product information. As a result, The MathWorks is now dedicating more
areas of its Web site to product demonstrations, which is expected to shorten
the sales cycle.
TECHNOLOGY AND ARCHITECTURE
Accrue Insight is designed to provide a robust architecture for customers
to implement flexible, scalable, detailed, and accurate e-business analysis. The
Accrue Insight architecture is compatible with documented application
programming interfaces, APIs, protocols and file formats to enable integration
with external systems such as Web applications (such as commerce servers and ad
servers) and business process applications (such as sales force automation
systems and call center systems). The architecture adheres to numerous standard
programming languages, including hyper-text machine language, or HTML, Java and
C, and network protocols, including hyper-text transfer protocol, or HTTP. In
addition, we believe that our system architecture is flexible and powerful
enough to serve as the foundation for related future products.
[Chart depicts Accrue's architectural layers consisting of the collection
layer, modeling layer, storage layer, application layer and presentation layer,
each of which is described in the following paragraphs]
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The Accrue Insight system architecture may be viewed as a series of layers,
each performing specific functions between our customer's Web site and their
visitors.
Collection Layer. The collection modules consist of our network collector,
server collector and logfile collector, each of which obtains data from
different sources. Our network collector is the most comprehensive collection
module within Accrue Insight and obtains data from the network through packet
sniffing technology. Our server collector is a customized module which plugs
directly into the customer's Web server for use in environments where encryption
of network traffic prevents packet sniffing, such as in credit card processing
and banking applications. Finally, our logfile collector may also be used when
encrypted or secure Web servers are employed or to obtain customer legacy data
that existed prior to installation of packet sniffing technology contained in
our network collector. All of these collection modules may be used in any
combination to gather and consolidate data into our data warehouse.
Modeling Layer. Our analyzer provides a fast, flexible mechanism for
filtering, segmenting and organizing collected data into a Web site
configuration model that the customer has defined. Our analyzer performs the
following tasks:
- sews or stitches collector data into a coherent view of the Web site,
taking into consideration where the Web server resides in the customer's
system configuration (physical server), the execution of the Web server,
or logical server, and the specific mirrored set of content, or content
set obtained from the Web server;
- discards non-essential details;
- translates raw hit information into concepts such as page views and the
time spent viewing a page;
- transposes raw Web server transaction data into higher-level information,
such as visitors and visits;
- tracks visitors across Web servers, time zones and different
authentication mechanisms;
- summarizes activity in many dimensions, such as by machine, URL or Web
site identifier, content set, logical server, or Web site; and
- creates a set of data to be loaded into the data warehouse.
Storage Layer. The storage layer consists of a data warehouse for storing
Web customer activity data processed by the analyzer, Web site definition data,
and Web network configuration data, collectively known as meta data or data
about data. The storage layer also consists of an online analytical processing,
or OLAP, database for fast access to summarized data. In addition, the storage
layer includes a database administration subsystem capable of handling high
volumes of data, thereby alleviating the customer's need to dedicate excessive
resources to data administration.
Data Access Layer. The data access layer consists of an API that provides a
unified view into the various storage facilities that make up the data warehouse
within Accrue Insight. It can also be used to access external databases, such as
those containing customer profile, demographic information and transaction data.
Application Layer. Accrue and third-party software vendors can write
applications to provide additional, customized functionality in addition to
Accrue Insight's basic
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functionality. For instance, a rules engine can view the data for specific
business rules, and manipulate the data accordingly.
Presentation Layer. MyAccrue provides enterprise-class service
functionality, such as scheduling, email and printing, that can be executed by
Accrue Insight. Report Wizard provides an easy to use, HTML interface to create
and save data queries in a format that can then be read by MyAccrue.
Integration Layer. We originally designed Accrue Insight and continue to
enhance its features to allow for maximum integration into existing systems and
the creation of new functionality. Accrue Insight can be integrated into
existing systems through the following APIs:
- Network Collector API. Our network collector API allows business rules to
be invoked as data is being collected. For instance, the collector can be
instructed not to save any hits for graphic images, and to ignore all
hits from the local domain.
- Analyzer API. Our analyzer API allows third-party applications to tailor
how the analyzer executes. For instance, this API may cause the Analyzer
to rewrite the URL to be more analysis-friendly, such as in the case of
the Vignette Profile Bridge.
- Data Access API. Our data warehouse provides a unified view of various
legacy and third-party databases and data marts.
INDUSTRY STANDARDS
We use many widely accepted standards in developing our products, including
structured query language, or SQL, and open data base connectivity, or ODBC, for
accessing the data warehouse, Netscape Application Programming Interface, or
NSAPI, for accessing Netscape's Web servers, hyper-text transfer protocol, or
HTTP, for communication between collectors and the central warehouse machine,
and hyper-text machine language, or HTML and Java for user interfaces. In
addition, Accrue Insight contains software that supports the ABC Interactive
digital signature standard, used for auditing log files for tampering. Most of
our software is written in C and Java, two widely accepted standard programming
languages for applications development. Adherence to industry standards provides
compatibility with existing applications, enables ease of modification, and
reduces the need for software to be rewritten, thus protecting the customer's
investment.
SALES AND MARKETING
We currently market and sell our products primarily through our direct
sales force in North America. We have maintained a ratio of two to one sales
territory manager to sales engineer to support the consulting nature of our
sales process. We also intend to expand our marketing and selling efforts
through partnering with third parties. We have recently expanded into
international markets through informal alliances with Sumisho Electronics
Company, Ltd., a subsidiary of Sumitomo Corporation, and Itochu Techno-Science
Corporation in Japan and Scientific Computers GmbH in Europe and we plan to
leverage our management's experience in international expansion as opportunities
occur.
Once a new customer lead is qualified, our typical sales process includes a
presentation of our products to the appropriate business executives within the
customer's
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organization, such as their vice president of sales, vice president of
marketing, or e-commerce director, followed by a product demonstration and
dialogue concerning technical questions. Normally product trials and evaluation
of the software are not required, as existing customer referrals and validation
are sufficient to handle new customer concerns.
Currently, we have eleven sales territory mangers located in Boston, New
Jersey, New York, Atlanta, Dallas, Chicago, Toronto, Seattle, San Francisco, San
Jose and Los Angeles. They are supported by four corporate sales representatives
located at our headquarters in Fremont, California and six regional systems
engineers in New York, Dallas, Chicago, and the San Francisco Bay Area. To
ensure maximum yields per sales representative and to facilitate ramp-up and
training for new sales personnel we utilize the Vantive Corporation Sales
Automation System which tracks customer and contract information, as well as new
sales prospects and sales call history. Our internal Web site also contains
extensive competitive information, case histories and sales presentation and
training materials that are used as resources for our sales organization.
Building brand awareness and commanding recognition of our leadership in
the marketplace is key to our success. We employ a number of marketing vehicles
to promote our brand in the e-business analysis market and to generate leads for
our sales organization. Traditional methods include press releases, speaking
engagements, product reviews, discussions with industry analysts and attendance
at tradeshows and seminars. We have also found, however, that emerging means of
communication, such as email and Web seminars, provide us with even greater
reach at less cost. Continued investment into our own Web site is critical to
maintain our image in the e-business community and to generate sales leads. We
also post important information about our products, technology and organization
on our Web site for potential customers' ease of access. Finally we publish data
sheets, white papers and articles concerning our products and services.
STRATEGIC ALLIANCES
A critical element of our sales and marketing strategy is to establish
alliances and partnerships to provide integrated solutions to our customers,
extend our sales reach, assist in implementation and customization of our
solutions, and broaden our brand awareness. Some examples of our current
partners include the following:
- Vignette Corporation. Our co-marketing and sales partnership includes
joint seminars and sales calls, joint development of the Vignette
Quickbridge for integration of Accrue Insight with Vignette StoryServer.
- Cisco Systems, Inc. Our co-marketing and sales partnership includes joint
seminars and sales calls demonstrating the compatability of Accrue
Insight with Cisco's Local Director load balancer.
- Informix Software, Inc. Our co-marketing and sales partnership includes
Accrue's participation in Informix's Data Warehouse Initiative.
- MicroStrategy, Inc. Our joint-development partnership provides Accrue
access to MicroStrategy's OLAP technology for the development of
e-commerce analysis applications.
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- ABC Interactive. Our joint-development partnership provides Accrue access
to ABC Interactive's encryption technology for the development of audited
traffic results for advertisers.
We have alliances with strategic platform partners, e-business application
partners, interactive agencies/hosters and solution providers. By partnering
with the leading vendors in each of these categories, we are better able to
provide the technical integration expertise and sales and marketing resources,
which result in the most valuable integrated solutions to our customers and
prospects.
Strategic Platform Providers. To ensure that our products are based on
current technologies and standards, we have partnered with companies whose
products represent the best-of-breed in their respective categories. These
companies include Cisco Systems, Inc., Informix Software, Inc., Oracle
Corporation, Microsoft Corporation, Netscape Corporation, Sun Microsystems, Inc.
and Silicon Graphics, Inc.
E-Business Application Partners. These partners sell complimentary
technologies to similar high-end clientele. These technologies include
personalization, ad serving, content management, customer relationship
management, load balancing, e-commerce and application serving. Our alliances
range from strong sales and co-marketing relationships to alliances with
companies with whom we have built integrated technology. Representative
companies include Vignette Corporation, Net Perceptions, Inc., NetGravity, Inc.,
Resonate, Inc. and Resolute, Inc.
Interactive Agencies and Web-Hosting Organizations. Our relationships with
these firms ensure that our product is the recommended solution of choice when
customers and prospects are seeking e-business analysis solutions while
implementing or upgrading their Web sites. We have worked with and have joint
customers with the following interactive agencies: Organic Online, Inc.,
USWeb/CKS Corporation, Modem Media.Poppe Tyson, Inc. We share customers with the
following Web-Hosting firms: AboveNet Communications, Inc., Exodus
Communications, Inc., NaviSite, Inc. and Frontier Corporation.
Solution Providers. To supplement our internal service capacity, we have
established relationships with firms, such as Cambridge Technology Partners and
Worldwide Web Associates, which provide implementation and customization
services. We have also partnered with firms that provide strategic
web-merchandising, web-marketing and online advertisement analysis services to
our clients, such as Viant Corporation.
Most of our strategic relationships are not subject to binding agreements,
have no specified performance requirements by us or by our alliance partners,
and may be terminated by either party at any time.
COMPETITION
The market for e-business analysis solutions is intensely competitive,
evolving and subject to rapid technological change. We expect the intensity of
competition to increase in the future. We believe that the principal competitive
factors affecting our market are:
- product features;
- product performance, including scalability and integrity;
- ease of integration with customers' existing enterprise systems;
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- quality of support and service; and
- company reputation.
Although we believe that our products currently compete favorably with
respect to such factors, our market is relatively new and is rapidly evolving.
We may not be able to maintain our competitive position against current and
potential competitors, especially those with significantly greater financial,
marketing, service, support, technical and other resources. A description of our
principal competitors and the risks associated with the competitive nature of
our market are discussed in greater detail in "Risk Factors -- We face intense
competition which could make it difficult to acquire and retain customers now
and in the future."
We may not be able to compete successfully against current and future
competitors. If we fail to compete successfully against current and future
competitors, our business could suffer.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
We are a technology company. Our success depends on protecting our
intellectual property assets. If we do not adequately protect our intellectual
property, our business, financial condition and results of operations would be
seriously harmed.
We license our software and require our customers to enter into license
agreements, which impose restrictions on our customers' ability to utilize the
software. In addition, we seek to avoid disclosure of our trade secrets,
including but not limited to requiring those persons with access to our
proprietary information to execute confidentiality agreements with us and
restricting access to our source code. We seek to protect our software,
documentation and other written materials under trade secret and copyright laws,
which afford only limited protection.
We currently have no issued U.S. or foreign patents, we have applied for
one U.S. patent and we have no pending foreign patent applications. It is
possible that no patents will issue from our currently pending patent
application and that our potential future patents may be found invalid or
unenforceable, or otherwise be successfully challenged. It is also possible that
any patent issued to us may not provide us with any competitive advantages, that
we may not develop future proprietary products or technologies that are
patentable, and that the patents of others may seriously limit our ability to do
business. In this regard, we have not performed any comprehensive analysis of
patents of others that may limit our ability to do business.
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. Policing unauthorized use of our products is
difficult, and while we are unable to determine the extent to which piracy of
our software products exists, software piracy can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect our
proprietary rights to as great an extent as do the laws of the United States. A
discussion of risks associated with the protection of our patents and
intellectual property rights and potential infringement by us of the patents and
intellectual property rights and potential infringement by us of the patents and
intellectual property rights of others is presented in "Risk Factors -- We may
be unable to protect our intellectual property which could harm our business,
results of operations and financial condition" and "-- Others may
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bring infringement claims against us which could harm our business, results of
operations and financial condition."
We also integrate third-party software into our software products and a
discussion of risks associated with this practice is presented in "Risk
Factors -- If third-party software incorporated in our products is no longer
available, our business could be harmed."
EMPLOYEES
As of April 30, 1999, Accrue had 62 full-time employees, including 20 in
product development, 30 in sales and support, 5 in marketing, and 7 in general
and administrative functions. From time to time, we also employ independent
contractors to support our engineering, marketing, sales and support and
administrative organizations. We believe that our relations with our employees
are good.
FACILITIES
We are headquartered in Fremont, California, where we lease approximately
25,000 square feet of office space under a lease expiring on March 31, 2002. We
believe that our existing facilities are adequate to meet our current and future
requirements or that suitable additional or substitute space will be available
as needed.
LEGAL PROCEEDINGS
We are not currently subject to any material legal proceedings. We may from
time to time become a party to various legal proceedings arising in the ordinary
course of its business.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors and their ages as of May 25, 1999 are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard D. Kreysar......... 43 President, Chief Executive Officer and Director
Gregory C. Walker.......... 45 Vice President of Finance and Chief Financial
Officer
Bob Page................... 37 Vice President of Product Development and Chief
Technology Officer
Brett Kilpatrick........... 40 Vice President of Sales
Vito Salvaggio............. 36 Vice President of Marketing
Max D. Hopper.............. 64 Director
Jonathan Nelson(2)......... 31 Director and Chairman of the Board
Christopher J. 36 Director
O'Brien(1)...............
A. Brooke Seawell(1)....... 51 Director
Robert Smelick(2).......... 57 Director
</TABLE>
- -------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
Richard D. Kreysar, President and Chief Executive Officer, joined Accrue
and became a director in June 1998. From January 1997 to May 1998, Mr. Kreysar
taught high school mathematics and coached soccer and baseball. From January
1995 to January 1997, Mr. Kreysar was the General Manager and Vice President of
Operations at Network Associates, Inc., an enterprise security software company,
where he was responsible for marketing, sales, product line development,
consulting and MIS operations. From January 1994 to January 1995, Mr. Kreysar
was Executive Vice President of Marketing and Sales of Open Vision, a UNIX
systems management software company. From June 1985 to December 1993, Mr.
Kreysar was Vice President of Marketing and Sales at Computer Associates
International, Inc. (CA), an enterprise software company, where he was
responsible for integrating acquired companies and products into CA's
applications and personal computer products divisions. Mr. Kreysar holds a B.S.
degree in mathematics from Rockhurst College.
Gregory C. Walker, Vice President of Finance and Chief Financial Officer,
joined Accrue in April 1999. From October 1997 to March 1999, Mr. Walker was
Chief Financial Officer at Duet Technologies, Inc., a provider of semiconductor
design services and software. From January 1997 through September 1997, Mr.
Walker served as Chief Financial Officer of NeTpower, Inc., a manufacturer of
work stations and servers. From December 1990 to January 1997, Mr. Walker served
as Vice President of Finance and acting Chief Financial Officer at Synopsys,
Inc., a supplier of electronic design automation solutions for the global
electronic market. Prior to working at Synopsys, Mr. Walker held various
positions in financial operations at Xerox Corporation and IBM Corporation. Mr.
Walker holds a B.A. degree in economics from Union College and an M.B.A. from
the University of Rochester.
Bob Page, Vice President of Product Development and Chief Technology
Officer, joined Accrue in February 1996. From March 1989 to February 1996, Mr.
Page worked at Sun Microsystems, Inc., a leading manufacturer of UNIX operating
platforms, where he served as Chief Scientist with the Network Management group
and Principal Investigator
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with the Advanced Network Applications group. While at Sun Microsystems, Mr.
Page served as the Technical Chair of the Desktop Management Task Force, a
cross-industry consortium of vendors formed to address issues in connection with
personal computers. From 1986 to 1989, Mr. Page was Senior Network Engineer and
Operations Manager at the University of Massachusetts, Lowell. Mr. Page received
his B.S. degree in computer science from Fitchburg State College.
Brett Kilpatrick, Vice President of Sales, joined Accrue in November 1998.
From January 1998 to July 1998, Mr. Kilpatrick was Vice President of Sales and
Business Development at AvantGo, Inc., a mobile computing software company. From
April 1997 to January 1998, Mr. Kilpatrick was Vice President of Sales and
Operations, Americas for IONA Technologies PLC, a producer of network
integration software. From February 1992 to March 1997, Mr. Kilpatrick was North
American Director of Sales at Versant Object Technology Corporation, a provider
of high performance object database management systems. Mr. Kilpatrick has also
held positions as Andersen Consulting's Midwest Sales Director and as Oracle
Corporation's Chicago Branch Manager. Mr. Kilpatrick holds a B.S. degree in
biology from Purdue University.
Vito Salvaggio, Vice President of Marketing, joined Accrue in September
1997. From August 1990 to September 1997, Mr. Salvaggio worked at Apple
Computer, Inc., where he served in various positions, including Director of
Product Marketing for System Software, Product Line Manager for Operating
Systems and Product Manager for High End Systems. From January 1986 until
September 1988, Mr. Salvaggio served as Design Engineer at Matrox Electronic
Systems, Ltd., a manufacturer of computer peripherals. Mr. Salvaggio holds a
B.S. degree in electrical engineering from Concordia University and an M.B.A.
from the Sloan School of Management at the Massachusetts Institute of
Technology.
Max D. Hopper has served as a director of Accrue since March 1999. Mr.
Hopper has been the Chief Executive Officer of Max D. Hopper Associates, Inc.,
an IS management consulting firm, since January 1995. From 1985 to January 1995,
he served in various positions at American Airlines, a subsidiary of AMR
Corporation, most recently as Senior Vice President, Information Systems and
Chairman of the SABRE Group, a provider of information technology services to
the travel and transportation industry. Mr. Hopper is also a director of Exodus
Communications, Inc., a Web hosting company, Gartner Group, Inc., a provider of
information technology research and recommendations, USDATA Corporation, a
provider of development tools and management software, VTEL Corporation, a
designer and manufacturer of video conferencing systems, Worldtalk Corporation,
a provider of content security and policy management solutions, Metrocall, Inc.,
a provider of local and regional paging service, Payless Cashways, Inc., a
building materials specialty retailer, and United Stationers, Inc., a wholesaler
of office supplies and equipment. Mr. Hopper received a B.S. degree in
mathematics and an M.B.A. from the University of Houston.
Jonathan Nelson has served as a director of Accrue since its inception in
February 1996. Mr. Nelson has been the Chairman and Chief Executive Officer of
Organic Online, Inc., an online business builder, since November 1993. He also
served as Accrue's President and Chief Executive Officer from February 1996
until May 1996. Mr. Nelson currently serves as a director of Post
Communications, Inc., a direct email management company. Mr. Nelson received a
B.A. degree in history and art history from Allegheny College.
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<PAGE> 60
Christopher J. O'Brien has served as a director of Accrue since October
1998. Mr. O'Brien is a partner at Orchid Holdings, L.P., a private equity
investment firm he co-founded in 1993. From 1989 to 1992, Mr. O'Brien was a
partner at Rainwater, Inc., a private equity investment firm affiliated with
Richard E. Rainwater. Previously, Mr. O'Brien worked in mergers and acquisitions
with Goldman, Sachs & Co. and at Trammell Crow Ventures. Mr. O'Brien received a
B.A. degree in political science from Stanford University and an M.B.A. from the
Harvard Business School.
A. Brooke Seawell has served as a director of Accrue since May 1999. From
January 1997 to August 1998, Mr. Seawell was Executive Vice President of
NetDynamics, Inc., an Internet applications server company. From March 1991 to
April 1997, Mr. Seawell was Senior Vice President and Chief Financial Officer of
Synopsys, Inc. Mr. Seawell holds a B.A. degree in economics and an M.B.A. degree
in finance and accounting from Stanford University. Mr. Seawell serves on the
board of directors of Informatica Corporation, a software company, NVIDIA
Corporation, a three-dimensional graphics processor company, and several
privately held companies.
Robert Smelick has served as a director of Accrue since May 1996. Mr.
Smelick is the managing director of Sterling Payot Management, Inc., the general
partner of Sterling Payot Capital, L.P., an investment partnership specializing
in technology based start-up companies and he is also a managing principal and
founding director of Sterling Payot Company, a private investment banking firm.
Before founding Sterling Payot Company in 1989, Mr. Smelick was a Managing
Director of First Boston Corporation. Prior to that, Mr. Smelick was an
investment banking partner of Kidder, Peabody & Co. Mr. Smelick received a B.A.
degree from Stanford University and an M.B.A. from the Harvard Business School.
He also attended the University of Melbourne in Melbourne, Australia. Mr.
Smelick currently serves as a director of Willamette Industries, a producer of
paper products, building materials and related specialty products and services.
BOARD COMPOSITION
Our bylaws currently provide for a board of directors consisting of six
directors. Each director is elected for a period of one year at our annual
meeting of stockholders and serves until the next annual meeting or until his or
her successor is duly elected and qualified.
BOARD COMPENSATION
Our directors do not receive cash compensation for their services as
directors, although some directors are reimbursed for reasonable expenses
incurred in attending board or committee meetings. In August 1998, Mr. Kreysar
was granted an option to purchase 1,605,683 shares of common stock at an
exercise price of $0.12 per share, which he exercised in October 1998. The
shares underlying the stock option are subject to our right of repurchase at the
original purchase price that lapses over a four-year period. Our repurchase
right will also lapse with respect to 25% of the shares purchased by Mr. Kreysar
in the event of a merger or sale resulting in a change of control, and our
repurchase right will lapse with respect to an additional 25% of the shares if
Mr. Kreysar is terminated within twelve months after a merger or sale resulting
in a change of control. In April 1999, Mr. Hopper purchased 100,000 shares of
common stock at a price per share of $0.75. The stock purchased by Mr. Hopper is
subject to our right of repurchase that lapses over a four-year period. Our
repurchase right will also lapse with respect to 25% of the
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<PAGE> 61
shares purchased by Mr. Hopper if he is terminated within six months after a
merger or sale resulting in a change of control. In May 1999, Mr. Seawell was
granted an option to purchase 50,000 shares of common stock at an exercise price
of $8.00 per share under our 1999 Directors' Stock Option Plan. The option vests
monthly over four years, provided that vesting will accelerate with respect to
25% of the shares if Mr. Seawell is terminated within three months after a
merger or sale resulting in a change of control. Directors are eligible to
participate in our 1996 Stock Plan, and beginning in May 1999, directors who are
not employees of Accrue are eligible to participate in our 1999 Directors' Stock
Option Plan. See "Stock Plans."
We have entered into indemnification agreements with each member of the
board of directors and our executive officers providing them indemnification to
the fullest extent authorized and permitted by law.
BOARD COMMITTEES
The board of directors has a compensation committee that reviews and
recommends to the board the compensation arrangements for Accrue's management
team and administers the various stock plans. The current members of the
compensation committee are Messrs. Nelson and Smelick.
The board of directors has an audit committee that reviews Accrue's annual
audited financial results and unaudited quarterly results, and meets with
Accrue's independent auditors to review Accrue's financial statements, internal
controls and financial management practices. The current members of the audit
committee are Messrs. O'Brien and Seawell.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the compensation committee of Accrue's board are
Messrs. Nelson and Smelick. Mr. Smelick has not at any time been an officer or
employee of Accrue. However, Mr. Nelson served as Accrue's President and Chief
Executive Officer from February 1996 until May 1996. We have also issued and
sold in private placement transactions shares of common and preferred stock to
Organic Online, Inc., Sterling Payot Capital L.P. and Sterling Payot Company.
Mr. Nelson is President and Chief Executive Officer of Organic Online, Inc. Mr.
Smelick is managing director of Sterling Payot Management, Inc., the general
partner of Sterling Payot Capital, L.P., and he is also a principal of Sterling
Payot Company. The following is a summary of the stock purchase transactions
between Accrue and Organic Online, Inc., and between Accrue and Sterling Payot
Capital, L.P. and/or Sterling Payot Company.
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Organic Online, Inc.
- May 3, 1996: we issued 2,685,714 shares of common stock to Organic
Online, Inc. in consideration for Organic's transfer and assignment of
intellectual property to Accrue.
Entities Affiliated with Sterling Payot Capital, L.P.
- February 21, 1996: we issued a convertible promissory note in the
principal amount of $100,000 to Sterling Payot Capital, L.P., which note
was canceled and converted into shares of Series A preferred stock at
$0.70 per share on May 3, 1996.
- April 4, 1996: we issued a convertible promissory note in the principal
amount of $50,000 to Sterling Payot Capital, L.P., which note was
canceled and converted into shares of Series A preferred stock at $0.70
per share on May 3, 1996.
- May 3, 1996: we issued and sold to Sterling Payot Company for $3,500 a
warrant to purchase 350,000 shares of common stock at an exercise price
of $0.70 per share for advisory services.
- May 3, 1996: we issued and sold to Sterling Payot Capital, L.P. 214,285
shares of Series A preferred stock at $0.70 per share in exchange for
cancelation and conversion of the promissory notes issued to Sterling
Payot Capital, L.P. on February 21, 1996 and April 4, 1996.
- September 18, 1996: we issued and sold to Sterling Payot Company and
Sterling Payot Capital, L.P. 93,092 shares of Series B preferred stock at
$2.17 per share.
- June 2, 1998: we issued and sold to Sterling Payot Capital, L.P. 142,907
shares of Series D preferred stock at $2.17 per share.
- July 10, 1998: we issued and sold to Sterling Payot Capital, L.P. 209,678
shares of Series D preferred stock at $2.17 per share.
- August 17, 1998: we issued and sold to Sterling Payot Capital, L.P.
1,350,000 shares of Series E preferred stock at $1.00 per share.
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EXECUTIVE COMPENSATION
The following table sets forth compensation awarded to, earned by, or paid
to each individual who served as chief executive officer of Accrue during the
fiscal year ended March 31, 1999 and each of the other four most highly
compensated executive officers (the "named officers"), each of whose
compensation exceeds $100,000 on an annual basis, two of whom were no longer
serving as executive officers at the end of the fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------------
---------------------------------------- RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY ($) BONUS ($) COMPENSATION($) AWARD(S)($)(1) OPTIONS (#) COMPENSATION($)
------------------ ---------- --------- --------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Kreysar(2)... $155,000 $100,000 -- -- 1,605,683 --
President and Chief
Executive Officer
Bob Page................ 155,000 -- -- -- 309,294 --
Vice President of
Product Development
and Chief Technology
Officer
Brett Kilpatrick(3)..... 56,250 -- $25,683(8) -- 255,000 --
Vice President of
Sales
James Patterson(4)...... -- -- -- $7,700 -- --
President and Chief
Executive Officer
Simon Roy(5)............ 37,500 -- -- -- -- $87,500(9)
President and Chief
Executive Officer
Martin Yam(6)........... 73,089 -- 30,781(8) -- -- --
Vice President of
Sales
William Stein(7)........ 74,716 -- -- -- -- --
Vice President of
Product Development
</TABLE>
- -------------------------
(1) The aggregate number and value of shares of restricted common stock of
Accrue outstanding at March 31, 1999 were 15,710,046 and $ , based
on the assumed initial public offering price of $ per share. On July 8,
1998, Mr. Patterson was issued 22,000 shares of restricted stock under our
1996 Stock Plan in consideration of his services as our interim president
and chief executive officer during May and June 1998. As of March 31, 1999,
the market value of the 22,000 shares, based on the assumed initial public
offering price of $ per share less the amount paid by Mr. Patterson for
them, equaled $ , and Mr. Patterson continued to hold all of the
shares.
(2) Richard D. Kreysar became President and Chief Executive Officer in June
1998. On an annual basis, Mr. Kreysar's salary would have been $200,000. Mr.
Kreysar's bonus of $100,000 earned in the fiscal year ending March 31, 1999
was paid in the fiscal year ending March 31, 2000.
(3) Brett Kilpatrick became Vice President of Sales in November 1998. On an
annualized basis, Mr. Kilpatrick's salary would have been $150,000.
(4) James Patterson served as President and Chief Executive Officer on an
interim basis from May 1998 until June 1998 until we completed our search
for a new chief executive officer. See footnote (1) above for more
information.
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(5) Simon Roy served as President and Chief Executive Officer until May 1998. On
an annualized basis, Mr. Roy's salary would have been $150,000.
(6) Martin Yam terminated his employment as Vice President of Sales in October
1998. On an annualized basis, Mr. Yam's salary would have been $135,000.
(7) William Stein terminated his employment as Vice President of Product
Development in September 1998. On an annualized basis, Mr. Stein's salary
would have been $160,000.
(8) Sales commissions earned by Messrs. Kilpatrick and Yam.
(9) Severance payment to Mr. Roy.
OPTION GRANTS
The following table provides summary information regarding stock options
granted to the named officers during the fiscal year ended March 31, 1999. The
options were granted pursuant to our 1996 Stock Plan. Stock price appreciation
of 5% and 10% is assumed pursuant to rules promulgated by the Securities and
Exchange Commission and does not represent Accrue's predictions of its stock
performance. There can be no assurance that the actual stock price appreciation
over the ten-year option term will be at the assumed 5% and 10% levels or at any
other defined level.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR(1) ($/SHARE)(2) DATE 5% 10%
---- ----------- ---------------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Kreysar... 1,605,683(3) 47.67% $0.12 08/18/08 $ $
-------- --------
Bob Page............. 309,294(4) 9.18% $0.12 09/09/08
-------- --------
Brett Kilpatrick..... 255,000(5) 7.57% $0.12 11/19/08
-------- --------
James Patterson...... -- -- -- -- -- --
Simon Roy............ -- -- -- -- -- --
Martin Yam........... -- -- -- -- -- --
William Stein........ -- -- -- -- -- --
</TABLE>
- ---------------
(1) We granted options for an aggregate of 3,368,000 shares to our employees and
consultants under our 1996 Stock Plan during our fiscal year ended March 31,
1999. See "Stock Plans."
(2) Options were granted at an exercise price equal to the fair market value of
the common stock, as determined by our board of directors on the date of
grant.
(3) The option was immediately exercisable on the date of grant, and was
exercised in full by Mr. Kreysar on October 1, 1998. However, the underlying
shares are subject to our right of repurchase at the original purchase
price. Our repurchase right will lapse with respect to 25% of the shares on
June 22, 1999 and with respect to 1/48th of the shares on the 22nd day of
each month after that date. In addition, our repurchase right will lapse
with respect to 25% of the shares held by Mr. Kreysar in the event of a
change of control in connection with a merger or sale, and our repurchase
right will lapse with respect to an additional 25% of the shares if Mr.
Kreysar is terminated
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<PAGE> 65
without cause within twelve months after a change of control in connection
with a merger or sale.
(4) The option was immediately exercisable on the date of grant, and was
exercised in full by Mr. Page on April 14, 1999. However, the underlying
shares are subject to our repurchase right at the original purchase price.
Our repurchase right will lapse with respect to 25% of the shares on
September 9, 1999 and with respect to 1/48th of the shares on the 9th day of
each month after that date. In addition, our repurchase right will lapse
with respect to 25% of the shares held by Mr. Page in the event of a change
of control in connection with a merger or sale.
(5) The option was immediately exercisable on the date of grant, and was
exercised in full by Mr. Kilpatrick on April 15, 1999. However, the
underlying shares are subject to our repurchase right at the original
purchase price. Our repurchase right will lapse with respect to 25% of the
shares on November 16, 1999 and with respect to 1/48th of the shares on the
16th day of each month after that date. In addition, our repurchase right
will lapse with respect to 25% of the shares held by Mr. Kilpatrick if he is
terminated without cause within three months after a change of control in
connection with a merger or sale.
OPTION EXERCISES AND HOLDINGS
The following table provides summary information concerning the shares of
common stock acquired in the year ended March 31, 1999, the value realized upon
exercise of stock options during that period, and the number and value of
unexercised options with respect to each of the named officers as of March 31,
1999. The value was calculated by determining the difference between the fair
market value of the underlying common stock and the exercise price.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE MARCH 31, 1999 (#) MARCH 31, 1999 ($)
NAME EXERCISE (#) REALIZED ($)(1) (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)(1)
---- ------------ --------------- --------------------------- ------------------------------
<S> <C> <C> <C> <C>
Richard D. Kreysar(2)... 1,605,683 0/0 --
-------
Bob Page(3)............. 139,029 467,221/0 --/--
-------
Brett Kilpatrick(4)..... -- -- 255,000/0 --/--
James Patterson......... -- -- 0/0 --
Simon Roy(5)............ 149,312 0/0 --
-------
Martin Yam(6)........... 31,667 0/0 --
-------
William Stein(7)........ 48,000 0/0 --
-------
</TABLE>
- ---------------
(1) The amount set forth represents the difference between the fair market value
of our underlying common stock at March 31, 1999 (using an assumed initial
public offering price of $ per share as the fair market value) and the
exercise price of the option.
(2) The option was immediately exercisable on the date of grant, and was
exercised in full by Mr. Kreysar on October 1, 1998. However, the underlying
shares are subject to our right of repurchase at the original purchase
price. Our repurchase right will lapse with respect to 25% of the shares on
June 22, 1999 and with respect to 1/48th of the
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<PAGE> 66
shares on the 22nd day of each month after that date. In addition, our
repurchase right will lapse with respect to 25% of the shares held by Mr.
Kreysar in the event of a change of control in connection with a merger or
sale, and our repurchase right will lapse with respect to an additional 25%
of the shares if Mr. Kreysar is terminated without cause within twelve
months after a change of control in connection with a merger or sale.
(3) Mr. Page had three separate option grants exercisable for 250,000 shares,
140,706 shares, and 309,294 shares, respectively, all of which were
immediately exercisable on the dates of grant. During our fiscal year ended
March 31, 1999 Mr. Page exercised the first option with respect to 83,333
shares and the second option with respect to 55,696 shares on January 4,
1999. Subsequently, he exercised the first option with respect to 72,917
shares, the second option with respect to 85,010 shares, and the third
option with respect to 309,294 shares on April 14, 1999. However, the
underlying shares are subject to our repurchase right at the original
purchase price. For the first option, our repurchase right lapsed with
respect to 25% of the shares on September 9, 1997 and it lapses with respect
to 1/48th of the shares on the 9th day of each month after that date. For
the second option, our repurchase right lapsed with respect to 25% of the
shares on June 26, 1998 and it lapses with respect to 1/48 of the shares on
the 26th day of each month after that date. For the third option, our
repurchase right will lapse with respect to 25% of the shares on September
9, 1999 and it will lapse with respect to 1/48th of the shares on the 9th
day of each month after that date. In addition, our repurchase right with
respect to each of these options will lapse with respect to 25% of the
shares held by Mr. Page in the event of a change of control in connection
with a merger or sale.
(4) The option was immediately exercisable on the date of grant, and was
exercised by Mr. Kilpatrick on April 15, 1998. However, the underlying
shares are subject to our right of repurchase at the original purchase
price. Our repurchase right will lapse with respect to 25% of the shares on
November 16, 1999 and with respect to 1/48th of the shares on the 16th day
of each month after that date. In addition, our repurchase right will lapse
with respect to 25% of the shares held by Mr. Kilpatrick if he is terminated
without cause within three months after a change of control in connection
with a merger or sale.
(5) Mr. Roy's employment terminated as of July 1, 1998.
(6) Mr. Yam's employment terminated as of October 2, 1998.
(7) Mr. Stein's employment terminated as of September 8, 1998.
EMPLOYEE BENEFIT PLANS
401(k) Plan. We maintain a 401(k) tax-qualified employee savings and
retirement plan covering all employees who satisfy eligibility requirements
relating to minimum age and length of service. Pursuant to our 401(k) plan,
eligible employees may elect to contribute up to 20% of their cash compensation
to the 401(k) plan. The 401(k) plan is intended to qualify under applicable law,
so that contributions to the 401(k) plan and income earned on the 401(k) plan
contributions are not taxable until withdrawn. The 401(k) plan is available to
Accrue's executive officers on terms not more favorable than those offered to
other employees. We may elect to make contributions to the 401(k) plan at the
discretion of our board of directors. No contributions have been made by us as
of March 31, 1999. All employee contribution are 100% vested.
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STOCK PLANS
1996 Stock Plan. Our 1996 Stock Plan was adopted by our board of directors
in April 1996 and approved by our stockholders in November 1996. The plan was
amended at various times after November 1996 to increase the number of shares
reserved for issuance thereunder. These amendments were approved by our
stockholders. A total of 6,630,000 shares of common stock has been reserved for
issuance under our stock plan. As of March 31, 1999, options to purchase
2,663,043 shares of common stock had been exercised, options to purchase a total
of 1,868,072 shares at a weighted average exercise price of $0.24 per share were
outstanding and 1,517,784 shares remained available for future grants under the
plan.
In connection with this offering, our board amended the stock plan to
provide for, among other things, an automatic annual increase in the number of
shares of common stock reserved for issuance during each calendar year remaining
in the term of the stock plan equal to the lesser of:
- 800,000 shares;
- 4% of the shares outstanding on the last day of the immediately preceding
fiscal year; or
- a lesser number of shares as determined by our board of directors.
The purposes of our stock plan are to attract and retain the best available
personnel, to provide additional incentives to our employees and consultants and
to promote the success of our business. Our stock plan provides for the granting
to employees, including officers and employee directors, of incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") and for the granting to employees and consultants
including directors of nonstatutory stock options, stock purchase rights and
stock bonuses. To the extent an optionee would have the right in any calendar
year to exercise for the first time one or more incentive stock options for
shares having an aggregate fair market value (under all plans of Accrue and
determined for each share as of the date the option to purchase the shares was
granted) in excess of $100,000, any such excess options shall be treated as
nonstatutory stock options. If not terminated earlier, our stock plan will
terminate in April 2006.
Our stock plan may be administered by the board of directors or a committee
of the board. Our stock plan is currently administered by the compensation
committee of the board. The administrator determines the terms of options
granted under our stock plan, including the number of shares subject to the
option, exercise price, term and exercisability. In no event, however, may an
individual employee receive option grants for more than 2,000,000 shares under
the stock plan in any fiscal year. The exercise price of all incentive stock
options granted under our stock plan must be at least equal to the fair market
value of our common stock on the date of grant. The exercise price of any
incentive stock option granted to an optionee who owns stock representing more
than 10% of the total combined voting power of all classes of our outstanding
capital stock must equal at least 110% of the fair market value of the common
stock on the date of grant. The exercise price of all nonstatutory stock options
and stock purchase rights shall be the price determined by the administrator,
provided, however, that the exercise price of any nonstatutory stock option or
stock purchase right granted to a named officer will generally equal at least
100% of the fair market value of the common stock on the date of grant.
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<PAGE> 68
Payment of the exercise price may be made in cash or other consideration as
determined by the administrator.
The administrator determines the term of options, which may not exceed 10
years (5 years in the case of an incentive stock option granted to an optionee
who owns stock representing more than 10% of the total combined voting power of
all classes of our outstanding capital stock). Options and stock purchase rights
are generally nontransferable. The administrator may grant nonstatutory stock
option and stock purchase rights with limited transferability rights in
circumstances specified in the stock plan. Each option and stock purchase right
may be exercised during the lifetime of the optionee only by such optionee or a
permitted transferee. The administrator determines the vesting terms of options
and stock issued pursuant to stock purchase rights and stock bonuses. Options
granted and shares issued under our stock plan generally become exercisable or
vest at the rate of 1/4th of the total number of shares twelve months after the
date of grant, and 1/48th of the total number of shares each month thereafter.
In the event of a change of control due to the sale of all or substantially
all of our assets or our merger with another corporation, then each option may
be assumed or an equivalent option substituted by the successor corporation. If
the successor corporation does not agree to an assumption or substitution, each
outstanding stock option will terminate on the effective date of the
transaction. Certain option agreements issued by the administrator provide for
limited acceleration of vesting in certain circumstances following a change of
control transaction.
The administrator has the authority to amend or terminate our stock plan as
long as such action does not adversely affect any outstanding option, stock
purchase right or stock bonus and provided that stockholder approval shall be
required to the extent required by applicable law.
1999 Directors' Stock Option Plan. Our 1999 Directors' Stock Option Plan
was adopted by our board in May 1999 and approved by the stockholders in May
1999. A total of 250,000 shares of common stock have been reserved for issuance
under the directors' plan, plus an automatic annual increase on the first day of
our fiscal years beginning in 2000 and ending in 2004 equal to the lesser of:
- 100,000 shares;
- 1/2 of one percent of the shares outstanding on the last day of the
immediately preceding fiscal year; or
- a lesser number of shares as determined by our board.
As of May 25, 1999, one option to purchase 50,000 shares of our common stock had
been granted under the directors plan. The directors' plan provides for the
grant of nonstatutory stock options to nonemployee directors of Accrue. The
directors' plan is designed to work automatically without administration;
however, to the extent administration is necessary, it will be performed by the
board of directors. To the extent they arise, it is expected that conflicts of
interest will be addressed by abstention of any interested director from both
deliberations and voting regarding matters in which such director has a personal
interest.
The directors' plan provides that each person who becomes a nonemployee
director of Accrue on or after May 23, 1999 will be granted an initial
nonstatutory stock option to purchase 50,000 shares of common stock on the date
on which the optionee first becomes a nonemployee director of Accrue.
Thereafter, on the date of Accrue's annual stockholders meeting each year, each
nonemployee director will be granted a fully-vested option to
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purchase 5,000 shares of common stock if, on such date, he or she has served on
our board for at least six months.
The directors' plan sets neither a maximum nor a minimum number of shares
for which options may be granted to any one nonemployee director, but does
specify the number of shares that may be included in any grant and the method of
making a grant. No option granted under the directors' plan is transferable by
the optionee other than by will or the laws of descent or distribution or
pursuant to a qualified domestic relations order, and each option is
exercisable, during the lifetime of the optionee, only by such optionee. The
directors' plan provides that initial options shall become exercisable in
installments as to 1/48th of the number of shares subject to the option each
month after the date of grant. If a director ceases to serve as a director for
any reason other than death or disability, he or she may, but only within 90
days after the date he or she ceases to be a director of Accrue, exercise
options granted under the directors' plan to the extent that he or she was
entitled to exercise it at the date of such termination. To the extent that he
or she was not entitled to exercise any such option at the date of such
termination, or if he or she does not exercise such option (which he or she was
entitled to exercise) within such 90 day period, such option shall terminate.
The exercise price of all stock options granted under the directors' plan shall
be equal to the fair market value of a share of Accrue's common stock on the
date of grant of the option. Options granted under the directors' plan have a
term of ten years.
In the event of a change of control due to the sale of all or substantially
all of the assets of Accrue, the merger of Accrue with or into another
corporation or any other reorganization of Accrue in which more than 50% of the
shares of Accrue entitled to vote are exchanged, then each option may be assumed
or an equivalent option substituted by the successor corporation. If the
successor corporation does not agree to an assumption or substitution, each
outstanding stock option will terminate on the effective date of the
transaction. If the service of a director is terminated without cause within 3
months following a change of control transaction, then the vesting of unvested
shares under each outstanding option will automatically be accelerated by an
additional 12 months. The board of directors may amend or terminate the
directors' plan; provided, however, that no such action may adversely affect any
outstanding option. If not terminated earlier, the directors' plan will have a
term of ten years.
1999 Employee Stock Purchase Plan. Our 1999 Employee Stock Purchase Plan
was adopted by the board of directors in May 1999 and approved by the
stockholders in May 1999. A total of 500,000 shares of common stock have been
reserved for issuance under our purchase plan, plus an automatic annual increase
on the first day of each of our fiscal years beginning in 2000 and ending in
2004 equal to the lesser of:
- 200,000 shares;
- 1% of the shares outstanding on the last day of the immediately preceding
fiscal year; or
- a lesser number of shares as determined by our board.
Our purchase plan, which is intended to qualify under Section 423 of the
Code, will be implemented by a series of overlapping offering periods of 24
months' duration, with new offering periods (other than the first offering
period) commencing on August 1 and February 1 of each year. Each offering period
will consist of four consecutive purchase periods of 6 months duration. The
initial offering period is expected to commence on the date of this offering and
end on July 31, 2001, and the initial purchase period is expected to end on
January 31, 2000. The purchase plan will be administered by the board of
directors
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<PAGE> 70
or by a committee appointed by the board. Employees (including officers and
employee directors) of Accrue, or of any majority-owned subsidiary designated by
the board, are eligible to participate in the purchase plan if they are employed
by Accrue or any such subsidiary for at least 20 hours per week and more than
five months per year. The purchase plan permits eligible employees to purchase
common stock through payroll deductions, which may not exceed 20% of an
employee's compensation, at a price equal to the lower of 85% of the fair market
value of Accrue's common stock at the beginning of each offering period or at
the end of each purchase period. In circumstances described in the purchase
plan, the purchase price may be adjusted during an offering period to avoid our
incurring adverse accounting charges. The maximum number of shares an employee
may purchase during each purchase period is 2,000 shares, subject to certain IRS
limitations specified in the plan. Employees may end their participation in the
offering at any time during the offering period, and participation ends
automatically on termination of employment with Accrue. If not terminated
earlier, the purchase plan will have a term of 20 years.
The purchase plan provides that in the event of a merger of Accrue with or
into another corporation or a sale of all or substantially all of Accrue's
assets, each right to purchase stock under the purchase plan will be assumed or
an equivalent right substituted by the successor corporation. If the successor
corporation does not agree to assume or substitute stock purchase rights, our
board of directors will shorten the offering periods then in effect so that
employees' rights to purchase stock under the purchase plan are exercised prior
to the merger or sale of assets. The board of directors has the power to amend
or terminate the purchase plan as long as such action does not adversely affect
any outstanding rights to purchase stock thereunder, provided however, that the
board of directors may amend or terminate the purchase plan or an offering
period even if it would adversely affect outstanding options in order to avoid
our incurring adverse accounting charges.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, Accrue has included
in its restated certificate of incorporation a provision to eliminate the
personal liability of its officers and directors for monetary damages for breach
or alleged breach of their fiduciary duties as officers or directors,
respectively, subject to certain exceptions. In addition, Accrue's bylaws
provide that Accrue is required to indemnify its officers and directors under
certain circumstances, including those circumstances in which indemnification
would otherwise be discretionary, and Accrue is required to advance expenses to
its officers and directors as incurred in connection with proceedings against
them for which they may be indemnified. Accrue has entered into indemnification
agreements with its officers and directors containing provisions that are in
some respects broader than the specific indemnification provisions contained in
Delaware Law. The indemnification agreements require Accrue, among other things,
to indemnify such officers and directors against certain liabilities that may
arise by reason of their status or service as officers and directors (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. Accrue has also obtained directors' and officers'
liability insurance.
At present, Accrue is not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent of Accrue in which
indemnification would be required or permitted. Accrue is not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification. Accrue believes that its charter provisions and indemnification
agreements are necessary to attract and retain qualified persons as directors
and officers.
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<PAGE> 71
RELATED PARTY TRANSACTIONS WITH DIRECTORS,
OFFICERS AND 5% STOCKHOLDERS
PRIVATE PLACEMENTS OF SECURITIES
Some stock option grants to our directors and executive officers are
described under the caption "Management -- Executive Compensation."
Since our inception, we have issued, in private placement transactions,
shares of preferred stock as follows: an aggregate of 742,857 shares of Series A
preferred stock at $0.70 per share in May 1996, an aggregate of 1,845,172 shares
of Series B preferred stock at $2.17 per share in September 1996 and November
1996, an aggregate of 512,867 shares of Series C preferred stock at $2.80 per
share in November 1996 and November 1997, an aggregate of 928,621 shares of
Series D preferred stock at $2.17 per share in June and July 1998, and an
aggregate of 5,003,017 shares of Series E preferred stock at $1.00 per share in
August 1998. In addition, in May 1996, we issued 2,685,714 shares of our common
stock to Organic Online, Inc. in consideration of Organic's transfer to us of
intellectual property pursuant to a technology assignment agreement. We also
issued and sold to Sterling Payot Capital L.P. for $3,500, a warrant to purchase
350,000 shares of our common stock with an exercise price per share equal to
$0.70. The following table summarizes the shares of preferred stock purchased by
named executive officers, directors and 5% stockholders of Accrue and persons
and entities associated with them in the private placement transactions:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D SERIES E
PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED
INVESTOR STOCK STOCK STOCK STOCK STOCK
-------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Entities Affiliated with Sterling
Payot Capital, L.P. (Robert
Smelick)....................... 214,285 93,092 0 352,585 1,350,000
Entities Affiliated with Mohr
Davidow Ventures............... 0 922,586 490,367 460,829 1,000,000
Patterson Family Trust U/D/T
8/26/88 (James Patterson)...... 0 0 22,500 0 0
Orchid Holdings L.P.
(Christopher O'Brien)............ 0 0 0 0 900,000
Vertex Technology Fund Ltd....... 0 0 0 0 1,750,000
</TABLE>
Since our inception, we have, from time to time, issued and sold shares of
our common stock and granted options to purchase common stock to our employees,
directors and consultants.
DEBT FINANCINGS
In February 1996 and April 1996 we issued two convertible promissory notes
to Sterling Payot Capital, L.P. in the aggregate principal amount of $150,000.
The notes were subsequently canceled and converted into a total of 214,285
shares of our Series A preferred stock in May 1996.
In February 1998, we entered into a subordinated convertible note purchase
agreement with certain affiliates of Mohr Davidow Ventures pursuant to which the
Mohr Davidow entities loaned us a total of $1,000,000 in March, April and May
1998 pursuant
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<PAGE> 72
to ten subordinated convertible promissory notes. The notes were subsequently
canceled and converted into a total of 460,829 shares of our Series D preferred
stock in June 1998.
TRANSACTIONS WITH DIRECTORS AND OFFICERS
Affiliate Relationships. The following members of the board of directors
are affiliated with certain private investors that participated in the
transactions listed above: Jonathan Nelson (Organic Online, Inc.), Robert
Smelick (Sterling Payot Capital, L.P. and Sterling Payot Company), Christopher
J. O'Brien (Orchid Holdings L.P.).
Acceleration of Vesting. Other than as specifically set forth below,
options granted to officers under our 1996 Stock Plan are subject to
acceleration of vesting upon a change of control in connection with a sale or
merger with respect to 25% of the shares subject to the option grant if the
option holder is terminated within three months after the change of control.
Under the terms of Richard Kreysar's offer letter, if Accrue undergoes a
change of control in connection with a sale or merger, vesting for Mr. Kreysar's
option will be accelerated by one year, and if Mr. Kreysar's employment with
Accrue is terminated withour cause in connection with or within twelve months
after a change of control in connection with a sale or merger, vesting for Mr.
Kreysar's option will be accelerated by an additional year. Should Mr. Kreysar's
employment with Accrue be terminated involuntarily for any reason other than for
cause, his salary, benefits and vesting will continue for six months following
the date of his termination.
Bob Page received option grants in September 1996, June 1997 and September
1998 and Vito Salvaggio received an option grant in September 1997 which are
subject to acceleration of vesting of 25% of the shares subjection to the option
grant upon a change of control in connection with a merger or sale of Accrue.
In July 1998 we issued to James Patterson, a former director of Accrue and
our interim president and chief executive officer during May and June 1998,
22,000 fully vested shares of our common stock in exchange for his services
rendered as our interim president and chief executive officer during May and
June 1998.
Settlement Agreement with Simon Roy. In April 1998 we entered into an
amended settlement agreement with Simon Roy, upon his resignation as our
president and chief executive officer. Mr. Roy received a lump sum severance
payment in the amount of $87,500 and seven months accelerated vesting for his
option to purchase shares of common stock.
LOANS TO OFFICERS
Loan to Richard D. Kreysar. In October 1998 Accrue loaned Richard Kreysar
$192,681.91 in exchange for a promissory note dated October 1, 1998, which
becomes due and payable with interest at the rate of 5.06% on the earlier of
October 1, 2002 or upon termination of Mr. Kreysar's employment or consulting
relationship with Accrue. $199,181.71 is outstanding under the note as of June
1, 1999. The loan is full-recourse and secured by all shares of Accrue common
stock held by Mr. Kreysar.
Loan to Simon Roy. In July 1998 Accrue loaned Simon Roy $20,488.43 in
exchange for a promissory note dated July 1, 1998 which becomes due and payable
with interest at the rate of 6.00% on the earlier of July 1, 2002 or twelve
months following the initial public offering of our common stock. $21,615.29 is
outstanding under the note as of
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June 1, 1999. The loan is full-recourse and secured by all shares of Accrue
common stock held by Mr. Roy.
INDEMNIFICATION AGREEMENTS
We have entered into indemnification agreements with our officers and
directors that contain provisions which may require Accrue, among other things,
to indemnify our officers and directors against certain liabilities that may
arise by reason of their status or service as officers or directors (other than
liabilities arising from willful misconduct of a culpable nature) and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified. See "Management -- Limitation of Liability and
Indemnification Matters."
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<PAGE> 74
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the shares of our common stock on a fully-diluted basis as of May
25, 1999, and as adjusted to reflect the sale of the common stock offered by
Accrue pursuant to this prospectus and upon conversion of all outstanding shares
of preferred stock into common stock by:
- each person who is known by us to own beneficially more than 5% of
Accrue's common stock on a fully-diluted basis;
- each director, the chief executive officer and the named officers; and
- all of our directors and executive officers as a group.
Except as otherwise noted, the address of each person listed in the table
is c/o Accrue Software, Inc., 48634 Milmont Dr., Fremont, California 94538-7353.
The table includes all shares of common stock beneficially owned by the
indicated stockholder as of May 25, 1999. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission. In
computing the number of shares beneficially owned by a person and the percentage
of ownership of that person, shares of common stock subject to options held by
that person that are currently exercisable or exercisable within 60 days of May
25, 1999 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage of ownership of any
other person. To our knowledge, except as otherwise noted, the persons named in
the table have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them, subject to community property
laws where applicable.
The percent of beneficial ownership for each stockholder is based on
16,936,325 shares of common stock outstanding as of May 25, 1999 on an as
converted basis, and shares of common stock outstanding after
this offering. An "*" indicates ownership of less than 1%.
<TABLE>
<CAPTION>
PERCENT OF CLASS
SHARES --------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OWED OFFERING OFFERING
---------------- ------------ -------- --------
<S> <C> <C> <C>
Entities Affiliated with Mohr, Davidow
Ventures(1).................................. 3,700,275 21.7% %
2775 Sand Hill Road
Menlo Park, CA 94025
Organic Online, Inc............................ 2,635,714 15.6%
510 Third Street, Suite 540
San Francisco, CA 94107
Sterling Payot Capital, L.P.................... 2,752,486 15.9%
222 Sutter Street
San Francisco, CA 94108
Vertex Technology Fund Ltd. ................... 1,750,000 10.3%
3 Lagoon Drive, Suite 220
Redwood City, CA 94065
Richard D. Kreysar............................. 1,605,683 9.5%
Max D. Hopper.................................. 100,000 *
Jonathan Nelson(2)............................. 2,635,714 15.6%
Christopher O'Brien(3)......................... 900,000 5.3%
Bob Smelick(4)................................. 2,752,486 15.9%
</TABLE>
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<TABLE>
<CAPTION>
PERCENT OF CLASS
SHARES --------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OWED OFFERING OFFERING
---------------- ------------ -------- --------
<S> <C> <C> <C>
A. Brooke Seawell(5)........................... 2,083 *
Bob Page....................................... 700,000 4.1%
Brett Kilpatrick............................... 255,000 1.5%
Simon Roy...................................... 287,020 1.7%
James Patterson(6)............................. 96,570 *
Martin Yam..................................... 0 *
William Stein.................................. 48,000 *
All executive officers and directors as a group
(10 persons)(7).............................. 9,247,215 52.7%
</TABLE>
- -------------------------
(1) Comprised of 3,404,370 shares held by Mohr Davidow Ventures IV, L.P. and
162,681 shares held by MDV IV Entrepreneurs Network Fund, L.P. Includes
warrants to purchase 133,224 shares of common stock issued to Mohr Davidow
Ventures IV, L.P. and MDV IV Entrepreneur's Network Fund, L.P. by Organic
Online, Inc. that are currently exercisable within 60 days of May 25, 1999.
(2) Comprised of 2,635,714 shares held by Organic Online, Inc. Mr. Nelson is a
director of Accrue and the President and Chief Executive Officer of Organic
Online, Inc. and disclaims beneficial ownership of these shares except to
the extent of his pecuniary interest in these shares.
(3) Comprised of 900,000 shares held by Orchid Holding, L.P. Mr. O'Brien is a
director of Accrue and vice president of Joost Enterprises Corporation, the
general partner of Orchid Group Holdings, the general partner of Orchid
Holdings, L.P. and Mr. O'Brien disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest in these shares.
(4) Comprised of 2,375,477 shares held by Sterling Payot Capital, L.P., 27,009
shares held by Sterling Payot Company and a warrant issued to Serling Payot
Company to purchase 350,000 shares of common stock that is currently
exercisable within 60 days of May 25, 1999 and that is expected to be
exercised in full within 30 days after the closing of this offering. Mr.
Smelick is a director of Accrue and managing director of Sterling Payot
Management, Inc., the general partner of Sterling Payot Capital L.P., and he
is also a principal of Sterling Payot Company. Mr. Smelick disclaims
beneficial ownership of these shares except to the extent of his pecuniary
interest in these shares.
(5) Comprised of options to purchase 2,083 shares held by Mr. Seawell that are
currently exercisable or exercisable within 60 days of May 25, 1999.
(6) Includes 29,570 shares held by the Patterson Family Trust U/D/T 8/26/88 of
which Mr. Patterson is a trustee. Mr. Patterson disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest in
these shares.
(7) Includes 623,541 shares under outstanding stock options or warrants that are
currently exercisable or exercisable within 60 days of May 25, 1999.
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DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, our authorized capital stock will
consist of 75,000,000 shares of common stock, $0.001 par value, and 5,000,000
shares of undesignated preferred stock, $0.001 par value, after giving effect to
the amendment of our certificate of incorporation to delete references to our
Series A preferred stock, Series B preferred stock, Series C preferred stock,
Series D preferred stock and Series E preferred stock, which will occur upon
conversion of such preferred stock into common stock upon the closing of this
offering.
COMMON STOCK
As of May 25, 1999, there were 16,936,325 shares of common stock
outstanding held of record by 85 stockholders, after giving effect to the
conversion of our preferred stock into common stock, and options to purchase an
aggregate of 1,316,793 shares of common stock were also outstanding. There will
be shares of common stock outstanding (assuming no exercise of the
underwriters' option to purchase additional shares, exercise of outstanding
options under our stock plans after , 1999 or exercise of warrants
outstanding after the closing of this offering) after giving effect to the sale
of the shares of common stock to the public offered in this prospectus.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The common stock
has no preemptive or conversion rights or other subscription rights. There are
no sinking fund provisions applicable to the common stock. The outstanding
shares of common stock are, and the shares of common stock to be issued upon
completion of this offering will be, fully paid and non-assessable.
PREFERRED STOCK
Upon the closing of the offering, all outstanding shares of preferred stock
will be converted into 10,280,188 shares of common stock and automatically
retired. Thereafter, the Board of Directors is authorized to issue preferred
stock in one or more series and to fix the rights, preferences, privileges and
restrictions of any series of preferred stock, 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 Accrue without further action by the
stockholders. The issuance of preferred stock with voting and conversion rights
may adversely affect the voting power of the holders of common stock, including
voting rights of the holders of common stock. In certain circumstances, an
issuance of preferred stock could have the effect of decreasing the market price
of the common stock. As of the closing of the offering, no shares of preferred
stock will be outstanding and we currently have no plans to issue any shares of
preferred stock.
WARRANTS
At May 25, 1999, there was a warrant outstanding to purchase an aggregate
of 350,000 shares of common stock at an exercise price of $0.70 per share. This
warrant is
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expected to be exercised in full within thirty days following the closing of
this offering. On May 25, 1999, we issued a warrant to purchase 14,000 shares of
our common stock at an exercise price equal to the initial public offering price
to a financial institution in connection with a working capital line of credit.
These warrants contain provisions for the adjustment of the exercise price and
the aggregate number of shares issuable upon the exercise of the warrants under
certain circumstances, including stock dividends, stock splits, reorganizations,
reclassifications, consolidations, and the first warrant contains similar
provisions for certain dilutive issuances of securities at prices below the then
existing warrant exercise price.
REGISTRATION RIGHTS
The holders of 13,279,902 shares of common stock, including shares issuable
upon exercise of outstanding warrants, or their transferees are entitled to
certain rights with respect to the registration of their shares under the
Securities Act. These rights are provided under the terms of an agreement
between us and the holders of these registrable securities. On the written
demand of holders of more than 25% of the then-outstanding registrable
securities, we are required to use our best efforts to register the shares and
those of any other stockholders who, by prompt notice, request registration,
provided, however, that participation may be cut back by the managing
underwriter. We are not required to effect more than two demand registrations on
Form S-1 at any time and more than two demand registrations on Form S-3 in any
twelve-month period. Stockholders are also entitled to unlimited piggyback
registration rights, provided, however, that participation may be cut back by
the managing underwriter. All offering expenses in connection with such
registration will be borne by us, excluding underwriting discounts and
commissions.
DELAWARE LAW AND THE EFFECT OF CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW
PROVISIONS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, and anti-takeover law. In general, the statute prohibits a
publicly-held Delaware corporation from engaging in a business combination with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the stockholder. For purposes of Section 203, an
"interested stockholder" is defined to include any person that is:
- the owner of 15% or more of the outstanding voting stock of the
corporation;
- an affiliate or associate of the corporation and was the owner of 15% or
more of the voting stock outstanding of the corporation at any time
within three years immediately prior to the relevant date; or
- an affiliate or associate of the persons described in the foregoing
bullet points.
Stockholders may, by adopting an amendment to the corporation's certificate
of incorporation or bylaws, elect for the corporation not to be governed by
Section 203, effective 12 months after adoption. Neither our certificate of
incorporation nor our bylaws exempt us from the restrictions imposed under
Section 203 of the Delaware General Corporation Law. It is anticipated that the
provisions of Section 203 of the Delaware
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General Corporation Law may encourage companies interested in acquiring Accrue
to negotiate in advance with our board of directors because the stockholder
approval requirement would be avoided if a majority of the directors then in
office approve either the business combination or the transaction that results
in the stockholder becoming an interested stockholder.
Our amended and restated certificate of incorporation provides that
stockholder action can be taken only at an annual or special meeting of
stockholders and may not be taken by written consent. The bylaws provide that
special meetings of stockholders can be called only by the board of directors,
the chairman of the board, if any, the president and holders of 50% of the votes
entitled to be cast at a meeting. Moreover, the business permitted to be
conducted at any special meeting of stockholders is limited to the business
brought before the meeting by the board of directors, the chairman of the board,
if any, the president or any such 50% holder. The bylaws set forth an advance
notice procedure with regard to the nomination, other than by or at the
direction of the board of directors, of candidates for election as directors and
with regard to business to be brought before a meeting of stockholders.
The provisions discussed above could have the effect of making it more
difficult for a third party to effect a change in the control of the board of
directors. In addition, these provisions could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, a majority of our outstanding voting stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is U.S. Stock
Transfer Corporation. The transfer agent's address and telephone number is 1745
Gardena Avenue, 2nd Floor, Glendale, California 91204, (818) 502-1404.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of our common stock in the public market
could adversely affect prevailing market prices. Furthermore, due to contractual
and legal restrictions on resale, only a limited number of shares will be
available for sale shortly after the offering. After these restrictions lapse,
sales of substantial amounts of our common stock in the public market could
adversely affect the prevailing market price and our ability to raise equity
capital.
Upon completion of the offering, based on the number of shares outstanding
as of May 25, 1999 we will have outstanding shares of common stock.
Of these shares, the shares sold in the offering, plus any shares
issued upon exercise of the underwriters' option to purchase additional shares,
will be freely tradable without restriction under the Securities Act, unless
purchased by our "affiliates" as that term is defined in Rule 144 of the
Securities Act.
The remaining 16,936,325 shares of common stock outstanding are "restricted
securities" within the meaning of Rule 144. Restricted shares may be sold in the
public market only if registered with the Securities and Exchange Commission or
if they qualify for an exemption from registration under Rule 144. Rule 144(k),
or Rule 701 of the
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Securities Act, all of which are summarized below. Sales of the restricted
shares in the public market, or the availability of shares for sale, could
adversely affect the market price of our common stock.
Our stockholders have entered into agreements in which they have agreed
that they will not, without the prior written consent of BancBoston Robertson
Stephens Inc. offer, sell, contract to sell, or grant any option to purchase or
otherwise dispose of their shares of our common stock for a period of 180 days
following the effective date of the registration statement filed pursuant to
this offering. These agreements, often referred to as lock-up agreements, also
apply to any securities owned by our stockholders that are exercisable for or
convertible into our common stock. As a result of these contractual
restrictions, shares subject to lock-up agreements may not be sold until such
lock-up agreements expire or are waived by BancBoston Robertson Stephens Inc.
Taking into account the lock-up agreements, and assuming BancBoston Robertson
Stephens Inc. does not release stockholders from these agreements, the following
shares will be eligible for sale in the public market at the following times:
- beginning on the effective date, only the shares sold in the offering
will be immediately available for sale in the public market;
- beginning 180 days after the effective date, approximately 9,182,384
shares will be eligible for sale pursuant to Rules 144, 144(k) and 701;
and
- an additional 7,753,941 shares will be eligible for sale pursuant to Rule
144 at various times in the period following 180 days after the effective
date.
Under Rule 144, the number of shares that may be sold by affiliates of our
stockholders are subject to volume restrictions. In general, under Rule 144, and
beginning after the expiration of the lock-up agreements, a person who has
beneficially owned restricted shares, including shares that are aggregated to
such person or persons, for at least one year would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of:
- one percent of the number of shares of common stock then outstanding,
which will equal approximately shares immediately after the
offering; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale. In order to sell shares under Rule
144, the selling stockholder must comply with manner of sale provisions
and notice requirements and current public information about us must be
available.
Under Rule l44(k), the following persons may be expected to sell their
shares without complying with the manner of sale, public information, number of
shares limitation or notice provisions of Rule 144:
- not our affiliate during the three months preceding a sale; and
- beneficially owned the shares proposed to be sold for at least two years.
As part of the lock-up agreements, all of our employees holding common
stock or stock options may not sell shares acquired upon exercise of their
options until 180 days after the effective date. Beginning 180 days after the
effective date, any of our employees, officers, directors, or consultants who
purchased his or her shares pursuant to a written compensatory plan or contract
may be entitled to rely on the resale provisions of Rule 701.
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Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell their shares in reliance on Rule 144
without having to comply with the holding period, public information, number of
shares limitation or notice provisions of Rule 144. In addition, we intend to
file one or more registration statements under the Securities Act as promptly as
possible after the effective date to register shares to be issued under our
employee benefit plans. As a result, any options exercised under our stock
option plans or any other benefit plan after the effectiveness of a registration
statement will also be freely tradable in the public market, unless the shares
are held by affiliates of ours. Shares held by our affiliates will still be
subject to the number of shares limitation, manner of sale, notice and public
information requirements of Rule 144 unless the shares may otherwise be sold
under Rule 701. As of May 25, 1999, there were outstanding options for the
purchase of 1,316,793 shares (including one option exercisable for 50,000 shares
under our directors' plan), of which shares were exercisable. No
shares have been issued to date under our purchase plan. As of May 25, 1999,
there were outstanding warrants for the purchase of 350,000 shares that are
expected to be exercised within thirty days following this offering. Subsequent
to May 25, 1999, we issued a warrant exercisable for 14,000 shares of common
stock to a financial institution in connection with a working capital line of
credit. See "Risk Factors -- The book value of the common stock will be
substantially lower than the offering price," "Management -- Stock Plans" and
"Description of Capital Stock -- Registration Rights."
75
<PAGE> 81
UNDERWRITING
The underwriters named below, have entered into an underwriting agreement
to purchase from us the number of shares of common stock listed next to their
names below. BancBoston Robertson Stephens Inc. and Thomas Weisel Partners LLC
are the representative of the underwriters. The underwriters have committed to
purchase and pay for all of the shares listed below if any shares are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
BancBoston Robertson Stephens Inc. ....................
Thomas Weisel Partners LLC.............................
--------
Total........................................
========
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the public offering price listed on the cover page of this prospectus. Any
shares sold by underwriters to securities dealers will be sold at a discount of
up to per share from the initial public offering price. Those
securities dealers may resell any shares purchased from the underwriters to
other brokers or dealers at a discount of up to per share from the
public offering price. If all the shares are not sold at the initial offering
price, the representatives may change the offering price and other selling
terms.
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Option to Purchase Additional Shares. We have granted to the underwriters
an option, exercisable during the 30-day period after the date of this
prospectus, to purchase up to additional shares of common stock at
the same price per share as we will receive for the shares that the
underwriters have agreed to purchase. To the extent that the underwriters
exercise this option, each of the underwriters will have a firm commitment to
purchase approximately the same percentage of additional shares that the number
of shares of common stock to be purchased by it shown in the above table
represents as a percentage of the shares offered in this
prospectus. If purchased, additional shares will be sold by the underwriters on
the same terms as those on which the shares are being sold. We will
be obligated to sell these shares if the underwriters exercise their option to
purchase additional shares. If the option is exercised in full, the total price
to the public, underwriting discounts and commissions and proceeds to company
will be , respectively.
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including liabilities
under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Agreements Not to Sell Shares. Each of our officers and directors and other
holders of shares of our common stock have agreed, during the period ending 180
days after the date of this prospectus, subject to limited exceptions, not to
offer to sell, contract to sell, or otherwise sell, dispose of loan, pledge or
grant any rights with respect to any shares of common stock or any options or
warrants to purchase any shares of common stock, or any securities convertible
into or exchangeable for shares of common stock owned as of the
76
<PAGE> 82
date of this prospectus or later acquired directly by such holders or with
respect to which they have the power of disposition, without the prior written
consent of BancBoston Robertson Stephens Inc. However, BancBoston Robertson
Stephens Inc. may, in its sole discretion and at any time without notice,
release all or any portion of securities subject to the agreements not to sell
shares. There are no existing agreements between the representatives of the
underwriters and any of our stockholders providing consent to the sale of shares
prior to the expiration of the 180-day period.
Future Sales by Us. In addition, we have agreed that during the 180 days
after the date of this prospectus, we will not, without the prior written
consent of BancBoston Robertson Stephens Inc., subject to certain exceptions,
(1) consent to the disposition of any shares held by stockholders subject to
agreements not to sell shares prior to the expiration of the 180-day period or
(2) issue, sell, contract to sell, or otherwise dispose of, any shares of common
stock, any options to purchase any shares of common stock or any securities
convertible into, exercisable for or exchangeable for shares of common stock
other than our sale of shares in this offering, the issuance of common stock
upon the exercise of outstanding options, and the issuance of options under
existing stock option and incentive plans, provided such options do not vest
prior to the expiration of the 180-day period. See "Shares Eligible for Future
Sale."
Listing. We have applied to have our common stock approved for quotation on
the Nasdaq National Market under the symbol "ACRU."
No Prior Public Market. Prior to this offering, there has been no public
market for our common stock. Consequently, the public offering price for the
common stock offered by this prospectus will be determined through negotiations
among Accrue and the representatives of the underwriters. Among the factors to
be considered in such negotiations are prevailing market conditions, our
financial information, market valuations of other companies that we and the
representatives believe to be comparable to us, estimates of our business
potential, the present state of our development and other factors deemed
relevant.
Stabilization. The representatives of the underwriters have advised us
that, pursuant to Regulation M under the Securities Act, certain persons
participating in this offering may engage in transactions, including stabilizing
bids, syndicate covering transactions or the imposition of penalty bids, that
may have the effect of stabilizing or maintaining the market price of the common
stock at a level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of common stock on behalf of the
underwriters for the purpose of fixing or maintaining the price of the common
stock. A "syndicate covering transaction" is the bid for or the purchase of
common stock on behalf of the underwriters to reduce a short position incurred
by the underwriters in connection with this offering. A "penalty bid" is an
arrangement permitting the representatives to reclaim the selling concession
otherwise accruing to an underwriter or syndicate member in connection with this
offering if the common stock originally sold by such underwriter or syndicate
member is purchased by the representatives in a syndicate covering transaction
and has therefore not been effectively placed by such underwriter or syndicate
member. The representatives have advised us that these types of transactions may
be effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
Expenses of the Offering. We estimate the total expense of the offering to
be $ .
77
<PAGE> 83
New Underwriters. Thomas Weisel Partners LLC, one of the representatives of
the underwriters, was organized and registered as a broker-dealer in December
1998. Since December 1998, Thomas Weisel Partners has been named as a lead or
co-manager on 33 filed public offerings of equity securities, of which 16 have
been completed, and has acted as a syndicate member in an additional 14 public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with us
pursuant to the underwriting agreement entered into in connection with this
offering.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Accrue by Venture Law Group, A Professional Corporation, Menlo Park, California.
John V. Bautista, a director of Venture Law Group, is the secretary of Accrue.
Certain legal matters in connection with this offering will be passed upon for
the Underwriters by Brobeck Phleger & Harrison LLP, San Francisco, California.
As of the date of this prospectus, certain directors of Venture Law Group and an
investment partnership affiliated with Venture Law Group own 22,857 shares of
our Series A preferred stock, which shares will convert into 22,857 shares of
our common stock upon the completion of this offering and hold options to
purchase 20,000 shares of our common stock at an exercise price of $8.00 per
share.
EXPERTS
The financial statements as of March 31, 1998 and 1999 and for each of the
three years in the period ended March 31, 1999 included in this Prospectus have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION AVAILABLE TO YOU
Accrue has 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 and schedule therewith. For
further information with respect to Accrue and the common stock offered hereby,
reference is made to the registration statement and to the exhibits and
schedules therewith. Statements made in this prospectus concerning the contents
of any document referred to herein are not necessarily complete. With respect to
each such document filed as an exhibit to the registration statement, reference
is made to the exhibit for a more complete description of the matter involved.
The registration statement and the attached exhibits and schedules may be
inspected without charge at the public reference facilities maintained by the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at Seven World Trade Center, 13th Floor, New
York, NY 10048, and the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of all or any part of the
registration statement may be obtained from the SEC's offices upon payment of
certain fees prescribed by the SEC. The SEC maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. The address of the site is
http://www.sec.gov.
78
<PAGE> 84
ACCRUE SOFTWARE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 85
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Accrue Software, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Accrue Software, Inc. as of March
31, 1998 and 1999, and the results of its operations and its cash flows for each
of the three years in the period ended March 31, 1999, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of Accrue's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Jose, California
May 17, 1999, except for Note 11,
as to which the date is May 25, 1999
F-2
<PAGE> 86
ACCRUE SOFTWARE, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
MARCH 31, EQUITY
------------------- MARCH 31,
1998 1999 1999
------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 217 $ 1,600
Accounts receivable, net................. 744 1,636
Prepaid expenses and other current
assets................................ 28 144
------- --------
Total current assets.................. 989 3,380
Property and equipment, net................ 482 697
Other assets............................... -- 127
------- --------
Total assets.......................... $ 1,471 $ 4,204
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................... $ 61 $ 294
Accrued liabilities...................... 243 645
Deferred revenue......................... 162 971
Convertible subordinated notes payable... 500 --
Current portion long term debt........... 93 136
------- --------
Total current liabilities............. 1,059 2,046
Long term debt, net of current portion..... 312 169
------- --------
Total liabilities..................... 1,371 2,215
------- --------
Commitments (Note 4)
Convertible preferred stock, $0.001 par
value:
Authorized: 10,000 shares
Issued and outstanding: 3,101 and 9,033
shares in 1998 and 1999 and zero pro
forma shares........................ 5,893 12,876 $ --
Common stock, $0.001 par value:
Authorized: 20,000 shares
Issued and outstanding: 3,102 and 5,430
shares in 1998 and 1999 and 15,710 pro
forma shares.......................... 3 5 14
Additional paid-in capital................. 52 6,538 19,405
Notes receivable from stockholders......... -- (213) (213)
Unearned compensation...................... -- (4,726) (4,726)
Accumulated deficit........................ (5,848) (12,491) (12,491)
------- -------- --------
Total stockholders' equity............ 100 1,989 $ 1,989
------- -------- ========
Total liabilities and stockholders'
equity.............................. $ 1,471 $ 4,204
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 87
ACCRUE SOFTWARE, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Net revenue:
Software license............................... $ 163 $ 978 $ 2,192
Maintenance and service........................ 19 142 760
------- ------- -------
Total revenue............................... 182 1,120 2,952
Cost of revenue.................................. 22 141 227
------- ------- -------
Gross profit..................................... 160 979 2,725
------- ------- -------
Operating expenses:
Research and development....................... 909 2,232 2,887
Sales and marketing............................ 670 1,961 3,896
General and administrative..................... 616 772 1,326
Stock-based compensation expense............... -- -- 1,294
------- ------- -------
Total operating expenses.................... 2,195 4,965 9,403
------- ------- -------
Loss from operations............................. (2,035) (3,986) (6,678)
Other income..................................... 108 83 81
Interest expense................................. -- (18) (46)
------- ------- -------
Net loss......................................... $(1,927) $(3,921) $(6,643)
======= ======= =======
Net loss per share, basic and diluted............ $ (0.72) $ (1.37) $ (2.06)
======= ======= =======
Shares used in computing net loss per share,
basic and diluted.............................. 2,686 2,859 3,223
======= ======= =======
Pro forma net loss per share, basic and diluted
(unaudited).................................... $ (0.59)
=======
Shares used in computing pro forma net loss per
share, basic and diluted (unaudited)........... 11,299
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 88
ACCRUE SOFTWARE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE NOTES
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE
---------------- --------------- PAID-IN FROM UNEARNED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION DEFICIT TOTAL
------ ------- ------ ------ ---------- ------------ ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock
in exchange for in
process technology...... -- $ -- 2,686 $3 $ 24 $ -- $ -- $ -- $ 27
Issuance of warrant to
purchase 350 shares of
common stock............ -- -- -- -- 4 -- -- -- 4
Issuance of Series A
preferred stock and
conversion of notes
payable, net of issuance
costs of $19............ 743 501 -- -- -- -- -- -- 501
Issuance of Series B
preferred stock and
conversion of note
payable, net of issuance
costs of $24............ 1,845 3,979 -- -- -- -- -- -- 3,979
Issuance of Series C
preferred stock, net of
issuance costs of $23... 490 1,350 -- -- -- -- -- -- 1,350
Net loss.................. -- -- -- -- -- -- -- (1,927) (1,927)
----- ------- ----- -- ------ ----- ------- -------- -------
Balances, March 31,
1997.................... 3,078 5,830 2,686 3 28 -- -- (1,927) 3,934
Issuance of Series C
preferred stock, net.... 23 63 -- -- -- -- -- -- 63
Exercise of stock
options................. -- -- 416 -- 24 -- -- -- 24
Net loss.................. -- -- -- -- -- -- -- (3,921) (3,921)
----- ------- ----- -- ------ ----- ------- -------- -------
Balances, March 31,
1998.................... 3,101 5,893 3,102 3 52 -- -- (5,848) 100
Issuance of common stock
in exchange for
services................ -- -- 53 -- 167 -- -- -- 167
Issuance of common stock
in exchange for notes
receivable.............. -- -- 1,755 2 211 (213) -- -- --
Issuance of Series D
preferred stock and
conversion of notes
payable, net of issuance
costs of $13............ 929 2,003 -- -- -- -- -- -- 2,003
Issuance of Series E
preferred stock, net of
issuance costs of $23... 5,003 4,980 -- -- -- -- -- -- 4,980
Unearned compensation
related to grants of
stock options and
issuance of restricted
common stock............ -- -- -- -- 6,020 -- (6,020) -- --
Amortization of unearned
stock compensation...... -- -- -- -- -- -- 1,294 -- 1,294
Exercise of stock
options................. -- -- 520 -- 88 -- -- -- 88
Net loss.................. -- -- -- -- -- -- -- (6,643) (6,643)
----- ------- ----- -- ------ ----- ------- -------- -------
Balances, March 31,
1999.................... 9,033 $12,876 5,430 $5 $6,538 $(213) $(4,726) $(12,491) $ 1,989
===== ======= ===== == ====== ===== ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 89
ACCRUE SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................... $(1,927) $(3,921) $(6,643)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock issued for acquisition of
in-process technology..................... 27 --
Common stock issued for services............ -- -- 167
Depreciation and amortization............... 41 118 171
Provision for sales returns and doubtful
accounts.................................. -- 23 237
Stock-based compensation expense............ -- -- 1,294
Changes in operating assets and liabilities:
Accounts receivable....................... (43) (724) (1,129)
Prepaid expenses and other current
assets................................. (37) 9 (116)
Other assets.............................. (15) 15 (127)
Accounts payable.......................... 120 86 233
Accrued liabilities....................... 48 57 402
Deferred revenue.......................... 13 148 809
------- ------- -------
Net cash used in operating
activities.......................... (1,773) (4,189) (4,702)
------- ------- -------
Cash flows from investing activities:
Acquisition of property and equipment.......... (445) (187) (386)
------- ------- -------
Net cash used in investing
activities.......................... (445) (187) (386)
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of preferred stock, net
of issuance costs........................... 5,730 63 5,983
Proceeds from equipment loan................... -- 406 --
Proceeds from issuance of common stock
warrant..................................... 4 -- --
Proceeds from notes payable.................... -- 500 500
Proceeds from stock options exercised.......... -- 25 88
Repayment of equipment loan.................... -- -- (100)
------- ------- -------
Net cash provided by financing
activities.......................... 5,734 994 6,471
------- ------- -------
Net increase (decrease) in cash and cash
equivalents.................................... 3,516 (3,382) 1,383
Cash and cash equivalents at beginning of year... 83 3,599 217
------- ------- -------
Cash and cash equivalents at end of year......... $ 3,599 $ 217 $ 1,600
======= ======= =======
Supplemental disclosure of cash flow information:
Notes payable converted to preferred stock..... $ 100 $ -- $ 1,000
======= ======= =======
Interest paid.................................. $ 3 $ 18 $ 47
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 90
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 -- FORMATION AND BUSINESS OF ACCRUE:
Accrue Software, Inc. ("Accrue") was formed in February 1996 and is a
provider of enterprise e-business analysis solutions. The activity from February
1996 through March 31, 1996 was insignificant and was included in fiscal year
1997 results of operations. Accrue's product, Accrue Insight, is an e-business
analysis software that allows organizations to evaluate the effectiveness of
their e-business initiatives by providing data in a format and level of accuracy
that facilitates strategic merchandising and marketing decisions. Accrue Insight
offers users detailed Web-site traffic information, visitor activity, and
content effectiveness metrics. Web site managers and marketers can analyze this
data to make merchandising and marketing decisions which maximize revenue, new
buyers and customer loyalty. Accrue also provides professional services to
assist customers in Accrue Insight deployment.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CERTAIN RISKS AND CONCENTRATIONS
Accrue's cash and cash equivalents as of March 31, 1999 are on deposit with
one U.S. financial institution.
Accrue performs ongoing credit evaluations of its customers and collateral
is not required. Accrue maintains allowances for potential returns and credit
losses.
At March 31, 1998, two customers individually accounted for 13% and 12% of
accounts receivable. At March 31, 1999, two customers individually accounted for
14% and 11% of accounts receivable.
The market in which Accrue competes is characterized by rapid technological
change, frequent new product introductions, changes in customer requirements and
emerging industry standards. Significant technological change could adversely
affect Accrue's operating results and subject Accrue to returns of products.
While Accrue has ongoing programs to minimize the adverse effect of such changes
and considers technological change in estimating its allowance, such estimates
could change in the future.
Accrue licenses technology that is incorporated into its products from
certain third parties. Any significant interruption in the supply or support of
any licensed software could adversely affect Accrue's sales, unless and until
Accrue can replace the functionality provided by this licensed software. Because
Accrue's products incorporate software developed and maintained by third
parties, Accrue depends on such third parties to deliver and support reliable
products, enhance their current products, develop new products on a timely and
cost-effective basis and respond to emerging industry standards and other
technological changes. The failure of these third parties to meet these criteria
could adversely impact Accrue's business.
F-7
<PAGE> 91
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
USE OF ESTIMATES
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FINANCIAL INSTRUMENTS
Financial instruments that potentially subject Accrue to concentrations of
credit risks principally comprise cash and cash equivalents. Cash equivalents
are highly liquid investments with original or remaining maturities of three
months or less as of the date of purchase. Cash equivalents present
insignificant risk of changes in value because of interest rate changes. Accrue
has not experienced significant losses relating to any investment instruments.
The amounts reported for cash equivalents, receivables, notes payable and
long-term debt are considered to approximate fair values based upon comparable
market information available at the balance sheet date.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation expense is provided
using the straight-line method over the estimated useful lives of the respective
assets, generally three to seven years. Leasehold improvements are amortized on
a straight line basis over the estimated life of the lease, or the useful life
of the asset, whichever is shorter.
Maintenance and repairs are charged to expense as incurred. When assets are
sold or retired, the cost and related accumulated depreciation are removed from
the accounts and any resulting gain or loss is included in operations.
REVENUE RECOGNITION
Accrue adopted the provisions of Statement of Position 97-2, or SOP 97-2,
Software Revenue Recognition, as amended by Statement of Position 98-4, Deferral
of the Effective Date of Certain Provisions of SOP 97-2, effective April 1,
1998. SOP 97-2 supersedes Statement of Position 91-1, Software Revenue
Recognition, and delineates the accounting for software product, products
including software that is not incidental to the product, and maintenance
revenues. Under SOP 97-2, Accrue recognizes product revenues upon shipment if a
signed contract exists, the fee is fixed and determinable, collection of
resulting receivables is probable and product returns are reasonably estimable.
Accrue generally does not allow product returns; however, in the past, upon
request by a customer and approval of management, certain returns have been
allowed. Therefore, provision for estimated product returns are recorded at the
time the products are shipped.
For contracts with multiple obligations (e.g. deliverable and undeliverable
products, maintenance, installation and other services), revenue is allocated to
each component of
F-8
<PAGE> 92
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
the contract based on objective evidence of its fair value, which is specific to
Accrue, or for products not being sold separately, the price established by
management. Accrue recognizes revenue allocated to undelivered products when the
criteria for product revenue set forth above are met. Accrue recognizes revenue
allocated to maintenance fees, including amounts allocated from product revenue,
for ongoing customer support and product updates ratably over the period of the
maintenance contract. Payments for maintenance fees are generally made in
advance and are non-refundable. For revenue allocated to consulting services,
such as installation and training, Accrue recognizes revenue as the related
services are performed.
Prior to the adoption of SOP 97-2, effective April 1, 1998, Accrue
recognized revenue from the sale of products upon shipment if remaining
obligations were insignificant and collection of the resulting accounts
receivable was probable. Provisions for the estimated product returns were
accrued upon shipment. Revenue from software maintenance contracts, including
amounts unbundled from product sales, were deferred and recognized ratably over
the period of the contract. Consulting services revenue was recognized as the
related services were performed.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations as incurred.
Software development costs are capitalized beginning when a product's
technological feasibility has been established and ending when a product is
available for general release to customers. Amounts that could have been
capitalized under Statement of Financial Accounting Standards No. 86 Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,
have been insignificant and therefore no costs have been capitalized to date.
ADVERTISING EXPENSE
Accrue accounts for advertising costs as expense in the period in which
they are incurred. Advertising expense for the fiscal years ended March 31,
1997, 1998 and 1999 was $1, $15 and zero, respectively.
INCOME TAXES
Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be realized.
The provision for income tax expense is comprised of income taxes payable for
the current period, plus the net change in deferred tax amounts during the
period.
F-9
<PAGE> 93
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NET LOSS PER SHARE AND UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
Basic and diluted net loss per share are computed using the weighted
average number of common shares outstanding. Options, warrant, shares subject to
repurchase and preferred stock were not included in the computation of diluted
net loss per share because the effect would be antidilutive.
Unaudited pro forma net loss per share has been computed as described above
and also gives effect, even if antidilutive, to common equivalent shares from
preferred stock that will automatically convert upon the closing of Accrue's
initial public offering (using the as-if-converted method). If the offering
contemplated by this Prospectus is consummated, all of the convertible preferred
stock outstanding as of the closing date will automatically be converted into an
aggregate of approximately 10,280 shares of common stock based on the shares of
convertible preferred stock outstanding at March 31, 1999. The pro forma effect
of this conversion of preferred stock is presented on the pro forma balance
sheet.
A reconciliation of shares used in the calculation of net loss per share
and unaudited pro forma net loss per share follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
NET LOSS PER SHARE, BASIC AND DILUTED:
Net loss....................................... $(1,927) $(3,921) $(6,643)
======= ======= =======
Weighted average shares of common stock
outstanding................................. 2,686 2,926 4,310
Less weighted average shares subject to
repurchase.................................. -- (67) (1,087)
------- ------- -------
Shares used in computing net loss per share,
basic and diluted........................... 2,686 2,859 3,223
======= ======= =======
Net loss per share, basic and diluted.......... $ (0.72) $ (1.37) $ (2.06)
======= ======= =======
Antidilutive options, warrant, shares subject
to repurchase and preferred stock not
included in loss per share calculations..... 4,440 4,889 13,586
======= ======= =======
PRO FORMA NET LOSS PER SHARE, BASIC AND DILUTED:
Net loss....................................... $(6,643)
=======
Shares used in computing net loss per share,
basic and diluted........................... 3,223
Adjustments to reflect the effect of the
assumed conversion of weighted average
shares of convertible preferred stock
outstanding................................. 8,076
-------
Shares used in computing pro forma net loss per
share, basic and diluted.................... 11,299
=======
Pro forma net loss per share, basic and
diluted..................................... $ (0.59)
=======
</TABLE>
F-10
<PAGE> 94
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STOCK-BASED COMPENSATION
Accrue accounts for its stock-based compensation in accordance with the
provision of Accounting Principles Board Opinion No. 25, or APB 25, "Accounting
for Stock Issued to Employees" and presents disclosures required by Statement of
Financial Accounting Standard No. 123, or SFAS No. 123.
COMPREHENSIVE INCOME
Accrue has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," or SFAS 130. SFAS 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. There was no difference between
Accrue's net loss and its total comprehensive loss for fiscal years 1997, 1998
and 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants, or
AICPA, issued Statement of Position 98-1, or SOP 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." SOP 98-1
establishes the accounting for costs of software products developed or purchased
for internal use, including when such costs should be capitalized. Accrue does
not expect SOP 98-1, which is effective for financial statements for fiscal
years beginning after December 15, 1998, to have a significant effect on its
financial condition or results of operations.
In April 1998, AICPA issued Statement of Position 98-5, or SOP 98-5,
"Reporting on the Costs of Start-Up Activities." SOP 98-5 requires companies to
expense the costs of start-up activities and organization costs as incurred. In
general, SOP 98-5 is effective for fiscal years beginning after December 15,
1998. Accrue believes the adoption of SOP 98-5 will not have a material impact
on its results of operations.
In June 1998, the FASB issued Statement of Financial Accounting Standard
No. 133, or SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including derivative instruments embedded in other
contracts, and hedging activities. SFAS No. 133 is effective for all fiscal
quarters beginning after June 15, 1999. Accrue does not expect SFAS No. 133 to
have a significant effect on its financial condition or results of operations.
In December 1998, the Accounting Standards Executive Committee, or AcSEC,
issued Statement of Position 98-9, or SOP 98-9, modification of SOP 97-2,
"Software Revenue Recognition," with Respect to Certain Transactions. SOP 98-9
amends SOP 97-2 to require that an entity recognize revenue for multiple element
arrangements by means of the "residual method" when (1) there is vendor-specific
objective evidence, or VSOE, of the fair values of all the undelivered elements
that are not accounted for by means of long-term contract accounting, and (2)
VSOE of fair value does not exist for one or more of the delivered elements, and
(3) all revenue recognition criteria of SOP 97-2 and SOP 98-9
F-11
<PAGE> 95
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
will be effective for transactions that are entered into in fiscal years
beginning after March 15, 1999. Retroactive application is prohibited. Accrue
does not expect SOP 98-9 to have any effect on its results of operations.
NOTE 3 -- BALANCE SHEET COMPONENTS:
ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
MARCH 31,
--------------
1998 1999
---- ------
<S> <C> <C>
Accounts receivable.................................... $767 $1,741
Less: Allowance for sales returns and doubtful
accounts............................................. (23) (105)
---- ------
$744 $1,636
==== ======
</TABLE>
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
MARCH 31,
---------------
1998 1999
----- ------
<S> <C> <C>
Computer equipment.................................... $ 426 $ 700
Software.............................................. 75 167
Furniture and fixtures................................ 133 153
Leasehold improvements................................ 7 7
----- ------
641 1,027
Less: Accumulated depreciation and amortization....... (159) (330)
----- ------
$ 482 $ 697
===== ======
</TABLE>
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
MARCH 31,
------------
1998 1999
---- ----
<S> <C> <C>
Compensation............................................ $ 75 $196
Accrued royalties....................................... 19 206
Sales tax............................................... -- 150
Other................................................... 149 93
---- ----
$243 $645
==== ====
</TABLE>
F-12
<PAGE> 96
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 4 -- COMMITMENTS:
On February 3, 1999, Accrue entered into a noncancelable operating lease
for its office facility for the three year period April 1, 1999 to March 31,
2002. Minimum future lease payments under this agreement are as follows:
<TABLE>
<CAPTION>
OPERATING
YEAR ENDED MARCH 31, LEASE
-------------------- ---------
<S> <C>
2000........................................................ $264
2001........................................................ 278
2002........................................................ 293
----
$835
====
</TABLE>
Rent expense was $98, $178 and $178 in fiscal years 1997, 1998 and 1999,
respectively.
NOTE 5 -- LONG-TERM DEBT:
In September 1997, Accrue entered into a loan and security agreement with a
financial institution under which Accrue can borrow up to an aggregate amount of
$2,000. The total agreement includes a revolving line of credit (revolving line)
for up to $1,000 and an equipment line of credit (equipment line) for up to
$1,000. The revolving line consists of advances against eligible accounts
receivable in an aggregate amount not to exceed the total of the committed
revolving line or the borrowing base, whichever is less, minus any outstanding
letters of credit. Advances against the revolving line bear interest at the
bank's prime rate (7.75% at March 31, 1999) plus 0.5% and are due in monthly
payments. At March 31, 1999, there have been no advances against the revolving
line.
The equipment line consists of advances for acquisition of equipment
through June 18, 1998. Each advance bears interest at the bank's prime rate
(7.75% at March 31, 1999) plus 1% and is due in 36 monthly principal and
interest payments. The revolving line and equipment line mature on June 18, 2001
and are collateralized by all assets of Accrue, including receivables, equipment
and intellectual property.
At March 31, 1999, future minimum payments under the equipment line are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------
<S> <C>
2000........................................................ $ 136
2001........................................................ 145
2002........................................................ 24
-----
Total principal amounts due....................... 305
Less current portion........................................ (136)
-----
Long-term portion........................................... $ 169
=====
</TABLE>
Under these agreements, Accrue is required to comply with certain
covenants, among which are minimum quick ratios, debt to net worth ratios,
tangible net worth ratios and
F-13
<PAGE> 97
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
profitability. Accrue was not in compliance with the aforementioned minimum
quick ratios or the tangible net worth requirements. However, the financial
institution provided a waiver for these instances of non-compliance.
NOTE 6 -- SUBORDINATED CONVERTIBLE NOTES PAYABLE:
In January 1998, Accrue received commitments to purchase $1,000 of
convertible subordinated promissory notes from venture capitalists. All
principal and accrued interest, at 6% per annum, is due 180 calendar days from
the date of each note. Accrue had the right to draw down the notes in increments
of at least $100 and $1,000 was drawn down. On June 2, 1998 the $1,000
subordinated promissory notes were converted into 461 shares of Series D
preferred stock at $2.17 per share.
NOTE 7 -- STOCKHOLDERS' EQUITY:
CONVERTIBLE PREFERRED STOCK
The following is a summary of Series A-E ("Preferred Stock") convertible
preferred stock authorized, issued and outstanding:
<TABLE>
<CAPTION>
SHARES ISSUED AND
OUTSTANDING AT MARCH 31,
SHARES --------------------------
SERIES AUTHORIZED 1997 1998 1999
------ ---------- ------ ------ ------
<S> <C> <C> <C> <C>
A.................................. 750 743 743 743
B.................................. 2,000 1,845 1,845 1,845
C.................................. 550 490 513 513
D.................................. 1,000 -- -- 929
E.................................. 5,250 -- -- 5,003
----- ----- ----- -----
9,550 3,078 3,101 9,033
===== ===== ===== =====
</TABLE>
Authorized shares of Preferred Stock of 450 remaining undesignated.
DIVIDENDS
The holders of shares of Series A, Series B, Series C, Series D and Series
E Preferred Stock are entitled to receive noncumulative dividends at the per
share rate equal to $0.07, $0.22, $0.28, $0.22 and $0.10, respectively per share
of the purchase price per annum, payable when and as declared by the Board of
Directors. For any other dividends or distributions, the outstanding shares of
Preferred Stock shall participate with common stock on an as converted basis. As
of March 31, 1999, no dividends have been declared.
LIQUIDATION
In the event of any liquidation, dissolution or winding up of Accrue,
either voluntary or involuntary, the holders of Series A, Series B, Series C,
Series D and Series E preferred stock shall be entitled to receive, prior and in
preference to any distribution of any assets of Accrue to the holders of common
stock, an amount per share equal to the sum of
F-14
<PAGE> 98
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(i) $0.70, $2.17, $2.80, $2.17 and $1.00, respectively, for each outstanding
share of Preferred Stock and (ii) an amount equal to declared but unpaid
dividends on such shares. Thereafter, the remaining assets or property
distributable upon such liquidation shall be divided pro rata among the holders
of common stock.
CONVERSION
Each share of Series A, Series B and Series E preferred stock is
convertible, at the option of the holder, into shares of common stock at the
conversion rate of 1:1. Each share of Series C and Series D preferred stock is
convertible, at the option of the holder, into shares of common stock at the
conversion rate of 1.314:1 and 2.17:1, respectively. Each share of Preferred
Stock shall automatically be converted into shares of common stock immediately
upon the earlier of the closing of a firm commitment or an underwritten public
offering in which the public offering results in not less than $15,000 to Accrue
and the per share price to the public which is at least $9.00.
VOTING
The holder of each share of Preferred Stock is entitled to the number of
votes equal to the number of shares of common stock into which each share of
Preferred Stock could be converted on the record date for the vote or consent of
shareholders, except as otherwise required by law, and has voting rights and
powers equal to the voting rights and powers of the common stockholders.
COMMON STOCK
Holders of common stock are entitled to dividends as and when declared by
the Board of Directors subject to the prior rights of the preferred
stockholders. Each share of common stock has the right to one vote. No dividends
have been declared or paid as of March 31, 1999.
Accrue has reserved common stock for issuance of Preferred Stock as
follows:
<TABLE>
<CAPTION>
SHARES RESERVED AT
MARCH 31,
------------------------
SERIES 1997 1998 1999
------ ----- ----- ------
<S> <C> <C> <C>
A............................................. 750 750 750
B............................................. 2,000 2,000 2,000
C............................................. 550 550 724
D............................................. -- -- 2,170
E............................................. -- -- 5,250
----- ----- ------
3,300 3,300 10,894
===== ===== ======
</TABLE>
F-15
<PAGE> 99
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
COMMON STOCK WARRANT
In May 1996, Accrue issued a warrant to purchase 350 shares of common stock
of Accrue at an exercise price of $0.70 per share for $4 in cash. The warrant
exercise period expires May 2001. Accrue has reserved common stock for issuance
upon exercise of this warrant.
STOCK OPTION PLAN
Under Accrue's 1996 Stock Option Plan ("the Plan"), as amended, Accrue is
authorized to issue up to 6,130 shares of common stock. Under the Plan,
incentive options to purchase Accrue's common stock may be granted to employees
at prices not lower than fair market value at the date of grant, as determined
by the Board of Directors. Non-qualified stock options may be granted to
employees, directors and consultants, at prices not lower than 85% of fair
market value at the date of grant, as determined by the Board of Directors. The
Board also has the authority to set the term of the options (no longer than ten
years from date of grant). Options granted generally vest over four years.
Unexercised options expire 30 days after termination of employment with Accrue.
During 1999, Accrue granted an immediately exercisable option to purchase
1,606 shares of common stock to an officer. The option was exercised in October
1998. In connection with the exercise, Accrue received a promissory note
receivable agreement from the officer for $193. The note bears interest at 5.06%
per annum and is payable in full on October 1, 2002. Under the terms of the
agreement, the shares issued are subject to repurchase by Accrue at a rate of
1/4 one year subsequent to the date of purchase and 1/48 thereafter. At March
31, 1999, 1,606 shares were subject to repurchase.
STOCK-BASED COMPENSATION
During fiscal year 1999, Accrue issued stock purchase rights and options to
certain employees under the Plan with exercise prices below the deemed fair
market value of Accrue's common stock at the date of grant. In accordance with
the requirements of APB 25, Accrue has recorded unearned compensation for the
differences between the purchase price of stock issued to employees under stock
purchase rights or the exercise price of the stock options and the deemed fair
market value Accrue's stock at the date of grant. This unearned compensation is
amortized to expense over the period during which Accrue's right to repurchase
the stock lapses or options become exercisable, generally four years. At March
31, 1999, Accrue has recorded unearned compensation related to these options in
the total amount of $6,020, of which $1,294 had been amortized to expense during
fiscal year 1999.
F-16
<PAGE> 100
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
If the stock-based compensation for the year ended March 31, 1999 had been
allocated across the relevant functional expense categories within operating
expenses, the allocation would be as follows:
<TABLE>
<CAPTION>
MARCH 31,
1999
---------
<S> <C>
Research and development.................................... $ 475
Sales and marketing......................................... 374
General and administrative.................................. 445
------
$1,294
======
</TABLE>
1996 STOCK PLAN ACTIVITY
Activity under the Plan is as follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
------------------------------------------------
WEIGHTED
SHARES AVERAGE
AVAILABLE NUMBER EXERCISE AGGREGATE EXERCISE
FOR GRANT OF SHARES PRICE PRICE PRICE
--------- --------- ------------- --------- --------
<S> <C> <C> <C> <C> <C>
Shares reserved.......... 1,750
Options granted.......... (1,012) 1,012 $0.01 - $0.28 $ 30 $0.03
------ ------ -----
Balances, March 31,
1997................... 738 1,012 $0.01 - $0.28 30 $0.03
Shares reserved.......... 400
Options granted.......... (1,029) 1,029 $0.28 - $0.35 315 $0.31
Options exercised........ -- (416) $0.01 - $0.35 (24) $0.06
Options canceled......... 278 (278) $0.01 - $0.35 (48) $0.17
------ ------ -----
Balances, March 31,
1998................... 387 1,347 $0.01 - $0.35 273 $0.20
Shares reserved.......... 3,980
Options granted.......... (3,368) 3,368 $0.12 - $0.75 611 $0.18
Options exercised........ -- (2,328) $0.01 - $0.35 (321) $0.14
Options canceled......... 519 (519) $0.01 - $0.35 (107) $0.21
------ ------ -----
Balances, March 31,
1999................... 1,518 1,868 $0.01 - $0.75 $ 456 $0.24
====== ====== =====
</TABLE>
F-17
<PAGE> 101
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table summarizes information with respect to stock options
outstanding at March 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS CURRENTLY
---------------------------------------------------- EXERCISABLE
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE OPTIONS EXERCISE
PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 0.01 144 9.42 $0.01 39 $0.01
$ 0.12 1,049 9.56 $0.12 34 $0.12
$0.22 - $0.35 337 9.45 $0.32 51 $0.32
$0.50 - $0.75 338 9.96 $0.63 -- --
----- ---
1,868 124
===== ===
</TABLE>
At March 31, 1997, 1998 and 1999 vested options to purchase zero, 196 and
124 shares of common stock, respectively, were unexercised.
The following information is presented in accordance with the disclosure
requirements of SFAS 123. The fair value of each option grant to employees has
been estimated on the date of grant using the minimum value method with the
following weighted average assumptions used for grants:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rates.................. 6.60% 6.19% 4.91%
Expected life............................. 5 years 5 years 5 years
Expected dividends........................ -- -- --
</TABLE>
The weighted average fair value of the options granted was $0.01, $0.08 and
$0.14 per share for the years ended March 31, 1997, 1998 and 1999, respectively.
Had compensation expense for the stock plans been determined based on the
fair value at the grant date for options granted in 1997, 1998 and 1999,
consistent with the provisions of SFAS 123, the pro forma net loss would have
been reported as follows:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Net loss -- as reported.................. $(1,927) $(3,921) $(6,643)
Net loss -- pro forma.................... $(1,928) $(3,931) $(6,679)
Net loss per share -- as reported........ $ (0.72) $ (1.37) $ (2.06)
Net loss per share -- pro forma.......... $ (0.72) $ (1.37) $ (2.07)
</TABLE>
Such pro forma disclosures may not be representative of future compensation
cost because options generally vest over several years and additional grants are
made each year.
NOTE 8 -- PROFIT SHARING PLAN:
Accrue sponsors a 401(k) Profit Sharing Plan covering all of its domestic
employees. Under this plan, participating employees may elect to contribute up
to 20% of their cash
F-18
<PAGE> 102
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
compensation, subject to certain limitations. Accrue may elect to make
contributions to the plan at the discretion of the Board of Directors. No
contributions have been made by Accrue as of March 31, 1999. All employee
contributions are 100% vested.
NOTE 9 -- INCOME TAXES:
At March 31, 1999, Accrue has federal and state net operating loss
carryforwards of approximately $9,970 and $10,260, respectively, available to
offset future regular and alternative minimum taxable income, if any. In
addition, Accrue has federal and state tax credits of approximately $410 and
$180, respectively, to offset future tax liabilities, if any. These operating
loss carryforwards and credits will expire between 2003 to 2014, if not utilized
beforehand.
For federal and state tax purposes, a portion of Accrue's net operating
loss carryforwards may be subject to certain limitations on utilization in case
of a change in ownership, as defined by federal and state tax law.
Temporary differences which give rise to significant portions of deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
MARCH 31,
------------------
1998 1999
------- -------
<S> <C> <C>
Deferred tax assets and liabilities:
Net operating loss carry forwards.................. $ 2,147 $ 4,297
Capitalized start up costs......................... 231 155
Research and development credit.................... 369 593
Other.............................................. (8) 170
------- -------
2,739 5,215
Valuation allowance................................ (2,739) (5,215)
------- -------
$ -- $ --
======= =======
</TABLE>
Accrue has recorded a full valuation allowance due to uncertainties
concerning the recovery of the deferred tax assets. The valuation allowance
increased by $957, $1,782 and $2,476 in 1997, 1998 and 1999, respectively.
NOTE 10 -- SIGNIFICANT CUSTOMER AND GEOGRAPHIC INFORMATION:
Accrue has adopted the Financial Accounting Standards Board's Statements of
Financial Accounting Standards No. 131, or SFAS 131, "Disclosure about Segments
of an Enterprise and Related Information," effective for fiscal years beginning
after December 31, 1997.
F-19
<PAGE> 103
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Accrue has one reportable segment. Management uses one measurement of
profitability for its business. Accrue markets its products and related services
to customers in many industries in the United States and Europe. Revenue by
geographic region is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
---- ------ -------
<S> <C> <C> <C>
United States............................. $182 $1,107 $ 2,832
Foreign................................... -- 13 120
---- ------ -------
$182 $1,120 $ 2,952
==== ====== =======
</TABLE>
Two customers individually accounted for 81% and 10% of revenue in 1997. No
customer individually accounted for more than 10% of revenue in 1998 and 1999.
NOTE 11 -- SUBSEQUENT EVENTS:
INCENTIVE PLANS
On May 23, 1999, the board of directors and stockholders approved the 1999
Employee Stock Purchase Plan and the 1999 Directors' Option Plan. Accrue intends
for the Employee Stock Purchase Plan to qualify under Section 423 of the
Internal Revenue code of 1986, as amended. The Directors' Option Plan provides
for automatic grant of an option to purchase 50 shares of common stock upon
election of each non-employee director and an additional option to purchase 5
shares of common stock, annually thereafter. Accrue reserved 500 shares of
common stock for issuance under the 1999 Employee Stock Purchase Plan and 200
shares of common stock for issuance under the 1999 Directors' Option Plan.
Accrue also reserved an additional 500 shares of common stock for issuance under
the 1996 Plan.
INITIAL PUBLIC OFFERING
On May 23, 1999, the Board of Directors authorized Accrue to undertake an
initial public offering (IPO) of Accrue's common stock. In addition, the
articles of incorporation were amended and restated to provide for (i) the
automatic conversion of Preferred Stock into common stock at an IPO price of at
least $7.00 per share and net proceeds of $15,000, and (ii) concurrently with
the closing of the IPO, the authorization of 75,000 shares of common stock and
5,000 shares of Preferred Stock.
LINE OF CREDIT
On May 25, 1999, Accrue entered into an irrevocable commitment with a
financial institution for a working capital line of credit under which Accrue
can borrow up to an aggregate of $2,000. This line of credit will replace the
$1,000 revolving line in Note 5 and expires in May 2000. This line of credit has
a borrowing base of the lessor of 80% of eligible accounts receivable or $2,000.
Advances against the line of credit bear interest at prime plus 1% to prime plus
5%, depending upon certain conditions. In connection with the line of credit
agreement, Accrue has a commitment fee of $15 and has granted the
F-20
<PAGE> 104
ACCRUE SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
financial institution a warrant to purchase the number of shares derived as
follows: 7% multiplied by $2,000 divided by the exercise price. The exercise
price is defined as the IPO price if the IPO is executed by October 31, 1999. If
Accrue does not execute an IPO by October 31, 1999, (i) the price of the warrant
will revert to the latest Preferred Stock financing cost and (ii) if Accrue has
not executed a separate equity financing, as defined, then the financial
institution will also be eligible for an additional number of shares derived as
follows: 3% multiplied by $2,000 divided by the exercise price, as defined. The
warrant expires on the later of May 25, 2004 or five years from the date of the
IPO.
F-21
<PAGE> 105
[COLOR ARTWORK]
INSIDE BACK COVER
SLIDE 5
[Shows the Web traffic analysis cycle by following arrows in circular pattern
starting with Set Site Goals and ending with Qualitative Analysis.]
E-Business initiatives are underway in some form at almost every major
corporation today. However, understanding what is required to create, deploy and
implement an effective Web site is not the only part of planning an e-business
initiative. Corporations must also consider how to measure effectiveness through
collection of Web site customer activity, storing this huge volume of detailed
data, flexibly analyzing it and providing quantitative reporting of the data in
order to answer the critical business question: "How do we attract more
visitors, obtain higher customer loyalty and achieve greater Web site revenues?"
<PAGE> 106
LOGO
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 107
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 us in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
SEC registration fee........................................ $ 11,510
NASD filing fee............................................. 4,640
Nasdaq National Market listing fee.......................... *
Printing and engraving expenses............................. 150,000
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky qualification fees and expenses.................... 3,000
Transfer Agent and Registrar fees........................... 10,000
Miscellaneous fees and expenses............................. *
--------
Total............................................. *
========
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "Delaware Law")
authorizes a court to award, or a corporation's Board of Directors to grant,
indemnity 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 XI of our Certificate of
Incorporation (Exhibit 3.2 hereto) and Article VI of Accrue's Bylaws (Exhibit
3.3 hereto) provide for indemnification of our directors, officers, employees
and other agents to the maximum extent permitted by Delaware Law. In addition,
we have entered into Indemnification Agreements (Exhibit 10.7 hereto) with its
officers and directors. The Underwriting Agreement (Exhibit 1.1) also provides
for cross-indemnification among us and the Underwriters with respect to certain
matters, including matters arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since our incorporation in February 1996, we have sold and issued the
following securities:
1. On February 21, 1996, we issued a convertible promissory note in
the principal amount of $100,000 to one accredited investor. The note was
canceled and converted into shares of Series A preferred stock on May 3,
1996.
II-1
<PAGE> 108
2. On April 4, 1996, we issued a convertible promissory note in the
principal amount of $50,000 to one accredited investor. The note was
canceled and converted into shares of Series A preferred stock on May 3,
1996.
3. On May 3, 1996, we issued to Organic Online, Inc. 2,685,714 shares
of common stock in connection with the transfer by Organic of certain
intellectual property to us.
4. On May 3, 1996, we issued 742,857 shares of our Series A preferred
stock to ten accredited investors for an aggregate cash consideration of
$519,999.90, which included conversion of the convertible promissory notes
described in items 1 and 2 above into a total of 214,285 shares of our
Series A preferred stock.
5. On May 3, 1996, we issued a warrant to purchase 350,000 shares of
our common stock to one accredited investor for an aggregate cash
consideration of $3,500.
6. On September 18, 1996, we issued 922,586 shares of our Series B
preferred stock to eight accredited investors for an aggregate cash
consideration of $2,002,011.62.
7. On November 27, 1996, we issued 922,586 shares of our Series B
preferred stock and 490,367 shares of our Series C preferred stock to two
accredited investors for an aggregate cash consideration of $3,375,039.22.
8. On November 26, 1996, we issued 22,500 shares of our Series C
preferred stock to one accredited investor for an aggregate cash
consideration of $63,000.
9. On March 2, 1998, we issued subordinated convertible promissory
notes in the aggregate principal amount of $100,000 to two accredited
investors. The notes were canceled and converted into shares of our Series
D preferred stock on June 2, 1998.
10. On March 24, 1998, we issued subordinated convertible promissory
notes in the aggregate principal amount of $400,000 to two accredited
investors. The notes were canceled and converted into shares of our Series
D preferred stock on June 2, 1998.
11. On April 14, 1998, we issued subordinated convertible promissory
notes in the aggregate principal amount of $100,000 to two accredited
investors. The notes were canceled and converted into shares of our Series
D preferred stock on June 2, 1998.
12. On April 28, 1998, we issued subordinated convertible promissory
notes in the aggregate principal amount of $300,000 to two accredited
investors. The notes were canceled and converted into shares of our Series
D preferred stock on June 2, 1998.
13. On May 27, 1998, we issued subordinated convertible promissory
notes in the aggregate principal amount of $100,000 to two accredited
investors. The notes were canceled and converted into shares of our Series
D preferred stock on June 2, 1998.
14. On June 2, 1998, we issued 695,902 shares of our Series D
preferred stock to four accredited investors for an aggregate cash
consideration of $1,510,107.34,
II-2
<PAGE> 109
which includes conversion of the subordinated convertible promissory notes
described in items 10-14 above into a total of 460,829 shares of our Series
D preferred stock.
15. On July 10, 1998, we issued 232,719 shares of our Series D
preferred stock to two accredited investors for an aggregate cash
consideration of $505,000.23.
16. On August 17, 1998, we issued 5,003,017 shares of our Series E
preferred stock to seven accredited investors for an aggregate cash
consideration of $5,003,017.
17. On May 25, 1999, we issued a warrant to purchase 14,000 shares of
our common stock to a financial institution in connection with a working
line of credit.
18. Since inception through May 25, 1999 we have granted a total of
5,287,216 options and stock purchase rights to purchase our common stock,
excluding options returned to our stock plans, with a weighted average
price of $0.53 to a number of our employees, directors and consultants.
The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of such
Securities Act as transactions by an issuer not involving any public
offering. In addition, certain issuances described in Item 18 were deemed
exempt from registration under the Securities Act in reliance upon Rule 701
promulgated under the Securities Act. 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 and warrants issued in such transactions. All recipients had
adequate access, through their relationships with Accrue, to information
about Accrue.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1 Form of Underwriting Agreement dated , 1999 (subject
to negotiation).
3.1 Amended and Restated Certificate of Incorporation of Accrue.
3.2 Amended and Restated Certificate of Incorporation of Accrue
(proposed).
3.3 Amended and Restated Bylaws of Accrue.
4.1+ Specimen Stock Certificate.
5.1 Opinion of Venture Law Group regarding the legality of the
common stock being registered (proposed).
10.1 Form of Indemnification Agreement between Accrue and each of
its officers and directors.
10.2 Common Stock Purchase Warrant issued to Sterling Pagot
Company on May 3, 1996, exercisable for 350,000 shares of
Common Stock and letter amendment dated May 23, 1999 between
Accrue and Sterling Payot Company.
10.3 1996 Stock Plan, as amended August 13, 1998 and May 23,
1999, and form of agreement thereunder.
10.4 Employment letter agreement effective February 1996 between
Accrue and Bob Page.
</TABLE>
II-3
<PAGE> 110
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.5** Software License Agreement dated July 1, 1997 between Accrue
and VI/Visualize, Inc.
10.6 Loan and Security Agreement dated September 19, 1997 between
Accrue and Silicon Valley Bank, as amended by the Loan
Modification Agreement dated April 9, 1999.
10.7 Settlement Agreement dated March 3, 1998 between Accrue and
Simon Roy, as amended by Amendment No. 1 dated April 29,
1998.
10.8 Settlement Agreement and Mutual Release dated May 13, 1998
between Accrue and William R. Stein.
10.9 Employment letter agreement dated June 16, 1998 between
Accrue and Richard D. Kreysar.
10.10 Second Amended and Restated Investor Rights Agreement dated
August 13, 1998.
10.11 Employment letter agreement dated November 5, 1998 between
Accrue and Brett Kilpatrick.
10.12 Standard Sublease dated February 25, 1999 between Accrue and
Premisys Communications, Inc., as sublessor, and Lease
Agreement dated June 4, 1998 between Premisys
Communications, Inc. and Aetna Life Insurance Company, as
master landlord, for 48634 Milmont Drive, Fremont, CA 94538.
10.13** OEM Agreement dated March 29, 1999 between Accrue and
Informix Software, Inc.
10.14 1999 Employee Stock Purchase Plan dated May 23, 1999 and
form of agreement thereunder.
10.15 1999 Directors' Stock Option Plan dated May 23, 1999 and
form of agreement thereunder.
10.16+ Loan and Security Agreement with Silicon Valley Bank dated
, 1999.
10.17 Warrant Purchase Agreement with Silicon Valley Bank dated
May 25, 1999.
10.18 Employment letter agreement dated March 3, 1999 between
Accrue and Gregory C. Walker
23.1 Consent of Independent Accountants
23.2 Consent of Attorney (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-6)
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
</TABLE>
- -------------------------
+ To be supplied by amendment.
** Confidential treatment requested as to certain portions of this exhibit.
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
II-4
<PAGE> 111
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, 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 Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 112
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 Palo Alto, State of
California on May 26, 1999.
ACCRUE SOFTWARE, INC.
By: /s/ RICHARD D. KREYSAR
-----------------------------------
Richard D. Kreysar
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Richard D.
Kreysar and Gregory Walker, and each of them, as his attorney-in-fact, with full
power of substitution, for him in any and all capacities, to sign any and all
amendments to this Registration Statement (including post-effective amendments),
and any and all Registration Statements filed pursuant to Rule 462 under the
Securities Act of 1933, as amended, in connection with or related to the
offering contemplated by this Registration Statement and its amendments, if any,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorney to any and
all amendments to said Registration Statement.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ RICHARD D. KREYSAR President and May 26, 1999
- ------------------------------------------------ Chief Executive Officer
Richard D. Kreysar (Principal Executive
Officer)
/s/ GREGORY C. WALKER Chief Financial Officer May 26, 1999
- ------------------------------------------------ (Principal Financial and
Gregory C. Walker Accounting Officer)
/s/ CHRISTOPHER J. O'BRIEN Director May 26, 1999
- ------------------------------------------------
Christopher J. O'Brien
/s/ JONATHAN NELSON Director May 26, 1999
- ------------------------------------------------
Jonathan Nelson
</TABLE>
II-6
<PAGE> 113
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT SMELICK Director May 26, 1999
- ------------------------------------------------
Robert Smelick
Director May , 1999
- ------------------------------------------------
Max D. Hopper
/s/ A. BROOKE SEAWELL Director May 26, 1999
- ------------------------------------------------
A. Brooke Seawell
</TABLE>
II-7
<PAGE> 114
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of Accrue Software, Inc.
In connection with our audits of the financial statements of Accrue
Software, Inc. as of March 31, 1998 and 1999, and for each of the three years in
the period ended March 31, 1999, which financial statements are included in the
Prospectus, we have also audited the financial statement schedule listed in Item
16(b) herein. In our opinion, this financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
PricewaterhouseCoopers LLP
San Jose, California
May 17, 1999
S-1
<PAGE> 115
SCHEDULE II
ACCRUE SOFTWARE, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF WRITE- BALANCE AT
YEAR ADDITIONS OFFS END OF YEAR
-------------- --------- ---------- -------------
<S> <C> <C> <C> <C>
Allowance for sales returns and
doubtful accounts:
Year end March 31, 1997........... $ -- $ -- $ -- $ --
Year end March 31, 1998........... -- 23 -- 23
Year end March 31, 1999........... 23 237 (155) 105
Valuation allowance for deferred tax
assets:
Year end March 31, 1997........... $ -- $ 957 $ -- $ 957
Year end March 31, 1998........... 957 1,782 -- 2,739
Year end March 31, 1999........... 2,739 2,476 -- 5,215
</TABLE>
S-2
<PAGE> 116
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1 Form of Underwriting Agreement dated , 1999 (subject
to negotiation).
3.1 Amended and Restated Certificate of Incorporation of Accrue.
3.2 Amended and Restated Certificate of Incorporation of Accrue
(proposed).
3.3 Amended and Restated Bylaws of Accrue.
4.1+ Specimen Stock Certificate.
5.1 Opinion of Venture Law Group regarding the legality of the
common stock being registered (proposed).
10.1 Form of Indemnification Agreement between Accrue and each of
its officers and directors.
10.2 Common Stock Purchase Warrant issued to Sterling Payot
Company on May 3, 1996, exercisable for 350,000 shares of
Common Stock and letter amendment dated May 23, 1999 between
Accrue and Sterling Payot Company.
10.3 1996 Stock Plan, as amended August 13, 1998 and May 23,
1999, and form of agreement thereunder.
10.4 Employment letter agreement effective February 1996 between
Accrue and Bob Page.
10.5** Software License Agreement dated July 1, 1997 between Accrue
and VI/Visualize, Inc.
10.6 Loan and Security Agreement dated September 19, 1997 between
Accrue and Silicon Valley Bank, as amended by the Loan
Modification Agreement dated April 9, 1999.
10.7 Settlement Agreement dated March 3, 1998 between Accrue and
Simon Roy, as amended by Amendment No. 1 dated April 29,
1998.
10.8 Settlement Agreement and Mutual Release dated May 13, 1998
between Accrue and William R. Stein.
10.9 Employment letter agreement dated June 16, 1998 between
Accrue and Richard D. Kreysar.
10.10 Second Amended and Restated Investor Rights Agreement dated
August 13, 1998.
10.11 Employment letter agreement dated November 5, 1998 between
Accrue and Brett Kilpatrick.
10.12 Standard Sublease dated February 25, 1999 between Accrue and
Premisys Communications, Inc., as sublessor, and Lease
Agreement dated June 4, 1998 between Premisys
Communications, Inc. and Aetna Life Insurance Company, as
master landlord, for 48634 Milmont Drive, Fremont, CA 94538.
10.13** OEM Agreement dated March 29, 1999 between Accrue and
Informix Software, Inc.
10.14 1999 Employee Stock Purchase Plan dated May 23, 1999 and
form of agreement thereunder.
</TABLE>
<PAGE> 117
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.15 1999 Directors' Stock Option Plan dated May 23, 1999 and
form of agreement thereunder.
10.16+ Loan and Security Agreement with Silicon Valley Bank dated
, 1999.
10.17 Warrant Purchase Agreement with Silicon Valley Bank dated
May 25, 1999.
10.18 Employment letter agreement dated March 3, 1999 between
Accrue and Gregory C. Walker
23.1 Consent of Independent Accountants
23.2 Consent of Attorney (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-6)
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
</TABLE>
- -------------------------
+ To be supplied by amendment.
** Confidential treatment requested as to certain portions of this exhibit.
<PAGE> 1
EXHIBIT 1.1
Draft of May 21, 1999
UNDERWRITING AGREEMENT
___________1999
BancBoston Robertson Stephens Inc.
Thomas Weisel Partners LLC
As Representatives of the several Underwriters
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, CA 94104
Ladies and Gentlemen:
INTRODUCTORY. Accrue Software, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of [___] shares (the "Firm Shares")
of its Common Stock, par value $0.001 per share (the "Common Shares"). In
addition, the Company has granted to the Underwriters an option to purchase up
to an additional [___] Common Shares (the "Option Shares") as provided in
Section 2. The Firm Shares and, if and to the extent such option is exercised,
the Option Shares are collectively called the "Shares". BancBoston Robertson
Stephens Inc., Thomas Weisel Partners LLC, and Wit Capital Corporation have
agreed to act as representatives of the several Underwriters (in such capacity,
the "Representatives") in connection with the offering and sale of the Shares.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-1.
(File No. 333-[___]), which contains a form of prospectus to be used in
connection with the public offering and sale of the Shares. Such registration
statement, as amended, including the financial statements, exhibits and
schedules thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933 and the rules and regulations
promulgated thereunder (collectively, the "Securities Act"), including any
information deemed to be a part thereof at the time of effectiveness pursuant to
Rule 430A or Rule 434 under the Securities Act, is called the "Registration
Statement". Any registration statement filed by the Company pursuant to Rule
462(b) under the Securities Act is called the "Rule 462(b) Registration
Statement", and from and after the date and time of filing of the Rule 462(b)
Registration Statement the term "Registration Statement" shall include the Rule
462(b) Registration Statement. Such
<PAGE> 2
prospectus, in the form first used by the Underwriters to confirm sales of the
Shares, is called the "Prospectus"; provided, however, if the Company has, with
the consent of BancBoston Robertson Stephens Inc., elected to rely upon Rule 434
under the Securities Act, the term "Prospectus" shall mean the Company's
prospectus subject to completion (each, a "preliminary prospectus") dated [___]
(such preliminary prospectus is called the "Rule 434 preliminary prospectus"),
together with the applicable term sheet (the "Term Sheet") prepared and filed by
the Company with the Commission under Rules 434 and 424(b) under the Securities
Act and all references in this Agreement to the date of the Prospectus shall
mean the date of the Term Sheet. All references in this Agreement to the
Registration Statement, the Rule 462(b) Registration Statement, a preliminary
prospectus, the Prospectus or the Term Sheet, or any amendments or supplements
to any of the foregoing, shall include any copy thereof filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
System ("EDGAR").
The Company hereby confirms its respective agreements with the
Underwriters as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents, warrants and covenants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has complied
to the Commission's satisfaction with all requests of the Commission for
additional or supplemental information. No stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed
complied in all material respects with the Securities Act and, if filed by
electronic transmission pursuant to EDGAR (except as may be permitted by
Regulation S-T under the Securities Act), was identical to the copy thereof
delivered to the Underwriters for use in connection with the offer and sale of
the Shares. Each of the Registration Statement, any Rule 462(b) Registration
Statement and any post-effective amendment thereto, at the time it became
effective and at all subsequent times, complied and will comply in all material
respects with the Securities Act and did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Prospectus, as amended or supplemented, as of its date and at all subsequent
times, did not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
The representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements thereto,
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by the Representatives
2
<PAGE> 3
expressly for use therein. There are no contracts or other documents required to
be described in the Prospectus or to be filed as exhibits to the Registration
Statement which have not been described or filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representatives one complete conformed copy of the Registration
Statement and of each consent and certificate of experts filed as a part
thereof, and conformed copies of the Registration Statement (without exhibits)
and preliminary prospectuses and the Prospectus, as amended or supplemented, in
such quantities and at such places as the Representatives have reasonably
requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company. The Company has
not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a preliminary prospectus, the
Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) Authorization of the Shares. The Shares to be purchased by the
Underwriters from the Company have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(g) No Material Adverse Change. Subsequent to the respective dates as of
which information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (any such change or effect, where the
context so requires, is called a "Material Adverse Change" or a "Material
Adverse Effect"); (ii) the Company and its subsidiaries, considered as one
entity, have not incurred any material liability or obligation, indirect, direct
or contingent, not in the ordinary course of business nor entered into any
material transaction or agreement not in the ordinary course of business; and
(iii) there has been no dividend or distribution of any kind declared, paid or
made by the Company or, except for dividends paid to the Company or other
subsidiaries, any of its subsidiaries on any class of capital
3
<PAGE> 4
stock or repurchase or redemption by the Company or any of its subsidiaries of
any class of capital stock.
(h) Independent Accountants. PricewaterhouseCoopers LLP who have
expressed their opinion with respect to the financial statements (which term as
used in this Agreement includes the related notes thereto) [and supporting
schedules] filed with the Commission as a part of the Registration Statement and
included in the Prospectus, are independent public or certified public
accountants as required by the Securities Act.
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the consolidated financial position of the
Company and its subsidiaries as of and at the dates indicated and the results of
their operations and cash flows for the periods specified. [The supporting
schedules included in the Registration Statement present fairly the information
required to be stated herein.] Such financial statements [and supporting
schedules] have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved, except
as may be expressly stated in the related notes thereto. No other financial
statements or supporting schedules are required to be included in the
Registration Statement. The financial data set forth in the Prospectus under the
captions "Summary--Summary Selected Financial Data", "Selected Financial Data"
and "Capitalization" fairly present the information set forth therein on a basis
consistent with that of the audited financial statements contained in the
Registration Statement.
(j) Company's Accounting System. The Company and each of its
subsidiaries maintain a system of accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(k) Subsidiaries of the Company. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the subsidiaries listed in Exhibit 21 to the Registration Statement.
(l) Incorporation and Good Standing of the Company and its Subsidiaries.
Each of the Company and its subsidiaries has been duly organized and is validly
existing as a corporation or limited liability company, as the case may be, in
good standing under the laws of the jurisdiction in which it is organized with
full corporate power and authority to own its properties and conduct its
business as described in the prospectus, and is duly qualified to do business as
a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification.
(m) Capitalization of the Subsidiaries. All the outstanding shares of
capital stock of each subsidiary have been duly and validly authorized and
issued and are fully paid and nonassessable, and, except as otherwise set forth
in the Prospectus, all
4
<PAGE> 5
outstanding shares of capital stock of the subsidiaries are owned by the Company
either directly or through wholly owned subsidiaries free and clear of any
security interests, claims, liens or encumbrances.
(n) No Prohibition on Subsidiaries from Paying Dividends or Making Other
Distributions. No subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on such subsidiary's capital stock, from repaying to the Company
any loans or advances to such subsidiary from the Company or from transferring
any of such subsidiary's property or assets to the Company or any other
subsidiary of the Company, except as described in or contemplated by the
Prospectus.
(o) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in the
Prospectus). The Common Shares (including the Shares) conform in all material
respects to the description thereof contained in the Prospectus. All of the
issued and outstanding Common Shares have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in compliance with
federal and state securities laws. None of the outstanding Common Shares were
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company. There are
no authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of the
Company or any of its subsidiaries other than those accurately described in the
Prospectus. The description of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options or other rights granted thereunder,
set forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(p) Stock Exchange Listing. The Shares have been approved for listing on
the Nasdaq National Market, subject only to official notice of issuance.
(q) No Consents, Approvals or Authorizations Required. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the Underwriters in the manner contemplated here and in the Prospectus, (ii) by
the National Association of Securities Dealers, LLC and (iii) by the federal and
provincial laws of Canada.
(r) Non-Contravention of Existing Instruments Agreements. Neither the
issue and sale of the Shares nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, (i) the charter or by-laws
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of the Company or any of its subsidiaries, (ii) the terms of any indenture,
contract, lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument to which the
Company or any of its subsidiaries is a party or bound or to which its or their
property is subject or (iii) any statute, law, rule, regulation, judgment, order
or decree applicable to the Company or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or any of its subsidiaries or any
of its or their properties.
(s) No Defaults or Violations. Neither the Company nor any subsidiary is
in violation or default of (i) any provision of its charter or by-laws, (ii) the
terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument to which it is a party or bound or to which its property is subject
or (iii) any statute, law, rule, regulation, judgment, order or decree of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or such subsidiary or any
of its properties, as applicable, except any such violation or default which
would not, singly or in the aggregate, result in a Material Adverse Change
except as otherwise disclosed in the Prospectus.
(t) No Actions, Suits or Proceedings. Except as otherwise disclosed in
the Prospectus, no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of its subsidiaries or its or their property is pending or, to the best
knowledge of the Company, threatened that (i) could reasonably be expected to
have a Material Adverse Effect on the performance of this Agreement or the
consummation of any of the transactions contemplated hereby or (ii) could
reasonably be expected to result in a Material Adverse Effect.
(u) All Necessary Permits, Etc. The Company and each subsidiary possess
such valid and current certificates, authorizations or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies necessary to
conduct their respective businesses, and neither the Company nor any subsidiary
has received any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could result in a Material Adverse Change.
(v) Title to Properties. The Company and each of its subsidiaries has
good and marketable title to all the properties and assets reflected as owned in
the financial statements referred to in Section 1(i) above (or elsewhere in the
Prospectus), in each case free and clear of any security interests, mortgages,
liens, encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not materially
interfere with the use made or proposed to be made of such property by the
Company or such subsidiary. The real property, improvements, equipment and
personal property held under lease by the Company or any subsidiary are held
under valid and enforceable leases, with such exceptions as are not material and
do not materially interfere with the use made or proposed to be made
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<PAGE> 7
of such real property, improvements, equipment or personal property by the
Company or such subsidiary.
(w) Tax Law Compliance. The Company and its subsidiaries have filed all
necessary federal, state and foreign income and franchise tax returns and have
paid all taxes required to be paid by any of them and, if due and payable, any
related or similar assessment, fine or penalty levied against any of them. The
Company has made adequate charges, accruals and reserves in the applicable
financial statements referred to in Section 1(i) above in respect of all
federal, state and foreign income and franchise taxes for all periods as to
which the tax liability of the Company or any of its subsidiaries has not been
finally determined. The Company is not aware of any tax deficiency that has been
or might be asserted or threatened against the Company that could result in a
Material Adverse Change.
(x) Intellectual Property Rights. Each of the Company and its
subsidiaries owns or possesses adequate rights to use all patents, patent rights
or licenses, inventions, collaborative research agreements, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which are
necessary to conduct its businesses as described in the Registration Statement
and Prospectus; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not result in a
Material Adverse Change that is not otherwise disclosed in the Prospectus; the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by others with
respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights; and the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a Material Adverse Change. There is no
claim being made against the Company regarding patents, patent rights or
licenses, inventions, collaborative research, trade secrets, know-how,
trademarks, service marks, trade names or copyrights. The Company and its
subsidiaries do not in the conduct of their business as now or proposed to be
conducted as described in the Prospectus infringe or conflict with any right or
patent of any third party, or any discovery, invention, product or process which
is the subject of a patent application filed by any third party, known to the
Company or any of its subsidiaries, which such infringement or conflict is
reasonably likely to result in a Material Adverse Change.
(y) Year 2000 Preparedness. There are no issues related to the
Company's, or any of its subsidiaries', preparedness for the Year 2000 that (i)
are of a character required to be described or referred to in the Registration
Statement or Prospectus by the Securities Act which have not been accurately
described in the Registration Statement or Prospectus or (ii) might reasonably
be expected to result in any Material Adverse Change or that might materially
affect their properties, assets or rights. All internal computer systems and
each Constituent Component (as defined below) of those systems and all
computer-related products and each Constituent Component (as defined below) of
those products of the Company and each of its subsidiaries fully comply with
Year 2000 Qualification Requirements. "Year 2000 Qualifications
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Requirements" means that the internal computer systems and each Constituent
Component (as defined below) of those systems and all computer-related products
and each Constituent Component (as defined below) of those products of the
Company and each of its Subsidiaries (i) have been reviewed to confirm that they
store, process (including sorting and performing mathematical operations,
calculations and computations), input and output data containing date and
information correctly regardless of whether the date contains dates and times
before, on or after January 1, 2000, (ii) have been designated to ensure date
and time entry recognition and calculations, and date data interface values that
reflect the century, (iii) accurately manage and manipulate data involving dates
and times, including single century formulas and multi-century formulas, and
will not cause an abnormal ending scenario within the application or generate
incorrect values or invalid results involving such dates, (iv) accurately
process any date rollover, and (v) accept and respond to two-digit year date
input in a manner that resolves any ambiguities as to the century. "Constituent
Component" means all software (including operating systems, programs, packages
and utilities), firmware, hardware, networking components, and peripherals
provided as part of the configuration. The Company has inquired of material
vendors as to their preparedness for the Year 2000 and has disclosed in the
Registration Statement or Prospectus any issues that might reasonably be
expected to result in any Material Adverse Change.
(z) No Transfer Taxes or Other Fees. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the shares.
(aa) Company Not an "Investment Company". The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and after receipt of
payment for the Shares will not be, an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act and will conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(bb) Insurance. Each of the Company and its subsidiaries are insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company
and its subsidiaries against theft, damage, destruction, acts of vandalism and
earthquakes, general liability and Directors and Officers liability. The Company
has no reason to believe that it or any subsidiary will not be able (i) to renew
its existing insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change. Neither of the Company nor any
subsidiary has been denied any insurance coverage which it has sought or for
which it has applied.
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(cc) Labor Matters. To the best of Company's knowledge, no labor
disturbance by the employees of the Company or any of its subsidiaries exists or
is imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers, value added
resellers, original equipment manufacturers, that might be expected to result in
a Material Adverse Change.
(dd) No Price Stabilization or Manipulation. The Company has not taken
and will not take, directly or indirectly, any action designed to or that might
be reasonably expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
(ee) Lock-Up Agreements. Each officer and director of the company and
each beneficial owner of one or more percent of the outstanding issued share
capital of the Company has agreed to sign an agreement substantially in the form
attached hereto as Exhibit A (the "Lock-up Agreements"). The Company has
provided to counsel for the Underwriters a complete and accurate list of all
securityholders of the Company and the number and type of securities held by
each securityholder. The Company has provided to counsel for the Underwriters
true, accurate and complete copies of all of the Lock-up Agreements presently in
effect or effected hereby. The Company hereby represents and warrants that it
will not release any of its officers, directors or other stockholders from any
Lock-up Agreements currently existing or hereafter effected without the prior
written consent of BancBoston Robertson Stephens Inc.
(ff) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any subsidiary or any other
person required to be described in the Prospectus which have not been described
as required.
(gg) No Unlawful Contributions or Other Payments. Neither the Company
nor any of its subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any subsidiary, has made any contribution or
other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any law or of the character required to be
disclosed in the Prospectus.
(hh) Environmental Laws. (i) The Company is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Change, (ii) the Company has received no
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus; (iii) the Company will not be required to make
future material capital expenditures to comply with Environmental Laws and (iv)
no property which is owned, leased or occupied by the Company has been
designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et
seq.), or otherwise designated as a contaminated site under applicable state or
local law.
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(ii) ERISA Compliance. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or maintained by
the Company, its subsidiaries or their "ERISA Affiliates" (as defined below) are
in compliance in all material respects with ERISA. "ERISA Affiliate" means, with
respect to the Company or a subsidiary, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of
1986, as amended, and the regulations and published interpretations thereunder
(the "Code") of which the Company or such subsidiary is a member. No "reportable
event" (as defined under ERISA) has occurred or is reasonably expected to occur
with respect to any "employee benefit plan" established or maintained by the
Company, its subsidiaries or any of their ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company, its subsidiaries or any of their
ERISA Affiliates, if such "employee benefit plan" were terminated, would have
any "amount of unfounded benefit liabilities" (as defined under ERISA). Neither
the Company, its subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification.
(jj) Financial Projections. The statements, (including the assumptions
described therein) included in the Registration Statement and the Prospectus
under the headings "Summary of Significant Projections and Assumptions" and
"Financial Projections" (i) are within the coverage of Rule 175(b) under the Act
to the extent such data constitute forward looking statements as defined in Rule
175(c) and (ii) were made by the Company with a reasonable basis and reflect the
Company's good faith estimate of the matters described therein.
Any certificate signed by an officer of the Company and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to each Underwriter as
to the matters set forth therein.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) The Firm Shares. The Company agrees to issue and sell to the several
Underwriters the Firm Shares upon the terms herein set forth. On the basis of
the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company the respective number of
Firm Shares set forth opposite their names on Schedule A. The purchase price per
Firm Share to be paid by the several Underwriters to the Company shall be $[___]
per share.
(b) The First Closing Date. Delivery of the Firm Shares to be purchased
by the Underwriters and payment therefor shall be made by the Company and the
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Representatives at 6:00 a.m. San Francisco time, at the offices of Venture Law
Group, 2800 Sand Hill Road, Menlo Park, CA 94025 (or at such other place as may
be agreed upon among the Representatives and the Company), (i) on the third
(3rd) full business day following the first day that Shares are traded, (ii) if
this Agreement is executed and delivered after 1:30 P.M., San Francisco time,
the fourth (4th) full business day following the day that this Agreement is
executed and delivered or (iii) at such other time and date not later that seven
(7) full business days following the first day that Shares are traded as the
Representatives and the Company may determine (or at such time and date to which
payment and delivery shall have been postponed pursuant to Section 8 hereof),
such time and date of payment and delivery being herein called the "Closing
Date;" provided, however, that if the Company has not made available to the
Representatives copies of the Prospectus within the time provided in Section
3(e) hereof, the Representatives may, in their sole discretion, postpone the
Closing Date until no later that two (2) full business days following delivery
of copies of the Prospectus to the Representatives.
(c) The Option Shares; the Second Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of [___] Option Shares from the Company at the
purchase price per share to be paid by the Underwriters for the Firm Shares. The
option granted hereunder is for use by the Underwriters solely in covering any
over-allotments in connection with the sale and distribution of the Firm Shares.
The option granted hereunder may be exercised at any time upon notice by the
Representatives to the Company, which notice may be given at any time within 30
days from the date of this Agreement. The time and date of delivery of the
Option Shares, if subsequent to the First Closing Date, is called the "Second
Closing Date" and shall be determined by the Representatives and shall not be
earlier than three nor later than five full business days after delivery of such
notice of exercise. If any Option Shares are to be purchased, each Underwriter
agrees, severally and not jointly, to purchase the number of Option Shares
(subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Option Shares to be purchased as the number of Firm Shares set forth
on Schedule A opposite the name of such Underwriter bears to the total number of
Firm Shares. The Representatives may cancel the option at any time prior to its
expiration by giving written notice of such cancellation to the Company.
(d) Public Offering of the Shares. The Representatives hereby advise the
Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representatives, in their sole judgment, have
determined is advisable and practicable.
(e) Payment for the Shares. Payment for the Shares shall be made at the
First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer in immediately available-funds to the order of the Company.
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It is understood that the Representatives have been authorized,
for their own account and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Shares and any Option Shares the Underwriters have agreed to purchase.
BancBoston Robertson Stephens Inc., individually and not as the Representatives
of the Underwriters, may (but shall not be obligated to) make payment for any
Shares to be purchased by any Underwriter whose funds shall not have been
received by the Representatives by the First Closing Date or the Second Closing
Date, as the case may be, for the account of such Underwriter, but any such
payment shall not relieve such Underwriter from any of its obligations under
this Agreement.
(f) Delivery of the Shares. The Company shall deliver, or cause to be
delivered, a credit representing the Firm Shares to an account or accounts at
The Depository Trust Company, as designated by the Representatives for the
accounts of the Representatives and the several Underwriters at the First
Closing Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company shall
also deliver, or cause to be delivered, a credit representing the Option Shares
the Underwriters have agreed to purchase at the First Closing Date (or the
Second Closing Date, as the case may be), to an account or accounts at The
Depository Trust Company as designated by the Representatives for the accounts
of the Representatives and the several Underwriters, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the
purchase price therefor. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
(g) Delivery of Prospectus to the Underwriters. Not later than 12:00
noon on the second business day following the date the Shares are released by
the Underwriters for sale to the public, the Company shall deliver or cause to
be delivered copies of the Prospectus in such quantities and at such places as
the Representatives shall request.
SECTION 3. COVENANTS OF THE COMPANY. The Company further covenants and
agrees with each Underwriter as follows:
(a) Registration Statement Matters. The Company will (i) use its best
efforts to cause a registration statement on Form 8-A (the "Form 8-A
Registration Statement") as required by the Securities Exchange Act of 1934 (the
"Exchange Act") to become effective simultaneously with the Registration
Statement, (ii) use its best efforts to cause the Registration Statement to
become effective or, if the procedure in Rule 430A of the Securities Act is
followed, to prepare and timely file with the Commission under Rule 424(b) under
the Securities Act a Prospectus in a form approved by the Representatives
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Securities Act and (iii)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which the Representatives shall not previously have been advised
and furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Securities Act. If
the Company elects to rely on Rule 462(b) under the Securities Act, the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) under the Securities Act prior to the time
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confirmations are sent or given, as specified by Rule 462(b)(2) under the
Securities Act, and shall pay the applicable fees in accordance with Rule 111
under the Securities Act.
(b) Securities Act Compliance. The Company will advise the
Representatives promptly (i) when the Registration Statement or any
post-effective amendment thereto shall have become effective, (ii) of receipt of
any comments from the Commission, (iii) of any request of the Commission for
amendment of the Registration Statement or for supplement to the Prospectus or
for any additional information and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the use
of the Prospectus or of the institution of any proceedings for that purpose. The
Company will use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(c) Blue Sky Compliance. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(d) Amendments and Supplements to the Prospectus and Other Securities
Act Matters. The Company will comply with the Securities Act and the Exchange
Act, and the rules and regulations of the Commission thereunder, so as to permit
the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Representatives or counsel for the Underwriters, it becomes
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances existing at the time the Prospectus
is delivered to a purchaser, not misleading, or, if it is necessary at any time
to amend or supplement the Prospectus to comply with any law, the Company
promptly will prepare and file with the Commission, and furnish at its own
expense to the Underwriters and to dealers, an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances when it
is so delivered, be misleading, or so that the Prospectus will comply with the
law.
(e) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the period
beginning on the date hereof and ending on the later of the First Closing Date
or such date, as in the opinion of counsel for the Underwriters, the Prospectus
is no longer required by law to be delivered in connection with sales by an
Underwriter or dealer (the
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"Prospectus Delivery Period"), as many copies of the Prospectus and any
amendments and supplements thereto as the Representatives may request.
(f) Insurance. The Company shall (i) obtain Directors and Officers
liability insurance in the minimum amount of $10 million which shall apply to
the offering contemplated hereby and (ii) shall cause BancBoston Robertson
Stephens Inc. to be added as an additional insured to such policy in respect of
the offering contemplated hereby.
(g) Notice of Subsequent Events. If at any time during the ninety (90)
day period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Company Shares has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(h) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Shares sold by it in the manner described under the caption "Use of
Proceeds" in the Prospectus.
(i) Transfer Agent. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Company Shares.
(j) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month period
ending [___] that satisfies the provisions of Section 11(a) of the Securities
Act.
(k) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under the
Exchange Act.
(l) Agreement Not to Offer or Sell Additional Securities. The Company
will not, without the prior written consent of BancBoston Robertson Stephens
Inc., for a period of 180 days following the date of the Prospectus, offer, sell
or contract to sell, or otherwise dispose of or enter into any transaction which
is designed to, or could be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, or announce the offering of, any other Common Shares or any
securities convertible into, or exchangeable for, Common Shares; provided,
however, that the Company may (i) issue and sell Common Shares pursuant to any
director or employee stock option plan, stock ownership plan or dividend
reinvestment plan of the Company in effect at the date of the Prospectus and
described in the Prospectus so long as none of those shares may be transferred
on during the period of 180 days from
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the date that the Registration Statement is declared effective (the "Lock-Up
Period") and the Company shall enter stop transfer instructions with its
transfer agent and registrar against the transfer of any such Common Shares and
(ii) the Company may issue Common Shares issuable upon the conversion of
securities or the exercise of warrants outstanding at the date of the Prospectus
and described in the Prospectus.
(m) Future Reports to the Representatives. During the period of five
years hereafter the Company will furnish to the Representatives (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
or certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the National Association of Securities Dealers, LLC
or any securities exchange; and (iii) as soon as available, copies of any report
or communication of the Company mailed generally to holders of its capital
stock.
SECTION 4. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein on the First Closing Date and, with respect to the Option
Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Option Shares, as of the Second Closing Date as
though then made, to the timely performance by the of its covenants and other
obligations hereunder, and to each of the following additional conditions:
(a) Compliance with Registration Requirements; No Stop Order; No
Objection from the National Association of Securities Dealers, LLC. The
Registration Statement shall have become effective prior to the execution of
this Agreement, or at such later date as shall be consented to in writing by
you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of Underwriters' Counsel; and the National Association
of Securities Dealers, LLC shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(b) Corporate Proceedings. All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
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(c) No Material Adverse Change [or Ratings Agency Change]. Subsequent to
the execution and delivery of this Agreement and prior to the First Closing
Date, or the Second Closing Date, as the case may be,
(i) there shall not have been any Material Adverse Change in the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse and
that makes it, in your sole judgment, impracticable or inadvisable to
proceed with the public offering of the Shares as contemplated by the
Prospectus; and
(ii) there shall not have occurred any downgrading, nor shall any notice
have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities
by any "nationally recognized statistical rating organization," as such
term is defined for purposes of Rule 436(g)(2) under the Act.
(d) Opinion of Counsel for the Company. You shall have received on the
First Closing Date, or the Second Closing Date, as the case may be, an opinion
of Venture Law Group, counsel for the Company substantially in the form of
Exhibit B attached hereto, dated the First Closing Date, or the Second Closing
Date, addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters.
Counsel rendering the opinion contained in Exhibit B may rely as to
questions of law not involving the laws of the United States or the State of
California and Delaware upon opinions of local counsel, and as to questions of
fact upon representations or certificates of officers of the Company, and of
government officials, in which case their opinion is to state that they are so
relying and that they have no knowledge of any material misstatement or
inaccuracy in any such opinion, representation or certificate. Copies of any
opinion, representation or certificate so relied upon shall be delivered to you,
as Representatives of the Underwriters, and to Underwriters' Counsel.
[(e) Opinion of Patent Counsel for the Company. You shall have received
on the First Closing Date, or the Second Closing Date, as the case may be, an
opinion of [NAME OF PATENT COUNSEL], patent counsel for the Company
substantially in the form of Exhibit C attached hereto.]
(f) Opinion of Counsel for the Underwriters. You shall have received on
the First Closing Date or the Second Closing Date, as the case may be, an
opinion of Brobeck, Phleger & Harrison LLP, substantially in the form of Exhibit
D hereto. The Company shall have furnished to such counsel such documents as
they may have requested for the purpose of enabling them to pass upon such
matters.
(g) Accountants' Comfort Letter. You shall have received on the First
Closing Date and on the Second Closing Date, as the case may be, a letter from
PricewaterhouseCoopers LLP addressed to the Underwriters, dated the First
Closing Date or the Second Closing Date, as the case may be, confirming that
they are independent
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<PAGE> 17
certified public accountants with respect to the Company within the meaning of
the Act and the applicable published Rules and Regulations and based upon the
procedures described in such letter delivered to you concurrently with the
execution of this Agreement (herein called the "Original Letter"), but carried
out to a date not more than four (4) business days prior to the First Closing
Date or the Second Closing Date, as the case may be, (i) confirming, to the
extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the First Closing Date or the Second Closing Date, as
the case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise from
that set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. The Original Letter from
PricewaterhouseCoopers LLP shall be addressed to or for the use of the
Underwriters in form and substance satisfactory to the Underwriters and shall
(i) represent, to the extent true, that they are independent certified public
accountants with respect to the Company within the meaning of the Act and the
applicable published Rules and Regulations, (ii) set forth their opinion with
respect to their examination of the consolidated balance sheet of the Company as
of March 31, 1999 and related consolidated statements of operations,
shareholders' equity, and cash flows for the twelve (12) months ended March 31,
1999, (iii) state that PricewaterhouseCoopers LLP has performed the procedures
set out in Statement on Auditing Standards No. 71 ("SAS 71") for a review of
interim financial information and providing the report of PricewaterhouseCoopers
LLP as described in SAS 71 on the financial statements for each of the quarters
in the ____ quarter period ended March 31, 1999 (the "Quarterly Financial
Statements"), (iv) state that in the course of such review, nothing came to
their attention that leads them to believe that any material modifications need
to be made to any of the Quarterly Financial Statements in order for them to be
in compliance with generally accepted accounting principles consistently applied
across the periods presented, and address other matters agreed upon by
PricewaterhouseCoopers LLP and you. In addition, you shall have received from
PricewaterhouseCoopers LLP a letter addressed to the Company and made available
to you for the use of the Underwriters stating that their review of the
Company's system of internal accounting controls, to the extent they deemed
necessary in establishing the scope of their examination of the Company's
consolidated financial statements as of March 31, 1999, did not disclose any
weaknesses in internal controls that they considered to be material weaknesses.
(h) Officers' Certificate. You shall have received on the First Closing
Date and the Second Closing Date, as the case may be, a certificate of the
Company, dated the First Closing Date or the Second Closing Date, as the case
may be, signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this Agreement
are true and correct, as if made on and as of the First Closing Date or
the Second Closing Date, as the case may be, and the Company has
complied with all the
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<PAGE> 18
agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to the First Closing Date or the Second Closing
Date, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to be
included therein by the Securities Act and in all material respects
conformed to the requirements of the Securities Act the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
did not and does not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and, since the effective
date of the Registration Statement, there has occurred no event required
to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
(iv) Subsequent to the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been (a) any
material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and
its subsidiaries considered as one enterprise, (b) any transaction that
is material to the Company and its subsidiaries considered as one
enterprise, except transactions entered into in the ordinary course of
business, (c) any obligation, direct or contingent, that is material to
the Company and its subsidiaries considered as one enterprise, incurred
by the Company or its subsidiaries, except obligations incurred in the
ordinary course of business, (d) any change in the capital stock or
outstanding indebtedness of the Company or any of its subsidiaries that
is material to the Company and its subsidiaries considered as one
enterprise, (e) any dividend or distribution of any kind declared, paid
or made on the capital stock of the Company or any of its subsidiaries,
or (f) any loss or damage (whether or not insured) to the property of
the Company or any of its subsidiaries which has been sustained or will
have been sustained which has a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one
enterprise.
(i) Lock-up Agreement from Certain Stockholders of the Company. The
Company shall have obtained and delivered to you an agreement substantially in
the form of Exhibit A attached hereto from each officer and director of the
Company and each beneficial owner of one or more percent of the outstanding
issued share capital of the Company.
(j) Stock Exchange Listing. The Shares shall have been approved for
listing on the Nasdaq National Market, subject only to official notice of
issuance.
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(k) Compliance with Prospectus Delivery Requirements. The Company shall
have complied with the provisions of Sections 2(g) and 3(e) hereof with respect
to the furnishing of Prospectuses.
(l) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, as the case may be, the Representatives and counsel
for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Shares as contemplated herein, or in
order to evidence the accuracy of any of the representations and warranties, or
the satisfaction of any of the conditions or agreements, herein contained.
If any condition specified in this Section 4 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 5 (Payment of Expenses),
Section 6 (Reimbursement of Underwriters' Expenses), Section 7 (Indemnification
and Contribution) and Section 10 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.
SECTION 5. PAYMENT OF EXPENSES. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Common Shares (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Shares to the Underwriters, (iv) all fees and expenses of the
Company's counsel, independent public or certified public accountants and other
advisors, (v) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution of the Registration
Statement (including financial statements, exhibits, schedules, consents and
certificates of experts), each preliminary prospectus and the Prospectus, and
all amendments and supplements thereto, and this Agreement, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriters
in connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Shares for offer and
sale under the state securities or blue sky laws or the provincial securities
laws of Canada or any other country, and, if requested by the Representatives,
preparing and printing a "Blue Sky Survey", an "International Blue Sky Survey"
or other memorandum, and any supplements thereto, advising the Underwriters of
such qualifications, registrations and exemptions, (vii) the filing fees
incident to, and the reasonable fees and expenses of counsel for the
Underwriters in connection with, the National Association of Securities Dealers,
LLC review and approval of the Underwriters' participation in the offering and
distribution of the Common Shares, (viii) the fees and expenses associated with
listing the Common Shares on the Nasdaq National Market, (ix) all costs and
expenses incident to the preparation and undertaking of "road show" preparations
to be made to prospective investors, and (x) all other fees, costs and expenses
referred to in Item 13 and Item 14 of Part II of the Registration
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<PAGE> 20
Statement. Except as provided in this Section 5, Section 6, and Section 7
hereof, the Underwriters shall pay their own expenses, including the fees and
disbursements of their counsel.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement is
terminated by the Representatives pursuant to Section 4, Section 7, Section 8,
or Section 9, or if the sale to the Underwriters of the Shares on the First
Closing Date is not consummated because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or to comply with any
provision hereof, the Company agrees to reimburse the Representatives and the
other Underwriters (or such Underwriters as have terminated this Agreement with
respect to themselves), severally, upon demand for all out-of-pocket expenses
that shall have been reasonably incurred by the Representatives and the
Underwriters in connection with the proposed purchase and the offering and sale
of the Shares, including but not limited to fees and disbursements of counsel,
printing expenses, travel expenses, postage, facsimile and telephone charges.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification of the Underwriters. The Company agrees to indemnify
and hold harmless each Underwriter, its officers and employees, and each person,
if any, who controls any Underwriter within the meaning of the Securities Act
and the Exchange Act against any loss, claim, damage, liability or expense, as
incurred, to which such Underwriter or such controlling person may become
subject, under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company, which consent shall not be unreasonably withheld),
insofar as such loss, claim, damage, liability or expense (or actions in respect
thereof as contemplated below) arises out of or is based (i) upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, including any information
deemed to be a part thereof pursuant to Rule 430A or Rule 434 under the
Securities Act, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading; or (ii) upon any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; or (iii)
in whole or in part upon any inaccuracy in the representations and warranties of
the Company contained herein; or (iv) in whole or in part upon any failure of
the Company to perform its obligations hereunder or under law; or (v) any act or
failure to act or any alleged act or failure to act by any Underwriter in
connection with, or relating in any manner to, the Shares or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon any matter
covered by clause (i), (ii), (iii) or (iv) above, provided that the Company
shall not be liable under this clause (v) to the extent that a court of
competent jurisdiction shall have determined by a final judgment that such loss,
claim, damage, liability or action resulted directly from any such acts or
failures to act
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undertaken or omitted to be taken by such Underwriter through its bad faith or
willful misconduct; and to reimburse each Underwriter and each such controlling
person for any and all expenses (including the fees and disbursements of counsel
chosen by BancBoston Robertson Stephens Inc.) as such expenses are reasonably
incurred by such Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that the foregoing
indemnity agreement shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Representatives expressly for use in the Registration
Statement, any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); and provided, further, that with respect to any preliminary
prospectus, the foregoing indemnity agreement shall not inure to the benefit of
any Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The indemnity agreement
set forth in this Section 7(a) shall be in addition to any liabilities that the
Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon 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, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company by the
Representatives expressly for use therein; and to reimburse the Company, or any
such director, officer or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. The indemnity
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agreement set forth in this Section 7(b) shall be in addition to any liabilities
that each Underwriter may otherwise have.
(c) Information Provided by the Underwriters. The Company hereby
acknowledges that the only information that the Underwriters have furnished to
the Company expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) are the
statements set forth in the table in the paragraphs and table preceding the
paragraph titled "Option to Purchase Additional Shares," and in the paragraph
titled "Stabilization" in the Prospectus; and the Underwriters confirm that such
statements are correct.
(d) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 7 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party (BancBoston Robertson Stephens Inc. in the case of Section
7(b) and Section 8), representing the indemnified parties who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying party.
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<PAGE> 23
(e) Settlements. The indemnifying party under this Section 7 shall not
be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes (i) an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(f) Contribution. If the indemnification provided for in this Section 7
is unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law then each indemnifying party shall contribute to such amount paid or payable
by such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bears to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
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<PAGE> 24
The Company and Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 7(f) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7(f). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 7(f) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (f), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this Section 7(f)
to contribute are several in proportion to their respective underwriting
obligations and not joint.
(g) Timing of Any Payments of Indemnification. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than thirty
(30) days of invoice to the indemnifying party.
(h) Survival. The indemnity and contribution agreements contained in
this Section 7 and the representation and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor to
any Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 7.
(i) Acknowledgements of Parties. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Securities Act and the Exchange Act.
SECTION 8. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Shares that
it or they have agreed to purchase hereunder on such date, and the aggregate
number of Common Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused
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<PAGE> 25
to purchase does not exceed 10% of the aggregate number of the Shares to be
purchased on such date, the other Underwriters shall be obligated, severally, in
the proportions that the number of Firm Common Shares set forth opposite their
respective names on Schedule A bears to the aggregate number of Firm Shares set
forth opposite the names of all such non-defaulting Underwriters, or in such
other proportions as may be specified by the Representatives with the consent of
the non-defaulting Underwriters, to purchase the Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date. If, on the First Closing Date or the Second Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
and the aggregate number of Shares with respect to which such default occurs
exceeds 10% of the aggregate number of Shares to be purchased on such date, and
arrangements satisfactory to the Representatives and the Company for the
purchase of such Shares are not made within 48 hours after such default, this
Agreement shall terminate without liability of any party to any other party
except that the provisions of Section 4, and Section 7 shall at all times be
effective and shall survive such termination. In any such case either the
Representatives or the Company shall have the right to postpone the First
Closing Date or the Second Closing Date, as the case may be, but in no event for
longer than seven days in order that the required changes, if any, to the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed
to include any person substituted for a defaulting Underwriter under this
Section 8. Any action taken under this Section 8 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
SECTION 9. TERMINATION OF THIS AGREEMENT. Prior to the First Closing
Date, this Agreement may be terminated by the Representatives by notice given to
the Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq Stock Market or trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the National Association of
Securities Dealers, LLC; (ii) a general banking moratorium shall have been
declared by any of federal, New York, Delaware or California authorities; (iii)
there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective change in United States' or international
political, financial or economic conditions, as in the judgment of the
Representatives is material and adverse and makes it impracticable or
inadvisable to market the Common Shares in the manner and on the terms described
in the Prospectus or to enforce contracts for the sale of securities; (iv) in
the judgment of the Representatives there shall have occurred any Material
Adverse Change; or (v) the Company shall have sustained a loss by strike, fire,
flood, earthquake, accident or other calamity of such character as in the
judgment of the Representatives may interfere materially with the conduct of the
business and operations of the Company regardless of whether or not such loss
shall have been insured. Any termination pursuant to this Section 9 shall be
without liability on the part
25
<PAGE> 26
of (a) the Company to any Underwriter, except that the Company shall be
obligated to reimburse the expenses of the Representatives and the Underwriters
pursuant to Sections 5 and 6 hereof, (b) any Underwriter to the Company, or (c)
of any party hereto to any other party except that the provisions of Section 7
shall at all times be effective and shall survive such termination.
SECTION 10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Shares sold hereunder and any termination of this Agreement.
SECTION 11. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
BANCBOSTON ROBERTSON STEPHENS INC.
555 California Street
San Francisco, California 94104
Facsimile: (415) 676-2696
Attention: General Counsel
If to the Company:
Accrue Software, Inc.
48634 Milmont Drive
Freemont, California 94538
Facsimile: (510) 580-4500
Attention: Richard D. Kreysar
With a copy to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94024
Attention: John V. Bautista
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
26
<PAGE> 27
SECTION 12. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 9 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 7, and to their
respective successors, and no other person will have any right or obligation
hereunder. The term "successors" shall not include any purchaser of the Shares
as such from any of the Underwriters merely by reason of such purchase.
SECTION 13. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 14. GOVERNING LAW PROVISIONS.
(a) Governing Law. This agreement shall be governed by and construed in
accordance with the internal laws of the state of New York applicable to
agreements made and to be performed in such state.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the City and County of San Francisco or the
courts of the State of California in each case located in the City and County of
San Francisco (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT Corporation System, which currently
maintains a San Francisco office at 49 Stevenson Street, San Francisco,
California 94105, United States of America, as its agent to receive service of
process or other legal summons for purposes of any such suit, action or
proceeding that may be instituted in any state or federal court in the City and
County of San Francisco.
[(c) Waiver of Immunity. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise
27
<PAGE> 28
be entitled in the Specified Courts, and with respect to any Related Judgment,
each party waives any such immunity in the Specified Courts or any other court
of competent jurisdiction, and will not raise or claim or cause to be pleaded
any such immunity at or in respect of any such Related Proceeding or Related
Judgment, including, without limitation, any immunity pursuant to the United
States Foreign Sovereign Immunities Act of 1976, as amended.]
SECTION 15. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
[The remainder of this page has been intentionally left blank.]
28
<PAGE> 29
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
ACCRUE SOFTWARE, INC.
By:__________________________
[Title]
The foregoing Underwriting Agreement is hereby confirmed and accepted by
the Representatives as of the date first above written.
BANCBOSTON ROBERTSON STEPHENS INC.
THOMAS WEISEL PARTNERS LLC
On their behalf and on behalf of each of the several underwriters named in
Schedule A hereto.
BY BANCBOSTON ROBERTSON STEPHENS INC.
By:_________________________________
Authorized Signatory
29
<PAGE> 30
SCHEDULE A
<TABLE>
<CAPTION>
Number of Firm
Common Shares
Underwriters To be Purchased
<S> <C>
BANCBOSTON ROBERTSON STEPHENS INC............... [___]
THOMAS WEISEL PARTNERS LLC ..................... [___]
Total................................... [___]
</TABLE>
S-A
<PAGE> 31
EXHIBIT A
LOCK-UP AGREEMENT
BancBoston Robertson Stephens Inc.
Thomas Weisel Partners LLC
As Representatives of the Several Underwriters
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, California 94104
RE: Accrue Software, Inc. (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares
of Common Stock of the Company ("Common Stock") or securities convertible into
or exchangeable or exercisable for Common Stock. The Company proposes to carry
out a public offering of Common Stock (the "Offering") for which you will act as
the representatives (the "Representatives") of the underwriters. The undersigned
recognizes that the Offering will be of benefit to the undersigned and will
benefit the Company by, among other things, raising additional capital for its
operations. The undersigned acknowledges that you and the other underwriters are
relying on the representations and agreements of the undersigned contained in
this letter in carrying out the Offering and in entering into underwriting
arrangements with the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that
the undersigned will not offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to (collectively, a
"Disposition") any shares of Common Stock, any options or warrants to purchase
any shares of Common Stock or any securities convertible into or exchangeable
for shares of Common Stock (collectively, "Securities") now owned or hereafter
acquired directly by such person or with respect to which such person has or
hereafter acquires the power of disposition, otherwise than (i) as a bona fide
gift or gifts, provided the donee or donees thereof agree in writing to be bound
by this restriction, (ii) as a distribution to partners or shareholders of such
person, provided that the distributees thereof agree in writing to be bound by
the terms of this restriction, (iii) with respect to dispositions of Common
Shares acquired on the open market or (iv) with the prior written consent of
BancBoston Robertson Stephens Inc., for a period commencing on the date hereof
and continuing to a date 180 days after the Registration Statement is declared
effective by the Securities and Exchange Commission (the "Lock-up Period"). The
foregoing restriction has been expressly agreed to preclude the holder of the
A-1
<PAGE> 32
Securities from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a Disposition of Securities
during the Lock-up Period, even if such Securities would be disposed of by
someone other than such holder. Such prohibited hedging or other transactions
would include, without limitation, any short sale (whether or not against the
box) or any purchase, sale or grant of any right (including, without limitation,
any put or call option) with respect to any Securities or with respect to any
security (other than a broad-based market basket or index) that included,
relates to or derives any significant part of its value from Securities. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of shares
of Common Stock or Securities held by the undersigned except in compliance with
the foregoing restrictions. BancBoston Robertson Stephens Inc., acting alone and
in its sole discretion, may waive any provisions of this Lock-Up Agreement
without notice to any third party
This agreement is irrevocable and will be binding on the undersigned and
the respective successors, heirs, personal representatives, and assigns of the
undersigned. In the event that the Registration Statement shall not have been
declared effective on or before September 31, 1999, this Lock-Up Agreement shall
be of no further force or effect.
Dated: _______________________________
______________________________________
Printed Name of Holder
By:___________________________________
Signature
______________________________________
Printed Name of
Person Signing (and indicate
capacity of person signing if
signing as custodian,
trustee, or on behalf
of an entity)
A-2
<PAGE> 33
EXHIBIT B
MATTERS TO BE COVERED IN THE OPINION OF COMPANY COUNSEL
(i) The Company and each Significant Subsidiary (as that term is defined
in Regulation S-X of the Act) has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation;
(ii) The Company and each Significant Subsidiary has the corporate power
and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus;
(iii) The Company and each Significant Subsidiary is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction, if any, in which the ownership or leasing of its
properties or the conduct of its business requires such qualification,
except where the failure to be so qualified or be in good standing would
not have a Material Adverse Effect. To such counsel's knowledge, the
Company does not own or control, directly or indirectly, any
corporation, association or other entity other than [list subsidiaries];
(iv) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus under the caption "Capitalization" as
of the dates stated therein, the issued and outstanding shares of
capital stock of the Company have been duly and validly issued and are
fully paid and nonassessable, and, to such counsel's knowledge, will not
have been issued in violation of or subject to any preemptive right,
co-sale right, registration right, right of first refusal or other
similar right;
(v) All issued and outstanding shares of capital stock of each
Significant Subsidiary of the Company have been duly authorized and
validly issued and are fully paid and nonassessable, and, to such
counsel's knowledge, have not been issued in violation of or subject to
any preemptive right, co-sale right, registration right, right of first
refusal or other similar right and are owned by the Company free and
clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest;
(vi) The Firm Shares or the Option Shares, as the case may be, to be
issued by the Company pursuant to the terms of this Agreement have been
duly authorized and, upon issuance and delivery against payment therefor
in accordance with the terms hereof, will be duly and validly issued and
fully paid and nonassessable, and will not have been issued in violation
of or subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right.
(vii) The Company has the corporate power and authority to enter into
this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
B-1
<PAGE> 34
(viii) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed
and delivered by the Company and, assuming due authorization, execution
and delivery by you, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights
generally or by general equitable principles;
(ix) The Registration Statement has become effective under the Act and,
to such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or threatened under the
Securities Act;
(x) The 8-A Registration Statement complied as to form in all material
respects with the requirements of the Exchange Act; the 8-A Registration
Statement has become effective under the Exchange Act; and the Firm
Shares or the Option Shares have been validly registered under the
Securities Act and the Rules and Regulations of the Exchange Act and the
applicable rules and regulations of the Commission thereunder;
(xi) The Registration Statement and the Prospectus, and each amendment
or supplement thereto (other than the financial statements (including
supporting schedules) and financial data derived therefrom as to which
such counsel need express no opinion), as of the effective date of the
Registration Statement, complied as to form in all material respects
with the requirements of the Act and the applicable Rules and
Regulations;
(xii) The information in the Prospectus under the caption "Description
of Capital Stock," to the extent that it constitutes matters of law or
legal conclusions, has been reviewed by such counsel and is a fair
summary of such matters and conclusions; and the forms of certificates
evidencing the Common Stock and filed as exhibits to the Registration
Statement comply with Delaware law;
(xiii) The description in the Registration Statement and the Prospectus
of the charter and bylaws of the Company and of statutes are accurate
and fairly present the information required to be presented by the
Securities Act;
(xiv) To such counsel's knowledge, there are no agreements, contracts,
leases or documents to which the Company is a party of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement
which are not described or referred to therein or filed as required;
B-2
<PAGE> 35
(xv) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the
Company's indemnification obligations hereunder, concerning which no
opinion need be expressed) will not (a) result in any violation of the
Company's charter or bylaws or (b) to such counsel's knowledge, result
in a material breach or violation of any of the terms and provisions of,
or constitute a default under, any bond, debenture, note or other
evidence of indebtedness, or any lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or
instrument known to such counsel to which the Company is a party or by
which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any
order, writ or decree of any court, government or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries, or
over any of their properties or operations;
(xvi) No consent, approval, authorization or order of or qualification
with any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any of
their properties or operations is necessary in connection with the
consummation by the Company of the transactions herein contemplated,
except (i) such as have been obtained under the Securities Act, (ii)
such as may be required under state or other securities or Blue Sky laws
in connection with the purchase and the distribution of the Shares by
the Underwriters, (iii) such as may be required by the National
Association of Securities Dealers, LLC and (iv) such as may be required
under the federal or provincial laws of Canada;
(xvii) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Company or any of its
subsidiaries of a character required to be disclosed in the Registration
Statement or the Prospectus by the Securities Act, other than those
described therein;
(xviii) To such counsel's knowledge, neither the Company nor any of its
subsidiaries is presently (a) in material violation of its respective
charter or bylaws, or (b) in material breach of any applicable statute,
rule or regulation known to such counsel or, to such counsel's
knowledge, any order, writ or decree of any court or governmental agency
or body having jurisdiction over the Company or any of its subsidiaries,
or over any of their properties or operations; and
(xix) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Company Shares or
other securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company
having rights known to such counsel to registration of such shares of
Company Shares or other securities, because of the filing of the
Registration Statement by the Company have, with respect to the offering
contemplated thereby, waived such rights or such rights have expired by
reason of lapse of time following notification of the Company's intent
to file the Registration
B-3
<PAGE> 36
Statement or have included securities in the Registration Statement
pursuant to the exercise of and in full satisfaction of such rights.
(xx) The Company is not and, after giving effect to the offering and the
sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as
such term is defined in the Investment Company Act of 1940, as amended.
(xxi) To such counsel's knowledge, the Company owns or possesses
sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals, trade secrets and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary to conduct their
business as now conducted; and the expected expiration of any such
Intellectual Property Rights would not result in a Material Adverse
Effect. The Company has not received any notice of infringement or
conflict with asserted Intellectual Property Rights of others, which
infringement or conflict, if the subject of an unfavorable decision,
would result in a Material Adverse Effect. To such counsel's knowledge,
the Company's discoveries, inventions, products, or processes referred
to in the Registration Statement or Prospectus do not infringe or
conflict with any right or patent which is the subject of a patent
application known to the Company.
In addition, such counsel shall state that such counsel has participated
in conferences with officials and other representatives of the Company, the
Representatives, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not verified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the First Closing Date or Second Closing Date, as the case may be, the
Registration Statement and any amendment or supplement thereto (other than the
financial statements including supporting schedules and other financial and
statistical information derived therefrom, as to which such counsel need express
no comment) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the First Closing Date or the Second
Closing Date, as the case may be, the Registration Statement, the Prospectus and
any amendment or supplement thereto (except as aforesaid) contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
B-4
<PAGE> 37
EXHIBIT C
MATTERS TO BE COVERED IN THE OPINION OF
PATENT COUNSEL FOR THE COMPANY
Such counsel are familiar with the technology used by the Company
in its business and the manner of its use thereof and have read the Registration
Statement and the Prospectus, including particularly the portions of the
Registration Statement and the Prospectus referring to patents, trade secrets,
trademarks, service marks or other proprietary information or materials and:
(i) The Company is listed in the records of the United States Patent and
Trademark Office as the holder of record of the patents listed on a
schedule to such opinion (the "Patents") and each of the applications
listed on a schedule to such opinion (the "Applications"). To the
knowledge of such counsel, there are no claims of third parties to any
ownership interest or lien with respect to any of the Patents or
Applications. Such counsel is not aware of any material defect in form
in the preparation or filing of the Applications on behalf of the
Company. To the knowledge of such counsel, the Applications are being
pursued by the Company. To the knowledge of such counsel, the Company
owns as its sole property the Patents and pending Applications;
(ii) The Company is listed in the records of the appropriate foreign
offices as the sole holder of record of the foreign patents listed on a
schedule to such opinion (the "Foreign Patents") and each of the
applications listed on a schedule to such opinion (the "Foreign
Applications"). Such counsel knows of no claims of third parties to any
ownership interest or lien with respect to the Foreign Patents or
Foreign Applications. Such counsel is not aware of any material defect
of form in the preparation or filing of the Foreign Applications on
behalf of the Company. To the knowledge of such counsel, the Foreign
Applications are being pursued by the Company. To the knowledge of such
counsel, the Company owns as its sole property the Foreign Patents and
pending Foreign Applications;
(iii) Such counsel knows of no reason why the Patents or Foreign Patents
are not valid as issued. Such counsel has no knowledge of any reason why
any patent to be issued as a result of any Application or Foreign
Application would not be valid or would not afford the Company useful
patent protection with respect thereto;
(iv) As to the statements under the captions "Risk Factors -- Dependence
on Patents and Proprietary Rights" and "Business -- Patents and
Proprietary Rights," nothing has come to the attention of such counsel
which caused them to believe that the above-mentioned sections of the
Registration Statement, at the time the Registration Statement became
effective and at all times subsequent thereto up to and on the Closing
Date and on any later date on which Option
C-1
<PAGE> 38
Stock are to be purchased the Registration Statement and any amendment
or supplement thereto made available and reviewed by such counsel
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the Closing Date or any later
date on which the Option Stock are to be purchased, as the case may be,
the above-mentioned sections of the Registration Statement, Prospectus
and any amendment or supplement thereto made available and reviewed by
such counsel contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; and
(v) Such counsel knows of no material action, suit, claim or proceeding
relating to patents, patent rights or licenses, trademarks or trademark
rights, copyrights, collaborative research, licenses or royalty
arrangements or agreements or trade secrets, know-how or proprietary
techniques, including processes and substances, owned by or affecting
the business or operations of the Company which are pending or
threatened against the Company or any of its officers or directors.
C-2
<PAGE> 39
EXHIBIT D
MATTERS TO BE COVERED IN THE OPINION OF UNDERWRITERS' COUNSEL
(i) The Shares have been duly authorized and, upon issuance and delivery
and payment therefor in accordance with the terms of the Underwriting
Agreement, will be validly issued, fully paid and non-assessable.
(ii) The Registration Statement complied as to form in all material
respects with the requirements of the Act; the Registration Statement
has become effective under the Act and, to such counsel's knowledge, no
stop order proceedings with respect thereto have been instituted or
threatened or are pending under the Securities Act.
(iii) The 8-A Registration Statement complied as to form in all material
respects with the requirements of the Exchange Act; the 8-A Registration
Statement has become effective under the Exchange Act; and the Shares
have been validly registered under the Securities Act and the the
Exchange Act and the applicable rules and regulations of the Commission
thereunder;
(iv) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
Such counsel shall state that such counsel has reviewed the opinions
addressed to the Representatives from Venture Law Group and [Patent Counsel],
each dated the date hereof, and furnished to you in accordance with the
provisions of the Underwriting Agreement. Such opinions appear on their face to
be appropriately responsive to the requirements of the Underwriting Agreement.
In addition, such counsel shall state that such counsel has participated
in conferences with officials and other representatives of the Company, the
Representatives, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not verified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the First Closing Date or Second Closing Date, as the case may be, the
Registration Statement and any amendment or supplement thereto (other than the
financial statements including supporting schedules and other financial and
statistical information derived therefrom, as to which such counsel need express
no comment) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the First Closing Date or the Second
Closing Date, as the case may be, the Registration Statement, the Prospectus and
any amendment or supplement thereto
D-1
<PAGE> 40
(except as aforesaid) contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
D-2
<PAGE> 1
EXHIBIT 3.1
FIFTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
ACCRUE SOFTWARE, INC.
The following Fifth Amended and Restated Certificate of Incorporation of
Accrue Software, Inc. amends and restates the provisions of the Fourth Amended
and Restated Certificate of Incorporation of Accrue Software, Inc. filed with
the Secretary of State of the State of Delaware on June 2, 1998, and supersedes
the original Certificate of Incorporation and all amendments and restatements
thereto in their entirety. The original Certificate of Incorporation was filed
on February 16, 1996 under the name of Plumb, Inc.
ARTICLE I
The name of the Corporation is Accrue Software, Inc. (the "Corporation").
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or
activity for which Corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE III
(A) Classes of Stock. This Corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the Corporation is authorized to issue
is thirty million (30,000,000) shares, of which twenty million (20,000,000)
shares shall be Common Stock and ten million (10,000,000) shares shall be
Preferred Stock, each with a par value of $0.001 per share.
(B) Rights, Preferences and Restrictions of Preferred Stock. The
Preferred Stock authorized by this Certificate of Incorporation shall be divided
into series. The first series shall consist of 750,000 shares and is designated
Series A Preferred Stock. The second series shall consist of 2,000,000 shares
and is designated Series B Preferred Stock. The third series shall consist of
550,000 shares and is designated Series C Preferred Stock. The fourth series
shall consist of 1,000,000 shares and is designated Series D Preferred Stock.
The fifth series shall consist of 5,250,000 shares and is designated Series E
Preferred Stock. The Board of Directors is expressly authorized to provide for
the issue of all or any of the remaining shares of the Preferred Stock in one or
more series, and to fix the number of shares and to determine or alter for each
such series, such voting powers, full or limited, or no voting powers, and such
designations, preferences, and relative, participating, optional, or other
rights and such qualifications, limitations, or restrictions thereof, as shall
be stated and expressed in the resolution or resolutions adopted by the Board of
Directors providing for the issue of such shares and as may be permitted by the
General Corporation Law of the State of Delaware. The Board of Directors is also
expressly authorized to increase or decrease
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(but not below the number of shares of such series then outstanding) the number
of shares of any series other than the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and
the Series E Preferred Stock subsequent to the issue of shares of that series.
In case the number of shares of any such 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.
The rights, preferences, privileges, and restrictions granted to and
imposed on the Series A, Series B, Series C, Series D and Series E Preferred
Stock are set forth below in this Article III(B).
(1) Dividends. Subject to the rights and privileges of such other
series of Preferred Stock that may from time to time come into existence, the
holders of outstanding Series A Preferred Stock shall be entitled to receive in
any fiscal year, when, as and if declared by the Board of Directors, out of any
assets at the time legally available therefor, dividends in cash at the rate of
$0.07 per share (adjusted to reflect subsequent stock splits, stock dividends or
recapitalizations) of Series A Preferred Stock per annum, the holders of
outstanding Series B Preferred Stock shall be entitled to receive in any fiscal
year, when, as and if declared by the Board of Directors, out of any assets at
the time legally available therefor, dividends in cash at the rate of $0.22 per
share (adjusted to reflect subsequent stock splits, stock dividends or
recapitalizations) of Series B Preferred Stock per annum, the holders of
outstanding Series C Preferred Stock shall be entitled to receive in any fiscal
year, when, as and if declared by the Board of Directors, out of any assets at
the time legally available therefor, dividends in cash at the rate of $0.28 per
share (adjusted to reflect subsequent stock splits, stock dividends or
recapitalizations) of Series C Preferred Stock per annum, and the holders of
outstanding Series D Preferred Stock shall be entitled to receive in any fiscal
year, when, as and if declared by the Board of Directors, out of any assets at
the time legally available therefor, dividends in cash at the rate of $0.22 per
share (adjusted to reflect subsequent stock splits, stock dividends or
recapitalizations) of Series D Preferred Stock per annum, and the holders of
outstanding Series E Preferred Stock shall be entitled to receive in any fiscal
year, when, as and if declared by the Board of Directors, out of any assets at
the time legally available therefore, dividends in cash at the rate of $0.10 per
share (adjusted to reflect subsequent stock splits, stock dividends or
recapitalizations) of Series E Preferred Stock per annum, before any cash
dividend is paid on Common Stock or, if greater (as determined on a per annum
basis and an as converted basis for the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and
the Series E Preferred Stock), an amount equal to that paid on any other
outstanding shares of this Corporation. Such dividend or distribution may be
payable annually or otherwise as the Board of Directors may from time to time
determine. Dividends or distributions (other than dividends payable solely in
shares of Common Stock) may be declared and paid upon shares of Common Stock in
any fiscal year of the Corporation only if dividends shall have been paid on or
declared and set apart upon all shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock at such annual rate, and no further dividends shall be paid to
holders of shares of Series A Preferred Stock, holders of shares of Series B
Preferred Stock, holders of shares of Series C Preferred Stock, holders of
Series D Preferred Stock and holders of shares of Series E Preferred Stock in
excess of such annual rate in any fiscal year unless at the same time equivalent
dividends are paid to holders of shares of Common Stock, and no dividends may be
paid on the Common Stock unless equivalent
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dividends are paid to holders of the Preferred Stock. The right to such
dividends on shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
shall not be cumulative and no right shall accrue to holders of shares of Series
A Preferred Stock, holders of shares of Series B Preferred Stock, holders of
shares of Series C Preferred Stock, holders of shares of Series D Preferred
Stock or holders of shares of Series E Preferred Stock by reason of the fact
that dividends on said shares are not declared in any prior year, nor shall any
undeclared or unpaid dividend bear or accrue interest. Payment of any partial
amounts on dividends declared by the Board of Directors shall be made pro rata
to holders of Common Stock (as applicable) and Preferred Stock based on the
number of shares of Common Stock held by such holders on an as-converted basis.
(2) Voting Rights.
(aa) Subject to Article III(B)(2)(bb) below, each holder
of shares of Preferred Stock shall be entitled to the number of votes equal to
the number of shares of Common Stock into which such shares of Preferred Stock
could be converted on the record date for the vote or consent of stockholders
and shall have voting rights and powers equal to the voting rights and powers of
the Common Stock. Each holder of shares of Preferred Stock shall be entitled to
notice of any stockholders' meeting in accordance with the Bylaws of the
Corporation and shall vote with holders of the Common Stock upon the election of
directors and upon any other matter submitted to a vote of stockholders, except
those matters required by law or required hereunder to be submitted to a class
vote. Fractional votes by the holders of Preferred Stock shall not, however, be
permitted and any fractional voting rights resulting from the above formula
(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.
(bb) Notwithstanding the foregoing, the holders of Series
A Preferred Stock and Series B Preferred Stock shall have the right, voting
together as a separate class, to elect one (1) director to the Board of
Directors, the holders of Series C Preferred Stock, voting together as a single
class, shall have the right to elect one (1) director to the Board of Directors,
the holders of Series E Preferred Stock, voting together as a single class,
shall have the right to elect two (2) directors to the Board of Directors,
provided with respect to the right of each series that at least 300,000 shares
(adjusted to reflect subsequent stock splits, stock dividends or
recapitalizations) of such series of Preferred Stock remains outstanding. The
holders of the outstanding Common Stock, voting together as a single class,
shall have the right to elect one (1) director. Any additional directors shall
be elected by holders of the then outstanding Common Stock and Preferred Stock,
voting together on an as-converted basis as a single class. In the case of a
vacancy in the office of any director entitled to be elected by the holders of a
particular class or series of stock, at any annual or special meeting or by
unanimous written consent thereof, such vacancy shall be filled by the
affirmative vote of a majority of the voting power of such class or series of
stock given at a special meeting of stockholders duly called or by an action by
written consent for that purpose. Any director elected by the holders of a
particular class or series of stock may be removed during such director's term
of office, either for or without cause, by and only by the affirmative vote of
the holders of a majority of the voting power of such class or series of stock
given at a special meeting of stockholders duly called or by an action by
written consent for that purpose.
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(3) Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(aa) Right to Convert.
(i) 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, at the office of the Corporation or any transfer agent
for the Preferred Stock, into Common Stock at the initial conversion rate of one
fully paid and nonassessable share of Common Stock for each share of Preferred
Stock, subject, however, to the adjustments described below. (The number of
shares of Common Stock into which each share of each series of Preferred Stock
may be converted is hereinafter referred to as the "Conversion Rate" for such
series.)
(ii) Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Rate immediately upon (a) the consummation of the Corporation's sale
of Common Stock pursuant to a registration statement under the Securities Act of
1933, as amended, pursuant to an underwritten firm commitment public offering,
provided that such offering has a public offering price of not less than $9.00
per share (adjusted to reflect subsequent stock splits, stock dividends or
recapitalizations) and results in $15,000,000 or more in aggregate cash proceeds
to the Corporation, net of underwriting discounts and commissions, or (b) the
date specified by written consent of holders of at least sixty-five percent
(65%) of the voting power of Preferred Stock then outstanding.
(iii) No fractional shares of Common Stock shall be
issued upon conversion of the Preferred Stock and any shares of Preferred Stock
surrendered for conversion which would otherwise result in a fractional share of
Common Stock shall be redeemed for the then fair market value thereof as
determined by the Corporation's Board of Directors, payable as promptly as
possible whenever funds are legally available therefor. If more than one share
of Preferred Stock is surrendered for conversion at any one time by the same
holder, the number of full shares of Common Stock to be issued upon conversion
shall be computed on the basis of the aggregate number of shares of Preferred
Stock so surrendered.
(bb) 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 the Corporation or of any transfer agent for the
Preferred Stock and shall give written notice to the Corporation at such office
that such holder elects to convert the same and shall state therein the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred Stock,
or to such holder's nominee or nominees, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of
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 on
such date. If the conversion is in connection with an underwritten offering of
securities registered pursuant to the Securities Act of
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<PAGE> 5
1933, as amended, 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 persons entitled to receive the Common Stock upon 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.
(cc) Adjustment of Conversion Rate for Combinations or
Consolidations of Common Stock. In the event the Corporation at any time or from
time to time after the effective date of a written agreement by the Corporation
for the initial sale of Series E Preferred Stock (hereinafter referred to as the
"Series E Original Issue Date") effects a subdivision or combination of its
outstanding Common Stock into a greater or lesser number of shares without a
proportionate and corresponding subdivision or combination of its outstanding
Preferred Stock, then and in each such event the Conversion Rate for the
Preferred Stock shall be proportionately increased or decreased, as appropriate.
(dd) Adjustment of Conversion Rate for Dividends,
Distributions and Common Stock Equivalents. In the event the Corporation at any
time or from time to time after the Series E Original Issue Date shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into or
entitling the holder thereof to receive additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of any
consideration by such holder for such Common Stock Equivalents (including the
additional shares of Common Stock issuable upon conversion or exercise thereof)
or the additional shares of Common Stock, then and in each such event the
maximum number of shares of Common Stock issuable in payment of such dividend or
distribution or upon conversion or exercise of such Common Stock Equivalents
shall be deemed to be issued and outstanding as of the time of such issuance or,
in the event such a record date shall have been fixed, as of the close of
business on such record date. In each such event the Conversion Rate for the
Preferred Stock shall be increased as of the time of such issuance or, in the
event such a record date shall have been fixed, as of the close of business on
such record date, by multiplying the Conversion Rate for such series by a
fraction,
(i) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding or deemed to be issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution or upon conversion or exercise of
such Common Stock Equivalents; and
(ii) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding or deemed to be issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date; provided, however, (A) if such record date shall
have been fixed and such dividend is not fully paid or if such distribution is
not fully made on the date fixed therefor, the Conversion Rate for such series
shall be recomputed accordingly as of the close of business on such record date
and thereafter the Conversion Rate for such series shall be adjusted pursuant to
this paragraph (B)(3)(dd) as of the time of actual payment of such dividends or
distribution, (B) if such Common Stock Equivalents provide, with the passage
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<PAGE> 6
of time or otherwise, for any increase or decrease in the number of shares of
Common Stock issuable upon conversion or exercise thereof, the Conversion Rate
for such series shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects the rights
of conversion or exercise of the Common Stock Equivalents then outstanding; and
(C) upon the expiration of any rights or conversion or exercise under any
unexercised Common Stock Equivalents, the Conversion Rate for such series
computed upon the original issue thereof shall, upon such expiration, be
recomputed as if the only additional shares of Common Stock issued were the
shares of such stock, if any, actually issued upon the conversion or exercise of
such Common Stock Equivalents.
(ee) Other Distributions. In the event the Corporation
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by the Corporation or other persons, assets (excluding
cash dividends) or options or rights not referred to in this paragraph (B)(3),
then, in each such case for the purpose of this paragraph (B)(3)(ee), the
holders of Preferred Stock shall be entitled to a proportionate share of any
such distribution as though they were the holders of the number of shares Common
Stock of the Corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(ff) Recapitalizations. If at any time or from time to
time there shall be a recapitalization of the Common Stock (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in this paragraph (B)(3) or (B)(4) of this Article III), provision
shall be made so that the holders of 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 the Company 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 of this paragraph (B)(3) with respect to the
rights of the holders of Preferred Stock after the recapitalization to the end
that the provisions of this paragraph (B)(3) (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Preferred Stock) shall be applicable after that event as
nearly equivalent as may be practicable.
(gg) Sale of Shares Below Conversion Price of the Series C
Preferred Stock. If at any time after the effective date of a written agreement
by the Corporation for the initial sale of Series C Preferred Stock (hereinafter
referred to as the "Series C Original Issue Date"), the Corporation shall issue
or sell any shares of its Common Stock, options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, (other than (i) shares of Common
Stock issued on conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred
Stock or on exercise of stock options or warrants outstanding on the Series C
Original Issue Date, (ii) shares of Common Stock (approved by the Board of
Directors), issued to employees, officers and directors of, or advisors,
consultants or other persons performing services for the Corporation pursuant to
sales or options granted after the Series C Original Issue Date, (iii) shares of
Common Stock or Preferred Stock of any series issued in connection with any
stock split, stock dividend or recapitalization of the Corporation, or (iv)
shares of Common Stock, Preferred Stock, warrants or
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<PAGE> 7
options for the purchase of shares of capital stock issued by the Corporation to
financial institutions or lessors in connection with the extension of credit to
the Corporation or the purchase financing of personal property by the
Corporation), for a consideration per share that is less than $2.80 divided by
the then existing Conversion Rate for the Series C Preferred Stock (the
"Conversion Price" for such series), then and in each such case, the Conversion
Rate for the Series C Preferred Stock shall be adjusted by dividing such
Conversion Rate by a fraction (1) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock which the aggregate consideration received by
the Corporation for the total number of shares of Common Stock so issued would
purchase if the purchase price per share were equal to the then existing
Conversion Price, and (2) the denominator of which shall be the number of shares
of Common Stock outstanding immediately prior to such issue plus the number of
such shares of Common Stock so issued or sold. For purposes of this subsection
(gg) the shares of Common Stock issuable upon conversion of the Series C
Preferred Stock and any other outstanding convertible securities of the
Corporation and upon exercise of options, warrants or other outstanding
securities of the Corporation bearing an exercise price that is lower than the
price at which the additional shares of Common Stock were issued (or deemed
issued), shall be deemed to be outstanding immediately prior to any such issue
described above.
For the purpose of making an adjustment in the Conversion Rate for a
series as provided above, the consideration received by the Corporation for any
issue or sale of Common Stock shall,
(1) to the extent it consists of cash, be computed at the net
amount of cash received by the Corporation after deduction of any expenses
payable by the Corporation and any underwriting or similar commissions,
compensation, or concessions paid or allowed by the Corporation in connection
with such issue or sale;
(2) to the extent it consists of property other than cash, be
computed at the fair market value of that property as determined in good faith
by the Corporation's Board of Directors;
(3) if Common Stock is issued or sold together with other stock
or securities or other assets of the Corporation for a consideration which
covers both, be computed as the portion of the consideration so received that
may be reasonably determined in good faith by the Board of Directors to be
allocable to such Common Stock.
If the Corporation shall (1) grant any rights or options to subscribe
for, purchase, or otherwise acquire shares of Common Stock (other than rights or
options issued to employees, officers, directors and consultants of the
Corporation), (2) issue or sell any security convertible into or exchangeable
for shares of Common Stock, or (3) grant any options to purchase or rights to
subscribe for the rights, options or securities referred to in (1) or (2) above,
the aggregate maximum number of shares of Common Stock deliverable upon exercise
of such options to purchase or rights to subscribe for Common Stock or upon
conversion or in exchange 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 (assuming the satisfaction of any conditions to exercisability,
convertibility or exchangeability, including without limitation, the passage of
time, but without taking into account potential antidilution adjustments) shall
be deemed to have been issued at the time such options or rights or convertible
or
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<PAGE> 8
exchangeable securities were issued. In each such case, the price per share of
Common Stock issuable on the exercise of the rights or options or the conversion
of the securities shall be determined by dividing the total amount, if any,
received or receivable by the Corporation as consideration for the granting of
the rights or options or the issue or sale of the convertible securities, plus
the minimum aggregate amounts of additional consideration payable to the
Corporation on exercise and/or conversion of the securities, by the maximum
number of shares of Common Stock issuable on the exercise and/or conversion.
If the price per share so determined with respect to the Series C
Preferred Stock, is less than the then existing Conversion Price for the Series
C Preferred Stock, the granting or issue or sale shall be considered to be an
issue or sale for cash of the maximum number of shares of Common Stock issuable
on exercise or conversion at the price per share determined under this
subsection, and the Conversion Rate for such series shall be adjusted as above
provided to reflect (on the basis of that determination) the issue or sale. No
further adjustment of the Conversion Rate for a series shall be made as a result
of the actual issuance of shares of Common Stock on the exercise of any such
rights or options or the conversion of any such convertible securities.
If such rights or options or convertible securities by their terms
provide, with the passage of time or otherwise, for an increase in the amount of
additional consideration payable to the Corporation or decrease in the number of
shares of Common Stock issuable on such exercise or exchange (by change of rate
or otherwise), the Conversion Rate for the Series C Preferred Stock shall, when
each such increase or decrease becomes effective, be readjusted to reflect the
increase or decrease insofar as it affects rights of exercise or conversion
which have not expired before that time.
If on the expiration of such rights or options or the rights of
conversion of such convertible securities any of them shall not have been
exercised, the Conversion Rate for the Series C Preferred Stock shall be
readjusted and shall thereafter be the same as it would have been had it
originally been adjusted (or had the original adjustment not been required, as
the case may be), on the basis that the only shares of Common Stock so issued
were the shares of Common Stock, if any, actually issued or sold on the exercise
of such rights or options or rights of conversion of such convertible
securities, and such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Corporation on such exercise plus the
consideration, if any, actually received by the Corporation for granting all
such rights or options or for issuing or selling all such convertible
securities.
(hh) Sale of Shares Below Conversion Price of the Series D
Preferred Stock Before the Series E Original Issue Date. If at any time after
the effective date of a written agreement by the Corporation for the initial
sale of Series D Preferred Stock (hereinafter referred to as the "Series D
Original Issue Date") and continuing through but ending on the effective date of
a written agreement by the Corporation for the initial sales of Series E
Preferred Stock (hereinafter referred to as the "Series E Original Issue Date"),
the Corporation shall issue or sell any shares of its Common Stock, options to
purchase or rights to subscribe for Common Stock, securities by their terms
convertible or exchangeable for Common Stock or options to purchase or rights to
subscribe for such convertible or exchangeable securities (other than (i) shares
of Common Stock issued on conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock,
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<PAGE> 9
Series D Preferred Stock or Series E Preferred Stock or on exercise of stock
options or warrants outstanding on the Series D Original Issue Date, (ii) shares
of Common Stock (approved by the Board of Directors), issued to employees,
officers and directors of, or advisors, consultants or other persons performing
services for the Corporation pursuant to sales or options granted after the
Series D Original Issue Date, (iii) shares of Common Stock or Preferred Stock of
any series issued in connection with any stock split, stock dividend or
recapitalization of the Corporation, or (iv) shares of Common Stock, Preferred
Stock, warrants or options for the purchase of shares of capital stock issued by
the Corporation to financial institutions or lessors in connection with the
extension of credit to the Corporation or the purchase financing of personal
property by the Corporation (collectively, "Additional Stock"), for a
consideration per share that is less than $2.17 divided by the then existing
Conversion Rate for the Series D Preferred Stock (the "Conversion Price" for
such series), then with respect to the shares of capital stock sold by the
Corporation (in one or a series of transactions) on or prior to the Series E
Original Issue Date having a weighted average purchase price of less than $2.17
per share (as adjusted for stock splits, stock dividends, recapitalizations and
the like), the Conversion Rate for the Series D Preferred Stock shall be
adjusted by multiplying the Conversion Rate by a fraction (1) the numerator of
which shall be the then existing Conversion Price for the Series D Preferred
Stock and (2) the denominator of which shall be the average price paid per share
for such Additional Stock (the "Full-Ratchet").
(ii) Sale of Shares Below Conversion Price of the Series D
Preferred and Series E Preferred After the Series E Original Issue Date. If at
any time after the Series E Original Issue Date, the Corporation shall issue or
sell any shares of its Common Stock, options to purchase or rights to subscribe
for Common Stock, securities by their terms convertible or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, (other than (i) shares of Common Stock issued on
conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock or on
exercise of stock options or warrants outstanding on the Series D Original Issue
Date, (ii) shares of Common Stock (approved by the Board of Directors), issued
to employees, officers and directors of, or advisors, consultants or other
persons performing services for the Corporation pursuant to sales or options
granted after the Series D Original Issue Date, (iii) shares of Common Stock or
Preferred Stock of any series issued in connection with any stock split, stock
dividend or recapitalization of the Corporation, or (iv) shares of Common Stock,
Preferred Stock, warrants or options for the purchase of shares of capital stock
issued by the Corporation to financial institutions or lessors in connection
with the extension of credit to the Corporation or the purchase financing of
personal property by the Corporation), for a consideration per share that is
less than $2.17 divided by the then existing Conversion Rate for the Series D
Preferred Stock, with respect to shares of Series D Preferred Stock, or less
than $1.00 divided by the then existing Conversion Rate for the Series E
Preferred Stock, with respect to shares of Series E Preferred Stock, (the
"Conversion Price" for such series), then and in each such case, the Conversion
Rate for the Series D Preferred Stock and the Conversion Rate for the Series E
Preferred Stock shall be adjusted by dividing such Conversion Rate by a fraction
(1) the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of shares of Common
Stock which the aggregate consideration received by the Corporation for the
total number of shares of Common Stock so issued would purchase if the purchase
price per share were equal to the then existing Conversion Price, and (2) the
denominator of which shall be the number of shares
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<PAGE> 10
of Common Stock outstanding immediately prior to such issue plus the number of
such shares of Common Stock so issued or sold. For purposes of this subsection
(ii) the shares of Common Stock issuable upon conversion of the Series D
Preferred Stock and Series E Preferred Stock and any other outstanding
convertible securities of the Corporation and upon exercise of options, warrants
or other outstanding securities of the Corporation bearing an exercise price
that is lower than the price at which the additional shares of Common Stock were
issued (or deemed issued), shall be deemed to be outstanding immediately prior
to any such issue described above.
For the purpose of making an adjustment in the Conversion Rate for a
series as provided above, the consideration received by the Corporation for any
issue or sale of Common Stock shall,
(1) to the extent it consists of cash, be computed at the net
amount of cash received by the Corporation after deduction of any expenses
payable by the Corporation and any underwriting or similar commissions,
compensation, or concessions paid or allowed by the Corporation in connection
with such issue or sale;
(2) to the extent it consists of property other than cash, be
computed at the fair market value of that property as determined in good faith
by the Corporation's Board of Directors;
(3) if Common Stock is issued or sold together with other stock
or securities or other assets of the Corporation for a consideration which
covers both, be computed as the portion of the consideration so received that
may be reasonably determined in good faith by the Board of Directors to be
allocable to such Common Stock.
If the Corporation shall (1) grant any rights or options to subscribe
for, purchase, or otherwise acquire shares of Common Stock (other than rights or
options issued to employees, officers, directors and consultants of the
Corporation), (2) issue or sell any security convertible into or exchangeable
for shares of Common Stock, or (3) grant any options to purchase or rights to
subscribe for the rights, options or securities referred to in (1) or (2) above,
the aggregate maximum number of shares of Common Stock deliverable upon exercise
of such options to purchase or rights to subscribe for Common Stock or upon
conversion or in exchange 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 (assuming the satisfaction of any conditions to exercisability,
convertibility or exchangeability, including without limitation, the passage of
time, but without taking into account potential antidilution adjustments) shall
be deemed to have been issued at the time such options or rights or convertible
or exchangeable securities were issued. In each such case, the price per share
of Common Stock issuable on the exercise of the rights or options or the
conversion of the securities shall be determined by dividing the total amount,
if any, received or receivable by the Corporation as consideration for the
granting of the rights or options or the issue or sale of the convertible
securities, plus the minimum aggregate amounts of additional consideration
payable to the Corporation on exercise and/or conversion of the securities, by
the maximum number of shares of Common Stock issuable on the exercise and/or
conversion.
If the price per share so determined with respect to the Series D
Preferred Stock or Series E Preferred Stock, as the case may be, is less than
the then existing Conversion Price for the Series D
-10-
<PAGE> 11
Preferred Stock or Series E Preferred Stock, as the case may be, the granting or
issue or sale shall be considered to be an issue or sale for cash of the maximum
number of shares of Common Stock issuable on exercise or conversion at the price
per share determined under this subsection, and the Conversion Rate for such
series shall be adjusted as above provided to reflect (on the basis of that
determination) the issue or sale. No further adjustment of the Conversion Rate
for a series shall be made as a result of the actual issuance of shares of
Common Stock on the exercise of any such rights or options or the conversion of
any such convertible securities.
If such rights or options or convertible securities by their terms
provide, with the passage of time or otherwise, for an increase in the amount of
additional consideration payable to the Corporation or decrease in the number of
shares of Common Stock issuable on such exercise or exchange (by change of rate
or otherwise), the Conversion Rate for the Series D Preferred Stock and the
Conversion Rate for the Series E Preferred Stock shall, when each such increase
or decrease becomes effective, be readjusted to reflect the increase or decrease
insofar as it affects rights of exercise or conversion which have not expired
before that time.
If on the expiration of such rights or options or the rights of
conversion of such convertible securities any of them shall not have been
exercised, the Conversion Rate for the Series D Preferred Stock and the
Conversion Rate for the Series E Preferred Stock shall be readjusted and shall
thereafter be the same as it would have been had it originally been adjusted (or
had the original adjustment not been required, as the case may be), on the basis
that the only shares of Common Stock so issued were the shares of Common Stock,
if any, actually issued or sold on the exercise of such rights or options or
rights of conversion of such convertible securities, and such shares of Common
Stock, if any, were issued or sold for the consideration actually received by
the Corporation on such exercise plus the consideration, if any, actually
received by the Corporation for granting all such rights or options or for
issuing or selling all such convertible securities.
(jj) No Impairment. The Corporation will not, by amendment
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this paragraph (B)(3) and in the taking of all such action
as may be necessary or appropriate in order to protect the Conversion Rights of
the holders of Preferred Stock.
(kk) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Rate for each series of
Preferred Stock pursuant to this paragraph (B)(3), the 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 such series of
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Rate for each such series at the time in effect, and (iii) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of such holder's shares of Preferred
Stock.
-11-
<PAGE> 12
(ll) Notices of Record Date. In the event of the
establishment by the 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 distribution, any
Common Stock Equivalents or 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, the 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 rights, and the amount and character
of such dividend, distribution or right.
(mm) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
then outstanding shares of 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 such Preferred Stock, the
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 purpose.
(nn) Notices. Any notices required by the provisions of
this paragraph (B)(3) to be given to the holders of shares of Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the Corporation.
(4) Liquidation Preference.
(aa) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, subject to the
rights and privileges of such other series of Preferred Stock that may from time
to time come into existence, the holders of the Series A Preferred Stock shall
be entitled to receive, prior and in preference to any distribution of any of
the assets or surplus funds of the Corporation to the holders of the Common
Stock by reason of their ownership thereof, the amount of $0.70 per share
(adjusted to reflect subsequent stock splits, stock dividends or
recapitalizations) for each share of Series A Preferred Stock then held by them
plus an amount equal to all declared but unpaid dividends on the Series A
Preferred Stock, the holders of the Series B Preferred Stock shall be entitled
to receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Common Stock by reason of
their ownership thereof, the amount of $2.17 per share (adjusted to reflect
subsequent stock splits, stock dividends or recapitalizations) for each share of
Series B Preferred Stock then held by them plus an amount equal to all declared
but unpaid dividends on the Series B Preferred Stock, the holders of the Series
C Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership thereof, the amount of
$2.80 per share (adjusted to reflect subsequent stock splits, stock dividends or
recapitalizations) for each share of Series C Preferred Stock then held by them
plus an amount equal to all declared but unpaid dividends on the Series C
Preferred Stock, the
-12-
<PAGE> 13
holders of the Series D Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock by reason of their ownership
thereof, the amount of $2.17 per share (adjusted to reflect subsequent stock
splits, stock dividends or recapitalizations) for each share of Series D
Preferred Stock then held by them plus an amount equal to all declared but
unpaid dividends on the Series D Preferred Stock and the holders of the Series E
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership thereof, the amount of
$1.00 per share (adjusted to reflect subsequent stock splits, stock dividends or
recapitalizations) for each share of Series E Preferred Stock then held by them
plus an amount equal to all declared but unpaid dividends on the Series E
Preferred Stock. If upon the occurrence of such event the assets and funds thus
distributed among the holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock shall be insufficient to permit the payment to such holders of
the full preferential amount, then, subject to the rights and privileges of such
other series of Preferred Stock that may from time to time come into existence,
the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock in proportion to the dollar value
of such stock owned by each such holder. Upon the completion of the
distributions required above, and subject to the rights and privileges of such
other series of Preferred Stock that may from time to time come into existence,
if assets remain in this Corporation, the holders of Common Stock shall receive
all of the remaining assets of the Corporation pro rata based on the number of
shares of Common Stock held by each such holder.
(bb) For purposes of this Section 4, a liquidation,
dissolution or winding up of this Corporation shall be deemed to be occasioned
by, or to include, (i) the acquisition of the Corporation by another entity by
means of any transaction or series of related transactions (including, without
limitation, any reorganization, merger, consolidation or transaction or series
of transactions in which greater than 50% of the voting power of the Company is
transferred, but excluding any merger or transaction effected exclusively for
the purpose of changing the domicile of the Corporation); or (ii) a sale of all
or substantially all of the assets of the Corporation (including for purposes of
this section, intellectual property rights which, in the aggregate, constitute
substantially all of the Corporation's material assets); unless the
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 the Corporation's acquisition or sale
or otherwise) hold at least 50% of the voting power of the surviving or
acquiring entity.
(cc) Any securities to be delivered to the holders of the
Preferred Stock pursuant to paragraph (B)(4)(bb) above shall be valued as
follows:
(i) Securities not subject to investment letter or
other similar restrictions on free marketability:
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<PAGE> 14
(A) If traded on a securities exchange or
through the Nasdaq Stock Market, the value shall be deemed to be the average of
the closing prices of the securities on such exchange over the 30-day period
ending three (3) days prior to the closing;
(B) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid prices over the
30-day period ending three (3) days prior to the closing; and
(C) If there is no active public market, the
value shall be the fair market value thereof, as determined in good faith by an
independent appraiser, mutually acceptable to the Board of Directors of the
Corporation and a majority in interest of the holders of the Preferred Stock.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in (i)(A), (B)
or (C) to reflect the approximate fair market value thereof, as determined in
good faith by the Board of Directors of the Corporation.
(dd) In the event the requirements of paragraph (B)(4)(ee)
are not complied with, the Corporation shall forthwith either:
(i) cause such closing to be postponed until such time as
the requirements of such paragraph have been complied with, or
(ii) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Preferred Stock shall revert to
and be the same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in paragraph (B)(4)(ee)
hereof.
(ee) The Corporation shall give each holder of record of
Preferred Stock written notice of an impending transaction of the type referred
to in paragraph (B)(4)(bb), which notice shall be mailed, postage prepaid, to
the post office address of such holder last shown on the records of the
Corporation, 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 paragraph (B)(4), and shall specify the date of
closing of such transaction. The Corporation shall thereafter give such holders
prompt notice of any material changes. The transaction shall in no event take
place sooner than twenty (20) days after the Corporation has given the first
notice provided for herein or sooner than ten (10) days after the 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 a
majority of the voting power of the Preferred Stock then outstanding.
(5) Protective Provisions. So long as shares of any series of
Preferred Stock are outstanding, this Corporation shall not without first
obtaining the approval (by vote or written
-14-
<PAGE> 15
consent, as provided by law) of the holders of at least a majority of the then
outstanding voting power of such series of Preferred Stock (voting separately as
a class):
(aa) alter or change the rights, preferences, privileges
or restrictions of the shares of such series of Preferred Stock so as to affect
such shares adversely;
(bb) increase or decrease (other than by conversion) the
total number of authorized shares of such series of Preferred Stock; or
(cc) amend any currently existing class or series of stock
or create any new class or series of stock or any other equity securities
(including securities having rights similar to those granted under this
paragraph (B)(5)) convertible into equity securities of the Corporation such
that such securities have rights, preferences or privileges senior to those of
such series of Preferred Stock, including without limitation rights, preferences
or privileges with respect to voting, dividends, redemption or upon liquidation,
dissolution or winding up (including, without limitation, any transaction deemed
to be a liquidation, dissolution or winding up pursuant to paragraph
(B)(4)(bb)).
(dd) amend the Corporation's Certificate of Incorporation
so as to adversely affect the rights of such series of Preferred Stock in a
manner that is different from the way in which other series of Preferred Stock
are affected.
So long as any shares of Preferred Stock are outstanding, this
Corporation shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least sixty-five percent (65%)
of the then outstanding voting power of Preferred Stock (voting separately as a
class):
(aa) effect any reclassification, recapitalization or
reorganization of the capital stock of the Corporation, merge into or
consolidate with any other Corporation (other than a wholly owned subsidiary
Corporation) or effect any transaction or series of related transactions in
which more than 50% of the voting power of the Corporation is disposed of or all
or substantially all of the assets of the Company are sold or which results in
the liquidation or dissolution of the Corporation;
(bb) encumber or grant a security interest in all or
substantially all of its assets (including, for purposes of this section,
intellectual property rights which, in the aggregate, constitute substantially
all of the Corporation's material assets) or business in connection with
incurring indebtedness, except in the ordinary course of business, such as in
connection with equipment or receivables lines, or sale and leaseback
transactions; or
(cc) effect or undertake any action that would result in
the issuance of shares of the Corporation's capital stock requiring an
adjustment to the Series C Preferred Stock Conversion Rate, the Series D
Preferred Stock Conversion Rate or the Series E Preferred Stock Conversion Rate
pursuant to the provisions of Articles III(B)(3)(gg), III(B)(3)(hh) or
III(B)(3)(ii).
-15-
<PAGE> 16
(C) Common Stock.
(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 the 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 the Corporation, the assets of the Corporation shall be
distributed as provided in paragraph III(B)(4) hereof.
(3) Voting Rights. The holder of each share of Common Stock shall
have the right to one vote, 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.
ARTICLE IV
The name and mailing address of the incorporator is John V. Bautista,
Venture Law Group, 2800 Sand Hill Road, Menlo Park, CA 94025.
ARTICLE V
The address of the Corporation's registered office 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 The Prentice-Hall
Corporation System, Inc.
ARTICLE VI
The Corporation is to have a perpetual existence.
ARTICLE VII
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Corporation.
ARTICLE VIII
The number of directors which will constitute the whole Board of
Directors of the Corporation shall be as specified in the Bylaws of the
Corporation.
ARTICLE IX
The election of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
-16-
<PAGE> 17
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any statutory provision) 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 the Corporation.
ARTICLE XI
A. To the fullest extent permitted by applicable law, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
B. The Corporation shall indemnify to the fullest extent permitted by
law any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the Corporation or any predecessor of the Corporation, or serves or served at
any other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor to the Corporation.
C. Neither any amendment nor repeal of this Article XI, nor the adoption
of any provision of this Certificate of Incorporation inconsistent with this
Article XI, shall eliminate or reduce the effect of this Article XI in respect
of any matter occurring, or any cause of action, proceeding, suit or claim
accruing or arising or that, but for this Article XI, would accrue or arise,
prior to such amendment, repeal or adoption of an inconsistent provision.
ARTICLE XII
Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the Corporation.
ARTICLE XIII
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
The foregoing Fifth Amended and Restated Certificate of Incorporation
has been duly adopted by the stockholders of the Corporation in accordance with
the provisions of Section 242 and 245 of the General Corporate Law of the State
of Delaware, as amended.
-17-
<PAGE> 18
IN WITNESS WHEREOF, the undersigned have executed this certificate on
August 17, 1998.
/s/ Richard Kreysar
----------------------------
Richard Kreysar, President
/s/ John V. Bautista
----------------------------
John V. Bautista, Secretary
The undersigned certify under penalty of perjury that they have read the
foregoing Fifth Amended and Restated Certificate of Incorporation and know the
contents thereof, and that the statements therein are true.
Executed at Menlo Park, California on August 17, 1998.
/s/ Richard Kreysar
----------------------------
Richard Kreysar, President
/s/ John V. Bautista
----------------------------
John V. Bautista, Secretary
-18-
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ACCRUE SOFTWARE, INC.
The undersigned, Richard D. Kreysar and John V. Bautista, hereby certify
that:
1. They are the duly elected and acting President and Secretary,
respectively, of Accrue Software, Inc., a Delaware corporation.
2. The Certificate of Incorporation of this corporation was
originally filed with the Secretary of State of Delaware on February 16, 1996.
3. The Certificate of Incorporation of this corporation shall be
amended and restated to read in full as follows:
ARTICLE I
"The name of this corporation is Accrue Software, Inc. (the
"Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, County of New Castle. The name of its
registered agent at such address is The Prentice-Hall Corporation System, Inc.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
(A) CLASSES OF STOCK. The Corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the Corporation is authorized to issue
is Eighty Million shares (80,000,000), each with a par value of $0.001 per
share. Seventy-Five Million (75,000,000) shares shall be Common Stock and Five
Million (5,000,000) shares shall be Preferred Stock.
(B) The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized, within the limitations
and restrictions stated in this Certificate of Incorporation, to determine or
alter the rights, preferences, privileges and restrictions granted to or imposed
upon any wholly unissued series of Preferred Stock and the number of shares
constituting any such series and the designation thereof, or any of them; and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of
<PAGE> 2
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.
ARTICLE V
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.
ARTICLE VI
In the election of directors, each holder of shares of any class or
series of capital stock of the Corporation shall be entitled to one vote for
each share held. No stockholder will be permitted to cumulate votes at any
election of directors.
ARTICLE VII
No action shall be taken by the stockholders of the Corporation other
than at an annual or special meeting of the stockholders, upon due notice and in
accordance with the provisions of the Corporation's bylaws.
ARTICLE VIII
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
ARTICLE IX
The Board of Directors of the Corporation is expressly authorized to
make, alter or repeal Bylaws of the Corporation.
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) 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 the Corporation.
ARTICLE XI
The Corporation shall have perpetual existence.
-2-
<PAGE> 3
ARTICLE XII
(A) To the fullest extent permitted by the General Corporation Law
of Delaware, as the same may be amended from time to time, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director. If
the General Corporation Law of Delaware is hereafter amended to authorize, with
the approval of a corporation's stockholders, further reductions in the
liability of the Corporation's directors for breach of fiduciary duty, then a
director of the Corporation shall not be liable for any such breach to the
fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
(B) Any repeal or modification of the foregoing provisions of this
Article XII shall not adversely affect any right or protection of a director of
the Corporation with respect to any acts or omissions of such director occurring
prior to such repeal or modification.
ARTICLE XIII
(A) To the fullest extent permitted by applicable law, the
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
the Corporation to provide indemnification) though 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 a corporation, its
stockholders, and others.
(B) Any repeal or modification of any of the foregoing provisions of
this Article XIII 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 repeal or
modification."
* * *
-3-
<PAGE> 4
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by this Corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at Menlo Park, California, on May __, 1999.
----------------------------------------
Richard D. Kreysar, President
----------------------------------------
John V. Bautista, Secretary
-4-
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
ACCRUE SOFTWARE, INC.
(AMENDED AND RESTATED
AS OF MAY 23, 1999)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I - CORPORATE OFFICES........................................................1
1.1 Registered Office........................................................1
1.2 Other Offices............................................................1
ARTICLE II - MEETINGS OF STOCKHOLDERS.................................................1
2.1 Place Of Meetings........................................................1
2.2 Annual Meeting...........................................................1
2.3 Special Meeting..........................................................1
2.4 Notice Of Stockholders' Meetings.........................................2
2.5 Manner Of Giving Notice; Affidavit Of Notice.............................2
2.6 Quorum...................................................................2
2.7 Adjourned Meeting; Notice................................................2
2.8 Conduct Of Business......................................................3
2.9 Voting...................................................................3
2.10 Waiver Of Notice.........................................................3
2.11 Stockholder Action By Written Consent Without A Meeting..................3
2.12 Record Date For Stockholder Notice; Voting; Giving Consents..............4
2.13 Proxies..................................................................4
ARTICLE III - DIRECTOR................................................................5
3.1 Powers...................................................................5
3.2 Number Of Directors......................................................5
3.3 Election, Qualification And Term Of Office Of Directors..................5
3.4 Resignation And Vacancies................................................5
3.5 Place Of Meetings; Meetings By Telephone.................................6
3.6 Regular Meetings.........................................................6
3.7 Special Meetings; Notice.................................................7
3.8 Quorum...................................................................7
3.9 Waiver Of Notice.........................................................7
3.10 Board Action By Written Consent Without A Meeting........................8
3.11 Fees And Compensation Of Directors.......................................8
3.12 Approval Of Loans To Officers............................................8
3.13 Removal Of Directors.....................................................8
3.14 Chairman Of The Board Of Directors.......................................8
ARTICLE IV - COMMITTEES...............................................................9
4.1 Committees Of Directors..................................................9
4.2 Committee Minutes........................................................9
4.3 Meetings And Action Of Committees........................................9
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE V - OFFICERS................................................................10
5.1 Officers................................................................10
5.2 Appointment Of Officers.................................................10
5.3 Subordinate Officers....................................................10
5.4 Removal And Resignation Of Officers.....................................10
5.5 Vacancies In Offices....................................................11
5.6 Chief Executive Officer.................................................11
5.7 President...............................................................11
5.8 Vice Presidents.........................................................11
5.9 Secretary...............................................................11
5.10 Chief Financial Officer.................................................12
5.11 Representation Of Shares Of Other Corporations..........................12
5.12 Authority And Duties Of Officers........................................13
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS.....13
6.1 Indemnification Of Directors And Officers...............................13
6.2 Indemnification Of Others...............................................13
6.3 Payment Of Expenses In Advance..........................................13
6.4 Indemnity Not Exclusive.................................................14
6.5 Insurance...............................................................14
6.6 Conflicts...............................................................14
ARTICLE VII - RECORDS AND REPORTS....................................................14
7.1 Maintenance And Inspection Of Records...................................14
7.2 Inspection By Directors.................................................15
7.3 Annual Statement To Stockholders........................................15
ARTICLE VIII - GENERAL MATTERS.......................................................15
8.1 Checks..................................................................15
8.2 Execution Of Corporate Contracts And Instruments........................15
8.3 Stock Certificates; Partly Paid Shares..................................16
8.4 Special Designation On Certificates.....................................16
8.5 Lost Certificates.......................................................17
8.6 Construction; Definitions...............................................17
8.7 Dividends...............................................................17
8.8 Fiscal Year.............................................................17
8.9 Seal....................................................................17
8.10 Transfer Of Stock.......................................................17
8.11 Stock Transfer Agreements...............................................18
8.12 Registered Stockholders.................................................18
ARTICLE IX - AMENDMENTS..............................................................18
</TABLE>
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<PAGE> 4
BYLAWS
OF
ACCRUE SOFTWARE, INC.
(AMENDED AND RESTATED AS OF MAY 23, 1999)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE.
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Prentice-Hall Corporation
System.
1.2 OTHER OFFICES.
The Board of Directors may at any time establish other offices
at any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS.
Meetings of stockholders shall be held at any place, within or
outside the State of Delaware, designated by the Board of Directors. In the
absence of any such designation, stockholders' meetings shall be held at the
registered office of the corporation.
2.2 ANNUAL MEETING.
The annual meeting of stockholders shall be held on such date,
time and place, either within or without the State of Delaware, as may be
designated by resolution of the Board of Directors each year. At the meeting,
directors shall be elected and any other proper business may be transacted.
2.3 SPECIAL MEETING.
A special meeting of the stockholders may be called at any time
by the Board of Directors, the chairman of the board, the president or by one or
more stockholders holding shares in the aggregate entitled to cast not less than
ten percent of the votes at that meeting.
If a special meeting is called by any person or persons other
than the Board of Directors, the president or the chairman of the board, the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and
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shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, any
vice president, or the secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
officer receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 2.4
and 2.5 of this Article II, that a meeting will be held at the time requested by
the person or persons calling the meeting, not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is not
given within twenty (20) days after the receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing contained in this
paragraph of this Section 2.3 shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.
All notices of meetings with stockholders shall be in writing
and shall be sent or otherwise given in accordance with Section 2.5 of these
Bylaws not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder entitled to vote at such meeting. The notice
shall specify the place, date, and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Written notice of any meeting of stockholders, if mailed, is
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.6 QUORUM.
The holders of a majority 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 is not present or represented at any
meeting of the stockholders, then either (i) the chairman of the meeting or (ii)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE.
When a meeting is adjourned to another time or place, unless
these Bylaws otherwise require, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the
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<PAGE> 6
corporation may transact any business that might have been transacted at the
original meeting. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
2.8 CONDUCT OF BUSINESS.
The chairman of any meeting of stockholders shall determine the
order of business and the procedure at the meeting, including the manner of
voting and the conduct of business.
2.9 VOTING.
The stockholders entitled to vote at any meeting of stockholders
shall be determined in accordance with the provisions of Section 2.12 of these
Bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
2.10 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of
the General Corporation Law of Delaware or of the certificate of incorporation
or these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the certificate of incorporation or these
Bylaws.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
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 that 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, is 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
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<PAGE> 7
writing. If the action which is consented to is such as would have required the
filing of a certificate under any section of the General Corporation Law of
Delaware if such action had been voted on by stockholders at a meeting thereof,
then the certificate filed under such section shall state, in lieu of any
statement required by such section concerning any vote of stockholders, that
written notice and written consent have been given as provided in Section 228 of
the General Corporation Law of Delaware.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.
In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled 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 (60) nor less than ten (10)
days before the date of such meeting, nor more than sixty (60) days prior to any
other action.
If the Board of Directors does not so fix a record date:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is necessary, shall be the day on which the first
written consent is delivered to the corporation.
(iii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
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.
2.13 PROXIES.
Each stockholder entitled to vote at a meeting of stockholders
or to express consent or dissent to corporate action in writing without a
meeting may authorize another person or persons to act for such stockholder by a
written proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's
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<PAGE> 8
attorney-in-fact. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Section 212(e) of the General
Corporation Law of Delaware.
ARTICLE III
DIRECTORS
3.1 POWERS.
Subject to the provisions of the General Corporation Law of
Delaware and any limitations in the certificate of incorporation or these Bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
Board of Directors.
3.2 NUMBER OF DIRECTORS.
The number of directors which shall constitute the whole Board
of Directors shall be determined by resolution of the stockholders or the Board
of Directors, but in no event shall be less than one. The number of directors
may be decreased at any time and from time to time either by the stockholders or
by a majority of the directors then in office, but only to eliminate vacancies
existing by reason of death, resignation or expiration of the term of one or
more directors. No reduction of the authorized number of directors shall have
the effect of removing any director before such director's term of office
expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.
Except as provided in Section 3.4 of these Bylaws, directors
shall be elected at each annual meeting of stockholders to hold office until the
next annual meeting. Directors need not be stockholders unless so required by
the certificate of incorporation or these Bylaws, wherein other qualifications
for directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES.
Any director may resign at any time upon written notice to the
attention of the Secretary of the corporation. When one or more directors so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or
these Bylaws:
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<PAGE> 9
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other
cause, the corporation should have no directors in office, then any officer or
any stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of stockholders in
accordance with the provisions of the certificate of incorporation or these
Bylaws, or may apply to the Court of Chancery for a decree summarily ordering an
election as provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.
The Board of Directors of the corporation may hold meetings,
both regular and special, either within or outside the State of Delaware.
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.
3.6 REGULAR MEETINGS.
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.
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<PAGE> 10
3.7 SPECIAL MEETINGS; NOTICE.
Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the chairman of the board, the president,
any vice president, the secretary or any two directors.
Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director or sent by first-class
mail or telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or by telegram, it shall be delivered personally or
by telephone or to the telegraph company at least forty-eight (48) hours before
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
3.8 QUORUM.
At all meetings of the Board of Directors, a majority of the
authorized number of 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 is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of
the General Corporation Law of Delaware or of the certificate of incorporation
or these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these Bylaws.
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3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Unless otherwise restricted by the certificate of incorporation
or these Bylaws, any action required or permitted to be taken at any meeting of
the Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the board 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. Written consents representing actions
taken by the board or committee may be executed by telex, telecopy or other
facsimile transmission, and such facsimile shall be valid and binding to the
same extent as if it were an original.
3.11 FEES AND COMPENSATION OF DIRECTORS.
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. No such compensation shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
3.12 APPROVAL OF LOANS TO OFFICERS.
The corporation may lend money to, or guarantee any obligation
of, or otherwise assist any officer or other employee of the corporation or of
its subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 REMOVAL OF DIRECTORS.
Unless otherwise restricted by statute, by the certificate of
incorporation or by these Bylaws, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that if the stockholders of the corporation are entitled to cumulative voting,
if less than the entire Board of Directors is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors.
No reduction of the authorized number of directors shall have
the effect of removing any director prior to the expiration of such director's
term of office.
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS.
The corporation may also have, at the discretion of the Board of
Directors, a chairman of the Board of Directors who shall not be considered an
officer of the corporation.
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ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS.
The Board of Directors may, by resolution passed by a majority
of the whole board, designate one or more committees, with 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 such member or members 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 or in the Bylaws of the
corporation, 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 that may require it; but no such committee shall have the power or
authority to (i) amend the certificate of incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix the designations
and any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series), (ii) adopt an
agreement of merger or consolidation under Sections 251 or 252 of the General
Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease
or exchange of all or substantially all of the corporation's property and
assets, (iv) recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or (v) amend the Bylaws of the corporation; and,
unless the board resolution establishing the committee, the Bylaws or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES.
Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES.
Meetings and actions of committees shall be governed by, and
held and taken in accordance with, the provisions of Section 3.5 (place of
meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7
(special meetings and notice), Section 3.8 (quorum),
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Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting) of
these Bylaws, with such changes in the context of such provisions as are
necessary to substitute the committee and its members for the Board of Directors
and its members; provided, however, that the time of regular meetings of
committees may be determined either by resolution of the Board of Directors or
by resolution of the committee, that special meetings of committees may also be
called by resolution of the Board of Directors and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these Bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS.
The officers of the corporation shall be a chief executive
officer, a president, a secretary, and a chief financial officer. The
corporation may also have, at the discretion of the Board of Directors, one or
more vice presidents, one or more assistant secretaries, one or more assistant
treasurers, and any such other officers as may be appointed in accordance with
the provisions of Section 5.3 of these Bylaws. Any number of offices may be held
by the same person.
5.2 APPOINTMENT OF OFFICERS.
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS.
The Board of Directors may appoint, or empower the chief
executive officer or the president to appoint, such other officers and agents as
the business of the corporation may require, each of whom shall hold office for
such period, have such authority, and perform such duties as are provided in
these Bylaws or as the Board of Directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS.
Subject to the rights, if any, of an officer under any contract
of employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
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Any officer may resign at any time by giving written notice to
the attention of the Secretary of the corporation. Any resignation shall take
effect at the date of the receipt of that notice or at any later time specified
in that notice; and, unless otherwise specified in that notice, the acceptance
of the resignation shall not be necessary to make it effective. Any resignation
is without prejudice to the rights, if any, of the corporation under any
contract to which the officer is a party.
5.5 VACANCIES IN OFFICES.
Any vacancy occurring in any office of the corporation shall be
filled by the Board of Directors.
5.6 CHIEF EXECUTIVE OFFICER.
Subject to such supervisory powers, if any, as may be given by
the Board of Directors to the chairman of the board, if any, the chief executive
officer of the corporation shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business and
the officers of the corporation. He or she shall preside at all meetings of the
stockholders and, in the absence or nonexistence of a chairman of the board, at
all meetings of the Board of Directors and shall have the general powers and
duties of management usually vested in the office of chief executive officer of
a corporation and shall have such other powers and duties as may be prescribed
by the Board of Directors or these bylaws.
5.7 PRESIDENT.
Subject to such supervisory powers, if any, as may be given by
the Board of Directors to the chairman of the board (if any) or the chief
executive officer, the president shall have general supervision, direction, and
control of the business and other officers of the corporation. He or she shall
have the general powers and duties of management usually vested in the office of
president of a corporation and such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
5.8 VICE PRESIDENTS.
In the absence or disability of the chief executive officer and
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the president or the chairman of the board.
5.9 SECRETARY.
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all
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meetings and actions of directors, committees of directors, and stockholders.
The minutes shall show the time and place of each meeting, the names of those
present at directors' meetings or committee meetings, the number of shares
present or represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors required to be given
by law or by these Bylaws. He or she shall keep the seal of the corporation, if
one be adopted, in safe custody and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or by these
Bylaws.
5.10 CHIEF FINANCIAL OFFICER.
The chief financial officer shall keep and maintain, or cause to
be kept and maintained, adequate and correct books and records of accounts of
the properties and business transactions of the corporation, including accounts
of its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president, the chief executive officer, or the
directors, upon request, an account of all his or her transactions as chief
financial officer and of the financial condition of the corporation, and shall
have other powers and perform such other duties as may be prescribed by the
Board of Directors or the bylaws.
5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The chairman of the board, the chief executive officer, the
president, any vice president, the chief financial officer, the secretary or
assistant secretary of this corporation, or any other person authorized by the
Board of Directors or the chief executive officer or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by the person
having such authority.
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5.12 AUTHORITY AND DUTIES OF OFFICERS.
In addition to the foregoing authority and duties, all officers
of the corporation shall respectively have such authority and perform such
duties in the management of the business of the corporation as may be designated
from time to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (i) who is or was
a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS.
The corporation shall have the power, to the maximum extent and
in the manner permitted by the General Corporation Law of Delaware, to indemnify
each of its employees and agents (other than directors and officers) against
expenses (including attorneys' fees), judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with any proceeding,
arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Section 6.2, an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (i) who is or
was an employee or agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE.
Expenses incurred in defending any action or proceeding for
which indemnification is required pursuant to Section 6.1 or for which
indemnification is permitted pursuant to Section 6.2 following authorization
thereof by the Board of Directors shall be paid by the corporation in advance of
the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of the indemnified party to repay such amount if it
shall ultimately
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be determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE.
The indemnification provided by this Article VI shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the certificate of
incorporation
6.5 INSURANCE.
The corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify him or her against such liability under the provisions of the General
Corporation Law of Delaware.
6.6 CONFLICTS.
No indemnification or advance shall be made under this Article
VI, except where such indemnification or advance is mandated by law or the
order, judgment or decree of any court of competent jurisdiction, in any
circumstance where it appears:
(a) That it would be inconsistent with a provision of the
certificate of incorporation, these Bylaws, a resolution of the stockholders or
an agreement in effect at the time of the accrual of the alleged cause of the
action asserted in the proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS.
The corporation shall, either at its principal executive offices
or at such place or places as designated by the Board of Directors, keep a
record of its stockholders listing their names and addresses and the number and
class of shares held by each stockholder, a copy of these Bylaws as amended to
date, accounting books, and other records.
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Any stockholder of record, in person or by attorney or other
agent, shall, upon written demand under oath stating the purpose thereof, have
the right during the usual hours for business to inspect for any proper purpose
the corporation's stock ledger, a list of its stockholders, and its other books
and records and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent is the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing that authorizes the attorney or other agent to so
act on behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS.
Any director shall have the right to examine the corporation's
stock ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.
The Board of Directors shall present at each annual meeting, and
at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS.
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.
The Board of Directors, except as otherwise provided in these
Bylaws, may authorize any officer or officers, or agent or agents, to enter into
any contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
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authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.
The shares of a corporation shall be represented by
certificates, provided that the Board of Directors of the corporation may
provide by resolution or resolutions that some or all of any or all classes or
series of its stock shall be uncertificated shares. Any such resolution shall
not apply to shares represented by a certificate until such certificate is
surrendered to the corporation. Notwithstanding the adoption of such a
resolution by the Board of Directors, every holder of stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the corporation by
the chairman or vice-chairman of the Board of Directors, or the chief executive
officer or the president or vice-president, and by the chief financial officer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES.
If the corporation is authorized to issue more than one class of
stock or more than one series of any class, then the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate that the
corporation shall issue to represent such class or series of stock; provided,
however, that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements there may be
set forth on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, the designations, the preferences, and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
8.5 LOST CERTIFICATES.
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Except as provided in this Section 8.5, no new certificates for
shares shall be issued to replace a previously issued certificate unless the
latter is surrendered to the corporation and cancelled at the same time. The
corporation may issue a new certificate of stock or uncertificated shares in the
place of any certificate previously issued by it, alleged to have been lost,
stolen or destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate, or the owner's legal representative, to give
the corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS.
Unless the context requires otherwise, the general provisions,
rules of construction, and definitions in the Delaware General Corporation Law
shall govern the construction of these Bylaws. Without limiting the generality
of this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS.
The directors of the corporation, subject to any restrictions
contained in (i) the General Corporation Law of Delaware or (ii) the certificate
of incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the
funds of the corporation available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve. Such purposes shall include but
not be limited to equalizing dividends, repairing or maintaining any property of
the corporation, and meeting contingencies.
8.8 FISCAL YEAR.
The fiscal year of the corporation shall be fixed by resolution
of the Board of Directors and may be changed by the Board of Directors.
8.9 SEAL.
The corporation may adopt a corporate seal, which may be altered
at pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK.
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 new
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certificate to the person entitled thereto, cancel the old certificate, and
record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS.
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS.
The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends and to vote as such owner, shall be entitled to hold liable for calls
and assessments the 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 another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The Bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal Bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal Bylaws.
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EXHIBIT 5.1
___, 1999
Accrue Software, Inc.
48634 Milmont Drive
Fremont, CA 94538-7353
REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-______)
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 (File No.
333-_________) (the "Registration Statement") filed by you, Accrue Software,
Inc. with the Securities and Exchange Commission on May ___, 1999 in connection
with the registration under the Securities Act of 1933, as amended, of shares of
your Common Stock (the "Shares"). As your counsel in connection with this
transaction, we have examined the proceedings taken and we are familiar with the
proceedings proposed to be taken by you in connection with the sale and issuance
of the Shares.
It is our opinion that upon conclusion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states where required, the Shares when issued and sold in the manner
described in the Registration Statement will be legally and validly issued,
fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and in any amendment thereto.
Very truly yours,
VENTURE LAW GROUP
A Professional Corporation
<PAGE> 1
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is made as of [Date] by
and between Accrue Software, Inc., a Delaware corporation (the "Company"), and
[Indemnitee Name] (the "Indemnitee").
RECITALS
The Company and Indemnitee recognize the increasing difficulty in
obtaining liability insurance for directors, officers and key employees, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance. The Company and Indemnitee further recognize
the substantial increase in corporate litigation in general, subjecting
directors, officers and key employees to expensive litigation risks at the same
time as the availability and coverage of liability insurance has been severely
limited. Indemnitee does not regard the current protection available as adequate
under the present circumstances, and Indemnitee and agents of the Company may
not be willing to continue to serve as agents of the Company without additional
protection. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, and to indemnify its directors,
officers and key employees so as to provide them with the maximum protection
permitted by law.
AGREEMENT
In consideration of the mutual promises made in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee 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,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee
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reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, that Indemnitee
had reasonable cause to believe that Indemnitee's conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The
Company shall indemnify Indemnitee if Indemnitee was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding by or in the right of the Company or any subsidiary of the Company to
procure a judgment in its favor by reason of the fact that Indemnitee is or was
a director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee 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,
against expenses (including attorneys' fees) and, to the fullest extent
permitted by law, amounts paid in settlement (if such settlement is approved in
advance by the Company, which approval shall not be unreasonably withheld), in
each case to the extent actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such action or suit if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company and its stockholders, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which Indemnitee shall have been finally adjudicated by court order or
judgment to be liable to the Company in the performance of Indemnitee's duty to
the Company and its stockholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) MANDATORY PAYMENT OF EXPENSES. To the extent that
Indemnitee has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1(a) or Section 1(b) or the
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
Indemnitee in connection therewith.
2. NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement is
intended to create in Indemnitee any right to continued employment.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action, suit or proceeding
referred to in Section l(a) or Section 1(b) hereof (including amounts actually
paid in settlement of any such action, suit or proceeding). Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
by the Company as authorized hereby. Any advances to be made under this
Agreement shall be paid by the Company to Indemnitee within twenty (20) days
following delivery of a written request therefor by Indemnitee to the Company.
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(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company and shall be given in accordance with the provisions of
Section 12(d) below. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power.
(c) PROCEDURE. Any indemnification and advances provided for
in Section 1 and this Section 3 shall be made no later than twenty (20) days
after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate of Incorporation or Bylaws providing for indemnification, is not
paid in full by the Company within twenty (20) days after a written request for
payment thereof has first been received by the Company, Indemnitee may, but need
not, at any time thereafter bring an action against the Company to recover the
unpaid amount of the claim and, subject to Section 11 of this Agreement,
Indemnitee shall also be entitled to be paid for the expenses (including
attorneys' fees) of bringing such action. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
connection with any action, suit or proceeding in advance of its final
disposition) that Indemnitee has not met the standards of conduct which make it
permissible under applicable law for the Company to indemnify Indemnitee for the
amount claimed, but the burden of proving such defense shall be on the Company
and Indemnitee shall be entitled to receive interim payments of expenses
pursuant to Section 3(a) unless and until such defense may be finally
adjudicated by court order or judgment from which no further right of appeal
exists. It is the parties' intention that if the Company contests Indemnitee's
right to indemnification, the question of Indemnitee's right to indemnification
shall be for the court to decide, and neither the failure of the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination that indemnification of Indemnitee is proper in the circumstances
because Indemnitee has met the applicable standard of conduct required by
applicable law, nor an actual determination by the Company (including its Board
of Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) that Indemnitee has not met such applicable
standard of conduct, shall create a presumption that Indemnitee has or has not
met the applicable standard of conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt of a
notice of a claim pursuant to Section 3(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by
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Indemnitee, upon the delivery to Indemnitee of written notice of its election so
to do. After delivery of such notice, approval of such counsel by Indemnitee and
the retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same proceeding, provided that (i) Indemnitee
shall have the right to employ counsel in any such proceeding at Indemnitee's
expense; and (ii) if (A) the employment of counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense or (C) the Company shall not, in
fact, have employed counsel to assume the defense of such proceeding, then the
fees and expenses of Indemnitee's counsel shall be at the expense of the
Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this
Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest
extent permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the Company's
Certificate of Incorporation, the Company's Bylaws or by statute. In the event
of any change, after the date of this Agreement, in any applicable law, statute,
or rule which expands the right of a Delaware corporation to indemnify a member
of its board of directors or an officer, such changes shall be deemed to be
within the purview of Indemnitee's rights and the Company's obligations under
this Agreement. In the event of any change in any applicable law, statute or
rule which narrows the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Certificate of Incorporation, its Bylaws, any
agreement, any vote of stockholders or disinterested members of the Company's
Board of Directors, the General Corporation Law of the State of Delaware, or
otherwise, both as to action in Indemnitee's official capacity and as to action
in another capacity while holding such office. The indemnification provided
under this Agreement shall continue as to Indemnitee for any action taken or not
taken while serving in an indemnified capacity even though he or she may have
ceased to serve in any such capacity at the time of any action, suit or other
covered proceeding.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
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6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee
acknowledge that in certain instances, Federal law or public policy may override
applicable state law and prohibit the Company from indemnifying its directors
and officers under this Agreement or otherwise. For example, the Company and
Indemnitee acknowledge that the Securities and Exchange Commission (the "SEC")
has taken the position that indemnification is not permissible for liabilities
arising under certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the SEC to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall,
from time to time, make the good faith determination whether or not it is
practicable for the Company to obtain and maintain a policy or policies of
insurance with reputable insurance companies providing the officers and
directors of the Company with coverage for losses from wrongful acts, or to
ensure the Company's performance of its indemnification obligations under this
Agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance coverage against the protection afforded by such
coverage. In all policies of director and officer liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company shall
have no obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably available, if the
premium costs for such insurance are disproportionate to the amount of coverage
provided, if the coverage provided by such insurance is limited by exclusions so
as to provide an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a parent or subsidiary of the Company.
8. SEVERABILITY. Nothing in this Agreement is intended to require
or shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with respect
to proceedings brought to establish or enforce a
-5-
<PAGE> 6
right to indemnification under this Agreement or any other statute or law or
otherwise as required under Section 145 of the Delaware General Corporation Law,
but such indemnification or advancement of expenses may be provided by the
Company in specific cases if the Board of Directors finds it to be appropriate;
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for any
expenses incurred by Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by Indemnitee
in such proceeding was not made in good faith or was frivolous;
(c) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
(d) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for
expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the
"Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that if Indemnitee is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan, Indemnitee shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.
-6-
<PAGE> 7
11. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
12. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of Delaware, without giving effect to principles of conflict of
law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement
sets forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) CONSTRUCTION. This Agreement is the result of
negotiations between and has been reviewed by each of the parties hereto and
their respective counsel, if any; accordingly, this Agreement shall be deemed to
be the product of all of the parties hereto, and no ambiguity shall be construed
in favor of or against any one of the parties hereto.
(d) NOTICES. Any notice, demand or request required or
permitted to be given under this Agreement shall be in writing and shall be
deemed sufficient when delivered personally or sent by telegram or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, and addressed to the party to be notified at such
party's address as set forth below or as subsequently modified by written
notice.
(e) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Company and its successors and assigns, and inure to the benefit of
Indemnitee and Indemnitee's heirs, legal representatives and assigns.
-7-
<PAGE> 8
(g) SUBROGATION. In the event of 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 documents
required and shall do all acts that may be necessary to secure such rights and
to enable the Company to effectively bring suit to enforce such rights.
[Signature Page Follows]
-8-
<PAGE> 9
The parties hereto have executed this Agreement as of the day and year
set forth on the first page of this Agreement.
Accrue Software, Inc.
By:
-------------------------------------
Title:
----------------------------------
Address: 48634 Milmont Dr.
Fremont, California 94538
AGREED TO AND ACCEPTED:
[IndemniteeName]
(Signature)
Address: [Indemnitee Address 1]
[Indemnitee Address 2]
-9-
<PAGE> 1
EXHIBIT 10.2
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY
NOT BE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES
UNDER THE SECURITIES ACT OF 1933, OR PURSUANT TO RULE 144 UNDER THE ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER SUCH ACT.
Issued: May 3, 1996 CSW-1
GAUGE TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
1. NUMBER AND PRICE OF SHARES SUBJECT TO WARRANT.
(a) Subject to the terms and conditions set forth in this Common
Stock Purchase Warrant (this "Warrant"), Sterling Payot Company (the "Investor")
is entitled to purchase from Gauge Technologies, Inc., a Delaware corporation
(the "Company"), at any time on or before May 3, 2001 (the "Expiration Date"),
unless the Warrant is earlier terminated pursuant to Section 12 hereof, up to
350,000 shares (which number of shares is subject to adjustment and/or
repurchase by the Company as described below) of fully paid and non-assessable
Common Stock of the Company ("Common Stock") upon the exercise of this Warrant
pursuant to Section 7 (the "Warrant Shares").
(b) Subject to adjustment as hereinafter provided, the purchase
price of one share of Common Stock (or such securities as may be substituted for
one share of Common Stock pursuant to the provisions hereinafter set forth)
shall be $.70. The purchase price of one share of Common Stock (or such
securities as may be substituted for one share of Common Stock pursuant to the
provisions hereinafter set forth) payable from time to time upon the exercise of
this Warrant (whether such price be the price specified above or an adjusted
price determined as hereinafter provided) is referred to herein as the "Warrant
Price."
2. CONVERSION OF WARRANT.
(a) RIGHT TO CONVERT. In addition to, and without limiting, the
other rights of the Investor hereunder, the Investor shall have the right (the
"Conversion Right") to convert this Warrant into shares of Common Stock at any
time during the term hereof. Upon exercise of the Conversion Right, the Company
shall deliver to the Investor, without payment by the Investor of any Warrant
Price or any cash or other consideration, that number of Warrant Shares computed
using the following formula:
<PAGE> 2
X= Y (A-B)
-------
A
Where: X= The number of Shares of Common Stock to be issued to the
Investor
Y= The number of Shares of Common Stock purchasable pursuant
to this Warrant
A= The Fair Market Value of one share of Common Stock as of
the Conversion Date
B= The Warrant Price
(b) METHOD OF EXERCISE. The Conversion Right may be exercised by
the Investor by the surrender of this Warrant to the Company at its principal
office at the address indicated on the signature page of this Warrant, together
with a written notice specifying that the Investor intends to exercise the
Conversion Right. Such conversion shall be effective upon the Company's receipt
of this Warrant, together with the conversion notice, or on such later date as
is specified in the conversion notice (the "Conversion Date") and, at the
Investor's election, may be made contingent upon the closing of (i) an "IPO" (as
defined in Section 12 of this Warrant) or (ii) an "Corporate Transaction" (as
defined in Section 12 of this Warrant).
(c) FAIR MARKET VALUE. "Fair Market Value" of a share of Common
Stock (issued upon conversion thereof) as of a particular date means: (a) if
conversion is effective as of the closing of the IPO, the "price to public"
specified for such shares in the final prospectus for the IPO, (b) if the
conversion is effected as of the closing of a Corporate Transaction, the
allocated consideration per share in the Corporate Transaction, and (c)
otherwise, the price as determined in good faith by the Board of Directors of
the Company.
3. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and kind
of securities issuable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) ADJUSTMENT FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR
PROPERTY. In case at any time or from time to time on or after the date hereof
the holders of the Common Stock of the Company (or any shares of stock or other
securities at the time receivable upon the exercise of this Warrant) shall have
received, or, on or after the record date fixed for the determination of
eligible stockholders, shall have become entitled to receive, without payment
therefor, other or additional stock or other securities or property (other than
cash) of the Company by way of dividend, then and in each case, the holder of
this Warrant shall, upon the exercise hereof, be entitled to receive, in
addition to the number of shares of Common Stock receivable thereupon, and
without payment of any additional consideration therefor, the amount of such
other or additional stock or other securities or property (other than cash) of
the Company which such holder would hold on the date of such exercise had it
been the holder of record of such Common Stock on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional stock
-2-
<PAGE> 3
available by it as aforesaid during such period, giving effect to all
adjustments called for during such period elsewhere in this Section 3.
(b) ADJUSTMENT FOR RECLASSIFICATION OR REORGANIZATION. In case of
any reclassification or change of the outstanding securities of the Company or
of any reorganization of the Company, then and in each such case the holder of
this Warrant, upon the exercise hereof at any time after the consummation of
such reclassification, change or reorganization, shall be entitled to receive,
in lieu of the stock or other securities and property receivable upon the
exercise hereof prior to such consummation, the stock or other securities or
property to which such holder would have been entitled upon such consummation if
such holder had exercised this Warrant immediately prior thereto, all subject to
further adjustment as provided elsewhere in this Section 3; and in each such
case, the terms of this Section 3 shall be applicable to the shares of stock or
other securities properly receivable upon the exercise of this Warrant after
such consummation.
(c) STOCK SPLITS AND REVERSE STOCK SPLITS. If at any time on or
after the date hereof the Company shall subdivide its outstanding shares of
Common Stock into a greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall thereby be proportionately reduced
and the number of shares receivable upon exercise of the Warrant shall thereby
be proportionately increased; and, conversely, if at any time on or after the
date hereof the outstanding number of shares of Common Stock shall be combined
into a smaller number of shares, the Warrant Price in effect immediately prior
to such combination shall thereby be proportionately increased and the number of
shares receivable upon exercise of this Warrant shall thereby be proportionately
decreased.
4. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
5. STOCKHOLDER RIGHTS. This Warrant represents only the right to
purchase shares of Common Stock of the Company and shall not otherwise entitle
its holder to any of the rights of a stockholder of the Company. Notwithstanding
the foregoing, the Warrant Shares to be issued to the Investor by the Company
upon the Investor's exercise of this Warrant shall be considered "Registrable
Securities" as defined in that certain Investor Rights Agreement of even date
hereof between the Company and certain Investors set forth therein, and shall be
entitled to the same registration rights as are set forth therein.
6. RESERVATION OF STOCK. The Company covenants that during the period
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant. The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the exercise of this
Warrant.
-3-
<PAGE> 4
7. EXERCISE OF WARRANT.
(a) Method of Exercise. This Warrant may be exercised by the
holder hereof, in whole but not in part, by the surrender of this Warrant at the
principal office of the Company, accompanied by payment to the Company, by
check, of an amount equal to the then applicable Warrant Price per share
multiplied by the number of shares of Common Stock being purchased. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the shares of Common Stock issuable upon such
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As promptly as practicable on
or after such date, the Company at its expense shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of full shares of Common Stock issuable upon such exercise, together
with cash in lieu of any fraction of a share as provided above. The shares of
Common Stock issuable upon exercise hereof shall, upon their issuance, be fully
paid and nonassessable.
(b) Timing of Exercise. This Warrant may not be exercised by the
holder hereof until the earlier of (i) October 31, 1996 or (ii) the date on
which a significant joint venture, partner arrangement, additional financing or
other similar business arrangement is established by Investor and completed,
each to the Company's satisfaction (a "Significant Transaction").
8. RIGHT OF REPURCHASE BY THE COMPANY. In the event that a Significant
Transaction has not occurred on or before September 30, 1996 ("the Repurchase
Date"), the Company shall have an irrevocable, exclusive option for a period of
thirty (30) days from such date to repurchase or cancel up to 50% of the Warrant
Shares that would be issued upon exercise of the Warrant (the "Right of
Repurchase"). The Company shall pay the Investor a purchase price of $0.01 per
Warrant Share (adjusted for any stock splits, stock dividends and the like) (the
"Repurchase Price") for each Warrant Share repurchased or canceled (each
"Repurchased Share"). The Right of Repurchase shall be exercised by the Company
by written notice and delivery to the Investor of a check in the amount of the
total Repurchase Price for the Repurchased Shares. Upon delivery of such notice
and payment, the Company shall become the legal and beneficial owner of the
Repurchased Shares and all rights and interest therein or related thereto, and
the Company shall have the right to transfer to its own name the number of
Repurchased Shares without further action by the Investor. The Right of
Repurchase shall expire on October 31, 1996.
9. CERTIFICATE OF ADJUSTMENT. Whenever the Warrant Price or number or
type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the nature of
such adjustment and a brief statement of the facts requiring such adjustment.
10. WARRANT TRANSFERABILITY. This Warrant and all rights hereunder are
not transferable except as set forth in Section 6 of the Purchase Agreement as
defined in Section 14 herein below.
-4-
<PAGE> 5
11. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. MISCELLANEOUS. This Warrant shall be governed by the laws of the
State of California. The headings in this Warrant are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the Company and the registered holder hereof. All notices and other
communications from the Company to the holder of this Warrant shall be mailed by
first class registered or certified mail, postage prepaid, to the address
furnished to the Company in writing by the last holder of this Warrant who shall
have furnished an address to the Company in writing. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provisions.
13. TERMINATION. This Warrant (and the right to purchase securities upon
exercise hereof) shall terminate upon the earliest of (a) May 3, 2001, (b) the
closing of the Company's sale of all or substantially all of its assets or the
acquisition of the Company by another entity by means of merger or other
transaction as a result of which stockholders of the Company immediately prior
to such acquisition possess a minority of the voting power of the acquiring
entity immediately following such acquisition (each, a "Corporate Transaction"),
or (c) the closing of a public offering of the Company's Common Stock registered
under the Securities Act of 1933, as amended, (an "IPO") if the underwriters
reasonably request that the Warrant shall terminate because the continuation of
the Warrant after the IPO would adversely affect the marketing of the offering.
14. AMENDMENT. This Warrant is being acquired pursuant to a Warrant
Purchase Agreement by and among the Company and the Investor of even date hereof
(the "Purchase Agreement"), and may be amended only upon the written agreement
of the Company and the Investor.
15. NOTICE. The Company shall give Investor written notice of any
Corporate Transaction or IPO referred to in Section 13 or any cash dividend
declared on the Company's Common Stock at least twenty (20) days prior to the
closing of any such Corporate Transaction or IPO or the record date fixed for
the determination of stockholders eligible for such dividend and shall deliver a
copy of the preliminary prospectus with respect to any such public offering to
Investor promptly after it becomes available.
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<PAGE> 6
This Common Stock Purchase Warrant No. CSW-1 is issued as of the 3 day
of May, 1996.
GAUGE TECHNOLOGIES, INC.
By: /s/ Jonathan Nelson
-----------------------------------
Title: Chief Executive Officer
-----------------------------------
Address: 83 Pioneer Way
Mountain View, CA 94041
Signature Page to Guage Technologies, Inc.
Common Stock Purchase Warrant
<PAGE> 7
[STERLING PAYOT COMPANY LETTERHEAD]
May 23, 1999
Mr. Richard Kreysar
Accrue Software, Inc.
48634 Milmont Drive
Fremont, CA 94538-7353
Exercise of Common Stock Warrant
Dear Rick:
This letter confirms that we have agreed to exercise the Common Stock
Purchase Warrant for 350,000 shares (CSW-1) held by Sterling Payot Company and
dated May 3, 1996 (the "Warrant") not later than 30 days after the closing date
of the Company's initial public offering. Such exercise will be made either for
cash or on a net exercise basis as provided by Section 2(a) of the Warrant.
It is our understanding that if the Warrant is exercised after the closing
of the IPO, the "Fair Market Value" of the Company's Common Stock will be
deemed to be the closing price of the Company's Common Stock quoted by the
Nasdaq National Stock Market on the date of exercise. To this end, Section 2(c)
of the Warrant is hereby amended and restated to read as follows:
"(c) FAIR MARKET VALUE. "Fair Market Value" of a share of Common Stock
(issued upon conversion thereof) as of a particular date means: (a) if
conversion is effective as of the closing of the IPO, the "price to public"
specified for such shares in the final prospectus for the IPO, (b) if
conversion is effective as of a date after the closing of the IPO, the
closing price of the Company's Common Stock quoted by the Nasdaq National
Stock Market on the date of exercise, (c) if the conversion is effected as
of the closing of a Corporate Transaction, the allocated consideration per
share in the Corporate Transaction, and (d) otherwise, the price as
determined in good faith by the Board of Directors of the Company."
Please execute the counterpart signature to this letter below to acknowledge
your agreement to the foregoing, including the amendment of Section 2(c) of the
Warrant. Thank you.
Sincerely,
STERLING PAYOT COMPANY
/s/ Robert M. Smelick
------------------------------
Robert M. Smelick
Managing Director
ACCEPTED AND AGREED:
ACCRUE SOFTWARE, INC.
By: /s/ Gregory C. Walker
----------------------------------
Title: CFO V.P. Finance
-------------------------------
Date: May 26, 1999
--------------------------------
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<PAGE> 1
EXHIBIT 10.3
ACCRUE SOFTWARE, INC.
1996 STOCK PLAN
(AS AMENDED BY THE BOARD OF DIRECTORS
AS OF MAY 23, 1999)
1. PURPOSES OF THE PLAN. The purposes of this 1996 Stock Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights and stock bonuses may
also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 6 of the Plan.
(b) "AFFILIATE" means an entity other than a Subsidiary in
which the Company owns an equity interest or which, together with the Company,
is under common control of a third person or entity.
(c) "APPLICABLE LAWS" means the legal requirements relating
to the administration of stock option, restricted stock purchase and stock bonus
plans under applicable U.S. state corporate laws, U.S. federal and applicable
state securities laws, the Code, any stock exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options, Stock
Purchase Rights or Stock Bonuses are granted under the Plan, as such laws,
rules, regulations and requirements shall be in place from time to time.
(d) "BOARD" means the Board of Directors of the Company.
(e) "CODE" means the Internal Revenue Code of 1986, as
amended.
(f) "COMMITTEE" means the Committee appointed by the Board
of Directors in accordance with Section 4(a) of the Plan.
(g) "COMMON STOCK" means the Common Stock of the Company.
(h) "COMPANY" means Accrue Software, Inc., a Delaware
corporation.
(i) "CONSULTANT" means any person, including an advisor, who
is engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
<PAGE> 2
(j) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means
the absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a Consultant or
from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.
(k) "DIRECTOR" means a member of the Board.
(l) "EMPLOYEE" means any person (including, if appropriate,
any Named Executive, Officer or Director), employed by the Company or any Parent
or Subsidiary of the Company, with the status of employment determined based
upon such minimum number of hours or periods worked as shall be determined by
the Administrator in its discretion, subject to any requirements of the Code.
The payment by the Company of a director's fee to a Director shall not be
sufficient to constitute "employment" of such Director by the Company.
(m) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(n) "FAIR MARKET VALUE" means, as of any date, the fair
market value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including without limitation the
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported), as quoted on such system or exchange, or the exchange with the
greatest volume of trading in Common Stock for the last market trading day prior
to the time of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq
System (but not on the National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock for the last market trading day prior to the time of determination,
as reported in The Wall Street Journal or such other source as the Administrator
deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
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<PAGE> 3
(o) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code, as designated in the applicable written option agreement.
(p) "LISTED SECURITY" means any security of the Company that
is listed or approved for listing on a national securities exchange or
designated or approved for designation as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc.
(q) "NAMED EXECUTIVE" means any individual who, on the last
day of the Company's fiscal year, is the chief executive officer of the Company
(or is acting in such capacity) or among the four most highly compensated
officers of the Company (other than the chief executive officer). Such officer
status shall be determined pursuant to the executive compensation disclosure
rules under the Exchange Act.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended
to qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(s) "OFFICER" means a person who is an officer of the
Company within the meaning of Section 16(a) of the Exchange Act and the rules
and regulations promulgated thereunder.
(t) "OPTION" means a stock option granted pursuant to the
Plan.
(u) "OPTIONED STOCK" means the Common Stock subject to an
Option, Stock Purchase Right or Stock Bonus.
(v) "OPTIONEE" means an Employee or Consultant who receives
an Option, a Stock Purchase Right, or a Stock Bonus.
(w) "PARENT" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code, or any successor
provision.
(x) "PLAN" means this 1996 Stock Plan.
(y) "REPORTING PERSON" means an officer, director, or
greater than ten percent stockholder of the Company within the meaning of Rule
16a-2 under the Exchange Act, who is required to file reports pursuant to Rule
16a-3 under the Exchange Act.
(z) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right or Stock Bonus under Section 11 or
Section 12 below.
(aa) "RULE 16B-3" means Rule 16b-3 promulgated under the
Exchange Act, as the same may be amended from time to time, or any successor
provision.
(bb) "SHARE" means a share of the Common Stock, as adjusted
in accordance with Section 14 of the Plan.
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(cc) "STOCK BONUS" means an award of Shares granted pursuant
to Section 12 below.
(dd) "STOCK EXCHANGE" means any stock exchange or
consolidated stock price reporting system on which prices for the Common Stock
are quoted at any given time.
(ee) "STOCK PURCHASE RIGHT" means the right to purchase
Common Stock pursuant to Section 10 below.
(ff) "SUBSIDIARY" means a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code, or any
successor provision.
(gg) "TEN PERCENT HOLDER" means a person who owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section
14 of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is 6,630,000 shares of Common Stock, plus an automatic
annual increase on the first day of each of the Company's fiscal years beginning
in 2000 and ending in 2006 equal to the lesser of: (i) 600,000 Shares; (ii) four
percent (4%) of the Shares outstanding on the last day of the immediately
preceding fiscal year; or (iii) such lesser number of shares as is determined by
the Board of Directors. The Shares may be authorized, but unissued, or
reacquired Common Stock. If an Option should expire or become unexercisable for
any reason without having been exercised in full, the unpurchased Shares that
were subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. In addition, any Shares of Common
Stock which are retained by the Company upon exercise of an Option or Stock
Purchase Right in order to satisfy the exercise or purchase price for such
Option or Stock Purchase Right or any withholding taxes due with respect to such
exercise shall be treated as not issued and shall continue to be available under
the Plan. Shares repurchased by the Company pursuant to any repurchase right
which the Company may have and Shares forfeited to the Company pursuant to
Section 12 below shall not be available for future grant as Incentive Stock
Options under the Plan to the extent the future grant of such options shall not
have satisfied the stockholder approval requirements under Section 422 of the
Code.
4. ADMINISTRATION OF THE PLAN.
(a) GENERAL. The Plan shall be administered by the Board or
a Committee, or a combination thereof, as determined by the Board. The Plan may
be administered by different administrative bodies with respect to different
classes of Optionees and, if permitted by the Applicable Laws, the Board may
authorize one or more officers (who may (but need not) be Officers) to grant
Options, Stock Purchase Rights or Stock Bonuses to Employees and Consultants.
(b) ADMINISTRATION WITH RESPECT TO REPORTING PERSONS. With
respect to Options granted to Reporting Persons and Named Executives, the Plan
may (but need not) be
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administered so as to permit such Options to qualify for the exemption set forth
in Rule 16b-3 and to qualify as performance-based compensation under Section
162(m) of the Code.
(c) POWERS OF THE ADMINISTRATOR. Subject to the provisions
of the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, including the approval, if required, of any Stock Exchange, the
Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom
Options, Stock Purchase Rights and Stock Bonuses may from time to time be
granted hereunder;
(iii) to determine whether and to what extent Options,
Stock Purchase Rights and Stock Bonuses or any combination thereof are granted
hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder;
(vii) to determine whether and under what
circumstances an Option may be settled in cash under Section 10(g) instead of
Common Stock;
(viii) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(ix) to determine the terms and restrictions
applicable to Stock Purchase Rights and Stock Bonuses and the Restricted Stock
purchased by exercising such Stock Purchase Rights or received through such
Stock Bonuses; and
(x) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan; and
(xi) in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options, Stock Purchase Rights or
Stock Bonuses to participants who are foreign nationals or employed outside of
the United States in order to recognize differences in local law, tax policies
or customs.
(d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options, Stock Purchase Rights or Stock Bonuses.
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5. ELIGIBILITY.
(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options, Stock
Purchase Rights and Stock Bonuses may be granted to Employees and Consultants.
Incentive Stock Options may be granted only to Employee, provided however that
Employees of Affiliates shall not be eligible to receive Incentive Stock
Options. An Employee or Consultant who has been granted an Option, Stock
Purchase Right or Stock Bonus may, if he or she is otherwise eligible, be
granted additional Options, Stock Purchase Rights or Stock Bonuses.
(b) TYPE OF OPTION. Each Option shall be designated in the
written option agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares with respect to which Options designated
as Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
(c) The Plan shall not confer upon any Optionee any right
with respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with such Optionee's right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 20 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 17 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated
in the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Option granted to an Optionee who, at the time the Option is granted is a Ten
Percent Holder, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the written option
agreement.
8. LIMITATION ON GRANTS TO EMPLOYEES. Subject to adjustment as
provided in Section 14 below, the maximum number of Shares which may be subject
to Options, Stock Purchase Rights and Stock Bonuses granted to any one Employee
under this Plan for any fiscal year of the Company shall be 2,000,000 Shares.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board and set forth in the applicable agreement, but shall be subject to the
following:
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(i) In the case of an Incentive Stock Option that
is:
(A) granted to an Employee who, at the time
of the grant of such Incentive Stock Option, is a Ten Percent Holder, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.
(B) granted to any other Employee, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option that
is:
(A) granted prior to the date, if any, on
which the Common Stock becomes a Listed Security, to a person who, at the time
of the grant of such Option, is a Ten Percent Holder, the per Share exercise
price shall be no less than 110% of the Fair Market Value per Share on the date
of the grant.
(B) granted to a person who, at the time of
the grant of such Option, is a Named Executive of the Company, the per share
Exercise Price shall be no less than 100% of the Fair Market Value on the date
of grant if such Option is intended to qualify as performance-based compensation
under Section 162(m) of the Code;
(C) granted prior to the date, if any, on
which the Common Stock becomes a Listed Security, to any person other than a
Named Executive or Ten Percent Holder, the per Share exercise price shall be no
less than 85% of the Fair Market Value per Share on the date of grant if
required by the Applicable Laws and, if not so required, shall be such price as
is determined by the Administrator; or
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price other than as required above pursuant to
a merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender or such other period as may be required
to avoid a charge to the Company's earnings, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) authorization for the Company to
retain from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to the
exercise price for the total number of Shares as to which the Option is
exercised, (6) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price and any
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<PAGE> 8
applicable income or employment taxes, (7) delivery of an irrevocable
subscription agreement for the Shares that irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, or (9) such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, and reflected in the written
option agreement, which may include vesting requirements and/or performance
criteria with respect to the Company and/or the Optionee; provided that if
required by the Applicable Laws, any option granted prior to the date, if any,
upon which the Common Stock becomes a Listed Security, shall become exercisable
at the rate of at least twenty percent (20%) per year over five (5) years from
the date the Option is granted. In the event that any of the Shares issued upon
exercise of an Option (which exercise occurs prior to the date, if any, upon
which the Common Stock becomes a Listed Security) should be subject to a right
of repurchase in the Company's favor, such repurchase right shall, if required
by the Applicable Laws, lapse at the rate of at least twenty percent (20%) per
year over five (5) years from the date the Option is granted.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and the
Company has received full payment for the Shares with respect to which the
Option is exercised. Full payment may, as authorized by the Board, consist of
any consideration and method of payment allowable under Section 9(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
not withstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 13 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares that thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP.
Subject to Section 10(c), in the event of termination of an Optionee's
Continuous Status as an Employee or Consultant with the Company, such Optionee
may, but only within three (3) months (or such other period of time not less
than thirty (30) days as is determined by the Administrator, with
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such determination in the case of an Incentive Stock Option being made at the
time of grant of the Option and not exceeding three (3) months) after the date
of such termination (but in no event later than the expiration date of the term
of such Option as set forth in the Option Agreement), exercise his or her Option
to the extent that the Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate. No termination shall be deemed to occur and this Section 10(b) shall
not apply if (i) the Optionee is a Consultant who becomes an Employee; or (ii)
the Optionee is an Employee who becomes a Consultant.
(c) DISABILITY OF OPTIONEE.
(i) Notwithstanding Section 10(b) above, in the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of his or her total and permanent disability (within the
meaning of Section 22(e)(3) of the Code), Optionee may, but only within twelve
(12) months from the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(ii) In the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of a disability which
does not fall within the meaning of total and permanent disability (as set forth
in Section 22(e)(3) of the Code), Optionee may, but only within six (6) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within three (3) months of the date of such termination, the
Option will not qualify for ISO treatment under the Code. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within six
months (6) from the date of termination, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an
Optionee during the period of Continuous Status as an Employee or Consultant
since the date of grant of the Option, or within thirty (30) days following
termination of Optionee's Continuous Status as an Employee or Consultant, the
Option may be exercised, at any time within six (6) months following the date of
death (but in no event later than the expiration date of the term of such Option
as set forth in the Option Agreement), by Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of death or, if
earlier, the date of termination of Optionee's Continuous Status as an Employee
or Consultant. To the extent that Optionee was not entitled to exercise the
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Option at the date of death or termination, as the case may be, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(e) EXTENSION OF EXERCISE PERIOD. The Administrator shall
have full power and authority to extend the period of time for which an Option
is to remain exercisable following termination of an Optionee's Continuous
Status as an Employee or Consultant from the periods set forth in Sections
10(b), 10(c) and 10(d) above or in the Option Agreement to such greater time as
the Board shall deem appropriate, provided that in no event shall such Option be
exercisable later than the date of expiration of the term of such Option as set
forth in the Option Agreement.
(f) RULE 16B-3. Options granted to Reporting Persons shall
comply with Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
for Plan transactions.
(g) BUYOUT PROVISIONS. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Administrator made the determination to grant the Stock Purchase
Right. In the case of a Stock Purchase Right granted prior to the date, if any,
on which the Common Stock becomes a Listed Security and if required by the
Applicable Laws at such time, the purchase price of Shares subject to such Stock
Purchase Rights shall not be less than 85% of the Fair Market Value of the
Shares as of the date of the offer, or, in the case of a Ten Percent Holder, the
price shall not be less than 100% of the Fair Market Value of the Shares as of
the date of the offer. If the Applicable Laws do not impose the requirements set
forth in the preceding sentence and with respect to any Stock Purchase Rights
granted after the date, if any, on which the Common Stock becomes a Listed
Security, the purchase price of Shares subject to Stock Purchase Rights shall be
as determined by the Administrator. The offer shall be accepted by execution of
a Restricted Stock Purchase Agreement in the form determined by the
Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right
shall be referred to herein as "Restricted Stock."
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
disability). The purchase price for Shares repurchased
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<PAGE> 11
pursuant to the Restricted Stock purchase agreement shall be the original
purchase price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at such rate as the Administrator may determine, provided, however, that with
respect to a Stock Purchase Right granted prior to the date, if any, on which
the Common Stock becomes a Listed Security to a purchaser who is not an officer
(including an Officer), Director or Consultant of the Company or any Parent or
Subsidiary of the Company, it shall lapse at a minimum rate of 20% per year.
(c) OTHER PROVISIONS. The Restricted Stock Purchase
Agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its sole
discretion. In addition, the provisions of Restricted Stock Purchase Agreements
need not be the same with respect to each purchaser.
(d) RIGHTS AS A STOCKHOLDER. Once the Stock Purchase Right
is exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. STOCK BONUSES.
(a) AWARDS OF STOCK BONUSES. Stock Bonuses may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. A Stock Bonus may be awarded
for past services already rendered to the Company, or any Parent, Subsidiary or
Affiliate of the Company pursuant to an agreement (a "Stock Bonus Agreement")
that shall be in such form (which shall not be the same for each recipient) as
the Administrator shall from time to time approve, and shall comply with and be
subject to the terms and conditions of the Plan. Stock Bonuses may vary from
recipient to recipient and between groups of recipients, and may be based upon
achievement of the Company, Parent, Subsidiary or Affiliate and/or individual
performance factors or upon such other criteria as the Administrator may
determine.
(b) FORFEITURE PROVISIONS. Unless the Administrator
determines otherwise, the Stock Bonus Agreement shall provide for the forfeiture
of Stock Bonus Shares to the Company without payment of consideration upon the
voluntary or involuntary termination of the recipient's employment with the
Company for any reason (including death or disability). The forfeiture provision
shall lapse at such rate as the Administrator may determine.
(c) OTHER PROVISIONS. The Stock Bonus Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Stock Bonus Agreements need not be the same with
respect to each purchaser.
(d) RIGHTS AS A STOCKHOLDER. Once the Stock Bonus is
awarded, the recipient shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or
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her award is entered upon the records of the duly authorized transfer agent of
the Company. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Stock Bonus is awarded, except as
provided in Section 14 of the Plan.
13. TAXES.
(a) As a condition of the exercise of an Option or Stock
Purchase Right or the award of a Stock Bonus granted under the Plan, the
Participant (or in the case of the Participant's death, the person exercising or
receiving the Option, Stock Purchase Right or Stock Bonus) shall make such
arrangements as the Administrator may require for the satisfaction of any
applicable federal, state, local or foreign withholding tax obligations that may
arise in connection with the exercise of Option or Stock Purchase Right or the
award of a Stock Bonus and the issuance of Shares. The Company shall not be
required to issue any Shares under the Plan until such obligations are
satisfied.
(b) In the case of an Employee and in the absence of any
other arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option or Stock Purchase Right or the award of the
Stock Bonus.
(c) This Section 13(c) shall apply only after the date, if
any, upon which the Common Stock becomes a Listed Security. In the case of
Participant other than an Employee (or in the case of an Employee where the next
payroll payment is not sufficient to satisfy such tax obligations, with respect
to any remaining tax obligations), in the absence of any other arrangement and
to the extent permitted under the Applicable Laws, the Participant shall be
deemed to have elected to have the Company withhold from the Shares to be issued
upon exercise of the Option or Stock Purchase Right or award of the Stock Bonus
that number of Shares having a Fair Market Value determined as of the applicable
Tax Date (as defined below) equal to the amount required to be withheld. For
purposes of this Section 13, the Fair Market Value of the Shares to be withheld
shall be determined on the date that the amount of tax to be withheld is to be
determined under the Applicable Laws (the "Tax Date").
(d) If permitted by the Administrator, in its discretion, a
Participant may satisfy his or her tax withholding obligations upon exercise of
an Option or Stock Purchase Right or award of a Stock Bonus by surrendering to
the Company Shares that (i) in the case of Shares previously acquired from the
Company, have been owned by the Participant for more than six (6) months on the
date of surrender, and (ii) have a Fair Market Value determined as of the
applicable Tax Date equal to the amount required to be withheld.
(e) Any election or deemed election by a Participant to have
Shares withheld to satisfy tax withholding obligations under Section 13(c) or
(d) above shall be irrevocable as to the particular Shares as to which the
election is made and shall be subject to the consent or disapproval of the
Administrator. Any election by a Participant under Section 13(d) above must be
made on or prior to the applicable Tax Date.
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(f) In the event an election to have Shares withheld is made
by a Participant and the Tax Date is deferred under Section 83 of the Code
because no election is filed under Section 83(b) of the Code, the Participant
shall receive the full number of Shares with respect to which the Option or
Stock Purchase Right is exercised or Stock Bonus is awarded but such Participant
shall be unconditionally obligated to tender back to the Company the proper
number of Shares on the applicable Tax Date.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN
OTHER TRANSACTIONS.
(a) CHANGES IN CAPITALIZATION. Subject to any required
action by the stockholders of the Company, the number of shares of Common Stock
covered by each outstanding Option, Stock Purchase Right or Stock Bonus, and the
number of shares of Common Stock that have been authorized for issuance under
the Plan but as to which no Options, Stock Purchase Rights or Stock Bonuses have
yet been granted or that have been returned to the Plan upon cancellation or
expiration of an Option, Stock Purchase Right or Stock Bonus, the number of
Shares described in Section 3(a)(i) and 8 above, as well as the price per share
of Common Stock covered by each such outstanding Option or Stock Purchase Right,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination, recapitalization or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option, Stock Purchase Right or Stock Bonus.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER OR SALE OF ASSETS. In the event of a proposed
sale of all or substantially all of the Company's assets or a merger of the
Company with or into another corporation where the successor corporation issues
its securities to the Company's stockholders, each outstanding Option or Stock
Purchase Right shall be assumed or an equivalent option or right shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the successor corporation does not agree to assume
the Option or Stock Purchase Right or to substitute an equivalent option or
right, in which case such Option or Stock Purchase Right shall terminate upon
the consummation of the merger or sale of assets.
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<PAGE> 14
(d) CERTAIN DISTRIBUTIONS. In the event of any distribution
to the Company's stockholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option or Stock Purchase Right to reflect the effect of such
distribution.
15. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS.
Options and Stock Purchase Rights may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution, provided that, after the date, if any, upon
which the Common Stock becomes a Listed Security, the Administrator may in its
discretion grant transferable Nonstatutory Stock Options pursuant to Option
Agreements specifying (i) the manner in which such Nonstatutory Stock Options
are transferable and (ii) that any such transfer shall be subject to the
Applicable Laws. The designation of a beneficiary by an Optionee will not
constitute a transfer. An Option or Stock Purchase Right may be exercised,
during the lifetime of the holder of Option or Stock Purchase Right, only by
such holder or a transferee permitted by this Section 16.
16. TIME OF GRANTING OPTIONS, STOCK PURCHASE RIGHTS AND STOCK
BONUSES. The date of grant of an Option, Stock Purchase Right or Stock Bonus
shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option, Stock Purchase Right or Stock Bonus, or such
other date as is determined by the Board; provided however that in the case of
any Incentive Stock Option, the grant date shall be the later of the date on
which the Administrator makes the determination granting such Incentive Stock
Option or the date of commencement of the Optionee's employment relationship
with the Company. Notice of the determination shall be given to each Employee or
Consultant to whom an Option, Stock Purchase Right or Stock Bonus is so granted
within a reasonable time after the date of such grant.
17. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AUTHORITY TO AMEND OR TERMINATE. The Board may at any
time amend, alter, suspend or discontinue the Plan, but no amendment,
alteration, suspension or discontinuation shall be made that would impair the
rights of any Optionee under any grant theretofore made, without his or her
consent. In addition, to the extent necessary and desirable to comply with the
Applicable Laws, the Company shall obtain stockholder approval of any Plan
amendment in such a manner and to such a degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or
termination of the Plan shall adversely affect Options, Stock Purchase Rights or
Stock Bonuses already granted, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by the
Optionee and the Company.
18. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right or the award of a
Stock Bonus unless the exercise of such Option or Stock Purchase Right or the
award of such Stock Bonus and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the
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<PAGE> 15
rules and regulations promulgated thereunder, and the requirements of any Stock
Exchange. As a condition to the exercise of an Option or Stock Purchase Right
and the award of a Stock Bonus, the Company may require the person exercising
such Option or Stock Purchase Right or receiving such Stock Bonus to represent
and warrant at the time of any such exercise or award that the Shares are being
purchased or received only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by law.
19. RESERVATION OF SHARES. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan. The inability of
the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
20. AGREEMENTS. Options, Stock Purchase Rights and Stock Bonuses
shall be evidenced by written agreements in such form as the Administrator shall
approve from time to time.
21. STOCKHOLDER APPROVAL. If required by the Applicable Laws,
continuance of the Plan shall be subject to approval by the stockholders of the
Company within twelve (12) months before or after the date the Plan is adopted.
Such stockholder approval shall be obtained in the degree and manner required
under the Applicable Laws. All Options, Stock Purchase Rights and Stock Bonuses
issued under the Plan shall become void in the event such approval is not
obtained.
22. INFORMATION AND DOCUMENTS TO OPTIONEES, PURCHASERS AND
RECIPIENTS. Prior to the date, if any, upon which the Common Stock becomes a
Listed Security and if required by the Applicable Laws, the Company shall
provide financial statements at least annually to each Optionee and to each
individual who acquired Shares Pursuant to the Plan, during the period such
Optionee, purchaser or recipient has one or more Options, Stock Purchase Rights
or Stock Bonuses outstanding, and in the case of an individual who acquired
Shares pursuant to the Plan, during the period such individual owns such Shares.
The Company shall not be required to provide such information if the issuance of
Options, Stock Purchase Rights or Stock Bonuses under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information. In addition, at the time of issuance of any securities
under the Plan, the Company shall provide to the Optionee or the Purchaser a
copy of the Plan and any agreement(s) pursuant to which securities under the
Plan are issued.
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<PAGE> 1
EXHIBIT 10.4
Bob Page
19963 Earle Ct.
Morgan Hill, CA 95037
Bob,
It is my pleasure to offer you the position of Chief Technical Officer at
(working title) Black Box Inc. We are pleased to have you on our staff. We
would like you to start full time by February 15, 1996.
Your starting salary is $120,000 per year paid on a twice monthly schedule. You
will be reviewed semi-annually and your next salary review will around July 15,
1996. The position will include extension of your Sun Microsystems health
insurance, life insurance, ISDN or Frame Relay into your home, a guaranteed
South Bay office (in a maximum 6 months, probably sooner), an engineering
assistant, and two weeks of vacation time per year. As the company grows, we
hope to offer more benefits to our employees.
You will also receive stock options to purchase ownership of Five Percent (5%)
of the outstanding stock of Black Box Inc. as of your acceptance date, vesting
over a 4 year period. The initial quarter of your shares will vest on your
first anniversary date, and the remaining shares will vest in monthly
increments after your first anniversary with Black Box Inc. Your option price
is one cent per share.
Welcome on board!
Sincerely,
Jonathan Nelson
Chief Executive Officer
Agreed
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Bob Page
<PAGE> 1
EXHIBIT 10.5
SOFTWARE LICENSE AGREEMENT
This License Agreement ("Agreement") made as of July 1, 1997
("Effective Date"), between VI/Visualize, Inc. ("Visualize"), a Nevada
corporation, having as its principal place of business at 1819 E. Morten, Suite
210, Phoenix, Arizona 85020 and Accrue Software, Inc. ("Accrue"), a Delaware
corporation, having its principal place of business at 1275 Orleans Drive,
Sunnyvale, CA 94089.
RECITALS
A. Visualize has developed and owns certain computer software known
as Visualize DataVista SDK (defined below as the "Product").
B. Accrue wishes to include certain aspects of the Product in
executable form in web analysis products Accrue is developing (defined below as
the "Application").
C. Visualize wishes to license the Product to Accrue and Accrue
wishes to license the Product from Visualize on the terms and conditions set
forth herein.
TERMS AND CONDITIONS
1. DEFINITIONS
1.1 "Product" is defined as any component of the Visualize
DataVista SDK ("DataVista"), as described in Exhibit A that is supplied to
Accrue under the terms of this Agreement, including all Documentation, Product
Releases and Maintenance Releases.
1.2 "Documentation" is defined as the "Visualize DataVista SDK
Reference Manual" in electronic or printed form and the "DataVista HTML Class
Library Reference."
1.3 "Product Release" is defined as a major enhancement or
restructuring of the Product. A Product Release is identified by an integer
version number, for example, Visualize DataVista SDK, Version 2.0.
1.4 "Maintenance Release" is defined as an update to an existing
release which adds minor features or corrects documented bugs. A Maintenance
Release is identified by a decimal integer appended to the Product Release
number, for example, Visualize DataVista SDK, Version 2.1.
1.5 "Application" is defined as the software programs including
enhancements and future versions thereof into which Accrue wishes to integrate
the Product, as more fully described in Exhibit C.
<PAGE> 2
2. LICENSE OF PRODUCT
2.1 LICENSE: Visualize hereby grants to Accrue a perpetual,
non-exclusive (except as set forth below), worldwide license (i) to copy and
incorporate all or part of Product, in object code (.class files) in
Application(s), (ii) to market, distribute, license and sublicense, without
restriction, Application(s) which incorporate the Product and any modifications,
enhancements, and/or alterations thereto, (iii) to develop Applications
incorporating the Product and to modify and enhance the Product for such
development, (iv) to grant trial licenses of Applications incorporating the
Product, and (v) to grant sublicenses to the above licenses. If and when the
source code to the Product is released to Accrue under Section 4.9 below,
Visualize hereby grants Accrue a perpetual, non-exclusive (except as set forth
below), worldwide, royalty-free license to use the source code to support and
maintain the Product as well as make modifications and enhancements thereto
(including enhancements that maintain competitiveness of the Product with then
market standards) in support of Accrue's rights to market, distribute, and
license Applications which incorporate the Product. Accrue may not, without
Visualize's written consent, distribute the Product as a stand-alone product or
otherwise use the Product in a manner inconsistent with this license agreement,
except that Accrue may distribute Maintenance Releases and Product Releases on a
stand-alone basis to its end users of the Application. Visualize will not
directly or indirectly license the Product or any similar or successor product
to Andromedia, Inc. or NetGenesis, Inc. or any parent or subsidiary of the
foregoing for use in a product that competes with Application(s) for one year
from the Effective Date of this Agreement.
2.2 CONSIDERATION: For the rights and license granted herein,
Accrue will pay Visualize as provided in Exhibit B attached hereto. [*] payments
to Visualize will be made [*], with the first payment due on October 31, 1998.
2.3 PROPRIETARY RIGHTS: Accrue agrees that the Product is and
shall remain the sole property of and proprietary to Visualize. Nothing in this
Agreement shall alter these rights and no title to or ownership of the Product
is transferred to Accrue. Each party may use the trademarks or name of the other
in promotional and advertising material related to distribution of the Product
provided such use is consistent with the standards of the other party and is
approved by such party before use of the material. Any such material not
disapproved within five working days will be deemed approved.
2.4 DELIVERY OF PRODUCT: Upon the execution of this Agreement,
Visualize shall deliver to Accrue the Product, (by CD-ROM, magnetic diskettes,
or electronically for installation on Accrue's computers) and such other
diskettes, CD-ROMs, manuals, examples, and other information as may relate to or
comprise the Product, including without limitation the items described on
Exhibit A hereto. The Product will be shipped to Accrue at the address set forth
on the signature page or such other address specified by Accrue in writing.
Visualize may package and ship the product in any commercially reasonable
manner. Thereafter, Visualize will deliver to Accrue, without charge (by CD-ROM,
magnetic diskettes, or electronically for
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* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE> 3
installation on Accrue's computers) any Product Releases and Maintenance
Releases and one master copy of any changes to the related Documentation
promptly when available.
2.5 TAXES: Accrue is responsible for all applicable sales, use,
personal property, excise or other similar taxes or export and import taxes,
duties, and charges, however designated (except only for tax based on the net
income of Visualize or franchise tax arising from Visualize's activities) and
such taxes shall be paid directly by Accrue or reimbursed by Accrue to
Visualize, as necessary, without reducing the amount otherwise due to Visualize
hereunder.
3. SUPPORT AND MAINTENANCE
3.1 SUPPORT: Visualize will provide Accrue, free of charge, with
phone and email technical support [*] for the term of the contract. Such support
will be available only during the hours of 8 a.m. to 5 p.m. Pacific Standard
Time. Accrue will provide technical support to its end users, and Visualize will
interface only with one primary and back-up Accrue appointed technical support
representative on any technical support related issues.
3.2 TRAINING: Visualize will provide Accrue, [*] with
24 consulting hours, all or part of which may be used in an on site training
visit by a Visualize developer to Accrue, travel at Visualize's expense.
3.3 MAINTENANCE: Visualize will provide, [*] promptly when available, Product
Releases and Maintenance Releases to Accrue during the term of this Agreement.
Maintenance Releases will be provided to fix bugs, whether or not reported by
Accrue, and to provide minor enhancements to the Product. If Accrue reports a
documented, reproducible bug in Product that significantly impairs the
intended functionality of the Application, then Visualize will use its best
efforts to provide a specific correction within 7 business days. Visualize
shall notify Accrue of its plans to release any Product Release or Maintenance
Release as soon as practicable prior to the scheduled release date, and in no
event less than twenty (20) days prior to such release.
4. COVENANTS
4.1 CONFIDENTIALITY: Each party will keep confidential any
confidential information relating to (i) the Product or to the other party's
business, finances, marketing and technology to which it obtains access and (ii)
the terms and conditions of this Agreement, and each party agrees that it will
take reasonable precautions to protect such confidential information of the
other party, or any part thereof to the same extent it protects its own similar
confidential information from any use, disclosure or copying, except to the
extent technical information relating to the Product is used, or copied by
Accrue for the purpose of (i) developing Application(s) incorporating the
Product pursuant to this Agreement (ii) obtaining any necessary governmental
approvals, or (iii) otherwise performing its rights or obligations as
contemplated by this Agreement. Confidential information of a party shall not
include information which (i) is or becomes publicly known through no fault of
the other party, (ii) is disclosed to the other party by a third party who had
lawfully obtained such information and without a breach of such third
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* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE> 4
party's confidentiality obligations, (iii) is developed independently by the
other party, or (iv) the party has given written permission to the other party
to not keep confidential. A party wishing to use or disclose information based
on any of the foregoing exceptions will have the burden of proving the
applicability of such exception by objective or verifiable evidence and will in
no event use such information prior to 30 days after notice of such intention to
the other party hereto.
4.2 INJUNCTIVE RELIEF: In the event of a breach of any of the
provisions of Section 4.1, the parties agree that there would be no adequate
remedy at law, and accordingly the parties agree that the non-breaching party,
in addition to any other available legal or equitable remedies, is entitled to
seek injunctive relief against such breach without any requirement to post bond
as a condition of such relief.
4.3 COPYRIGHT PROTECTION: Accrue shall include with all copies of
Product any copyright notices included in the object code version of the Product
(to the extent such inclusion is technically feasible and reasonable, given the
parties' intended use of Product), and shall comply with Visualize's reasonable
written instructions regarding protection thereof under applicable copyright
laws.
4.4 REVERSE COMPILING: Accrue shall not attempt to create or
permit others to attempt to create, by reverse compiling or disassembling or
otherwise, any part of the source program for the Product from the object code
or from other information made available to the Accrue. Accrue authorizes
Visualize to incorporate means for frustrating such reverse compilation or
disassembly in the Product.
4.5 COPIES: Accrue may make machine readable copies of each
Product and copies of the Documentation and other documents as necessary for the
use authorized in this Agreement. All copies, whether in machine readable,
printed, or other form, are part of the Product and Accrue must include on all
such material Visualize's notice of its proprietary rights in the form set forth
in the Product as delivered to Accrue.
4.6 ACCESS: Accrue may disclose and make the Product accessible to
its employees, contractors and agents only to the extent needed to exercise the
licenses granted hereunder.
4.7 GENERAL PAYMENT TERMS: Past due amounts will accrue interest
at a rate of one percent (1%) per month. The prevailing party in any legal
action brought by one party against the other and arising out of this Agreement
shall be entitled to reimbursement of all costs and reasonable attorney's fees
incurred by such party.
4.8 SOFTWARE AUDIT RIGHTS: Visualize shall have the right, using
an independent auditor or agent and not more than once each calendar year during
the term of this Agreement, upon thirty (30) days prior written notice to
Accrue, to enter Accrue's premises during normal business hours to inspect
Accrue's records to verify compliance by Accrue with the terms of this
Agreement. Accrue agrees to cooperate with Visualize in any such inspection. All
costs of such audit shall be borne by Visualize provided that if any such audit
reveals an
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<PAGE> 5
underpayment of 5% or more during the audited period, the costs of such audit
shall be borne by Accrue, and Accrue shall promptly pay the amount of the
underpayment plus accrued interest.
4.9 PRODUCT SOURCE CODE: Visualize shall, at its sole cost and
expense, establish a software escrow account with an escrow agent satisfactory
to Accrue on or before the Effective Date and shall deposit a copy of the source
code and object code for the Product and existing Documentation, manuals, logic
diagrams, flow charts, operating instructions other materials describing the
programming, design and use of the Product. After the Effective Date, Visualize
shall deposit into the escrow account all source code and object code for
Maintenance Releases and Product Releases and then-existing documentation upon
delivery of such releases to Accrue. The parties and the escrow agent shall
execute the Escrow Agreement attached hereto as Exhibit D on or before the
Effective Date. Should Visualize become insolvent, declare bankruptcy or be
declared bankrupt by a competent tribunal, make an assignment for the benefit of
creditors, cease to conduct business in the normal course, or cease support of
the Product for more than 60 days, Accrue shall be entitled to obtain from the
escrow account a complete copy of the escrow materials, including the Product
source code, from such escrow account, which Accrue shall have the right to use
as set forth in the source code license in Section 2.1 above. In the event
Visualize resumes rendering requested Support and Maintenance, the source code
will be returned to the escrow account and be subject to the terms and
conditions of this section governing access to such source code.
5. WARRANTIES AND INDEMNIFICATION
5.1 EXPRESS WARRANTY: Visualize represents and warrants to Accrue
that it has all necessary corporate power and authority to enter into this
Agreement, to consummate the transactions contemplated hereby, and to license
the Product to Accrue, and that such license does not conflict with or infringe
any rights of any third party (including, without limitation, any copyrights,
patent rights or trade secrets), or any agreement to which Visualize is bound or
the Product is subject.
5.2 LIMITED WARRANTY: Visualize hereby warrants to Accrue that the
Product will conform to its published specifications in all material respects.
This warranty is limited and shall not apply if failure of the Product to
conform to published specifications results from (i) improper use of the
Product; or (ii) operation of the Product outside the environmental conditions
specified on the User Documentation; or (iii) modifications to the Product not
made by Visualize. This warranty does not apply to any release of the Product
that is designated "beta test software" or "pre-release software" by Visualize.
5.3 EXCLUSION OF IMPLIED WARRANTIES: ANY AND ALL OTHER WARRANTIES
AS TO THE PRODUCT AND USER DOCUMENTATION, INCLUDING IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OR USE, ARE SPECIFICALLY
EXCLUDED, WAIVED, AND NEGATED.
5.4 LIMITATION OF LIABILITY: NEITHER VISUALIZE NOR ITS OFFICERS,
EMPLOYEES, OR DIRECTORS SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES, SUCH AS, BUT NOT LIMITED TO,
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<PAGE> 6
LOSS OF ANTICIPATED PROFITS OR BENEFITS, LOSS RESULTING FROM THE USE OF THE
PRODUCT OR ARISING OUT OF ANY BREACH OF ANY WARRANTY. EXCEPT AS EXPRESSLY
PROVIDED IN THIS AGREEMENT, VISUALIZE SHALL HAVE NO LIABILITY FOR ANY CLAIM OF
ANY KIND OR NATURE, INCLUDING BUT NOT LIMITED TO VISUALIZE'S NEGLIGENCE, ARISING
OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, OR IN CONNECTION WITH ANY USE OR
OTHER EMPLOYMENT OF ANY PRODUCT LICENSED TO THE CUSTOMER HEREUNDER, WHETHER SUCH
LIABILITY ARISES FROM ANY CLAIM BASED UPON CONTRACT, WARRANTY, OR OTHERWISE,
WHICH MAY BE ASSERTED BY THE CUSTOMER. EXCEPT FOR IN RESPECT OF THIRD-PARTY
CLAIMS PURSUANT TO SECTION 5.6 HEREIN, VISUALIZE'S AGGREGATE LIABILITY TO THE
CUSTOMER FOR ALL LOSS AND DAMAGE WHETHER IN NEGLIGENCE, CONTRACT OR OTHERWISE,
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, OR THE OPERATION OR FAILURE
TO OPERATE OF THE PRODUCT, SHALL IN ANY EVENT BE LIMITED TO AMOUNTS PAID TO
VISUALIZE BY ACCRUE UNDER THIS AGREEMENT.
5.5 NOTIFICATION: Accrue shall notify Visualize in writing of any
claim or other legal proceeding involving the Product promptly after it becomes
aware of any such claim of proceeding, and will also report all claimed or
suspected failures of the Product to conform to the Documentation promptly after
Accrue becomes aware of any such claimed or suspected failure, during the term
of the Agreement.
5.6 INDEMNIFICATION BY VISUALIZE: Visualize will defend,
indemnify, and hold harmless Accrue against any claim that the Product
(including Maintenance Releases and Product Releases) infringes any claim of
copyright or trademark of any third party, or any claim under any patent or
patent application, or that the foregoing incorporate any misappropriated trade
secrets of a third party, provided that Accrue gives Visualize prompt written
notice thereof, grants Visualize sole control of the defense and any related
settlement negotiations, cooperates with Visualize in the defense of such claim
and does not agree to settle any such claim without Visualize's written consent.
If use of the Product is finally enjoined, or if Visualize anticipates the
possibility of such an injunction, Visualize, at its option, will either (i)
procure for Accrue the right to use the Product under the same terms and
conditions of this Agreement, (ii) replace the Product with a substantially
equivalent program the use of which is not so enjoined, or if neither of the
foregoing options is reasonably available, (iii) terminate Accrue's license and
refund the license fee paid for the Product. Notwithstanding the limitations on
liability contained in Section 5.4, in the event that, as a result of a breach
by Visualize of the provisions of Section 5.1 or if pursuant to this Section 5.6
Accrue is required to replace copies of the Applications containing the Product
which has been distributed to Accrue's end users, or to refund any part of the
fees paid by such end users, Visualize shall reimburse Accrue for all such
reasonable replacement costs or refunds, as well as all reasonable costs
incurred in removing copies from distribution channels. Notwithstanding the
foregoing, Visualize shall have no liability to Accrue if the infringement
results from (a) use of the Product in combination with other software or
hardware, if the Product alone would not have been so infringing, (b)
modifications to the Product not made by Visualize if such infringement would
have been avoided by the absence of such modification, or (c) use of other than
the versions of the Product
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<PAGE> 7
most recently offered to Accrue within the preceding six month period if such
infringement would have been avoided by use of such current versions. THE
FOREGOING STATES THE ENTIRE LIABILITY OF VISUALIZE, AND THE SOLE REMEDY OF
ACCRUE, WITH RESPECT TO INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS OR
CONTRACTUAL RIGHTS OF THIRD PARTIES BY THE PRODUCT(S) OR ANY PARTS OR RELEASES
THEREOF.
5.7 EXCLUSIVE REMEDIES: Except in case of infringement of a third
party intellectual property right, Accrue's exclusive remedies for any claims
against Visualize arising out of the Agreement shall be limited to the
following, at the option of Visualize: (a) replacement by Visualize of the
Product with software acceptable to Accrue that functions substantially in
accordance with the User Documentation; (b) repair by Visualize of the Product,
by patch or work around, so that it functions substantially in accordance with
the User Documentation or; (c) refund by Visualize of the money paid by Accrue
and received by Visualize in respect to the Product. Accrue acknowledges that
this Section 5.7 limits its remedies in the event that Visualize has breached
any of its obligations to Accrue. WITHOUT LIMITING THE FOREGOING, VISUALIZE AND
ACCRUE AGREE THAT IF ANY REMEDY HEREUNDER IS DETERMINED TO HAVE FAILED OF ITS
ESSENTIAL PURPOSE, ALL OTHER LIMITATIONS AND EXCLUSIONS OF LIABILITY SET FORTH
HEREIN SHALL REMAIN IN EFFECT.
6. TERM AND TERMINATION
6.1 TERM - TERMINATION FOR CONVENIENCE: The term of this Agreement
will be three years from the Effective Date. Notwithstanding the foregoing,
Accrue may terminate this Agreement upon 60 days notice to Visualize.
6.2 TERMINATION FOR CAUSE: The occurrence of any of the following
events shall constitute a default under the terms of this Agreement, and a cause
for termination of this Agreement:
(a) The failure by Accrue to pay Visualize any amount on or
before the date payment is due, sixty (60) days after receipt of written notice
notifying Accrue of such failure (to allow Accrue to cure such default); or
(b) The failure of a party to cure any breach of any material
term of this Agreement (other than non-payment) within thirty (30) days of
receipt of written notice thereof.
6.3 EFFECT OF TERMINATION: If this Agreement expires or is
terminated for any reason, the license granted hereunder shall terminate, and
Accrue's right to distribute the licensed Product shall end immediately,
provided however, Accrue shall have the right to distribute the licensed Product
incorporated into its Applications which are in Accrue's inventory at the time
of expiration or termination for a period of three (3) months thereafter,
providing royalties on such sales are paid as set forth in Exhibit B. Within
three months following such termination, Accrue shall return or destroy all
copies of Product in Accrue's possession (other
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<PAGE> 8
than one copy, for support of existing licenses) and certify in writing that all
other copies of Product have been destroyed or returned. Notwithstanding any
conflicting provision herein, following termination of this Agreement and for so
long thereafter as is necessary for Accrue to satisfy obligations for support
and maintenance services to its end users, Accrue shall have a limited license
to use and modify a copy of the Product solely for such purposes, provided
however that Accrue shall provide mutually acceptable assurances to Visualize
which are appropriate under the circumstances. None of Accrue's existing
sublicenses to end users for Product in Accrue's application(s) shall be
affected by any termination of this Agreement and such licenses shall remain in
full force and effect until the end of their then respective terms. After
termination, Accrue shall also have the right to continue to obtain the same
support and maintenance services from Visualize as set forth in this Agreement,
including the right to distribute Maintenance Releases and Product Releases to
Accrue's end users, at Visualize's then standard rates and payment terms.
6.4 NO DAMAGES FOR TERMINATION: Neither Visualize nor Accrue shall
be liable to the other for lost profits or incidental, punitive or consequential
damages relative to termination of this Agreement in accordance with Section 6.1
or 6.2 even if advised of the possibility of such damages.
6.5 SURVIVAL: Sections 2.3, 3.3 (except as modified by Section
6.3), 4.1, 4.2, 5 ,6 and 7, as well as Accrue's obligations to pay Visualize all
sums due hereunder and all provisions regarding limitations of liability and
remedies, shall survive termination or expiration of this Agreement.
7. MISCELLANEOUS PROVISIONS
7.1 NO JOINT VENTURE: This is an Agreement between separate legal
entities and neither is the agent or employee of the other for any purpose
whatsoever. The parties do not intend to create a partnership or joint venture
between themselves. Neither party shall have the right to bind the other to any
Agreement with a third party or to incur any obligation or liability on behalf
of the other party.
7.2 WAIVER: The failure of either party to exercise any of its
rights under this Agreement or to require the performance of any term or
provision of this Agreement, or the waiver by either party of such breach of
this Agreement, shall not prevent a subsequent exercise or enforcement of such
right or be deemed a waiver of any subsequent breach of the same or any other
term or provision of this Agreement. Any waiver of the performance of any of the
terms or conditions of this Agreement shall be effective only if in writing and
signed by the party against which such waiver is to be enforced.
7.3 VALIDITY: If any of the terms and provisions of this Agreement
are invalid or unenforceable, such terms or provisions shall not invalidate the
rest of the Agreement which shall remain in full force and effect as if such
invalidated or unenforceable terms or provisions had not been made a part of
this Agreement. In the event this Section 7.3 becomes operative, the parties
agree to attempt to negotiate a settlement that carries out the economic intent
of the term(s) found invalid or unenforceable.
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<PAGE> 9
7.4 FORCE MAJEURE: If circumstances beyond the control of the
parties shall temporarily make it impossible for either or both of them to
perform their agreements hereunder, then the principles of force majeure shall
apply and the rights and obligations of the parties shall be temporarily
suspended during the force majeure period to the extent that such performance is
reasonably affected thereby. If such circumstances continue for 60 days, the
performing party may terminate the Agreement.
7.5 NOTICES: All notices and other communications herein provided
for shall be sent by postage prepaid, via registered or certified mail or
Federal Express, return receipt requested, or delivered personally to the
parties at their respective addresses as set forth on the first page of this
Agreement or to such other address as either party shall give to the other party
in the manner provided herein for giving notice or by e mail or facsimile to the
appropriate contact listed in Section 7.11 below. Notice by mail, e mail and
facsimile shall be considered given on the date received. Notice delivered
personally shall be considered given at the time it is delivered.
7.6 TRANSFER, ETC: Neither party may assign, transfer, or delegate
this Agreement or any such party's right and obligation hereunder to any third
party hereto except as provided in this subsection, without the consent of the
other party, which consent shall not be unreasonably withheld. Either party may
assign this Agreement in its entirety to a subsidiary or affiliate so long as
such party remains primarily liable for its obligations hereunder. In addition,
either party may assign this Agreement in its entirety to any party that
acquires a majority of such party's stock or substantially all of such party's
assets relating to that portion of such party's business that is related to the
subject of this Agreement. Any attempted assignment, delegation, or transfer in
contravention of this subsection shall be null and void.
7.7 SUCCESSORS AND PERMITTED ASSIGNS: This Agreement shall inure
to the benefit of and be binding upon each of the parties hereto and their
respective successors and permitted assigns.
7.8 COMPLETE AGREEMENT: This Agreement contains the whole
agreement between the parties concerning the subject matter hereof and there are
no collateral or precedent representations, agreements, or conditions not
specifically set forth herein. Any modification or amendment of any provision of
this Agreement must be in writing, signed by the parties hereto and dated
subsequent to the date hereof.
7.9 LAWS GOVERNING AGREEMENT: The validity of this Agreement and
the rights, obligations, and relations of the parties hereunder shall be
construed and determined under and in accordance with the laws of the State of
Arizona. Any dispute arising hereunder will be decided binding arbitration by a
panel of three arbitrators (one selected by each party, and the third arbitrator
selected by the first two arbitrators) under the rules of the American
Arbitration Association in Phoenix, Arizona.
7.10 NO THIRD PARTY BENEFICIARIES: The provisions of this
Agreement are solely for the benefit of the parties hereto, and not for the
benefit of any other person, persons, or legal entities.
-9-
<PAGE> 10
7.11 CONTACTS. The initial principal contacts for notices under
this Agreement shall be as follows:
<TABLE>
<CAPTION>
Visualize Accrue
--------- ------
<S> <C> <C>
Administrative/Business Contact: Neal Bangerter Simon Roy
Engineering David Krider Bob Page
PR/Marketing Troy Whisenhunt Theresa Marcroft
</TABLE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the Effective Date set forth above.
ACCRUE SOFTWARE, INC. VISUALIZE, INC.
By: /s/ Simon Roy By: /s/ Neal K. Bangerter
--------------------------------- ----------------------------
Name: Simon Roy Name: Neal K. Bangerter
------------------------------ -------------------------
Title: President and CEO Title: President
------------------------------ -------------------------
Date: July 9, 1997 Date: July 1, 1997
------------------------------ -------------------------
-10-
<PAGE> 11
Exhibit A
"Product" for the purposes of this Agreement is defined as the following:
Visualize DataVista SDK consisting of the set of software and documentation
components necessary to integrate Visualize DataVista SDK into Application.
These include the following:
- - Runtime .class files for redistribution with Application and the
output of Application created by end-users.
- - Javadoc generated HTML API documentation.
- - DataVista SDK Manual and Tutorial.
- - Use of developer key (which unlocks the functionality of the library)
for the term of Agreement. The developer key remains the exclusive
property of Visualize, and may not be transferred or disclosed to a
third party without written permission from Visualize, unless such
disclosure is necessary to implement the intent and purpose of this
Agreement.
<PAGE> 12
Exhibit B
1.0 PAYMENT - Accrue will pay [*] upon execution of Agreement.
This amount is non-refundable, and will be applied against future earned and
minimum royalties. Except as noted below, Accrue will pay [*] from the sale of
each Application to each end user, subject to [*]. In the event Accrue's price
for the Application [*] Accrue will pay either [*]. Accrue will not pay
royalties for services provided to end users in respect of the Application
(including without limitation maintenance and support services and distribution
of Maintenance Releases and Product Releases) or trial licenses to an unlimited
number of end users. After the first year, Accrue will pay [*]. The amount by
which the sum [*] exceeds the earned royalty (the "unearned excess") will be
non-refundable, but will apply against future royalties. The [*] payment will be
waived for [*]. Royalties will in no event [*].
2.0 MOST FAVORED TERMS - If Visualize grants more favorable terms, on
balance, to any other licensee for the same software, license rights, level of
support, volumes, and term of license, Visualize will promptly so inform Accrue
and extend the same terms to Accrue. Accrue will have 60 days from the time
Visualize extends such terms to Accrue to accept the new terms. In the event
that Accrue declines to accept the new terms within the 60 day period, this
agreement will remain in full force and Accrue will not be retroactively
entitled to the alternate terms.
- ---------------
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 13
Exhibit C
CUSTOMER APPLICATIONS\
DESCRIPTION
The Application is defined to be Accrue Insight and Insight follow-on products
which include the Visualize DataVista SDK. Accrue Insight is a web analysis tool
enabling analysis of Web sight information and other data integrated into the
Insight data store.
<PAGE> 14
PREFERRED PLUS
TECHNOLOGY ESCROW AGREEMENT
Account Number __________
This Agreement is effective ____________, 19__, among Data Securities
International, Inc. ("DSI"), VI/Visualize, Inc. ("Depositor"), and Accrue
Software, Inc. ("Preferred Registrant"), who collectively may be referred to in
this Agreement as "the parties."
A. Depositor and Preferred Registrant have entered or will enter into
a license agreement, development agreement, and/or other agreement regarding
certain proprietary technology of Depositor. To distinguish from this Agreement,
the other agreement(s) will be referred to as "the license agreement."
B. Depositor desires to avoid disclosure of its proprietary
technology except under certain limited circumstances.
C. The availability of the proprietary technology of Depositor is
critical to Preferred Registrant in the conduct of its business and, therefore,
Preferred Registrant needs access to the proprietary technology under limited
circumstances.
D. Depositor and Preferred Registrant desire to establish an escrow
with DSI to provide for the retention, administration and controlled access of
the proprietary technology materials of Depositor.
E. The parties desire this Agreement to be supplementary to the
license agreement pursuant to 11 United States [Bankruptcy] Code, Section
365(n).
ARTICLE 1 - DEPOSITS
1.1 Obligation to Make Deposit. Upon the signing of this Agreement by
the parties, Depositor shall deliver to DSI the proprietary information and
other materials ("deposit materials") required to be deposited by the license
agreement or, if the license agreement does not identify the materials to be
deposited with DSI, then such materials will be identified on an Exhibit A. If
Exhibit A is applicable, it is to be prepared and signed by Depositor and
Preferred Registrant. DSI shall have no obligation with respect to the
preparation, signing or delivery of Exhibit A.
1.2 Identification of Tangible Media. Prior to the delivery of the
deposit materials to DSI, Depositor shall conspicuously label for identification
each document, magnetic tape, disk, or other tangible media upon which the
deposit materials are written or stored. Additionally, Depositor shall complete
an Exhibit B to list each such tangible media by the item label description, the
type of media and the quantity. The Exhibit B must be signed by the Depositor
and delivered to DSI with the deposit materials. Unless and until Depositor
makes the initial deposit with DSI, DSI shall have no obligation with respect to
this Agreement, except the
<PAGE> 15
obligation to notify the parties regarding the status of the deposit account as
required in Section 2.2 below.
1.3 Deposit Inspection. When DSI receives the deposit materials and
the Exhibit B, DSI will conduct a deposit inspection by visually matching the
labeling of the tangible media containing the deposit materials to the item
descriptions and quantity listed on the Exhibit B. In addition to the deposit
inspection, Preferred Registrant may elect to cause a verification of the
deposit materials in accordance with Section 1.6 below.
1.4 Acceptance of Deposit. At completion of the deposit inspection,
if DSI determines that the labeling of the tangible media matches the item
descriptions and quantity on Exhibit B, DSI will sign the Exhibit B and mail and
copy thereof to Depositor and Preferred Registrant. If DSI determines the
labeling does not match the item descriptions or quantity on the Exhibit B, DSI
will (a) note the discrepancies in writing on the Exhibit B; (b) sign the
Exhibit B with the exceptions noted; and (c) provide and copy of the Exhibit B
to Depositor and Preferred Registrant. DSI's acceptance of the deposit occurs
upon the signing of the Exhibit B by DSI. Delivery of the signed Exhibit B to
Preferred Registrant is Preferred Registrant's notice that the deposit materials
have been received and accepted by DSI.
1.5 Depositor's Representations. Depositor represents as follows:
a. Depositor lawfully possesses all of the deposit materials
deposited with DSI;
b. With respect to all of the deposit materials, Depositor has
the right and authority to grant to DSI and Preferred Registrant the rights as
provided in this Agreement;
c. The deposit materials are not subject to any lien or other
encumbrance; and
d. The deposit materials consist of the proprietary information
and other materials identified either in the license agreement or Exhibit A, as
the case may be.
1.6 Verification. Preferred Registrant shall have the right, at
Preferred Registrant's expense, to cause a verification of any deposit
materials. A verification determines, in different levels of detail, the
accuracy, completeness, sufficiency and quality of the deposit materials. If a
verification is elected after the deposit materials have been delivered to DSI,
then only DSI, or at DSI's election an independent person or company selected
and supervised by DSI, may perform the verification.
1.7 Deposit Updates. Unless otherwise provided by the license
agreement, Depositor shall update the deposit materials within 60 days of each
release of a new version of the product which is subject to the license
agreement. Such updates will be added to the existing deposit. All deposit
updates shall be listed on a new Exhibit B and the new Exhibit B shall be signed
by Depositor. The processing of all deposit updates shall be in accordance with
Sections 1.2
-2-
<PAGE> 16
through 1.6 above. All references in this Agreement to the deposit materials
shall include the initial deposit materials and any updates.
1.8 Removal of Deposit Materials. The deposit materials may be
removed and/or exchanged only on written instructions signed by Depositor and
Preferred Registrant, or as otherwise provided in this Agreement.
ARTICLE 2 - CONFIDENTIALITY AND RECORDKEEPING
2.1 Confidentiality. DSI shall maintain the deposit materials in a
secure, environmentally safe, locked receptacle which is accessible only to
authorized employees of DSI. DSI shall have the obligation to reasonably protect
the confidentiality of the deposit materials. Except as provided in this
Agreement, DSI shall not disclose, transfer, make available, or use the deposit
materials. DSI shall not disclose the content of this Agreement to any third
party. If DSI receives a subpoena or other order of a court or other judicial
tribunal pertaining to the disclosure or release of the deposit materials, DSI
will immediately notify the parties to this Agreement. It shall be the
responsibility of Depositor and/or Preferred Registrant to challenge any such
order, provided, however, that DSI does not waive its rights to present its
position with respect to any such order. DSI will not be required to disobey any
court or other judicial tribunal order. (See Section 7.5 below for notices of
requested orders.)
2.2 Status Reports. DSI will issue to Depositor and Preferred
Registrant a report profiling the account history at least semi-annually. DSI
may provide copies of the account history pertaining to this Agreement upon the
request of any party to this Agreement.
2.3 Audit Rights. During the term of this Agreement, Depositor and
Preferred Registrant shall each have the right to inspect the written records of
DSI pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.
ARTICLE 3 - GRANT OF RIGHTS TO DSI
3.1 Title to Media. Depositor hereby transfers to DSI the title to
the media upon which the proprietary information and materials are written or
stored. However, this transfer does not include the ownership of the proprietary
information and materials contained on the media such as any copyright, trade
secret, patent or other intellectual property rights.
3.2 Right to Make Copies. DSI shall have the right to make copies of
the deposit materials as reasonably necessary to perform this Agreement. DSI
shall copy all copyright, nondisclosure, and other proprietary notices and
titles contained on the original deposit materials onto any copies made by DSI.
3.3 Right to Sublicense Upon Release. As of the effective date of
this Agreement, Depositor hereby grants to DSI a non-exclusive, irrevocable,
perpetual, and royalty-free license to sublicense the deposit materials to
Preferred Registrant upon the release, if any, of the deposit
-3-
<PAGE> 17
materials in accordance with Section 4.5 below. Except upon such a release, DSI
shall not sublicense or otherwise transfer the deposit materials.
ARTICLE 4 - RELEASE OF DEPOSIT
4.1 Release Conditions. As used in this Agreement, "Release
Conditions" shall mean the following:
a. Depositor's failure to carry out its support and maintenance
obligations imposed on it pursuant to the license agreement for a period of 60
days; or
b. Existence of any one or more of the following circumstances,
uncorrected for more than thirty (30) days entry of an order for relief under
Title 11 of the United States Code; the making by Depositor of a general
assignment for the benefit of creditors; the appointment of a general receiver
or trustee in bankruptcy of Depositor's business or property, or action by
Depositor under any state insolvency or similar law for the purpose of its
bankruptcy, reorganization, or liquidation; or
c. Depositor's failure to continue to do business in the ordinary
course.
4.2 Filing For Release. If Preferred Registrant believes in good
faith that a Release Condition has occurred, Preferred Registrant may provide to
DSI written notice of the occurrence of the Release Condition and a request for
the release of the deposit materials. Upon receipt of such notice, DSI shall
provide a copy of the notice to Depositor, by certified mail, return receipt
requested, or by Federal Express or equivalent.
4.3 Contrary Instructions. From the date DSI mails the notice
requesting release of the deposit materials, Depositor shall have ten business
days to deliver to DSI Contrary Instructions. "Contrary Instructions" shall mean
the written representation by Depositor that a Release Condition has not
occurred or has been cured. Upon receipt of Contrary Instructions, DSI shall
send a copy to Preferred Registrant by registered or certified mail, return
receipt requested, or by Federal Express or equivalent. Additionally, DSI shall
notify both Depositor and Preferred Registrant that there is a dispute to be
resolved pursuant to the Dispute Resolution section of this Agreement. Subject
to Section 5.2, DSI will continue to store the deposit materials without release
pending (a) joint instructions from Depositor and Preferred Registrant, (b)
resolution pursuant to the Dispute Resolution provisions, or (c) order of a
court.
4.4 Release of Deposit. If DSI does not receive Contrary Instructions
from the Depositor, DSI is authorized to release the deposit materials to the
Preferred Registrant or, if more than one registrant is registered to the
deposit, to release a copy of the deposit materials to the Preferred Registrant.
However, DSI is entitled to receive any fees due DSI before making the release.
This Agreement will terminate upon the release of the deposit materials held by
DSI.
4.5 Use License Following Release. Unless otherwise provided in the
license agreement, upon release of the deposit materials in accordance with this
Article 4, Preferred Registrant shall have a non-exclusive, non-transferable,
irrevocable right to use the deposit
-4-
<PAGE> 18
materials for the sole purpose of continuing the benefits afforded to Preferred
Registrant by the license agreement. Preferred Registrant shall be obligated to
maintain the confidentiality of the released deposit materials.
ARTICLE 5 - TERM AND TERMINATION
5.1 Term of Agreement. The initial term of this Agreement is for a
period of one year. Thereafter, this Agreement shall automatically renew from
year-to-year unless (a) Depositor and Preferred Registrant jointly instruct DSI
in writing at any time after one year that the Agreement is terminated; or (b)
the Agreement is terminated by DSI for nonpayment in accordance with Section
5.2. If the deposit materials are subject to another escrow agreement with DSI,
DSI reserves the right, after the initial one year term, to adjust the
anniversary date of this Agreement to match the then prevailing anniversary date
of such other escrow arrangements.
5.2 Termination for Nonpayment. In the event of the nonpayment of
fees owned to DSI, DSI shall provide written notice of delinquency to all
parties to this Agreement. Any party to this Agreement shall have the right to
make the payment to DSI to cure the default. If the past-due payment is not
received in full by DSI within one month of the date of such notice, then DSI
shall have the right to terminate this Agreement any time thereafter by sending
written notice of termination to all parties. DSI shall have no obligation to
take any other action under this Agreement so long as any payment due to DSI
remains unpaid.
5.3 Disposition of Deposit Materials Upon Termination. Upon any
termination of this Agreement by joint instruction of Depositor and Preferred
Registrant, DSI shall destroy, return, or otherwise deliver the deposit
materials in accordance with such instructions. Upon any termination for
nonpayment, DSI may, at its sole discretion, destroy the deposit materials or
return them to Depositor. DSI shall have no obligation to return or destroy the
deposit materials if the deposit materials are subject to another escrow
agreement with DSI.
5.4 Survival of Terms Following Termination. Upon any termination of
this Agreement, the following provisions of this Agreement shall survive:
a. Depositor's Representations (Section 1.5).
b. The obligations of confidentiality with respect to the deposit
materials.
c. The licenses granted in the sections entitled Right to
Sublicense Upon Release (Section 3.3) and Use License Following Release (Section
4.5), if a release of the deposit materials has occurred prior to termination.
d. The obligation to pay DSI any fees and expenses due.
e. The provisions of Article 7.
f. Any provisions in this Agreement which specifically state they
survive the termination or expiration of this Agreement.
-5-
<PAGE> 19
ARTICLE 6 - DSI'S FEES
6.1 Fee Schedule. DSI is entitled to be paid its standard fees and
expenses applicable to its services. DSI shall notify the parties at least 90
days prior to any increase in fees. For any service not listed on DSI's standard
fee schedule, DSI will provide a quote prior to rendering the service, if
requested.
6.2 Payment Terms. SDI shall not be required to perform any service
unless the payment for such service and any outstanding balances owned to DSI
are paid in full. All other fees are due upon receipt of invoice. If invoiced
fees are not paid, DSI may terminate this Agreement in accordance with Section
5.2. Late fees on past due amounts shall accrue at the rate of one and one-half
percent per month (18% pre annum) from the date of the invoice.
ARTICLE 7 - LIABILITY AND DISPUTES
7.1 Right to Rely on Instructions. DSI may act in reliance upon any
instruction, instrument, or signature reasonably believed by DSI to be genuine.
DSI may assume that any employee of a party to this Agreement who gives any
written notice, request, or instruction has the authority to do so. DSI shall
not be responsible for failure to act as a result of causes beyond the
reasonable control of DSI.
7.2 Indemnification. DSI shall be responsible to perform its
obligations under this Agreement and to act in a reasonable and prudent manner
with regard to this escrow arrangement. Provided DSI has acted in the manner
stated in the preceding sentence, Depositor and Preferred Registrant each agree
to indemnify, defend and hold harmless DSI from any and all claims, actions,
damages, arbitration fees and expenses, costs, attorney's fees and other
liabilities incurred by DSI relating in any way to this escrow arrangement.
7.3 Dispute Resolution. Any dispute relating to or arising from this
Agreement shall be resolved by arbitration under the Commercial Rules of the
American Arbitration Association. Unless otherwise agreed by Depositor and
Preferred Registrant, arbitration will take place in San Diego, California,
U.S.A. Any court having jurisdiction over the matter may enter judgment on the
award of the arbitrator(s). Service of a petition to confirm the arbitration
award may be made by First Class mail or by Federal Express or equivalent, to
the attorney for the party or, if unrepresented, to the party at the last known
business address.
7.4 Controlling Law. This Agreement is to be governed and construed
in accordance with the laws of the state of California, without regard to its
conflict of law provisions.
7.5 Notice of Requested Order. If any party intends to obtain an
order from the arbitrator or any court of competent jurisdiction which may
direct DSI to take, or refrain from taking any action, that party shall:
a. Give DSI at least two business days' prior notice of the
hearing;
-6-
<PAGE> 20
b. Include in any such order that, as a precondition to DSI's
obligation, DSI be paid in full for any past due fees and be paid for the
reasonable value of the services to be rendered pursuant to such order; and
c. Ensure that DSI not be required to deliver the original (as
opposed to a copy) of the deposit materials if DSI may need to retain the
original in its possession to fulfill any of its other escrow duties.
ARTICLE 8 - GENERAL PROVISIONS
8.1 Entire Agreement. This Agreement, which includes the Exhibits
described herein, embodies the entire understanding between all of the parties
with respect to its subject matter and supersedes all previous communications,
representations or understandings, either oral or written. No amendment or
modification of this Agreement shall be valid or binding unless signed by all
the parties hereto, except Exhibit A need not be signed by DSI and Exhibit B
need not be signed by Preferred Registrant.
8.2 Notices. All notices, invoices, payments, deposits and other
documents and communications shall be given to the parties at the addresses
specified in the attached Exhibit C. It shall be the responsibility of the
parties to notify each other as provided in this Section in the event of a
change of address. The parties shall have the right to rely on the last known
address of the other parties. Unless otherwise provided in this Agreement, all
documents and communications may be delivered by First Class Mail.
8.3 Severability. In the event any provision of this Agreement is
found to be invalid, voidable or unenforceable, the parties agree that unless it
materially affects the entire intent and purpose of this Agreement, such
invalidity, voidability or unenforceability shall affect neither the validity of
this Agreement nor the remaining provisions herein, and the provision in
question shall be deemed to be replaced with a valid and enforceable provision
most closely reflecting the intent and purpose of the original provision.
-7-
<PAGE> 21
8.4 Successors. This Agreement shall be binding upon and shall inure
to the benefit of the successors and assigns of the parties. However, DSI shall
have no obligation in performing this Agreement to recognize any successor of
Depositor or Preferred Registrant unless DSI receives clear, authoritative and
conclusive written evidence of the change of parties.
VI/Visualize, Inc.
- ---------------------------------- --------------------------------
Depositor Preferred Registrant
By: Neal K. Bangerter By:
------------------------------- -----------------------------
Name: Neal K. Bangerter Name:
----------------------------- ---------------------------
Title: President Title:
---------------------------- --------------------------
Date: July 1, 1997 Date:
----------------------------- ---------------------------
Data Securities International, Inc.
By: /s/ Christine A. Louie
-------------------------------
Christine A. Louie
Vice President Finance
7/1/97
-8-
<PAGE> 22
EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIAL
Deposit Account Number_________________________________________________________
Depositor Company Name_________________________________________________________
DEPOSIT TYPE: _____ Initial __________ Supplement
ENVIRONMENT:
Host System CPU/OS_________________________ Version________ Backup_____________
Source System CPU/OS_______________________ Version________ Compiler___________
Special Instructions: _________________________________________________________
_______________________________________________________________________________
DEPOSIT MATERIAL:
Exhibit B Name ____________________________ Version____________________________
Item label description_____________________ Media ____________ Quantity _______
For Depositor, I certify that For DSI, I certify that the
the above described deposit deposit inspection has been
materials have been completed (any exceptions are
transmitted to DSI: noted above):
By___________________________ By________________________________
Print Name___________________ Print Name________________________
Date_________________________ Date______________________________
ISE_________________ EX.B#________
<PAGE> 23
EXHIBIT C
DESIGNATED CONTACT
ACCOUNT NUMBER ______________
<TABLE>
<S> <C>
Notices to Deposit Material Invoices to Depositor should
returns and communication, be addressed to:
including delinquencies to
Depositor should be addressed to:
Company Name: _________________________ __________________________________
Address: _________________________ __________________________________
_________________________ __________________________________
_________________________ __________________________________
Designated Contact: _________________________ Contact:__________________________
Telephone: _________________________ __________________________________
Facsimile _________________________ __________________________________
State of
Incorporation: _________________________
Notices to Deposit Material returns and communication, including delinquencies
to Invoices to Depositor should be addressed to: Depositor should be addressed
to:
Company Name: _________________________ __________________________________
Address: _________________________ __________________________________
_________________________ __________________________________
_________________________ __________________________________
Designated Contact: _________________________ Contact:__________________________
Telephone: _________________________ __________________________________
Facsimile _________________________ __________________________________
Requests from Depositor or Preferred Registrant to change the
Designed Contact should be given in writing by the Designated Contact or an
authorized employee of Depositor or Preferred Registrant.
Contracts, Deposits Material Invoice inquires and fees
and notices to DSI should be remittances to DSI should be
addressed to: addressed to:
DSI DSI
Attn: Contract Administration Attn: Accounts Receivable
Suite 200 Suite 1450
9555 Chesapeake Drive 425 California Street
San Diego, CA 92123 San Francisco, CA 94104
Telephone: (619) 694-1900 (415) 398-7900
Facsimile; (619) 694-1919 (415) 398-7914
Date: ________________________
</TABLE>
<PAGE> 24
PREFERRED PLUS AMENDMENT
TO PREFERRED REGISTRATION
TECHNOLOGY ESCROW AGREEMENT
Account Number __________
This document is intended to amend the Preferred Registration
Technology Escrow Agreement (the "Agreement") between the undersigned parties,
as follows:
Section 1.6 is replaced with the following:
DSI shall perform a Level One verification of the deposit materials
upon the initial deposit and for each update. A verification determines, in
different levels of detail, the accuracy, completeness, sufficiency and quality
of the deposit materials. A Level One verification is defined as follows: DSI
will cause a technically qualified DSI employee to evaluate the deposit
materials in order to identify (a) the hardware and software configurations
reasonably necessary to maintain the deposit materials, (b) the hardware and
software configurations reasonably necessary to compile the deposit materials,
and (c) the compilation instructions. DSI will then prepare and deliver to
Depositor and Preferred Registrant a report describing the information so
identified. The report will be provided within 30 days of any delivery of the
deposit materials. It shall be the responsibility of the Depositor, and not DSI,
to assure that the deposit materials contain the information so identified in
DSI's report, as well as any other information that may be required in the
license agreement.
Preferred Registrant shall have the right, at Preferred Registrant's
expense, to cause higher levels of verification of any deposit materials. If a
verification is elected after the deposit materials have been delivered to DSI,
then only DSI, or at DSI's election an independent person or company selected
and supervised by DSI, may perform the verification.
Section 1.7 is modified to add the following:
DSI shall notify Depositor in writing semiannually of Depositor's
obligation to make updated deposits. Within 30 days of receipt of each such
notice, Depositor shall certify in writing to DSI that (a) it has made the
updated deposits as required in the immediately preceding paragraph; or (b)
there has not been a release of a new version of the product since the last
deposit.
<PAGE> 25
Except as specifically provided above, the Agreement shall remain in
full force and effect without modification.
_____________________________ __________________________________
Depositor Preferred Registrant
By___________________________ By________________________________
Name:________________________ Name:_____________________________
Title:_______________________ Title:____________________________
Date:________________________ Date:_____________________________
Data Securities International, Inc.
-2-
<PAGE> 1
EXHIBIT 10.6
================================================================================
ACCRUE SOFTWARE, INC.
LOAN AND SECURITY AGREEMENT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. DEFINITIONS AND CONSTRUCTION....................................................... 1
1.1 Definitions................................................................. 1
1.2 Accounting Terms............................................................ 7
2. LOAN AND TERMS OF PAYMENT.......................................................... 7
2.1 Advances.................................................................... 7
2.2 Overadvances................................................................ 11
2.3 Interest Rates, Payments, and Calculations.................................. 11
2.4 Crediting Payments.......................................................... 11
2.5 Fees........................................................................ 11
2.6 Additional Costs............................................................ 12
3. CONDITIONS OF LOANS................................................................ 12
3.1 Conditions Precedent to Initial Advance..................................... 12
3.2 Conditions Precedent to all Advances........................................ 13
4. CREATION OF SECURITY INTEREST...................................................... 13
4.1 Grant of Security Interest.................................................. 13
4.2 Delivery of Additional Documentation Required............................... 13
4.3 Right to Inspect............................................................ 13
5. REPRESENTATIONS AND WARRANTIES..................................................... 14
5.1 Due Organization and Qualification.......................................... 14
5.2 Due Authorization; No Conflict.............................................. 14
5.3 No Prior Encumbrances....................................................... 14
5.4 Bona Fide Eligible Accounts................................................. 14
5.5 Merchantable Inventory...................................................... 14
5.6 Intellectual Property....................................................... 14
5.7 Name; Location of Chief Executive Office.................................... 14
5.8 Litigation.................................................................. 14
5.9 No Material Adverse Change in Financial Statements.......................... 15
5.10 Solvency.................................................................... 15
5.11 Regulatory Compliance....................................................... 15
5.12 Environmental Condition..................................................... 15
5.13 Taxes....................................................................... 15
5.14 Subsidiaries................................................................ 15
5.15 Government Consents......................................................... 15
5.16 Full Disclosure............................................................. 15
6. AFFIRMATIVE COVENANTS.............................................................. 16
6.1 Good Standing............................................................... 16
6.2 Government Compliance....................................................... 16
6.3 Financial Statements, Reports, Certificates................................. 16
6.4 Inventory; Returns.......................................................... 17
6.5 Taxes....................................................................... 17
6.6 Insurance................................................................... 17
</TABLE>
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<TABLE>
<S> <C> <C>
6.7 Principal Depository........................................................ 17
6.8 Quick Ratio................................................................. 17
6.9 Tangible Net Worth.......................................................... 17
6.10 Minimum Liquidity/Debt Service Coverage..................................... 17
6.11 Registration of Intellectual Property Rights................................ 18
6.12 Further Assurances.......................................................... 18
7. NEGATIVE COVENANTS................................................................. 18
7.1 Dispositions................................................................ 19
7.2 Change in Business.......................................................... 19
7.3 Mergers or Acquisitions..................................................... 19
7.4 Indebtedness................................................................ 19
7.5 Incumbrances................................................................ 19
7.6 Distributions............................................................... 19
7.7 Investments................................................................. 19
7.8 Transactions with Affiliates................................................ 19
7.9 Intellectual Property Agreements............................................ 19
7.10 Subordinated Debt........................................................... 20
7.11 Inventory................................................................... 20
7.12 Compliance.................................................................. 20
8. EVENTS OF DEFAULT.................................................................. 20
8.1 Payment Default............................................................. 20
8.2 Covenant Default............................................................ 20
8.3 Material Adverse Change..................................................... 20
8.4 Attachment.................................................................. 20
8.5 Insolvency.................................................................. 21
8.6 Other Agreements............................................................ 21
8.7 Subordinated Debt........................................................... 21
8.8 Judgments................................................................... 21
8.9 Misrepresentations.......................................................... 21
9. BANK'S RIGHTS AND REMEDIES......................................................... 21
9.1 Rights and Remedies......................................................... 21
9.2 Power of Attorney........................................................... 22
9.3 Accounts Collection......................................................... 23
9.4 Bank Expenses............................................................... 23
9.5 Bank's Liability for Collateral............................................. 23
9.6 Remedies Cumulative......................................................... 23
9.7 Demand; Protest............................................................. 23
10. NOTICES............................................................................ 24
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER......................................... 24
12. GENERAL PROVISIONS................................................................. 24
12.1 Successors and Assigns...................................................... 25
12.2 Indemnification............................................................. 25
12.3 Time of Essence............................................................. 25
12.4 Severability of Provisions.................................................. 25
</TABLE>
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<TABLE>
<S> <C> <C>
12.5 Amendments in Writing, Integration.......................................... 25
12.6 Counterparts................................................................ 25
12.7 Survival.................................................................... 25
12.8 Confidentiality............................................................. 25
</TABLE>
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This LOAN AND SECURITY AGREEMENT (the "Agreement") is entered into as of
September 19, 1997, by and between SILICON VALLEY BANK ("Bank") and ACCRUE
SOFTWARE, 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 a cash 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.
"Cash Management Sublimit" has the meaning set forth in
Section 2.1.3 hereof.
"Closing Date" means the date of this Agreement.
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"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A
attached hereto.
"Committed Line" means One Million Dollars ($1,000,000).
"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.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections 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.
"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.
"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 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 invoice 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;
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<PAGE> 7
(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;
(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 as approved in writing by Bank, except for
the Accounts of Apple Computer and Sun Microsystems, for which the applicable
percentage shall be thirty-five percent (35%).
(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.
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.
"Foreign Exchange Reserve" has the meaning set forth in
Section 2.1.3 herein.
"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
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<PAGE> 8
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.
"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.
"Intellectual Property Collateral" means
(a) Copyrights, Trademarks and Patents;
(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) Any and all claims for damages by way of past, present
and future infringement of any of the rights included above, with the right, but
not the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(e) 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;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(g) 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.
"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.
"Letter of Credit" or "Letters of Credit" has the meaning
set forth in Section 2.1.1 herein.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
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<PAGE> 9
"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 June 18, 2001.
"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.
"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.
"Patents means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
"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.
"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) Indebtedness secured by a Lien described in clause (c)
of Permitted Liens, provided the principal amount of such Indebtedness does not
exceed the lesser of the cost or fair market value of the Equipment financed
with the proceeds of such Indebtedness;
(d) Subordinated Debt;
(e) Indebtedness to trade creditors incurred in the
ordinary course of business; and
(f) Other Indebtedness in an aggregate outstanding amount
not exceeding $100,000.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in
the Schedule; and
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<PAGE> 10
(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., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank and other investments in the aggregate amount
not exceeding $100,000.
"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, unless required by law;
(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) Leases or subleases and licenses or sublicenses
granted to others in the ordinary course of Borrower's business not interfering
in any material respect with the business of Borrower and its Subsidiaries taken
as a whole, and any interest or title of a lessor, licensor or under any lease
or license provided that such leases, subleases, licenses and sublicenses do not
prohibit the grant of the security interest granted hereunder; and
(e) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (a) through (d) 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.
"Responsible Officer" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" means the date immediately
preceding the first anniversary of the date of this Agreement.
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"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, if any.
"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.
"Trademarks" means 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 Assignor
connected with and symbolized by such trademarks.
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.
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2. LOAN AND TERMS OF PAYMENT
2.1 Advances
(a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an aggregate amount not
to exceed the lesser of (i) the Committed Line less amounts specified in the
Cash Management Services Agreement or (ii) the Borrowing Base, minus in each
case the face amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) and the Foreign Exchange Reserve. For purposes
of this Agreement, "Borrowing Base" shall mean an amount equal to One Hundred
Fifty Thousand Dollars ($150,000), plus 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
without penalty, in whole or in part, prior to the Revolving Maturity Date.
(b) Whenever Borrower desires an Advance, Borrower will
notify Bank by facsimile transmission or telephone no later than 3:00 p.m.
California time, on the Business Day that the 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 Advances
under this Agreement, based upon instructions received from a Responsible
Officer, or without instructions if in Bank's discretion such Advances are
necessary to meet 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 Advances made under this Section
2.1 to Borrower's deposit account.
(c) The Revolving Facility shall terminate on the
Revolving Maturity Date, at which time all Advances under this Section 2.1 shall
be immediately due and payable.
2.1.1 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
Committed Line minus the amount specified in the Cash Management Services
Agreement or (ii) the Borrowing Base minus in each case the sum of the then
outstanding principal balance of the Advances, the face amount outstanding
Letters of Credit and the Foreign Exchange Reserve; provided that the face
amount of outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit) shall not in any case exceed Two Hundred Fifty Thousand
Dollars ($250,000). 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 an 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
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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.
2.1.2 Foreign Exchange Contract; Foreign Exchange
Settlements.
(a) Subject to the terms of this Agreement,
Borrower may enter into foreign exchange contracts (the "Exchange Contracts")
not to exceed an aggregate amount of $250,000 (the "Contract Limit"), pursuant
to which Bank shall sell to or purchase from Borrower foreign currency on a spot
or future basis. Borrower shall not request any Exchange Contracts at any time
it is out of compliance with any of the provisions of this Agreement. All
Exchange Contracts must provide for delivery of settlement on or before the
Revolving Maturity Date. The amount available under the Committed Line at any
time shall be reduced by the following amounts (the "Foreign Exchange Reserve")
on any given day (the "Determination Date"): (i) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement allowed more than
two business days after the Determination Date, ten percent (10%) of the gross
amount of the Exchange Contracts; plus (ii) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement allowed within two
business days after the Determination Date, one hundred percent (100%) of the
gross amount of the Exchange Contracts.
(b) Bank may, in its discretion, terminate the
Exchange Contracts at any time (a) that an Event of Default occurs or (b) that
there is no sufficient availability under the Committed Line and Borrower does
not have available funds in its bank account to satisfy the Foreign Exchange
Reserve. If Bank terminates the Exchange Contracts, and without limitation of
any applicable indemnities, Borrower agrees to reimburse Bank for any and all
fees, costs and expenses relating thereto or arising in connection therewith.
(c) Borrower shall not permit the total gross
amount of all Exchange Contracts on which delivery is to be effected and
settlement allowed in any two business day period to be more than $250,000 (the
"Settlement Limit"), nor shall Borrower permit the total gross amount of all
Exchange Contracts to which Borrower is a party, outstanding at any one time, to
exceed the Contract Limit. Notwithstanding the above, however, the amount which
may be settled in any two (2) business day period may be increased above the
Settlement Limit up to, but in no event to exceed, the amount of the Contract
Limit under either of the following circumstances:
(i) if there is sufficient availability
under the Committed Line in the amount of the Foreign Exchange Reserve as of
each Determination Date, provided that Bank in advance shall reserve the full
amount of the Foreign Exchange Reserve against the Committed Line; or
(ii) if there is insufficient availability
under the Committed Line, as to settlements within any two (2) business day
period, provided that Bank, in its sole discretion, may: (A) verify good funds
overseas prior to crediting Borrower's deposit account with Bank (in the case of
Borrower's sale of foreign currency); or (B) debit Borrower's deposit account
with Bank prior to delivering foreign currency overseas (in the case of
Borrower's purchase of foreign currency).
(d) In the case of Borrower's purchase of foreign
currency, Borrower in advance shall instruct Bank upon settlement either to
treat the settlement amount as an advance under the
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Committed Line, or to debit Borrower's account for the amount settled.
(e) Borrower shall execute all standard form
applications and agreements of Bank in connection with the Exchange Contracts
and, without limiting any of the terms of such applications and agreements,
Borrower will pay all standard fees and charges of Bank in connection with the
Exchange Contracts.
(f) Without limiting any of the other terms of this
Agreement or any such standard form applications and agreements of Bank,
Borrower agrees to indemnify Bank and hold it harmless from and against any and
all claims, debts, liabilities, demands, obligations, actions, costs and
expenses (including, without limitation, reasonable attorneys' fees of counsel
of Bank's choice), of every nature and description which it may sustain or
incur, based upon, arising out of, or in any way relating to any of the Exchange
Contracts or any transactions relating thereto or contemplated thereby.
2.1.3 Cash Management Sublimit. Subject to the terms and
conditions of this Agreement, Borrower may utilize up to an aggregate amount not
to exceed Two Hundred Fifty Thousand Dollars ($250,000) (the "Cash Management
Sublimit") for cash management services provided by Bank, which services may
include merchant services, PC-ACH, direct deposit of payroll, business credit
card, Firstax, and other related check cashing services as defined in that
certain Cash Management Services Agreement entered into by Bank and Borrower
from time to time (a "Cash Management Service", or the "Cash Management
Services"). Any amounts actually paid by Bank in respect of a Cash Management
Service or Cash Management Services shall, when paid, constitute an Advance
under the Committed Line.
2.1.4 Equipment Advances.
(a) At any time from the date hereof through June
18, 1998 (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
Dollars ($1,000,000). The Equipment Advances shall be used to purchase Equipment
approved from time to time by Bank (which shall in any case have been purchased
since June 30, 1996) 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 twenty percent (20%) of the Equipment Advances may be
used for software and leasehold improvements or other soft costs approved by
Bank. Each Equipment Advance shall be in a minimum amount of Fifty Thousand
Dollars ($50,000).
(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 on the last Business Day of each month for each month through June,
1998. 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 July 18, 1998 and
continuing through the Maturity Date, on which date the entire principal amount
and all accrued but unpaid interest shall be due and payable. The principal and
all accrued but unpaid interest under the Equipment Advance or Equipment
advances may be repaid at any time without penalty, in whole or in part, prior
to the Maturity Date.
(c) When Borrower desires to obtain an 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.
2.2 Overadvances. If, at any time or for any reason, the
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amount of Obligations owed by Borrower to Bank pursuant to Section 2.1 of this
Agreement is greater than the lesser of (i) the Committed Line or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
such excess.
2.3 Interest Rates, Payments, and Calculations
(a) Interest Rate. Except as set forth in Section 2.3(b),
any Advances shall bear interest, on the average Daily Balance, at a rate equal
to one-half (0.5) percentage point above the Prime Rate, and all Equipment
Advances shall bear interest at a rate equal to one (1.0) percentage point above
the Prime Rate.
(b) Default Rate. All Obligations shall bear interest,
from and after the date Borrower receives written notice of 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.
(c) Payments. Except as specified in Section 2.1.4(b),
interest hereunder shall be due and payable on the eighteenth 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 any of Borrower's
deposit accounts or against the Committed Line, in which case those amounts
shall thereafter accrue interest at the rate then applicable hereunder. Bank
will notify Borrower of all debits and charges that Bank makes against
Borrower's accounts in the ordinary course of Bank's operations. 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. Bank shall notify
Borrower of the change in the ordinary course of Borrower's business. 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, provided however, that no late
fee shall accrue because the relevant date is not a Business Day.
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
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analysis and examination of Borrower performed from time to time by Bank or its
agents each such examination not be exceed $500 per day; and
(c) Bank Expenses. Upon the date hereof, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses not to exceed $7,500, 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,
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. Bank agrees that it will allocate all
such increased costs among its customers similarly affected in good faith and in
a manner consistent with Bank's customary practice.
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
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. Provided no Obligations are outstanding, Borrower
shall have the right to terminate this Agreement upon written notice to Bank.
Upon any termination, Bank's Lien on the Collateral shall terminate provided no
Obligations are outstanding and Bank shall cooperate with Borrower to make such
filings (e.g., financing statements and termination of the Intellectual Property
Security Agreement) as Borrower may reasonably request to evidence such
termination.
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
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resolutions authorizing the execution and delivery of this Agreement;
(c) an intellectual property security agreement;
(d) an audit of Borrower's Accounts (prior to any
Advances);
(e) financing statement (Form UCC-1);
(f) insurance certificate;
(g) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof; and
(h) 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).
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
assuming Bank has timely and properly filed and taken all other actions
necessary or desirable to perfect and protect such security interest.
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
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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 except to the extent that
certain intellectual property agreements prohibit the assignment of the rights
thereunder to a third party without the Borrower's or other party's consent.
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, normal
wear and tear excepted; provided, however, that the Inventory is the product of
rapidly changing technology and therefore is subject to technological
obsolescence.
5.6 Intellectual Property. Borrower is the sole owner of the
Intellectual Property Collateral, except for non-exclusive licenses granted by
Borrower to its customers in the ordinary course of business or except as
permitted under this Agreement. To Borrower's best knowledge, each of the
Patents is valid and enforceable, and no part of the Intellectual Property
Collateral has been judged invalid or unenforceable, in whole or in part, and as
of the date hereof, Borrower has no knowledge that nor has it received any
communication that a claim has been made that any part of the Intellectual
Property Collateral violates the rights of any third party.
5.7 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.
5.8 Litigation. Except as set forth in the Schedule, there
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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.
5.9 No Material Adverse Change in Financial Statements. All
consolidated historical 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.
5.10 Solvency. The fair saleable value of Borrower's assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement; and Borrower is able to pay its
debts (including trade debts) as they mature.
5.11 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 have a Material
Adverse Effect.
5.12 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.
5.13 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.
5.14 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments and has no Subsidiaries.
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5.15 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, except to the extent that any failure to do so would not have a
Material Adverse Effect.
5.16 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.
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 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 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 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 ninety (90) 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 (provided the audited statements for the fiscal year ending
December 31, 1996 shall be due not later than October 31, 1997); (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 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; (e) prompt notice of any
material change in the composition of the Intellectual Property Collateral,
including, but not limited to, any subsequent ownership right of the Borrower in
or to any Copyright, Patent or Trademark not specified in any intellectual
property security agreement between Borrower and Bank or knowledge of an event
that materially adversely effects the value of the Intellectual Property
Collateral; and (f) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.
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Within twenty (20) days after the last day of each month, 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, and no audit will be conducted if no Advances have been requested
during the three-month period prior to the scheduled date of an audit.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good
and marketable condition, free from all material defects, subject to normal wear
and tear and normal obsolescence due to the technological basis of such
Inventory. 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).
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. 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
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shall maintain its principal depository and operating accounts with Bank.
6.8 Quick Ratio. For the periods ending September 30, 1997 and
January 31, 1998 and quarterly thereafter beginning March 31, 1998, Borrower
shall maintain, as of the last day of each period, a ratio of Quick Assets to
Current Liabilities of at least 2.0 to 1.0.
6.9 Tangible Net Worth. Borrower shall maintain, as of January
31, 1998 and the last day of each fiscal quarter, thereafter a Tangible Net
Worth of not less than Three Million Dollars ($3,000,000).
6.10 Minimum Liquidity/Debt Service Coverage. Subject to the
remainder of this Section, Borrower shall maintain, as of the last day of each
calendar month the sum of (i) cash and cash equivalents plus (ii) short term
investments plus (iii) amounts available to be drawn but not drawn on the
Committed Line minus (iv) restricted cash of at least one and one-half (1.5)
times the outstanding amount of Equipment Advances. Notwithstanding the
foregoing, from and after the time Borrower achieves for two consecutive fiscal
quarters a Debt Service Coverage of at least 2.0 to 1.0, Borrower shall not be
subject to the minimum liquidity requirement set forth above, but instead shall
maintain, as of the last day of each fiscal quarter, a Debt Service Coverage of
at least 2.0 to 1.0. "Debt Service Coverage" means, as of any date of
determination, with respect to Borrower and its Subsidiaries on a consolidated
basis, a ratio of (a) the sum of (i) earnings after tax plus (ii) interest and
non-cash (i.e. depreciation and amortization) expense to (b) the sum of (i)
current portion of long term debt plus (ii) interest expense.
6.11 Registration of Intellectual Property Rights.
(a) Borrower shall register or cause to be registered (to
the extent not already registered) with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, those intellectual
property rights listed on Exhibits A, B and C to the Intellectual Property
Security Agreement delivered to Bank by Borrower in connection with this
Agreement within thirty (30) days of the date of this Agreement and in form and
substance reasonably acceptable to Borrower's legal counsel. Borrower shall
register or cause to be registered with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, those additional
intellectual property rights developed or acquired by Borrower from time to time
in connection with any product prior to the sale or licensing of such product to
any third party, including without limitation revisions or additions to the
intellectual property rights listed on such Exhibits A, B and C and in form and
substance reasonably acceptable to Borrower's legal counsel, unless Borrower, in
the exercise of its prudent business judgment, deems such registration not to
have any significant commercial value, provided that Borrower shall in all cases
register in accordance with this Section 6.11 the copyright of the source code
of any software, the licensing of which generates 5 percent or more of
Borrower's gross revenue in any calendar month.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents and Copyrights, (ii) use
its best efforts to detect infringements of the Trademarks, Patents and
Copyrights and promptly advise Bank in writing of material infringements
detected and (iii) not allow any Trademarks, Patents or Copyrights to be
abandoned, forfeited or dedicated to the public without the written consent of
Bank, which shall not be unreasonably withheld, unless Borrower determines that
reasonable business practices suggest that abandonment is appropriate.
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(d) Bank shall have the right, but not the obligation, to
take, at Borrower's sole expense, any actions that Borrower is required under
this Section 6.11 to take but which Borrower fails to take, after fifteen (15)
days' notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.11.
6.12 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:
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.
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
provided that nothing in this Section 7.2 shall prohibit Borrower from
completing a public offering of its Common Stock pursuant to a Registration
Statement filed with the Securities and Exchange Commission. 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.
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, except Borrower may at any time when an Event of Default
is not continuing, repurchase from an officer, director or employee shares of
equity securities of Borrower held by them upon such person's termination of
employment or rendering of service to Borrower.
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
19
<PAGE> 24
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 Intellectual Property Agreements. Borrower shall not permit
the inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way prevent the creation of a security
interest in Borrower's rights and interests in any property included within the
definition of the Intellectual Property Collateral acquired under such
contracts, except to the extent that such provisions are necessary in Borrower's
exercise of its reasonable business judgement.
7.10 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.
7.11 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.
7.12 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 in a
material respect with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could 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 ten (10) 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 ten (10) day period or cannot
after diligent attempts by Borrower be cured within such
20
<PAGE> 25
ten (10) 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 thirty (30) 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 ten (10) 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 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;
8.8 Judgments. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000) 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.
21
<PAGE> 26
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) Demand that Borrower (i) deposit cash with Bank in an
amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;
(d) Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(e) 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, for up to one hundred twenty (120) days in order to exercise any
of Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(f) 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;
(g) 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;
(h) 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;
22
<PAGE> 27
(i) Bank may credit bid and purchase at any public sale;
and
(j) 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; (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; (f) to modify, in its
sole discretion, any intellectual property security agreement entered into
between Borrower and Bank without first obtaining Borrower's approval of or
signature to such modification by amending Exhibit A, Exhibit B and Exhibit C,
thereof, as appropriate, to include reference to any right, title or interest in
any Copyrights, Patents or Trademarks acquired by Borrower after the execution
hereof or to delete any reference to any right, title or interest in any
Copyrights, Patents or Trademarks in which Borrower no longer has or claims any
right, title or interest; (g) to file, in its sole discretion, one or more
financing or continuation statements and amendments thereto, relative to any of
the Collateral without the signature of Borrower where permitted by law; and (h)
dispose of the Intellectual Property Collateral in accordance with, but only to
the extent permitted under, Section 9504 of the California Uniform Commercial
Code (and to register such disposition with appropriate government authorities);
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. Upon the occurrence and during the
continuance of an Event of Default, 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
23
<PAGE> 28
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.
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: Accrue Software, Inc.
1275 Orleans Drive
Sunnyvale, CA 94089
Attn: Mr. Mike Hayashida
FAX: (408) 541-1874
With a Copy to: Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: John V. Bautista
FAX: (415) 854-1121
If to Bank: Silicon Valley Bank
1731 Embarcadero Road, Suite 220
Palo Alto, CA 94303
Attn: Mr. Jim Marshall
FAX: (415) 812-0864
Any notice delivered or sent to Borrower shall be effective
notwithstanding a failure to deliver or send a copy of such notice to Borrower's
counsel or any other person. 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.
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<PAGE> 29
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
The Loan Documents 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 the Loan Documents;
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 the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
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
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<PAGE> 30
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.
12.8 Confidentiality. In handling any confidential information
Bank and all employees and agents of Bank, including but not limited to
accountants, 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
ACCRUE SOFTWARE, INC.
By: /s/ Simon Roy
-----------------------------------
Title: President and CEO
-----------------------------------
SILICON VALLEY BANK
By: /s/ James R. Marshall
-----------------------------------
Title: Vice President
-----------------------------------
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<PAGE> 31
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, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, 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, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to the foregoing;
(f) All 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;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
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<PAGE> 32
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
----------------
FAX#: (408) 496-2426 TIME:
----------------
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 and
Security 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.
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<PAGE> 33
BANK USE ONLY
TELEPHONE REQUEST:
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)
29
<PAGE> 34
EXHIBIT C
BORROWING BASE CERTIFICATE
- --------------------------------------------------------------------------------
Borrower: Accrue Software, Inc. Lender: Silicon Valley Bank
Commitment Amount: $1,000,000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <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) $
--------
NONFORMULA SUBLIMIT
16. Nonformula Sublimit $150,000
BALANCES
17. Maximum Loan Amount $
-------
18. Total Funds Available [Lesser of #17 or (#15 plus #16)] $
--------
19. Present balance owing on Line of Credit $
--------
20. Outstanding under Sublimits ( ) $
-------
21. RESERVE POSITION (#18 minus #19 and #20) $
--------
</TABLE>
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.
*35% maximum concentration limit allowed for Apple Computer and Sun
Microsystems.
-------------------------
BANK USE ONLY
Rec'd By:
----------------
Auth. Signer
Date:
----------------
Verified:
----------------
Auth. Signer
-------------------------
Date:
----------------
-------------------------
COMMENTS:
Accrue Software, Inc.
/s/ Richard Kreysar
- ----------------------------
30
<PAGE> 35
By:
-------------------------
Authorized Signer
31
<PAGE> 36
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: ACCRUE SOFTWARE, INC.
The undersigned authorized officer of Accrue Software, 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 90 days* Yes No
A/R & A/P Agings Monthly within 15 days Yes No
A/R Audit Initial and Semi-Annual** Yes No
</TABLE>
* 12/31/96 FYE, Financial Statement due before 10/31/97.
** Unless no borrowings have occurred for three (3) months prior to scheduled
audit date.
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
<S> <C> <C> <C>
Maintain on a Quarterly Basis:
Minimum Quick Ratio 2.0:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $3,000,000 $_____ Yes No
Liquidity 1.5:1.0* _____:1.0 Yes No
Debt Service Coverage 2.0:1.0* _____:1.0 Yes No
</TABLE>
* Debt Service replaces Liquidity after 2 quarters of DSC > 2.0.
32
<PAGE> 37
COMMENTS REGARDING EXCEPTIONS: BANK USE ONLY
See Attached
Sincerely,
Received by:
- ------------------------------ ---------------------------
SIGNATURE AUTHORIZED SIGNER
Date:
- ------------------------------ ---------------------------
TITLE
Verified:
- ------------------------------ ---------------------------
DATE AUTHORIZED SIGNER
Date:
---------------------------
Compliance Status: Yes No
33
<PAGE> 38
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Accrue Software, Inc. Bank: Silicon Valley Bank
================================================================================
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $1,000,000 and an Equipment Line of Credit 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 and Equipment Acquisition.
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 Line
-------------- --------------
<S> <C> <C>
Amount paid to Borrower directly: $ $
---------- -----------
Undisbursed Funds $ $
---------- -----------
Principal $1,000,000 $1,000,000
</TABLE>
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
<TABLE>
<CAPTION>
Charges Paid in Cash:
<S> <C>
$5,000 Loan Fee
$ Accounts Receivables Audit
------
$ 100 UCC Search Fees
$ 100 UCC Filing Fees
$ Patent Filing Fees
------
$ Trademark Filing Fees
------
$ Copyright Filing Fees
------
$7,500 Outside Counsel Fees and Expenses (Maximum)
------
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 ____________, 19___.
BORROWER:
Accrue Software, Inc.
/s/ Richard Kreysar
- ---------------------------------
Authorized Officer
<PAGE> 39
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: Accrue Software, Inc. BANK: Silicon Valley Bank
- --------------------------------------------------------------------------------
INSURANCE REQUIREMENTS. Accrue Software, 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"):
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 canceled or diminished without
a minimum of twenty (20) days' prior written notice
to Bank.
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 September 19, 1997, 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 SEPTEMBER 19,
1997.
GRANTOR:
Accrue Software, Inc.
x
Authorized Officer
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS: _______________
================================================================================
<PAGE> 40
CORPORATE RESOLUTIONS TO BORROW
BORROWER: ACCRUE SOFTWARE, INC.
I, the undersigned Secretary or Assistant Secretary of Accrue Software,
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 September 19, 1997 (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
1
<PAGE> 41
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.
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 _______________,
19___ and attest that the signatures set opposite the names listed above are
their genuine signatures.
CERTIFIED TO AND ATTESTED BY:
X
-----------------------------------
2
<PAGE> 42
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of April 9, 1999, by
and between Accrue Software, Inc. ("Borrower") and Silicon Valley Bank ("Bank").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, a Loan and Security Agreement, dated September 19, 1997, as may be
amended from time to time, (the "Loan Agreement"). The Loan Agreement provided
for, among other things, an Equipment facility in the original principal amount
of One Million Dollars ($1,000,000). Defined terms used but not otherwise
defined herein shall have the same meanings as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement and in that certain
Intellectual Property Security Agreement, dated September 19, 1997, by and
between Borrower and Bank.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents." Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents."
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement
1. The following terms are hereby incorporated into Section 1.1
entitled "Definitions":
"Committed Equipment 2 Line" is a Credit Extension in an amount
of $750,000.
"Credit Extension" is each Equipment Advance, Equipment 2 Advance
or any other extension of credit by Bank for Borrower's benefit.
"Equipment 2 Advance(s)" is defined in Section 2.1.5.
"Equipment 2 Availability End Date" is defined in Section 2.1.5.
"Equipment 2 Maturity Loan Maturity Date" is defined in Section
2.1.5.
2. The following Section is hereby incorporated into the Loan
Agreement:
2.1.5 Equipment 2 Advances.
(a) Through April 9, 2000 (the "Equipment 2
Availability End Date"), Bank will make advances ("Equipment 2
Advance" and, collectively, "Equipment 2 Advances") not exceeding
the Committed Equipment 2 Line. The Equipment 2 Advances may only
be used to purchase Equipment, including computer equipment,
office equipment and other machinery and may not exceed 100% of
the equipment invoice, excluding taxes, shipping, warranty
charges, freight discounts and installation expense. Software
licenses, leasehold improvements and other soft costs may
constitute up to 20% of the aggregate Equipment 2 Advances. Each
Equipment 2 Advance must be for minimum of $75,000.
(b) Interest accrues from the date of each Equipment 2
Advance at the rate in Section 2.3(a) and is payable monthly.
<PAGE> 43
(c) Equipment 2 Advances outstanding on October 9, 1999 are
payable in 36 equal monthly installments of principal, plus
accrued interest, beginning on November 9, 1999 and ending on
October 9, 2002.
(d) Equipment 2 Advances made after October 9, 1999 and
outstanding on the Equipment 2 Availability End Date are payable
in 36 equal monthly installments of principal, plus accrued
interest, beginning on the 9th of each month following the
Equipment 2 Availability End Date and ending on April 9, 2003
(the "Equipment 2 Loan Maturity Date"). Equipment 2 Advances when
repaid may not be reborrowed.
(e) To obtain an Equipment 2 Advance, Borrower must notify
Bank (the notice is irrevocable) by facsimile no later than 3:00
p.m. Pacific time 1 Business Day before the day on which the
Equipment 2 Advance is to be made. The notice must be signed by a
Responsible Officer or designee and include a copy of the invoice
for the Equipment being financed.
3. Section 2.3(a) entitled "Interest Rate" is herby amended to read
as follows:
Except as set forth in Section 2.3(b), any Equipment Advances
and Equipment 2 Advances shall bear interest, on the average
Daily Balance, at a rate equal to one (1.000) percentage point
above the Prime Rate.
4. Section 6.8 entitled "quick Ratio" is hereby amended to read as
follows:
Borrower shall maintain, as of the last day of each month, a
ratio of Quick Assets to Current Liabilities, less deferred
revenue, of 2.00 to 1.00.
5. Section 6.9 entitled "Tangible Net Worth" is hereby replaced with
the following Section:
6.9. Net Income. Borrower shall achieve as of the last day of
each fiscal quarter a minimum net profit of $1., provided,
however, Borrower is allowed losses, provided such losses do not
exceed $1,040,000 for the fiscal quarter ending June 30, 1999 and
$670,000 for the fiscal quarter ending September 30, 1999.
6. Section 6.10 entitled "Minimum Liquidity/Debt Service Coverage"
is hereby amended to read as follows:
Borrower shall maintain, as of the last day of each fiscal
quarter, the sum of (i) cash and cash equivalents plus (ii) short
term investments plus (iii) 60% of Borrower's net Accounts
divided by (iii) all outstanding Credit Extensions of not less
than 1.20 to 1.00 (the "Liquidity Covenant"). Beginning the
fiscal quarter ending March 31, 2000 and each fiscal quarter
ending thereafter, the Liquidity Covenant shall be replaced by a
Debt Service Coverage Covenant of (a) quarterly adjusted net
income plus (b) quarterly depreciation/amortization plus (c)
quarterly interest expense, divided by (d) current portion of
long term debt divided by 4 plus (e) quarterly interest expense
of 1.50 to 1.00 (the "Debt Service Coverage Covenant").
7. The term "Advances" as stated in the last sentence under Section
8.2, 8.4, 8.5 and 8.8 is hereby replaced with the term "Credit
Extensions."
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
-2-
<PAGE> 44
5. PAYMENT OF LOAN FEE. Borrower shall pay to bank a fee in the amount of
Three Thousand Seven Hundred Fifty Dollars ($3.750) (the "Loan Fee") plus all
out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Indebtedness, Bank
is relying upon Borrower's representations, warranties,and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker, endorser,
or guarantor will be released by virtue of this Loan Modification Agreement.
The terms of this paragraph apply not only to this Loan Modification
Agreement, but also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrower's payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
ACCRUE SOFTWARE, INC. SILICON VALLEY BANK
By: /s/ Rick Kreysar By: /s/ R. Bryan Jadot
------------------------------ ----------------------------
Name: Rick Kreysar Name: R. Bryan Jadot
---------------------------- --------------------------
Title: CEO Title: A/O
--------------------------- -------------------------
Date: 4/19/99
---------------------------
-3-
<PAGE> 45
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
<TABLE>
<S> <C> <C>
BORROWER: Accrue Software, Inc.
LOAN OFFICER: R. Bryan Jadot
DATE: April 9, 1999
Loan Fee $3,750.00
Documentation Fee 250.00
TOTAL FEE DUE $4,000.00
=========
( ) A check for the total amount is attached.
( ) Debit DDA #___________ for the total amount.
</TABLE>
Borrower:
- --------------------------------
(Authorized Signer)
Bank:
- --------------------------------
Silicon Valley Bank (Date)
Account Officer's Signature
-4-
<PAGE> 1
EXHIBIT 10.7
ACCRUE SOFTWARE, INC.
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release ("Agreement") is made by
and between Accrue Software, Inc., a Delaware corporation (the "Company"),
and Simon P. Roy ("Employee").
WHEREAS, Employee is employed by the Company; and
WHEREAS, the Company and Employee have mutually agreed to terminate the
existing employment relationship and to release each other from any claims
arising from or related to the employment relationship.
NOW, THEREFORE, in consideration of the mutual promises made herein, the
Company and Employee (collectively referred to as the "Parties") hereby agree as
follows:
1. RESIGNATION; CONTINUATION OF EMPLOYMENT.
(a) Employee and the Company agree to the following terms with
respect to continuation of Employee's employment by the Company:
(i) that Employee shall continue to work as President and
Chief Executive Officer of the Company and shall remain a Director of the
Company until the earlier of the Termination Date (as defined below) or the date
he is requested to resign by the Company's Board of Directors, at which time
Employee agrees to resign each such position.
(ii) that Employee shall continue to work as a full-time
employee of the Company until the later of April 1, 1998 or such period of time
thereafter as requested by the Company's Board of Directors, but not later than
June 1, 1998 (the "Employment Dates"), provided, however, that the Company may
terminate Employee's employment earlier than the Employment Dates as provided in
Section 2 hereof. The date on which Employee's employment relationship with the
Company terminates shall be the "Termination Date";
(iii) that until the Termination Date Employee shall be
entitled to receive his current base salary (less applicable withholding), plus
accrual of vacation, in accordance with the Company's regular payroll practices;
and
(iv) that as a condition to Employee's continued employment
with the Company, Employee agrees to devote his full-time and business attention
to the Company.
2. SEVERANCE PAYMENT. In consideration for the release of claims set forth
below and other obligations under this Agreement, the Company agrees to pay
Employee a lump sum severance payment of $112,500 (less applicable tax
withholding) within thirty (30) days of the Termination Date; provided, however,
in the event the Company terminates Employee's employment for Cause (as defined
below) or Employee voluntarily terminates his employment prior to the applicable
Employment Date, then Employee shall be entitled only to a lump sum
<PAGE> 2
severance payment of $75,000. "Cause" for purposes of this Agreement shall mean
Employee's failure to devote his full-time and business attention to the
Company, Employee's breach of this Agreement, the Confidentiality Agreement, or
the Company's employee policies which continues uncured for ten (10) days
following notice thereof, Employee being convicted of a felony, or committing an
act of dishonesty, fraud or intentional illegal conduct against the Company,
Employee's misappropriation of Company property, or Employee's commencement of
employment with another employer while he is an employee of the Company. As
additional consideration for the release of claims set forth below and other
obligations under this Agreement, the Company hereby transfer to Employee all
right, title and interest in and to the notebook computer designated to Employee
as of the date of this Agreement.
3. EMPLOYEE BENEFITS.
(a) Employee shall continue to receive the Company's medical
insurance benefits at Company expense until the Termination Date, which date
shall be the "qualifying event" date under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"). Following such date, Employee
shall have the right to continue coverage under the Company's medical insurance
programs as provided by COBRA. Such continued coverage shall be provided at the
Company's expense until the earlier of twelve months following the Termination
Date or the date on which Employee commences full or part-time employment with a
new employer which provides comparable medical insurance benefits.
(b) Except as otherwise provided above, Employee shall not be
entitled to participate in any of the Company's benefit plans or programs
offered to employees or officers of the Company, including, but not limited to,
any accrual of vacation, after the Termination Date.
4. STOCK OPTIONS. Under the terms of the Stock Option Agreements issued to
Employee over the course of his employment with the Company, Employee was
granted options to purchase 250,000 (the "September 1996 Option") and 168,847
(the "June 1997 Option") shares of the Company's Common Stock under the
Company's 1996 Stock Plan (collectively, the "Options" or "Stock Option
Agreements"). The Parties acknowledge and agree that as of December 1, 1997, the
September 1996 Option had vested as to 93,750 shares, of which 67,708 shares
were exercised effective as of June 27, 1997, and the June 1997 Option had
vested as to 21,106 shares, of which no shares were exercised. In consideration
for the release of claims set forth below and other obligations under this
Agreement, the Parties agree that, the Options shall continue to vest at the
rate and under the terms set forth in the Stock Option Agreements until the
Termination Date. The Parties further agree that on the Termination Date, the
Options shall vest with respect to the number of shares under each Option that
would have vested on the date nine (9) months after the Termination Date if
Employee's employment had continued with the Company through the date nine (9)
months after the Termination Date; provided, however, in the event the Company
terminates Employee's employment for Cause or Employee voluntarily terminates
his employment prior to the applicable Employment Date, then the Options shall
vest only with respect to the number of shares under each Option that would have
vested on the date that is six (6) months after the Termination Date if
Employee's employment had continued with the Company through the date six (6)
months after the Termination Date. Employee
-2-
<PAGE> 3
acknowledges and agrees that if the Options are not exercised within thirty (30)
days of the Termination Date, they will terminate. Employee further acknowledges
and agrees that except as set forth in this Section 4, Employee shall not be
entitled to acceleration of vesting under the Options, including acceleration of
vesting upon change of control as set forth in the Stock Option Agreements.
Employee further acknowledges and agrees that he shall remain bound by all other
terms of the Stock Option Agreements.
5. LOAN. The Company agrees that within thirty (30) days after the
Termination Date, or such earlier date on which Employee notifies the Company of
his desire to draw down the Loan, the Company will loan Employee an amount equal
to the aggregate exercise price of the then vested and unexercised shares under
the Options for the sole purpose of permitting Employee to purchase such shares
(the "Loan" and "Loan Amount"), or in the event the loan is drawn down prior to
thirty (30) days after the Termination Date, the Loan will be based on the
aggregate exercise price of the number of shares Employee would vest if Employee
remains a full-time employee through June 1, 1998 (such unvested but exercised
shares will remain subject to the Company's repurchase option in accordance with
the Option Agreement between Employee and the Company). The Company's obligation
to make the Loan will be subject to the execution by Employee of a Loan and
Security Agreement which shall provide that interest under the Loan shall accrue
at the minimum applicable federal rate (as of the date of the Loan) per year,
compounded semi-annually, and all outstanding principal and interest under the
Loan shall be due and payable in full on the earlier of (i) four (4) years from
the Termination Date, (ii) eighteen (18) months following the Company's initial
public offering of its Common Stock, or (iii) upon the sale of any shares of the
Company's Common Stock held by Employee. The Loan shall be full recourse and
secured by the shares of the Company's Common Stock purchased by Employee upon
exercise of the Options.
6. NO OTHER PAYMENTS DUE. The Company agrees that it will continue to pay
to Employee the salary described in Section 1(a)(iii) through the Termination
Date in accordance with the Company's normal payroll practices, and that the
Company will pay to Employee on or before the Termination Date all salary and
accrued vacation as may then be due to Employee. Employee will execute an
acknowledgment of receipt of all such payments as received and an acknowledgment
that, in light of the payment by the Company of all wages due, or to become due
to Employee, California Labor Code Section 206.5 is not applicable to the
Parties hereto. That section provides in pertinent part as follows:
No employer shall require the execution of any release of any claim
or right on account of wages due, or to become due, or made as an
advance on wages to be earned, unless payment of such wages has been
made.
7. RELEASE OF CLAIMS. In consideration for the obligations of both parties
set forth in this Agreement, Employee and the Company, on behalf of themselves,
and their respective heirs, executors, officers, directors, employees,
investors, stockholders, administrators and assigns, hereby fully and forever
release each other and their respective heirs, executors, officers, directors,
employees, investors, stockholders, administrators and assigns, of and from any
claim, duty, obligation or cause of action relating to any matters of any kind,
whether presently known
-3-
<PAGE> 4
or unknown, suspected or unsuspected, that any of them may possess arising from
any omissions, acts or facts that have occurred up until and including the date
of this Agreement including, without limitation:
(a) any and all claims relating to or arising from Employee's
employment relationship with the Company and the termination of that
relationship;
(b) any and all claims relating to, or arising from, Employee's
right to purchase, or actual purchase of shares of stock of the Company;
(c) any and all claims for wrongful discharge of employment; breach
of contract, both express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; negligent or intentional infliction of
emotional distress; negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic advantage;
negligence; and defamation;
(d) any and all claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967, the Americans with Disabilities Act of 1990, and the California
Fair Employment and Housing Act;
(e) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination; and
(f) any and all claims for attorneys' fees and costs.
The Company and Employee agree that the release set forth in this Section
7 shall be and remain in effect in all respects as a complete general release as
to the matters released. This release does not extend to any obligations
incurred or specified under this Agreement.
8. CIVIL CODE SECTION 1542. The Parties represent that they are not aware
of any claim by either of them other than the claims that are released by this
Agreement. Employee and the Company acknowledge that they have been advised by
legal counsel and are familiar with the provisions of California Civil Code
Section 1542, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Employee and the Company, being aware of said Code section, agree to
expressly waive any rights they may have thereunder, as well as under any other
statute or common law principles of similar effect.
9. NONDISCLOSURE OF CONFIDENTIAL AND PROPRIETARY INFORMATION. Employee
understands and agrees that his obligations to the Company under his existing
Proprietary
-4-
<PAGE> 5
Information and Inventions Assignment and Confidentiality Agreement between
Employee and the Company (the "Confidentiality Agreement"), a copy of which is
attached hereto as Exhibit A, shall continue through the Termination Date and
shall survive termination of his relationship with the Company under this
Agreement and that Employee shall continue to maintain the confidentiality of
all confidential and proprietary information of the Company as provided by the
Confidentiality Agreement. Employee agrees that at all times hereafter, he shall
not intentionally divulge, furnish or make available to any party any of the
trade secrets, patents, patent applications, price decisions or determinations,
inventions, customers, proprietary information or other intellectual property of
the Company, until after such time as such information has become publicly known
otherwise than by act of collusion of Employee. Employee further agrees that he
will return all the Company's property and confidential and proprietary
information in his possession to the Company within five (5) days from the
Termination Date.
10. NONCOMPETITION AND NONSOLICITATION. Employee agrees that through the
Termination Date, Employee shall not, without the prior written consent of the
Company, at any time, directly or indirectly, whether or not for compensation,
engage in, or have any interest in any person, firm, corporation or business
(whether as an employee, officer, director, agent, security holder, creditor,
consultant, partner or otherwise) that engages in any activity that is in direct
competition with the Company. Employee further agrees that for a period of one
year after the Termination Date, Employee shall not induce or attempt to induce
any employee of the Company to leave the employ of the Company or solicit the
business of any client or customer of the Company (other than on behalf of the
Company) existing as of the Termination Date in a manner competitive with the
Company.
The Parties intend that the covenant contained in the preceding paragraph
shall be construed as a series of separate covenants, one for each county or
other geographic or political subdivision of each jurisdiction in which the
Company conducts business. If, in any judicial proceeding, a court shall refuse
to enforce any of the separate covenants deemed included in this paragraph, then
the unenforceable covenant shall be deemed eliminated from the provisions for
the purpose of those proceedings to the extent necessary to permit the remaining
separate covenants to be enforced.
11. NON-DISPARAGEMENT. Each Party agrees to refrain from any
disparagement, defamation, slander of the other, or tortious interference with
the contracts and relationships of the other.
12. TAX CONSEQUENCES. The Company makes no representations or warranties
with respect to the tax consequences of the payment of any sums to Employee
under the terms of this Agreement. Employee agrees and understands that he is
responsible for payment, if any, of local, state and/or federal taxes on the
sums paid or the indebtedness canceled hereunder by the Company and any
penalties or assessments thereon. Employee further agrees to indemnify and hold
the Company harmless from any claims, demands, deficiencies, penalties,
assessments, executions, judgments, or recoveries by any government agency
against the Company for any amounts claimed due on account of Employee's failure
to pay federal or state taxes or damages sustained by the Company by reason of
any such claims, including reasonable attorneys' fees.
-5-
<PAGE> 6
13. NO ADMISSION OF LIABILITY. The Parties understand and acknowledge that
this Agreement constitutes a compromise and settlement of claims. No action
taken by the Parties hereto, or either of them, either previously or in
connection with this Agreement shall be deemed or construed to be (a) an
admission of the truth or falsity of any claims heretofore made or (b) an
acknowledgment or admission by either Party of any fault or liability whatsoever
to the other Party or to any third party.
14. COSTS. The Parties shall each bear their own costs, expert fees,
attorneys' fees and other fees incurred in connection with this Agreement,
except that the Company will pay up to $2,500 of Employee's legal fees in
connection with the negotiation and execution of this Agreement.
15. AUTHORITY. The Company represents and warrants that the undersigned
has the authority to act on behalf of the Company and to bind the Company and
all who may claim through it to the terms and conditions of this Agreement.
Employee represents and warrants that he has the capacity to act on his own
behalf and on behalf of all who might claim through him to bind them to the
terms and conditions of this Agreement, including without limitation the Roy
Family Trust U/A DTD 10/16/96 and Julia W. Roy. Each Party warrants and
represents that there are no liens or claims of lien or assignments in law or
equity or otherwise of or against any of the claims or causes of action released
herein.
16. NO REPRESENTATIONS. Each Party represents that it has had the
opportunity to consult with an attorney, and has carefully read and understands
the scope and effect of the provisions of this Agreement. Neither Party has
relied upon any representations or statements made by the other Party hereto
which are not specifically set forth in this Agreement.
17. SEVERABILITY. In the event that any provision hereof becomes or is
declared by a court or other tribunal of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
18. ARBITRATION. The Parties shall attempt to settle all disputes arising
in connection with this Agreement through good faith consultation. In the event
no agreement can be reached on such dispute within fifteen (15) days after
notification in writing by either Party to the other concerning such dispute,
the dispute shall be settled by binding arbitration to be conducted in Santa
Clara County before the American Arbitration Association under its California
Employment Dispute Resolution Rules, or by a judge to be mutually agreed upon.
The arbitration decision shall be final, conclusive and binding on both Parties
and any arbitration award or decision may be entered in any court having
jurisdiction. The Parties agree that the prevailing party in any arbitration
shall be entitled to injunctive relief in any court of competent jurisdiction to
enforce the arbitration award. The Parties further agree that the prevailing
Party in any such proceeding shall be awarded reasonable attorneys' fees and
costs. This Section 18 shall not apply to the Confidentiality Agreement. The
Parties hereby waive any rights they may have to trial by jury in regard to
arbitrable claims.
19. ENTIRE AGREEMENT. This Agreement, and the exhibit hereto, represent
the entire agreement and understanding between the Company and Employee
concerning Employee's
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<PAGE> 7
separation from the Company, and supersede and replace any and all prior
agreements and understandings concerning Employee's relationship with the
Company and his compensation by the Company, including the Letter Agreement
between Employee and the Company dated May 18, 1996, other than the Stock Option
Agreements described in Section 4 (and all exhibits thereto), the Exercise
Notice and Investment Representation Statement each dated June 27, 1997 under
the September 1996 Option, the Confidentiality Agreement described in Section
10, and the Indemnification Agreement between the Company and Employee dated
____.
20. NO ORAL MODIFICATION. This Agreement may only be amended in writing
signed by Employee and the Company.
21. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California, without regard to its conflicts of law provisions.
22. EFFECTIVE DATE. This Agreement is effective seven days after it
has been signed by both Parties and such date is referred to herein as the
"Effective Date."
23. COUNTERPARTS. This Agreement may be executed in counterparts, and each
counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
24. ASSIGNMENT. This Agreement may not be assigned by Employee or the
Company without the prior written consent of the other party. Notwithstanding
the foregoing, this Agreement may be assigned by the Company (including an
assignment by operation of law) to a purchaser of all or substantially all of
the Company's assets, or to a successor corporation in connection with a merger
or similar transaction in which the Company's stockholders immediately prior to
such merger or similar transaction represent less than 50% of the voting power
of the successor corporation.
25. VOLUNTARY EXECUTION OF AGREEMENT. This Agreement is executed
voluntarily and without any duress or undue influence on the part or behalf of
the Parties hereto, with the full intent of releasing all claims. The Parties
acknowledge that:
(a) they have read this Agreement;
(b) they have been represented in the preparation, negotiation, and
execution of this Agreement by legal counsel of their own choice or that they
have voluntarily declined to seek such counsel;
(c) and they understand the terms and consequences of this Agreement
and of the releases it contains;
(d) they are fully aware of the legal and binding effect of this
Agreement.
[Signature Page Follows]
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<PAGE> 8
IN WITNESS WHEREOF, the Parties have executed this Agreement and Mutual
Release on the respective dates set forth below.
ACCRUE SOFTWARE, INC.
Dated as of March __, 1998 By: /s/ James L. Patterson
-------------------------------
Title: President and Chief
Executive Officer
SIMON P. ROY, AN INDIVIDUAL
Dated as of March 3, 1998 /s/ Simon P. Roy
--------------------------------------
-8-
<PAGE> 9
EXHIBIT A
CONFIDENTIALITY AGREEMENT
<PAGE> 10
AMENDMENT NO. 1 TO
ACCRUE SOFTWARE, INC.
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Amendment No. 1 to Settlement Agreement and Mutual Release
("Amendment") is made by and between Accrue Software, Inc., a Delaware
corporation (the "Company"), and Simon P. Roy ("Employee") and amends the
Settlement Agreement and Mutual Release dated March 3, 1998 (the "Agreement")
entered into between the Company and Employee.
WHEREAS, the Company and Employee wish to extend the period of time during
which Employee will remain employed by the Company; and
WHEREAS, the Company and Employee wish to modify certain additional terms
of the Agreement as set forth in this Amendment.
NOW, THEREFORE, in consideration of the mutual promises made herein, the
Company and Employee (collectively referred to as the "Parties") hereby agree as
follows:
1. RESIGNATION; CONTINUATION OF EMPLOYMENT. Section 1 of the Agreement
shall be modified to read in its entirety as follows:
"(a) Employee and the Company agree to the following terms with
respect to continuation of Employee's employment by the Company:
(i) that Employee hereby resigns as President and Chief
Executive Officer of the Company, and as a Director of the Company, effective at
end of business May 1, 1998;
(ii) that Employee shall continue to work as a part-time
employee of the Company until July 1, 1998, and shall make himself available to
the Company as reasonably requested by the Company (the "Termination Date") and;
(iii) that until the Termination Date Employee shall be
entitled to receive his current base salary (less applicable withholding), plus
accrual of vacation, in accordance with the Company's regular payroll
practices."
2. SEVERANCE PAYMENT. The first and second sentences of Section 2 of the
Agreement shall be modified to read in their entirety as follows: "In
consideration for the release of claims set forth below and other obligations
under this Agreement, the Company agrees to pay Employee a lump sum severance
payment of $87,500 (less applicable tax withholding) within thirty (30) days of
May 1, 1998."
3. STOCK OPTIONS. The fourth sentence of Section 4 of the Agreement shall
be modified to read in its entirety as follows: "The Parties further agree that
on the Termination Date, the Options shall vest with respect to the number of
shares under each Option that would
<PAGE> 11
have vested on the date seven (7) months after the Termination Date if
Employee's employment had continued with the Company through the date seven (7)
months after the Termination Date." In addition, Employee acknowledges and
agrees that if the Options are not exercised within thirty (30) days of the
Termination Date, they will terminate. Employee further acknowledges and agrees
that except as set forth in this Section 3, Employee shall not be entitled to
acceleration of vesting under the Options, including acceleration of vesting
upon change of control as set forth in the Stock Option Agreements. Employee
further acknowledges and agrees that he shall remain bound by all other terms of
the Stock Option Agreements.
4. NO MODIFICATION. Except as amended by this Amendment, all terms of the
Agreement shall remain in full force and effect and are herein incorporated by
reference.
5. VOLUNTARY EXECUTION OF AMENDMENT. This Amendment is executed
voluntarily and without any duress or undue influence on the part or behalf of
the Parties hereto, with the full intent of releasing all claims. The Parties
acknowledge that:
(a) they have read this Amendment;
(b) they have been represented in the preparation, negotiation, and
execution of this Amendment by legal counsel of their own choice or that they
have voluntarily declined to seek such counsel;
(c) they understand the terms and consequences of this Amendment and
its effect on the Agreement; and
(d) they are fully aware of the legal and binding effect of this
Amendment.
[Signature Page Follows]
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<PAGE> 12
IN WITNESS WHEREOF, the Parties have executed this Amendment No. 1 to the
Agreement and Mutual Release dated March 3, 1998 on the respective dates set
forth below.
ACCRUE SOFTWARE, INC.
Dated as of April __, 1998 By: /s/ James L. Patterson
-------------------------------
Title: President and Chief
Executive Officer
SIMON P. ROY, AN INDIVIDUAL
Dated as of April 29, 1998 /s/ Simon P. Roy
--------------------------------------
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<PAGE> 13
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement (the "Agreement") is entered into this
29th day of July, 1998 by and between Accrue Software, Inc., a Delaware
corporation (the "Company") and Simon P. Roy ("Purchaser").
RECITALS
In connection with Purchaser's exercise of options to purchase certain
shares of the Company's Common Stock (the "Shares") pursuant to Option
Agreements dated September 9, 1996 and June 27, 1997 between Purchaser and the
Company, Purchaser is delivering a promissory note of even date herewith (the
"Note") in full or partial payment of the exercise price for the Shares. The
company requires that the Note be secured by a pledge of the Shares or the terms
set forth below.
AGREEMENT
In consideration of the Company's acceptance of the Note as full or partial
payment of the exercise price of the Shares, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. The Note shall become payable on the earlier of (i) July 1, 2002, (ii)
twelve (12) months following the date of the Company's initial public offering
of its Common Stock, or (iii) upon the sale of any shares of the Company's
Common Stock held by the undersigned, unless otherwise agreed in writing by the
Company.
2. Purchaser shall deliver to the Secretary of the Company, or his or her
designee (hereinafter referred to as the "Pledge Holder"), all certificates
representing the Shares, together with an Assignment Separate from Certificate
in the form attached to this Agreement as Attachment A executed by Purchaser and
by Purchaser's spouse (if required for transfer), in blank, for use in
transferring all or a portion of the Shares to the Company if, as and when
required pursuant to this Agreement. In addition, if Purchaser is married,
Purchaser's spouse shall execute the signature page attached to this Agreement,
which shall be binding on Purchaser's spouse to the same extent as Purchaser.
3. As security for the payment of the Note and any renewal, extension or
modification of the Note, Purchaser hereby grants to the Company a security
interest in and pledges with and delivers to the Company Purchaser's Shares
(sometimes referred to herein as the "Collateral").
4. In the event that Purchaser prepays all or a portion of the Note, in
accordance with the provisions thereof, Purchaser intends, unless written notice
to the contrary is delivered to the Pledge Holder, that the Shares represented
by the portion of the Note so repaid, including annual interest thereon, shall
continue to be so held by the Pledge Holder, to serve as independent collateral
for the outstanding portion of the Note for the purpose of
<PAGE> 14
commencing the holding period set forth in Rule 144(d) promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
5. In the event of any foreclosure of the security interest created by
this Agreement, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the establishment
of a public market for the Shares of the Company, the securities laws affecting
sale of the Shares make a public sale of the Shares commercially unreasonable.
The parties further agree that the repurchasing of such Shares by the Company,
or by any person to whom the Company may have assigned its rights under this
Agreement, is commercially reasonable if made at a price determined by the Board
of Directors in its discretion, fairly exercised, representing what would be the
Fair Market Value of the Shares reduced by any limitation on transferability,
whether due to the size of the block of shares or the restrictions of applicable
securities laws.
6. In the event of default in payment when due of any indebtedness under
the Note, the Company may elect then, or at any time thereafter, to exercise all
rights available to a secured party under the California Commercial Code
including the right to sell the Collateral at a private or public sale or
repurchase the Shares as provided above. The proceeds of any sale shall be
applied in the following order:
(a) To the extent necessary, proceeds shall be used to pay all
reasonable expenses of the Company in enforcing this Agreement and the Note,
including, without limitation, reasonable attorney's fees and legal expenses
incurred by the Company.
(b) To the extent necessary, proceeds shall be used to satisfy any
remaining indebtedness under Purchaser's Note.
(c) Any remaining proceeds shall be delivered to Purchaser.
7. Upon full payment by Purchaser of all amounts due under the Note,
Pledge Holder shall deliver to Purchaser all Shares in Pledge Holder's
possession belonging to Purchaser, and Pledge Holder shall thereupon be
discharged of all further obligations under this Agreement.
<PAGE> 15
The parties have executed this Pledge and Security Agreement as of the date
first set forth above.
COMPANY:
Accrue Software, Inc.
By: /s/ Rick Kreysar
---------------------------
Name: Rick Kreysar
--------------------------
(print)
Title: CEO
-------------------------
Address: 1275 Orleans Drive
Sunnyvale, CA 94089
PURCHASER:
Simon Roy
/s/ Simon Roy
---------------------------
(Signature)
Simon Roy
---------------------------
(Print Name)
Address:
---------------------------
---------------------------
<PAGE> 16
ACCEPTED AND AGREED:
Spouse of Simon Roy
/s/ Julia Roy
---------------------------
(Signature)
Julia Roy
---------------------------
(Print Name)
Address (if different than Purchaser):
---------------------------
---------------------------
<PAGE> 17
ATTACHMENT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement between the undersigned ("Purchaser") and Accrue Software, Inc., dated
July 29, 1998, (the "Agreement"), Purchaser hereby sells, assigns and transfers
unto _______________________________ (________) shares of the Common Stock of
Accrue Software, Inc., standing in Purchaser's name on the books of said
corporation represented by Certificate No. ___ herewith and hereby irrevocably
appoints _____________________________ to transfer said stock on the books of
the within-named corporation with full power of substitution in the premises.
THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT.
Dated: ____________
Signature:
/s/ Simon P. Roy
---------------------------
Simon P. Roy
/s/ Julia Roy
---------------------------
Spouse of (if applicable)
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to perfect the security interest of the Company
pursuant to the Agreement.
<PAGE> 18
PROMISSORY NOTE
$20,488.43 ___________, California
July 29, 1998
For value received, the undersigned promise to pay Accrue Software, Inc., a
Delaware corporation (the "Company"), at its principal office the principal sum
of $20,488.43 with interest from the date hereof at a rate of 6.00% per annum,
compounded semiannually, on the unpaid balance of such principal sum. Such
principal and interest shall be due and payable on the earlier of (i) July 1,
2002, (ii) twelve (12) months following the date of the Company's initial public
offering of its Common Stock, or (iii) upon the sale of any shares of the
Company's Common Stock held by the undersigned, unless otherwise agreed in
writing by the Company.
Principal and interest are payable in lawful money of the United States of
America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT PREMIUM
OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
makers and endorsers have severally waived presentment for payment, protest,
notice of protest and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain shares
of Common Stock of the Company and is subject to the terms of a Pledge and
Security Agreement between the undersigned and the Company of even date
herewith.
/s/ Simon P. Roy
---------------------------
Simon P. Roy
/s/ Julia W. Roy
---------------------------
Julia W. Roy
<PAGE> 1
EXHIBIT 10.8
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release ("Agreement") is made as of
May 13, 1998 by and between Accrue Software, Inc. (the "Company") and William R.
Stein ("Employee").
Employee was employed by the Company and entered into an Employee
Agreement with the Company regarding, among other things, protection of
proprietary and confidential information (the "Employee Agreement").
The Company and Employee have mutually agreed to terminate the
employment relationship and to release each other from any claims arising from
or related to the employment relationship.
In consideration of the mutual promises made herein, the Company and
Employee (collectively referred to as the "Parties") hereby agree as follows:
1. Resignation and Termination. The Company and Employee acknowledge and
agree that Employee resigned as Vice President of Product Development with the
Company effective May 8, 1998, and that Employee's employment with the Company
will terminate effective September 8, 1998 (the "Termination Date"). Until the
Termination Date, Employee shall continue to work as a part-time employee of the
Company and shall make himself available to the Company as reasonably requested
by the Company. Until the Termination Date, Employee shall be entitled to
receive his current base salary (less applicable withholding), plus accrual of
vacation, in accordance with the Company's regular payroll practices.
2. Consideration. In consideration of the release of claims set forth
below and other obligations under this Agreement, the Company agrees to maintain
Employee's email and voicemail account at the Company until the Termination
Date. In addition, the Company agrees to transfer all of its right, title and
interest in and to the Toshiba Satellite Pro laptop, Ricochet wireless modem,
and Palm Pilot PDA currently used by Employee and all software contained therein
to Employee as a severance payment on the Termination Date after which time the
Company will have no further payment obligations to Employee; provided, however,
Employee will be responsible and shall pay for through payroll deductions all
dial-up, access and telephone charges, including Metricom charges, associated
with such equipment and incurred and pro rated for use after May 8, 1998.
3. Stock Options. The Company and Employee acknowledge and agree that
options to purchase the Company's Common Stock held by Employee under the Stock
Option Agreement between the parties dated as of April 24, 1997, as amended (the
"Option Agreement") which have vested as of the Termination Date, in accordance
with the vesting schedule set forth in the Option Agreement, will be exercisable
for a period of thirty (30) days after the Termination Date, after which time
such options will expire. Employee will not be entitled to any acceleration of
vesting in the event of a Corporate Transaction (as defined in and pursuant to
the terms under the Option Agreement). Furthermore, there will be no additional
vesting of such options after the Termination Date.
4. Benefits. Following the Termination Date, Employee shall have the
right to continue, at his own expense, coverage under the Company's health
insurance as provided by the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"). Employee shall not be entitled to participate in the
Company's medical, dental, vision or other benefits plans, or any Company 401(k)
<PAGE> 2
plan, and no additional vacation or other paid time off shall accrue following
the Termination Date.
5. Payment of Salary. Employee acknowledges and agrees that he has
received or will have received on the Termination Date all salary, accrued
vacation, commissions, bonuses, compensation, shares of stock or options
therefore or other such sums due to Employee. In light of the payment by the
Company of all wages due, or to become due to Employee, the Parties further
acknowledge and agree that California Labor Code Section 206.5 is not applicable
to the Parties hereto. That section provides in pertinent part as follows:
NO EMPLOYER SHALL REQUIRE THE EXECUTION OF ANY RELEASE OF ANY CLAIM OR
RIGHT ON ACCOUNT OF WAGES DUE, OR TO BECOME DUE, OR MADE AS AN ADVANCE
ON WAGES TO BE EARNED, UNLESS PAYMENT OF SUCH WAGES HAS BEEN MADE.
6. Release of Claims. Employee agrees that the foregoing consideration
represents settlement in full of all outstanding obligations owed to Employee by
the Company. Employee and the Company, on behalf of themselves, and their
respective heirs, executors, officers, directors, employees, investors,
shareholders, administrators, predecessor, successor and affiliate corporations,
and assigns, hereby fully and forever release each other and their respective
heirs, executors, officers, directors, employees, investors (and officers and
directors thereof), shareholders (and officers and directors thereof),
administrators, predecessor, successor and affiliate corporations, and assigns,
of and from any claim, duty, obligation or cause of action relating to any
matters of any kind, whether presently known or unknown, suspected or
unsuspected, that any of them may possess arising from any omissions, acts or
facts that have occurred up until and including the effective date of this
Agreement including, without limitation,
(a) any and all claims relating to or arising from Employee's
employment relationship with the Company and the termination of that
relationship and the appointment of any officers or directors of the Company in
connection with such termination;
(b) any and all claims relating to, or arising from, Employee's
right to purchase, or actual purchase or sale of shares of stock of the Company,
including, without limitation, any claim for fraud, misrepresentation, breach of
fiduciary duty, breach of duty under applicable state corporate law, and
securities fraud under any state or federal law;
(c) any and all claims for wrongful discharge of employment;
breach of contract, both express and implied; breach of a covenant of good faith
and fair dealing, both express and implied; negligent or intentional infliction
of emotional distress; negligent or intentional misrepresentation; negligent or
intentional interference with contract or prospective economic advantage;
defamation; negligence; personal injury, assault; battery; invasion of privacy;
false imprisonment; and conversion;
(d) any and all claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor
Standards Act, the California Fair Employment and Housing Act; and Labor Code
Section 201, et. seq.;
-2-
<PAGE> 3
(e) any and all claims arising out of any other laws and
regulations relating to employment or employment discrimination; and
(f) any and all claims for attorneys' fees and costs.
The Company and the Employee agree that the release set forth in this Section 6
shall be and remain in effect in all respects as a complete general release as
to the matters released. This release does not extend to any obligations
incurred under this Agreement.
7. Civil Code Section 1542. The Parties represent that they are not
aware of any claim by either of them other than the claims that are released by
this Agreement. Employee and the Company acknowledge that they have been advised
by legal counsel and are familiar with the provisions of California Civil Code
Section 1542, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
Employee and the Company, being aware of such code section, agree to
expressly waive any rights they may have thereunder, as well as under any other
statute or common law principles of similar effect.
8. Nonsolicitation. Employee agrees that until one year after the
effective date of this Agreement, he will not solicit or influence or attempt to
influence any person employed by the Company to terminate or otherwise cease his
or her employment with the Company or interfere in any manner with the
contractual or employment relationship between the Company and any customer,
vendor or employee of the Company.
9. No Cooperation. Employee agrees that he will not act in any manner
that might damage the business of the Company. Employee agrees that he will not
counsel or assist any attorneys or their clients in the presentation or
prosecution of any disputes, differences, grievances, claims, charges, or
complaints by any third party against the Company and/or any officer, director,
employee, agent, representative, stockholder or attorney of the Company, unless
under a subpoena or other court order to do so.
10. Nondisclosure of Confidential and Proprietary Information. Employee
shall continue to maintain the confidentiality of all confidential and
proprietary information of the Company and shall continue to comply with the
terms and conditions of the Employee Agreement, a copy of which is attached
hereto as Exhibit A. Employee agrees that at all times hereafter, Employee shall
not intentionally divulge, furnish or make available to any party any of the
trade secrets, patents, patent applications, price decisions or determinations,
inventions, customers, proprietary information or other intellectual property
rights of the Company, until after such time as such information has become
publicly known otherwise than by act or collusion of Employee. Employee further
agrees that he will
-3-
<PAGE> 4
return all the Company's property and confidential and proprietary information
in his possession to the Company within five (5) business days from the
Termination Date.
11. Non-Disparagement. Each Party agrees to refrain from any
disparagement or slander of the other, or tortuous interference with the then
existing contracts and relationships of the other.
12. Breach of this Agreement; Alternate Employment. Employee
acknowledges that upon any breach of the non-solicitation, no cooperation,
confidential and proprietary information, and non-disparagement provisions
contained in Sections 8 through 11 of this Agreement, the Company would sustain
irreparable harm from such breach, and, therefore, Employee agrees that in
addition to any other remedies which the Company may have under this Agreement
or otherwise, the Company shall be entitled to obtain equitable relief,
including specific performance and injunctions, restraining Employee from
committing or continuing any such violation of this Agreement. Provided that
Employee complies with the provisions of Sections 8 through 11 of this
Agreement, nothing in this Agreement shall preclude Employee from considering or
accepting alternate employment or consulting positions with other parties.
13. No Admission of Liability. The Parties understand and acknowledge
that this Agreement constitutes a compromise and settlement of claims. No action
taken by the Parties hereto, or either of them, either previously or in
connection with this Agreement shall be deemed or construed to be (a) an
admission of the truth or falsity of any claims heretofore made or (b) an
acknowledgment or admission by either party of any fault or liability whatsoever
to the other party or to any third party.
14. No Representations. Each Party represents that it has had the
opportunity to consult with an attorney, and has carefully read and understands
the scope and effect of the provisions of this Agreement. Neither Party has
relied upon any representations or statements made by the other Party hereto
which are not specifically set forth in this Agreement.
15. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
16. Entire Agreement. Except as provided herein, this Agreement
represents the entire agreement and understanding between the Company and
Employee concerning Employee's separation from the Company, and supersedes and
replaces any and all prior agreements and understandings concerning Employee's
relationship with the Company and his compensation by the Company, including
without limitation the letter agreement entered into between the Employee and
the Company on April 1, 1997.
17. No Oral Modification. This Agreement may only be amended in writing
signed by Employee and the Company.
18. Governing Law. This Agreement shall be governed by the laws of the
State of California.
19. Effective Date. This Agreement is effective seven days after it has
been signed by both Parties.
-4-
<PAGE> 5
20. Counterparts. This Agreement may be executed in counterparts, and
each counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
21. Assignment. This Agreement may not be assigned by the Employee or
the Company without the prior written consent of the other Party.
Notwithstanding the foregoing, this Agreement may be assigned by the Company to
a corporation controlling, controlled by or under common control with the
Company without the consent of the Employee.
The Parties have executed this Settlement Agreement and Mutual Release
as of the date set forth above.
Dated: May 27, 1998 By: /s/ James L. Patterson
-------------------------------------
James L. Patterson, President and CEO
An Individual: William R. Stein
Dated: June 4, 1998 /s/ William R. Stein
-----------------------------------------
(Employee Signature)
-5-
<PAGE> 1
EXHIBIT 10.9
June 16, 1998
Mr. Richard Kreysar
110 Tuscarry Way
Danville, CA 94506
Dear Rick:
On behalf of Accrue Software Inc., I am pleased to offer you the position of
President and Chief Executive Officer, reporting to the Board of Directors. In
addition to your role of CEO, you'll also be elected to serve as a Director.
Your annual salary will be $200,000. In addition, you will receive the
company's standard employee benefit package.
You will also be eligible for an annual bonus equal to up to one half of your
salary upon achievement of plan, with additional uncapped upside based on
revenue achievement above plan. This bonus will be based on achievement of
specific milestones. The milestones will be proposed by you by January of each
year (or within 45 days of your start date in the first year), and will be
negotiated and approved by the Board of Directors.
In addition, Accrue is offering you an option to purchase Common Stock
representing 8 1/4% of the fully diluted Accrue shares outstanding, post the
current round of financing. The exercise price of the option will be equal to
the fair market value of Accrue's Common Stock on the date the Board grants
your stock option. Your option will commence vesting upon your start of
employment and is contingent on continued employment. After the first year of
employment, 1/4 of the shares will vest and thereafter, 1/36 of the remaining
shares will vest each month. This grant, which is immediately exercisable, will
be subject to a Repurchase Agreement, which lapses according to the vesting
schedule. If you leave the Company, the terms and conditions of this repurchase
are specified in the Company's Stock Option Agreement. Furthermore, Accrue will
offer you a full-recourse note to facilitate your participation in such a stock
purchase, with details to be defined in an amendment to our Stock Option Plan.
Should Accrue undergo a change of control, your vesting in this option would be
accelerated by one year. In addition, in the event of a change of control,
should your employment and as a result of termination other than for cause, or
as a result of "constructive termination," vesting would be accelerated by an
additional year.
Should your job be terminated involuntarily for any reason other than "for
cause," your salary, benefits, and stock option vesting will continue for six
months beyond the date of termination, or one year from your date of hire,
whichever is later.
When Accrue offers to sell preferred stock to other investors, you will be
offered the opportunity to purchase that same series of stock, at the same
price, to maintain your pro rata equity position (or less, at your discretion)
in the Company.
<PAGE> 2
This offer of employment is contingent upon your completing, signing, and
returning to us, this offer letter. You will also be asked to sign a
Non-Disclosure Agreement and a Proprietary Information Agreement as part of
your new hire orientation. For purposes of federal immigration law (Immigration
Reform and Control Act of 1986) you are also required to provide documentary
evidence of your eligibility for employment in the United States.
Further, your employment with Accrue is "at will" and may be terminated by
either the employee or employer at any time, for any reason. Nothing in this
offer is to be construed as a contract of employment for any specific length of
time. Except for the Non-Disclosure Agreement and the Proprietary Information
Agreement and any rights in employee benefits generally offered to employees of
Accrue, this offer represents the entire agreement related to your employment
with Accrue and supersedes all prior or contemporaneous oral or written
communications and representations.
Except for injunctive proceedings against unauthorized disclosure of
confidential information, any and all claims or controversies between you and
Accrue, including but not limited to any claim based in tort, contract or
employment discrimination or any claim based on any federal or state
regulation, shall be settled by arbitration in accordance with the then
commercial arbitration rules of the American Arbitration Association. The
location of the arbitration shall be San Jose, California.
Rick, we are pleased to welcome you to Accrue Software, Inc. All of the team
members that have met you, our investors, and especially myself, are excited
about working with you. Please signify your acceptance of our offer by signing
below and returning this letter to me, no later than Wednesday, June 17th.
Sincerely,
ACCRUE SOFTWARE, INC.
/s/ JOHN FEIBER
- -----------------------------------
John Feiber, Mohr Davidow Venturas
Acknowledged receipt and accepted offer:
/s/ RICHARD KREYSAR Richard Kreysar
- ----------------------------------- -----------------------------------------
Name, Signature Name, Printed
6/17/98
- -----------------------------------
Today's Date
6/22/98
- -----------------------------------
Start Date
<PAGE> 3
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement (the "Agreement") is entered into this
1st day of October, 1998 by and between Accrue Software, Inc., a Delaware
corporation (the "Company") and Richard Kreysar ("Borrower").
RECITALS
The Company has loaned $192,681.96 to Borrower pursuant to a promissory
note of even date herewith (the "Note"). The Company requires that the Note be
secured by a pledge of certain shares of the Company's Common Stock (the
"Share") pursuant to a Restricted Stock Purchase Agreement dated October 1, 1998
between Borrower and the Company on the terms set forth below.
AGREEMENT
In consideration of the Company's acceptance of the Note as full or partial
payment of the exercise price of the Shares, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. The Note shall become payable in full upon the voluntary or
involuntary termination or cessation of employment of Borrower with the Company,
for any reason, with or without cause (including death or disability).
2. Borrower shall deliver to the Secretary of the Company, or his or her
designee (hereinafter referred to as the "Pledge Holder"), all certificates
representing the Shares, together with an Assignment Separate from Certificate
in the form attached to this Agreement as Attachment A executed by Borrower and
by Borrower's spouse (if required for transfer), in blank, for use in
transferring all or a portion of the Shares to the Company if, as and when
required pursuant to this Agreement. In addition, if Borrower is married,
Borrower's spouse shall execute the signature page attached to this Agreement.
3. As security for the payment of the Note and any renewal, extension or
modification of the Note, Borrower hereby grants to the Company a security
interest in and pledges with and delivers to the Company Borrower's Shares
(sometimes referred to herein as the "Collateral").
4. In the event that Borrower prepays all or a portion of the Note, in
accordance with the provisions thereof, Borrower intends, unless written notice
to the contrary is delivered to the Pledge Holder, that the Shares represented
by the portion of the Note so repaid, including annual interest thereon, shall
continue to be so held by the Pledge Holder, to serve as independent collateral
for the outstanding portion of the Note for the purpose of commencing the
holding period set forth in Rule 144(d) promulgated under the Securities Act of
1933, as amended (the "Securities Act").
<PAGE> 4
5. In the event of any foreclosure of the security interest created by
this Agreement, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the establishment
of a public market for the Shares of the Company, the securities laws affecting
sale of the Shares make a public sale of the Shares commercially unreasonable.
The parties further agree that the repurchasing of such Shares by the Company,
or by any person to whom the Company may have assigned its rights under this
Agreement, is commercially reasonable if made at a price determined by the Board
of Directors in its discretion, fairly exercised, representing what would be the
Fair Market Value of the Shares reduced by any limitation on transferability,
whether due to the size of the block of shares or the restrictions of applicable
securities laws.
6. In the event of default in payment when due of any indebtedness under
the Note, the Company may elect then, or at any time thereafter, to exercise all
rights available to a secured party under the California Commercial Code
including the right to sell the Collateral at a private or public sale or
repurchase the Shares as provided above. The proceeds of any sale shall be
applied in the following order:
(a) To the extent necessary, proceeds shall be used to pay all
reasonable expenses of the Company in enforcing this Agreement and the Note,
including, without limitation, reasonable attorney's fees and legal expenses
incurred by the Company.
(b) To the extent necessary, proceeds shall be used to satisfy any
remaining indebtedness under Borrower's Note.
(c) Any remaining proceeds shall be delivered to Borrower.
7. Upon full payment by Borrower of all amounts due under the Note,
Pledge Holder shall deliver to Borrower all Shares in Pledge Holder's possession
belonging to Borrower, and Pledge Holder shall thereupon be discharged of all
further obligations under this Agreement; provided, however, that Pledge Holder
shall nevertheless retain the Shares as escrow agent if at the time of full
payment by Borrower said Shares are still subject to a Repurchase Option in
favor of the Company.
<PAGE> 5
The parties have executed this Pledge and Security Agreement as of the date
first set forth above.
COMPANY:
ACCRUE SOFTWARE, INC.
By: /s/ Richard Kreysar
---------------------------------
Name: Richard Kreysar
-------------------------------
(print)
Title: President and CEO
------------------------------
Address:
1275 Orleans Drive
Sunnyvale, CA 94089
BORROWER:
RICHARD KREYSAR
/s/ Richard Kreysar
------------------------------------
(Signature)
------------------------------------
(Print Name)
Address:
------------------------------------
------------------------------------
<PAGE> 6
PROMISSORY NOTE
$192,681.96 Sunnyvale, California
October 1, 1998
For value received, the undersigned promises to pay Accrue Software, Inc.,
a Delaware corporation (the "Company"), at its principal office the principal
sum of $192,681.91 with interest from the date hereof at a rate of 5.06% per
annum, compounded semiannually, on the unpaid balance of such principal sum.
Such principal and interest shall be due and payable on October 1, 2002.
If the undersigned's employment or consulting relationship with the Company
is terminated prior to payment in full of this Note, this Note shall be
immediately due and payable.
Principal and interest are payable in lawful money of the United States of
America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT PREMIUM
OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
makers and endorsers have severally waived presentment for payment, protest,
notice of protest and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain shares
of Common Stock of the Company and is subject to the terms of a Pledge and
Security Agreement between the undersigned and the Company of even date
herewith.
/s/ Richard Kreysar
------------------------------
Richard Kreysar
<PAGE> 1
EXHIBIT 10.10
ACCRUE SOFTWARE, INC.
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
AUGUST 13, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Amendment...............................................................................................................1
1.1 Procedure...................................................................................................1
1.2 Rights of Holders...........................................................................................2
2. Registration Rights.....................................................................................................2
2.1 Definitions.................................................................................................2
2.2 Requested Registration......................................................................................3
2.3 Company Registration........................................................................................4
2.4 Obligations of the Company..................................................................................5
2.5 Furnish Information.........................................................................................6
2.6 Expenses of Demand Registration.............................................................................6
2.7 Expenses of Company Registration............................................................................7
2.8 Underwriting Requirements...................................................................................7
2.9 No Delay of Registration....................................................................................8
2.10 Indemnification............................................................................................8
2.11 Reports Under Securities Exchange Act of 1934.............................................................10
2.12 Form S-3 Registration.....................................................................................10
2.13 Assignment of Registration Rights.........................................................................12
2.14 Limitations on Subsequent Registration Rights.............................................................12
2.15 "Market Stand-Off"Agreement...............................................................................12
2.16 Termination of Registration Rights........................................................................13
3. Financial Information..................................................................................................13
3.1 Annual, Quarterly and Monthly Information..................................................................13
3.2 Inspection.................................................................................................13
3.3 Termination of Covenants...................................................................................14
4. Additional Rights......................................................................................................14
4.1 Right of First Refusal.....................................................................................14
4.2 Termination................................................................................................15
4.3 Assignment.................................................................................................15
4.4 Additional Registration Rights.............................................................................16
5. Miscellaneous..........................................................................................................16
5.1 Assignment.................................................................................................16
5.2 Third Parties..............................................................................................16
5.3 Governing Law..............................................................................................16
5.4 Counterparts...............................................................................................16
5.5 Notices....................................................................................................16
5.6 Severability...............................................................................................18
5.7 Delays or Omissions........................................................................................18
5.8 Consent and Waiver.........................................................................................19
5.9 Waiver of Conflicts........................................................................................19
5.10 Legal Representation......................................................................................19
</TABLE>
<PAGE> 3
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the
"Agreement") is entered into as of August 13, 1998, by and among Accrue
Software, Inc., a Delaware corporation (the "Company"), the holders of a
majority of the Company's Registrable Securities (as defined in the First
Amended and Restated Investor Rights Agreement dated May 29, 1998, (the "Prior
Rights Agreement")), the holders of the Company's Series E Preferred Stock (the
"Series E Purchasers"), Organic Online, Inc., a California corporation
("Organic"), and the Warrant Holder (as defined below).
RECITALS
A. The Company, the holders of the Series A Preferred Stock, the
holders of the Series B Preferred Stock, the holders of the Series C Preferred
Stock, the holders of the Series D Preferred Stock, Organic and Sterling Payot
Company ("Sterling Payot" or the "Warrant Holder") entered into the Prior Rights
Agreement, which granted the parties thereto (the "Former Rights Holders")
certain registration rights and certain other rights regarding the Company's
securities;
B. The Company entered into a Series E Preferred Stock Purchase
Agreement of even date herewith (the "Series E Agreement") providing for the
sale and issuance of up to 5,000,000 shares of the Company's Series E Preferred
Stock (the "Series E") to the Series E Purchasers;
C. The Company wishes to amend the registration rights of the Former
Rights Holders so as to conform them to those granted to the Series E Purchasers
under this Agreement and to set forth said registration rights and certain other
rights of all Former Rights Holders and Series E Purchasers (collectively the
"Rights Holders") in this Agreement as the sole agreement of the Company and the
Rights Holders with respect thereto.
D. The execution of this Agreement by the Company is a condition to
the obligations of the Series E Purchasers under the Series E Agreement; and
E. The Company wishes to execute this Agreement and grant to the
Rights Holders the rights contained herein in order to fulfill such condition.
THE PARTIES AGREE AS FOLLOWS:
1. Amendment.
1.1 Procedure. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought.
Notwithstanding the foregoing, any provision of this Agreement may be amended,
waived, discharged or terminated upon the written consent of the Company and
Organic and the holders of a majority of the outstanding Registrable Securities
-1-
<PAGE> 4
(as defined below) not held by Organic, determined on the basis of assumed
conversion of all Series A, Series B, Series C, Series D and Series E Preferred
Shares (the "Shares") and Warrant Shares (as defined hereinafter) into
Registrable Securities; provided, however, that no such amendment shall be
effective with respect to any Holder if such amendment materially adversely
affects any of the rights granted pursuant to the Agreement to such Holder (the
"Uniquely Affected Holder") in a manner different from the manner in which such
amendment affects all other Holders, unless such amendment is consented to in
writing by the Uniquely Affected Holder. If such Holder does not so consent,
then the amendment shall be effective as to all Holders other than the Uniquely
Affected Holder.
1.2 Rights of Holders. Each holder of Registrable Securities shall
have the absolute right to exercise or refrain from exercising any right or
rights that such holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
2. Registration Rights.
2.1 Definitions. As used in this Agreement:
(a) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the subsequent declaration or ordering of the
effectiveness of such registration statement.
(b) The term "Registrable Securities" means:
(i) The shares of Common Stock issuable or issued upon
conversion of the Shares purchased under: the Series A Preferred Stock Purchase
Agreement dated May 3, 1996 (the "Series A Agreement"); the Series B Preferred
Stock Purchase Agreement dated September 18, 1996 (the "Series B Agreement");
the Series B Preferred Stock and Series C Preferred Stock Purchase Agreement
dated November 22, 1996, as amended by Amendment No. 1 thereto dated November
26, 1997 (collectively, the "Series B and C Agreement"); the Series D Preferred
Stock Purchase Agreement dated May 29, 1998, (the "Series D Agreement"); and the
Series E Agreement.
(ii) The shares of Common Stock issued to Organic pursuant
to that certain Technology Assignment Agreement and that certain Restricted
Stock Agreement, each dated May 3, 1996;
(iii) The shares of Common Stock issuable or issued upon
exercise of the Warrant issued by the Company to Sterling Payot pursuant to the
Series A Agreement at the time of the Series A financing and the shares of
Common Stock issuable or issued upon exercise of the Warrant issued by Organic
to Mohr, Davidow Ventures IV, L.P. and MDV IV Entrepreneurs' Network Fund, L.P.
at the time of the Series B and C financing
-2-
<PAGE> 5
(collectively, the "Warrant Shares") (the shares of Common Stock referred to in
clauses (i), (ii) and (iii) hereof are collectively referred to hereafter as the
"Stock"); and
(iv) Any other shares of Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, the Stock, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
his or her rights under this Agreement are not assigned; provided, however, that
Common Stock or other securities shall only be treated as Registrable Securities
if and so long as they have not been (A) sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction, or
(B) sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all
transfer restrictions, and restrictive legends with respect thereto, if any, are
removed upon the consummation of such sale.
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock or
other securities outstanding which are, and the number of shares of Common Stock
or other securities issuable pursuant to then exercisable or convertible
securities which are, Registrable Securities.
(d) The term "Holder" means any holder of outstanding
Registrable Securities who, subject to the limitations set forth in Section 2.13
below, acquired such Registrable Securities in a transaction or series of
transactions not involving any registered public offering.
(e) The term "Form S-3" means such form under the Securities
Act of 1933, as amended (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.
2.2 Requested Registration.
(a) If the Company shall receive at any time after the earlier
of (i) January 31, 2001, or (ii) one (1) year after the effective date of the
first registration statement for a public offering of securities of the Company
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or an SEC Rule 145 transaction), a written request from the Holders
of at least twenty-five percent (25%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Act
covering the registration of that number of shares of Registrable Securities
whose anticipated aggregate offering price, net of underwriting discounts and
commissions, would equal at least $10,000,000, 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 2.2(b), effect as
soon as practicable, and in any event within 90 days of the receipt of such
request, the registration under the Act of all Registrable Securities which the
Holders request to be registered
-3-
<PAGE> 6
within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 5.5.
(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 2.2 and the
Company shall include such information in the written notice referred to in
subsection 2.2(a). The underwriter will be selected by the Company and shall be
reasonably acceptable to a majority in interest of the Initiating Holders. In
such event, the right of any Holder to include his 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 2.4(e)) 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 2.2, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities proposed to be sold by persons other than
the Holders are first entirely excluded from the underwriting.
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 2.2.
(d) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
2.2, 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 such filing
for a period of not more than 90 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve month period.
2.3 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
Common Stock or other securities under the Securities Act in connection with the
public offering of such securities solely for cash (other than a registration
relating either to the sale of securities to participants in a Company stock
option, stock purchase or similar plan or to an SEC Rule 145 transaction, or a
registration on any form which does not include substantially similar
information as would be required to
-4-
<PAGE> 7
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. Upon the written request of each Holder given
within fifteen (15) days from receipt of such notice by the Company in
accordance with Section 5.5, the Company shall, subject to the provisions of
Section 2.7, cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be registered.
2.4 Obligations of the Company. Whenever required under this
Section 2 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 either
Organic or the Holders of a majority of the Registrable Securities not held by
Organic registered thereunder, keep such registration statement effective for
one hundred twenty (120) days, or until the distribution contemplated in the
Registration Statement has been completed; provided, however, that (i) such
120-day period shall be extended for a period of time equal to the period the
Holder refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such 120-day
period shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold, provided that Rule
415, or any successor rule under the Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Act
governing the obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (I) includes any prospectus required by
Section 10(a)(3) of the Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, (the
"1934 Act") in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such reasonable numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall
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<PAGE> 8
not be required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any such
states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act 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) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 2, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 2, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent 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, if any, and to
the Holders requesting registration of Registrable Securities.
(h) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or automated quotation system
on which similar securities issued by the Company are then listed.
2.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 2 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.
2.6 Expenses of Demand Registration. All expenses other than stock
transfer taxes, the fees and disbursements of special counsel for individual
Holders, underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 2.2, 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 for the selling Holders (not to
exceed $15,000) shall be borne by the
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Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 2.2 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (in which case all
Participating Holders shall bear such expenses), unless the Holders of a
majority of the Registrable Securities agree to forfeit their right to one
demand registration pursuant to Section 2.2; provided further, however, that if
at the time of such withdrawal, the Holders have learned of a material adverse
change in the condition, business, or prospects of the Company from that known
to the Holders at the time of their request, then the Holders shall not be
required to pay any of such expenses and shall retain their rights pursuant to
Section 2.2.
2.7 Expenses of Company Registration. All expenses, other than
stock transfer taxes, the fees and disbursements of special counsel of
individual Holders, underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant to Section
2.3, 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 special counsel for
all of the participating Holders (not to exceed $15,000) shall be paid by the
Company.
2.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 2.3 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, and then
only in such quantity as will not, in the opinion of the underwriters, adversely
affect the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by Holders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters reasonably believe would not adversely affect
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 believe will not adversely affect the success
of the offering (the securities so included to be apportioned first to the
Company, then pro rata among the selling Holders according to the total amount
of Registrable Securities entitled to be included therein owned by each selling
Holder and then to all other selling stockholders, or in such other proportions
as shall mutually be agreed to by such selling stockholders); it being
understood that with respect to the Company's initial public offering, all
Registrable Securities may be excluded from the registration on this basis
(provided that no other Holder's or other stockholder's securities are included
in the registration), but that with respect to any subsequent offering, no
exclusion may reduce the total number of Registrable Securities to less than
twenty-five percent (25%) of the total number of securities subject to the
registration. For purposes of the first parenthetical in the preceding sentence
concerning apportionment, for any selling stockholder which is a holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners 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
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<PAGE> 10
shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder," as defined in this sentence.
2.9 No 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 2.
2.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Securities Act or the 1934 Act, against
any losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, 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 Securities Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the 1934 Act or any state securities law; and the Company will pay, as
incurred, to each such Holder, underwriter or controlling person, any legal or
other expenses reasonably incurred by them in connection with defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 2.10(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 (such consent not to
be unreasonably withheld), nor shall the Company be liable in any such case for
any such loss, claim, damage, liability, or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the 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)
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<PAGE> 11
that such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and each such Holder will pay, as incurred, any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 2.10(b), in connection with defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection 2.10(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 (such consent not to be
unreasonably withheld); provided further, that in no event shall any indemnity
under this Section 2.10(b) exceed the net proceeds from the offering received by
such Holder, except in the case of willful fraud by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.10 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 2.10, 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 shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.10 (to the extent of such prejudicial
effect), but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.10.
(d) No indemnifying party, in the defense of any claim arising
out of a Violation shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation and, in the event the terms of such judgment or settlement
include any term other than the payment by the indemnifying party of money
damages, the indemnifying party shall not so consent or enter into such a
settlement without the consent of each indemnified party (which will not be
unreasonably withheld) whether or not the terms thereof include such a release.
(e) The obligations of the Company and Holders under this
Section 2.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 2, and otherwise.
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<PAGE> 12
(f) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
2.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the 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 Securities 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 Securities 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 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.
2.12 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders (the "S-3 Initiating Holders") owning in the aggregate at
least 20% of the Registrable Securities a written request or requests that the
Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; 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
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<PAGE> 13
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 2.12, (1) if Form S-3 is not available for
such offering by the Holders; (2) if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $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 sixty (60) days after receipt of the request of the
Holder or Holders under this Section 2.12; provided, however, that the Company
shall not utilize this right more than once in any twelve month period; (4) if
the Company has, within the twelve (12) month period preceding the date of such
request effected a registration of its securities in connection with its Initial
Public Offering (as defined below in Section 2.16); (5) if the Company has,
within the twelve (12) month period preceding the date of such request, already
effected one registration on Form S-3 for the Holders pursuant to this Section
2.12; or (6) 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.
Notwithstanding any other provision of this Section 2.12, if the Company or an
underwriter advising the Company advises the S-3 Initiating Holders in writing
that marketing factors require a limitation of the number of shares to be
included in any registration on Form S-3, then the S-3 Initiating Holders shall
so advise all Holders of Registrable Securities which would otherwise be
included in such registration on Form S-3 hereunder, and the number of shares of
Registrable Securities that may be included in the registration shall be
allocated among all Holders thereof, including the S-3 Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in such registration shall not be
reduced unless all other securities proposed to be sold by persons other than
the Holders are first entirely excluded from the registration.
(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 other than stock transfer
taxes, the fees and disbursements of special counsel for individual Holders,
underwriting discounts and commissions incurred in connection with a
registration requested pursuant to Section 2.12, including (without limitation)
all registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
(not to exceed $15,000) and counsel for the Company, shall be borne by the
Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to this Section 2.12
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); provided further,
however, that if
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at the time of such withdrawal, the Holders have learned of a material adverse
change in the condition, business, or prospects of the Company from that known
to the Holders at the time of their request, then the Holders shall not be
required to pay any of such expenses and shall retain their rights pursuant to
this Section 2.12. Registrations effected pursuant to this Section 2.12 shall
not be counted as demands for registration or registrations effected pursuant to
Section 2.2 or 2.3.
(d) The Company is obligated to effect only five (5) such
registrations on Form S-3 pursuant to this Section 2.12.
2.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may only
be assigned by a Holder to a transferee who acquires at least 250,000 shares of
Registrable Securities (subject to appropriate adjustment for any stock split,
reverse stock split, stock dividend, recapitalization or similar transaction),
provided the Company is, prior to such transfer, furnished with written notice
of the name and address of such transferee; 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 Securities Act. The foregoing 250,000 share requirement
shall not apply, however, to any transferee which is a partner, retired partner
or affiliated or constituent partnership of any Holder which is a partnership,
(including spouses and ancestors, lineal descendants and siblings of such
partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) or which is a family member (including a spouse, ancestor,
lineal descendant or sibling) or a trust for the benefit of any individual
Holder, if all such transferees or assignees agree in writing to be bound by the
terms of this Agreement and appoint a single representative as their attorney in
fact for the purpose of receiving any notices and exercising their rights under
this Section 2.
2.14 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 2.2 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included or (b) to make a demand registration
which could result in such registration statement being declared effective prior
to the earlier of either of the dates set forth in subsection 2.2(a) or within
one hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 2.2.
2.15 "Market Stand-Off" Agreement. Each Purchaser hereby agrees
that during the one hundred eighty (180) day period following the effective date
of a registration statement of the Company filed under the Securities Act in
connection with the Company's initial public offering of securities, it shall
not, to the extent requested by the Company and the Company's underwriter, sell,
offer to sell, or otherwise transfer or dispose of any Common Stock of the
Company held by it at any time during such period except Common Stock included
in such registration. To enforce the foregoing covenant, the Company may impose
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<PAGE> 15
stop-transfer instructions with respect to the Registrable Securities of the
Purchaser (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period. Each Holder agrees to
execute the form of such market stand-off agreement as may be reasonably
requested by the underwriters.
2.16 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Agreement (a) after five (5)
years following the closing of the Company's sale of its Common Stock in a firm
commitment underwriting pursuant to a registration statement on Form S-1 under
the Securities Act (the "Initial Public Offering") (other than an offering
relating either to the sale of securities to employees of the Company pursuant
to a stock option, stock purchase or similar plan or an SEC Rule 145
transaction) or (b) at such time following the Company's Initial Public Offering
and for so long as such Holder may sell all of such Holder's Registrable
Securities in any single three (3) month period pursuant to Rule 144 (or such
successor rule as may be adopted).
3. Financial Information.
3.1 Annual and Quarterly Information. The Company will mail the
following reports to each Holder for so long as such Holder is a holder of at
least 100,000 shares of Registrable Securities:
(a) As soon as practicable after the end of each fiscal year,
and in any event within 120 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income, consolidated statements of cash flows and
consolidated statements of stockholders' equity of the Company and its
subsidiaries, if any, for such year, prepared in accordance with generally
accepted accounting principles and setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail and
audited and certified by independent public accountants of nationally recognized
standing selected by the Company.
(b) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the Company and in
any event within 45 days thereafter, an unaudited consolidated balance sheet of
the Company and its subsidiaries, if any, as of the end of each such quarterly
period, and unaudited consolidated statements of income, unaudited consolidated
statements of cash flow and unaudited consolidated statements of stockholders'
equity of the Company and its subsidiaries, if any, for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles (other than for accompanying notes and subject to normal
year-end audit adjustments).
(c) As soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget for the next fiscal year.
3.2 Inspection. The Company shall permit each Investor who holds
not less than 100,000 shares of Registrable Securities, at such Investor's
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by
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the Investor; provided, however, that the Company shall not be obligated
pursuant to this Section 3.2 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information.
3.3 Termination of Covenants. The covenants set forth in this
Section 3 shall terminate upon the earlier of (i) the consummation of the
Company's Initial Public Offering, or (ii) the registration by the Company of a
class of its equity securities under Section 12(b) or 12(g) of the Exchange Act.
4. Additional Rights.
4.1 Right of First Refusal. Subject to the terms and conditions
specified in this Section 4.1, the Company hereby grants to each Purchaser a
right of first refusal with respect to future sales by the Company of its New
Securities (as hereinafter defined). Each Purchaser shall be entitled to
apportion the right of first refusal hereby granted among itself and its
partners, stockholders and affiliates in such proportions as it deems
appropriate.
(a) In the event the Company proposes to issue New Securities,
it shall give each Purchaser written notice (the "Notice") of its intention
stating (i) a description of the New Securities it proposes to issue, (ii) the
number of shares of New Securities it proposes to offer, (iii) the price per
share at which, and other terms on which, it proposes to offer such New
Securities and (iv) the number of shares that the Purchaser has the right to
purchase under this Section 4.1, based on the Purchaser's Percentage (as defined
below).
(b) Within ten (10) days after the Notice is given (in
accordance with Section 5.5), the Purchaser may elect to purchase, at the price
and on the terms specified in the Notice, up to the number of shares of the New
Securities proposed to be issued that the Purchaser has the right to purchase as
specified in the Notice. An election to purchase shall be made in writing and
must be given to the Company within such 10-day period (in accordance with
Section 5.5). The closing of the sale of New Securities by the Company to the
participating Purchaser upon exercise of its rights under this Section 4.1 shall
take place simultaneously with the closing of the sale of New Securities to
third parties.
(c) The Company shall have one hundred twenty-days (120) days
after the last date on which the Purchaser's right of first refusal lapsed to
enter into an agreement (pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within forty-five (45) days from the
execution thereof) to sell the New Securities which the Purchaser did not elect
to purchase under this Section 4.1, at or above the price and upon terms not
more favorable to the purchasers of such securities than the terms specified in
the initial Notice given in connection with such sale. In the event the Company
has not entered into an agreement to sell the New Securities within such one
hundred twenty (120) day period (or sold and issued New Securities in accordance
with the foregoing within forty-five days from the date of said agreement), the
Company shall not thereafter issue or sell any New Securities without first
offering such New Securities to the Purchaser in the manner provided in this
Section 4.1.
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(d) (i) "New Securities" shall mean any shares of, or
securities convertible into or exercisable for any shares of, any class of the
Company's capital stock; provided that "New Securities" does not include: (A)
the Shares or the Common Stock issuable upon conversion of the Shares; (B)
securities issued pursuant to the acquisition of another business entity by the
Company by merger, purchase of substantially all of the assets of such entity,
or other reorganization whereby the Company owns at least a majority of the
voting power of such entity; (C) up to 6,130,000 shares, or options to purchase
shares, of the Company's Common Stock and the shares of Common Stock issuable
upon exercise of such options, issued pursuant to the Company's 1996 Stock Plan;
(D) shares of the Company's Common Stock or Preferred Stock of any series issued
in connection with any stock split, stock dividend or recapitalization of the
Company; (E) Common Stock issued upon exercise of warrants, options or
convertible securities if the issuance of such warrants, options or convertible
securities was subject to the right of first offer granted under this Section
4.1; (F) capital stock or warrants or options for the purchase of shares of
capital stock issued by the Company to financial institutions or lessors in
connection with the extension of credit to the Company or the purchase financing
of personal property by the Company; (G) shares of Common Stock issuable upon
the exercise of the Warrant; and (H) any public offering of shares of Common
Stock prior to or in connection with which all shares of Preferred Stock are
converted into Common Stock.
(ii) The applicable "Percentage" for the Purchaser shall
be the number of shares of New Securities calculated by dividing (A) the total
number of shares of Common Stock owned by the Purchaser (assuming conversion of
all outstanding shares of Preferred Stock) by (B) all of the Company's Common
Stock then outstanding (assuming conversion of all outstanding shares of
Preferred Stock and exercise of all outstanding options or warrants to purchase
Common Stock or Common Stock issuable upon exercise of Preferred Stock).
4.2 Termination. The right of first refusal granted under this
Section shall not apply to and shall expire upon the closing of the Company's
Initial Public Offering.
4.3 Assignment. The right of first refusal granted under this
Section may be assigned by a Purchaser to (i) a transferee or assignee of such
Purchaser's shares acquiring at least 100,000 shares of the Purchaser's shares
of the Company's Common Stock (treating all shares of Preferred Stock for this
purpose as though converted into Common Stock and as appropriately adjusted for
any stock splits, reverse stock splits, stock dividends, recapitalizations or
similar transactions), (ii) a transferee or assignee of the Purchaser's shares
that is a constituent affiliate, or constituent partner of the Purchaser
(including spouses and ancestors, lineal descendants and siblings of such
partners or spouses who acquire Registrable Securities by gift, will or
intestate succession) if all such transferees or assignees appoint a single
representative as their attorney in fact for the purpose of receiving any
notices and exercising their rights under this Section 4, or (iii) a transferee
or assignee who is either a family member (including a spouse, ancestor, lineal
descendant or sibling) of an individual Holder or a trust for the benefit of any
individual Holder if all such transferees or assignees appoint a single
representative as their attorney in fact for the purpose of receiving any
notices
-15-
<PAGE> 18
and exercising their rights under this Section 4. It shall be a condition to any
transfer or assignment pursuant to this Section 4.3, that the Company shall be,
within ten (10) days following such transfer, furnished with written notice of
the name and address of such transferee, and such transferee agrees in writing
to be bound by the terms of this Agreement.
4.4 Additional Registration Rights. The Company hereby grants to
each Purchaser the right to become a party to any agreement by which the Company
grants to any venture capital or strategic investor, as defined below,
registration rights, including demand rights, the right of investors to
participate in any registration initiated by the Company and S-3 registration
rights, and each Purchaser shall be entitled to the registration rights granted
under such agreement. For purposes of this Section 4.4, a "venture capital or
strategic investor" means an investor who purchases shares of the Company's next
series of Preferred Stock.
5. Miscellaneous.
5.1 Assignment. Subject to the provisions of Section 2.13 and
Section 4.3 hereof, 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 hereto.
5.2 Third Parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under this Agreement, except as expressly provided herein.
5.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
5.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.5 Notices.
(a) All notices, requests, demands and other communications
under this Agreement or in connection herewith shall be given to or made upon
the respective parties as follows:
-16-
<PAGE> 19
To the Company: Accrue Software, Inc.
1275 Orleans Drive
Sunnyvale, CA 94089
Telephone: (408) 542-8900
Telecopy: (408) 541-1874
Attention: President
with a copy to:
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, CA 94025
Telephone: (650) 854-4488
Telecopy: (650) 233-8386
Attention: John V. Bautista
To a Purchaser: At such Purchaser's address as set forth on
the signature page hereto.
(b) All notices, requests, demands and other communications
given or made in accordance with the provisions of this Agreement shall be in
writing, and shall be sent by airmail, return receipt requested, or by telex or
telecopy (facsimile) with confirmation of receipt, and shall be deemed to be
given or made when receipt is so confirmed.
(c) Any party may, by written notice (in accordance with this
Section 5.5) to the other, alter its address or respondent.
5.6 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
5.7 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party to this Agreement, upon any breach
or default of the other party, shall impair any such right, power or remedy of
such non-breaching party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only
-17-
<PAGE> 20
to the extent specifically set forth in such writing. All remedies, either under
this Agreement, or by law or otherwise afforded to any Holder, shall be
cumulative and not alternative.
5.8 Consent and Waiver. In connection with the issuance and sale
of the shares of Series E Preferred Stock by the Company to the Series E
Purchasers pursuant to the terms of the Series E Agreement, the Former Rights
Holders, severally, hereby, (i) consent to amend the Prior Rights Agreement in
the manner set forth herein, (ii) consent to the issuance and sale of the shares
of Series E Preferred Stock by the Company to the Series E Purchasers (and the
conversion of such shares into Common Stock ), (iii) consent to the amendment of
the Certificate of Incorporation of the Company to (A) increase the authorized
number of shares of Common Stock to Twenty Million (20,000,000), (B) increase
the authorized number of shares of Preferred Stock to Ten Million (10,000,000),
and (C) authorize a maximum of Five Million (5,000,000) shares of Series E
Preferred Stock for sale and issuance pursuant to the terms of the Series E
Agreement and (iv) consent to the issuance by the Company of the shares of
Series E Preferred Stock and the adjustment resulting from such issuance to the
Series C Conversion Rate pursuant to Article III(B)(3)(gg) of the Company's
Fourth Amended and Restated Certificate of Incorporation and to the Series D
Conversion Rate pursuant to Article III(B)(hh) of the Company's Fourth Amended
and Restated Certificate of Incorporation.
5.9 Waiver of Conflicts. Each party to this Agreement acknowledges
that Venture Law Group, counsel for the Company, has in the past performed and
may continue to perform legal services for certain of the Purchasers in matters
unrelated to the transactions described in this Agreement, including the
representation of such Purchasers in venture capital financings and other
matters. Accordingly, each party to this Agreement hereby (a) acknowledges that
they have had an opportunity to ask for information relevant to this disclosure;
and (b) gives its informed consent to Venture Law Group's representation of
certain of the Purchasers in such unrelated matters and to Venture Law Group's
representation of the Company in connection with this Agreement and the
transactions contemplated hereby.
5.10 Legal Representation. The Company and the Purchasers
acknowledge that: (a) they have read this Agreement; (b) they understand that
the Company has been represented in the preparation, negotiation, and execution
of this Agreement by Venture Law Group, counsel to the Company; (c) they have
been represented in the preparation, negotiation, and execution of this
Agreement by legal counsel of their own choice or have voluntarily declined to
seek such counsel; and (d) they understand the terms and consequences of this
Agreement and are fully aware of its legal and binding effect.
[SIGNATURE PAGES FOLLOW]
-18-
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Investor Rights Agreement as of the date first written above.
COMPANY:
ACCRUE SOFTWARE, INC., ORGANIC ONLINE, INC.,
a Delaware corporation a California corporation
By: /s/ Richard D. Kreysar By: /s/ Jonathan Nelson
----------------------------------------- ---------------------------
Title: CEO Title: CEO
-------------------------------------- ------------------------
Dated: 8/12/98 Dated: 8/17/98
-------------------------------------- ------------------------
FORMER RIGHTS HOLDERS:
Name: Sterling Payot
Capital, L.P.
-------------------------
By: /s/ Robert Smelick
---------------------------
Title:
------------------------
Address:
----------------------
----------------------
Dated:
------------------------
SERIES E PURCHASERS:
Name: Sterling Payot
Capitol, L.P.
-------------------------
By: /s/ Robert Smelick
---------------------------
Title:
------------------------
Address:
----------------------
----------------------
Dated:
------------------------
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Investor Rights Agreement as of the date first written above.
COMPANY:
ACCRUE SOFTWARE, INC., ORGANIC ONLINE, INC.,
a Delaware corporation a California corporation
By: By:
---------------------------------- ----------------------------------
Title: Title:
------------------------------- -------------------------------
Dated: Dated:
------------------------------- -------------------------------
FORMER RIGHTS HOLDERS:
Name: Mohr, Davidow Ventures IV, L.P.
By: Fourth MDV Partners,
L.L.C., General Partner
--------------------------------
By: /s/ W. H. Davidow
----------------------------------
William H. Davidow
MDV IV Entrepreneurs' Network
Fund, L.P.
By: /s/ W. H. Davidow
----------------------------------
William H. Davidow, Member
SERIES E PURCHASERS:
Mohr, Davidow Ventures IV, L.P.
By: Fourth MDV Partners, L.L.C.,
General Partner
-------------------------------------
By: /s/ W. H. Davidow
----------------------------------
William H. Davidow
MDV IV Entrepreneurs' Network
Fund, L.P.
By: Fourth MDV Partners, L.L.C.,
General Partner
By: /s/ W. H. Davidow
----------------------------------
William H. Davidow, Member
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Investor Rights Agreement as of the date first written above.
COMPANY:
ACCRUE SOFTWARE, INC., ORGANIC ONLINE, INC.,
a Delaware corporation a California corporation
By: By:
---------------------------------- ----------------------------------
Title: Title:
------------------------------- -------------------------------
Dated: Dated:
------------------------------- -------------------------------
FORMER RIGHTS HOLDERS:
Name: /s/ Vanessa A. Wittman
--------------------------------
By: Vanessa A. Wittman
----------------------------------
Title:
-------------------------------
Address: 1467 Hamilton
-----------------------------
Palo Alto, CA 94301
-----------------------------
Dated: 8/11/98
-------------------------------
SERIES E PURCHASERS:
Name: /s/ Vanessa A. Wittman
--------------------------------
By: Vanessa A. Wittman
----------------------------------
Title:
-------------------------------
Address: 1467 Hamilton
-----------------------------
Palo Alto, CA 94301
-----------------------------
Dated:
------------------------
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT
<PAGE> 24
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Investor Rights Agreement as of the date first written above.
COMPANY:
ACCRUE SOFTWARE, INC., ORGANIC ONLINE, INC.,
a Delaware corporation a California corporation
By: By:
---------------------------------- ----------------------------------
Title: Title:
------------------------------- -------------------------------
Dated: Dated:
------------------------------- -------------------------------
FORMER RIGHTS HOLDERS:
Name: /s/ John W. Glynn, Jr.
--------------------------------
By:
----------------------------------
Title:
-------------------------------
Address: 88 Laburnum Road
-----------------------------
Atherton, CA 94027
-----------------------------
Dated: August 11, 1998
-------------------------------
SERIES E PURCHASERS:
Name:
--------------------------------
By:
----------------------------------
Title:
-------------------------------
Address:
-----------------------------
-----------------------------
Dated:
------------------------
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT
<PAGE> 25
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Investor Rights Agreement as of the date first written above.
COMPANY:
ACCRUE SOFTWARE, INC., ORGANIC ONLINE, INC.,
a Delaware corporation a California corporation
By: By:
---------------------------------- ----------------------------------
Title: Title:
------------------------------- -------------------------------
Dated: Dated:
------------------------------- -------------------------------
FORMER RIGHTS HOLDERS:
Name: /s/ Morton Meyerson
--------------------------------
By:
----------------------------------
Title:
-------------------------------
Address:
-----------------------------
-----------------------------
Dated:
-------------------------------
SERIES E PURCHASERS:
Name:
--------------------------------
By:
----------------------------------
Title:
-------------------------------
Address:
-----------------------------
-----------------------------
Dated:
------------------------
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Investor Rights Agreement as of the date first written above.
COMPANY:
ACCRUE SOFTWARE, INC., ORGANIC ONLINE, INC.,
a Delaware corporation a California corporation
By: By:
---------------------------------- ----------------------------------
Title: Title:
------------------------------- -------------------------------
Dated: Dated:
------------------------------- -------------------------------
FORMER RIGHTS HOLDERS:
Name: /s/ Tom DuBois
--------------------------------
By: Tom DuBois
----------------------------------
Title: CEO, Active Research
-------------------------------
Address: 2689 Bryant Street
-----------------------------
Palo Alto, CA 94306
-----------------------------
Dated: 8/11/98
-------------------------------
SERIES E PURCHASERS:
Name: /s/ Tom DuBois
--------------------------------
By: Tom DuBois
----------------------------------
Title: CEO, Active Research
-------------------------------
Address: 2689 Bryant Street
-----------------------------
Palo Alto, CA 94306
-----------------------------
Dated: 8/11/98
-------------------------------
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT
<PAGE> 27
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Investor Rights Agreement as of the date first written above.
COMPANY:
ACCRUE SOFTWARE, INC., ORGANIC ONLINE, INC.,
a Delaware corporation a California corporation
By: By:
---------------------------------- ----------------------------------
Title: Title:
------------------------------- -------------------------------
Dated: Dated:
------------------------------- -------------------------------
FORMER RIGHTS HOLDERS:
Name:
--------------------------------
By:
----------------------------------
Title:
-------------------------------
Address:
-----------------------------
-----------------------------
Dated:
-------------------------------
SERIES E PURCHASERS:
Name: Lee Kheng Nam
--------------------------------
By: /s/ Lee Kheng Nam
----------------------------------
Title: President,
Vertex Technology Fund
Pt's. Ltd.
-------------------------------
Address:
-----------------------------
-----------------------------
Dated:
------------------------
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT
<PAGE> 28
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Investor Rights Agreement as of the date first written above.
COMPANY:
ACCRUE SOFTWARE, INC., ORGANIC ONLINE, INC.,
a Delaware corporation a California corporation
By: By:
---------------------------------- ----------------------------------
Title: Title:
------------------------------- -------------------------------
Dated: Dated:
------------------------------- -------------------------------
FORMER RIGHTS HOLDERS:
Name:
--------------------------------
By:
----------------------------------
Title:
-------------------------------
Address:
-----------------------------
-----------------------------
Dated:
-------------------------------
SERIES E PURCHASERS:
Name: Orchid Holdings, L.P.
Orchid Group Holdings
General Partner
By: Joos-Enterprises Corporation
Its General Partner
--------------------------------
By: /s/ Christopher J. O'Brien
----------------------------------
Christopher J. O'Brien
Title: Vice President
-------------------------------
Address: Orchid Holdings L.P.
555 California Street,
Suite 5180
-----------------------------
San Francisco, CA 94104
-----------------------------
Dated: 8/14/98
------------------------
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT
<PAGE> 29
WARRANT HOLDER:
Name: Sterling Payot
Capital, L.P.
-------------------------
By: /s/ Robert Smelick
---------------------------
By:
---------------------------
Title:
------------------------
Address:
----------------------
Dated:
------------------------
SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT
<PAGE> 1
[ACCRUE LETTERHEAD]
Exhibit 10.11
November 5, 1998
Mr. Brett Kilpatrick
939 Wedgewood Court
Glenview, IL 60025
Dear Brett:
On behalf of Accrue Software, Inc. (the "Company"), I am pleased to offer you
the position of Vice President of Sales, reporting to me, starting on November
10th, 1998. Your compensation will be comprised of an $150,000.00 annual base
salary and an annual target commission of $100,000.00 for a total annual target
compensation of $250,000.00 at 100% of your plan. In addition, we are offering a
$8,333.34 "month-to-month non-recoverable draw" for your first 3 months, which
will be paid monthly and non-recoverable from that month's commission. You will
be covered by the Company's standard benefits package including health insurance
and two weeks paid vacation per year, pro-rated during 1998. In the event of
relocation requirement, you and the "Company" will agree to reasonable
reimbursement for such relocation. If relocation becomes an issue that is
unresolvable, Accrue agrees to vesting of an additional year to what has been
vested to date.
You will be granted an incentive stock option to purchase 255,000 shares of
Common Stock exercisable at the fair market value on the date of grant by the
Company's board of directors. The option will become exercisable at the rate of
25% the shares one year after your commencement of employment and 1/48th of the
shares subject to the option each month thereafter, so that at the end of four
years, the option will be fully vested provided you remain an employee of the
Company. The option will be subject to approval and grant by the Company's board
of directors, which I expect will occur at the first regular board meeting
following the commencement of your employment, and the execution of the
Company's standard Option Agreement under its 1996 Stock Plan. In the event you
are terminated without cause, because of a Change of Control, there will be a
one year acceleration of vesting in addition to what has been vested to date.
You will be required to sign the Company's standard Assignment of Inventions
and Confidentiality Agreement prior to the initiation of your employment. In
addition, you will abide by the Company's strict policy that prohibits any new
employee from using or bringing with him or her from any previous employer any
confidential information, trade secret, or proprietary materials or processes of
such employer.
You will be an employee-at-will and your employment may be terminated at any
time by you or the Company, with or without notice, and with or without cause.
This Agreement constitutes the entire agreement between you and the Company and
supersedes all other agreements or understandings.
This offer will be held open for three (3) days. To accept please sign at the
bottom of this letter.
Again, let me indicate how pleased we all are to extend this offer, and how much
we look forward to working together. Please indicate your acceptance by signing
and returning the enclosed copy of this letter.
Very truly yours,
/s/ Richard D. Kreysar
- -----------------------------
Richard D. Kreysar
President and CEO
Accrue Software, Inc.
The foregoing terms and conditions are hereby accepted:
Signed: /s/ BRETT KILPATRICK Date: 11/5/98
---------------------------------------- -------------------------
<PAGE> 1
EXHIBIT 10.12
STANDARD SUBLEASE
1. PARTIES. This Sublease, dated for reference purposes only as February
3, 1999, is made by and between PREMISYS COMMUNICATIONS, INC., a Delaware
corporation ("Sublessor") and ACCRUE SOFTWARE, INC., a Delaware corporation
("Sublessee").
2. PREMISES. Sublessor hereby leases to Sublessee and Sublessee hereby
subleases from Sublessor for the term "Term" (as hereinafter defined), at the
rental, and upon all the conditions set forth herein, that certain real
property, including all improvements therein, and commonly known by the street
address of 48634 Milmont Drive ("Building"), City of Fremont, located in the
County of Alameda, State of California, and generally described as approximately
24,412 square feet of office/research and development space), as more
particularly described in Exhibit 2 attached hereto arid incorporated herein by
this reference ("Premises").
3. TERM.
3.1 The term of this Sublease ("Term") shall be for thirty-six
(36) months, commencing on April I, 1999 ("Commencement Date") and ending on
March 31, 2002, unless sooner terminated pursuant to any provision hereof;
provided, however, that Sublessee shall have the right, on or after March 1,
1999, at its sole risk, cost and expense, to enter upon and install data
equipment and trade improvements in the Premises, and to store inventory, and
the same will not cause Base Rent to commence, provided that (a) Sublessee shall
have paid for and provided evidence to Sublessor of all insurance required under
this Sublease having been secured, (b) Sublessee shall pay all utility charges
and other costs and expenses incurred by Sublessor with respect to such early
entry by Sublessee, (c) Sublessor shall be at no expense with respect to such
early occupancy and Sublessee hereby agrees to indemnify Sublessor for any and
all costs attributable to such early occupancy, and (d) all other terms and
conditions of this Sublease (excepting only Sublessee's obligation to pay rent)
shall be applicable during the period of Sublessee's early occupancy. Prior to
the Commencement Date, Sublessee shall be allowed to use the Premises as stated
above, but shall not otherwise commence the operation of business without the
express prior written consent of Sublessor. Sublessee's early occupancy shall
not unreasonably interfere with Sublessor's performance of the work set forth in
Paragraph 12 below.
3.2 Notwithstanding anything to the contrary contained in this
Sublease, the Commencement Date shall be the later of April 1, 1999 and the date
upon which Sublessor delivers possession of the Premises to Sublessee with the
work identified in Paragraph 12 of this Sublease substantially completed by
Sublessor. If the Premises are not delivered to Sublessee in the required
condition by April 1, 1999, Sublessee's obligation to pay Base Rent and
Additional Rent shall not commence until the date that Sublessor has delivered
possession of the Premises to Sublessee in the required condition.
<PAGE> 2
4. RENT.
4.1 BASE RENT. On the first day of each month of the Term,
Sublessee shall pay to Sublessor Base Rent for the Premises. For the first year
of the Term, monthly Base Rental shall be in equal payments of Twenty-One
Thousand Nine Hundred Seventy Dollars and Eighty Cents ($21,970.80) in advance.
For the second year of the Term, monthly Base Rental shall be in equal payments
of Twenty-Three Thousand One Hundred Ninety-One Dollars and Forty Cents
($23,191.40) in advance. For the third and last year of the Term, monthly Base
Rental shall be in equal payments of Twenty-Four Thousand Four Hundred Twelve
Dollars ($24,412.00) in advance. Upon the execution hereof, Sublessee shall pay
Sublessor Twenty-One Thousand Nine Hundred Seventy Dollars and Eighty Cents
($21,970.80) as Base Rent for April, 1999. Base Rent for any period during the
Term which is for less than one month shall be a pro rata portion of the monthly
installment.
4.2 ADDITIONAL RENT. In addition to the Base Rent, Sublessee
shall pay to Sublessor, in accordance with Paragraph 4 of the Master Lease,
Sublessee's proportionate share (which is agreed by Sublessor and Sublessee to
be forty-two and seven-tenths percent (42.7%) of the Building) of "Additional
Rent" as defined in Paragraph 4.(b) of the Master Lease. Notwithstanding the
foregoing, in no event shall Sublessee's obligation to pay Additional Rent
exceed the amount of Additional Rent payable by Sublessor under the Master Lease
with respect to the Premises. Sublessee shall pay Sublessee's pro rata share of
Additional Rent as and when the same is due and payable to Master Lessor under
the Master lease. Sublessee shall be entitled to its pro rata share of all
credits, if any, given by Master Lessor to Sublessor for Sublessor's overpayment
or abatement of such sums. Sublessee shall not be required to pay any Additional
Rent or perform any obligation that is (i) fairly allocable to any period of
time prior to the Commencement Date, or following the expiration or termination
thereof, or (ii) payable solely as a result of a default by Sublessor under any
of its obligations under the Master Lease, which default is not the result of
any default of Sublessee under any of its obligations under the Sublease.
4.3 RENT DEFINED. All monetary obligations (except for the
Security Deposit) of Sublessee to Sublessor under the terms of this Sublease are
deemed to be rent ("Rent"). 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.
5. SECURITY DEPOSIT. Sublessee shall deposit with Sublessor upon
execution hereof Twenty-Four Thousand Four Hundred Twelve Dollars ($24,412.00)
as security for Sublessee's faithful performance of Sublessee's obligations
hereunder. The rights and obligations of Sublessor and Sublessee as to said
Security Deposit shall be as set forth in Paragraph 5 of the "Master Lease" (as
defined in Paragraph 7.1 of this Sublease) (as modified by Paragraph 7.3 of this
Sublease).
-2-
<PAGE> 3
6. USE.
6.1 AGREED USE. The Premises shall be used and occupied only for
general office and administration, telecommunications, computers, software,
electronic research and development, light manufacturing and assembly of
components for the ecommerce industry, but only to the extent permitted by the
City of Fremont and all agencies and governmental authorities having
jurisdiction thereof.
6.2 COMPLIANCE. Sublessor warrants that the improvements on the
Premises comply with all applicable covenants or restrictions of record and
applicable building codes, regulations and ordinances ("Applicable
Requirements") in effect on the Commencement Date. Said warranty does not apply
to the use to which Sublessee will put the Premises or to any alterations or
utility installations made or to be made by Sublessee. NOTE: Sublessee is solely
responsible for determining whether or not the zoning is appropriate for its
intended use, and acknowledges that past uses of the Premises may no longer be
allowed.
6.3 ACCEPTANCE OF PREMISES AND SUBLESSEE. Sublessee acknowledges
that:
(a) it has been advised by Brokers to satisfy itself with
respect to the condition of the Premises (including but not limited to the
electrical, HVAC and fire sprinkler systems, security, environmental aspects,
and compliance with Applicable Requirements), and their suitability for
Sublessee's intended use.
(b) Sublessee has made such investigation as it deems
prudent and necessary with reference to such matters and assumes all
responsibility therefor as the same relate to the Premises, and
(c) neither Sublessor, Sublessor's agents, nor any Broker
has made any oral or written representations or warranties with respect to said
matters other than as set forth in this Sublease.
In addition, Sublessor acknowledges that:
(a) Broker has made no representations, promises or
warranties concerning Sublessee's ability to honor the Sublease or suitability
to occupy the Premises, and
(b) It is Sublessor's sole responsibility to investigate
the financial capacity and/or suitability of all proposed subtenants.
7. MASTER LEASE.
7.1 Sublessor is the lessee of the Premises by virtue of a lease
("Master Lease"), a copy of which is attached hereto as Exhibit 1 and
incorporated herein by this reference, wherein Aetna Life Insurance Company is
the lessor ("Master Lessor").
-3-
<PAGE> 4
7.2 This Sublease is and shall be at all times subject and
subordinate to the Master Lease.
7.3 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 directly contradicted by this Sublease in which event the terms of
this Sublease shall control over the Master Lease. Therefore, for the purposes
of this Sublease, wherever in the Master Lease the word "Landlord" is used it
shall be deemed to mean the Sublessor herein; wherever in the Master Lease the
word "Tenant" is used it shall be deemed to mean the Sublessee herein; and
wherever in the Master Lease the word "Lease" is used it shall be deemed to mean
this Sublease.
7.4 During the Term and for all periods subsequent thereto with
respect to obligations that have arisen prior to the termination of this
Sublease, 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 with respect to the Premises except as
otherwise provided herein and except as provided in Paragraph 18 hereof.
7.5 The obligations that Sublessee has assumed and agreed to
perform under Paragraph 7.4 hereof are hereinafter referred to as the
"Sublessee's Assumed Obligations". The obligations that Sublessee has not
assumed or agreed to perform under Paragraph 7.4 hereof are hereinafter referred
to as the "Sublessor's Remaining Obligations".
7.6 Sublessor hereby agrees for Sublessee's benefit to exercise
Sublessor's diligent good faith efforts to require Master Lessor to perform
Master Lessor's obligations pursuant to the Master Lease.
7.7 Sublessor agrees to maintain the Master Lease during the
Term, subject, however, to any earlier termination of the Master Lease without
the fault of Sublessor, and to comply with or perform Sublessor's Remaining
Obligations and to hold Sublessee free and harmless from all liability,
judgments, costs, damages, claims or demands arising out of Sublessor's failure
to comply with or perform Sublessor's Remaining Obligations or its obligations
under the Sublease. Unless Master Lessor has required Sublessee to attorn to
Master Lessor as provided in Section 9.4(f), Sublessor further agrees not to
terminate the Master Lease voluntarily during the Term.
7.8 Sublessor represents to Sublessee that 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. ASSIGNMENT OF SUBLEASE AND DEFAULT.
8.1 Sublessor hereby assigns and transfers to Master Lessor
Sublessor's interest in this Sublease, subject however to the provisions of
Paragraph 8.2 hereof.
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<PAGE> 5
8.2 Master Lessor, by executing this document, agrees that until
a "Default" (as defined in the Master Lease) shall occur in the performance of
Sublessor's Obligations under the Master Lease, that Sublessor may receive,
collect and enjoy the Rent accruing under this Sublease. However, if Sublessor
shall default 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. Master Lessor shall not, by
reason of this assignment of the Sublease nor by reason of the collection of the
Rent from the Sublessee, be deemed liable to Sublessee for any failure of
Sublessor to perform and comply with Sublessor's Remaining Obligations.
8.3 Sublessor hereby irrevocably authorizes and directs
Sublessee, upon receipt of any written notice from Master Lessor stating that a
Default exists in the performance of Sublessors obligations under the Master
Lease, and such obligations are not Sublessee's Assumed Obligations (in which
event Sublessee shall promptly commence the cure of any such Default), to pay to
Master Lessor the Rent 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 Rent 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 and Sublessor shall have no right or claim against Sublessee for any
such Rent so paid by Sublessee.
8.4 No changes or modifications shall be made to this Sublease
without the consent of Master Lessor, which shall not be unreasonably withheld
or delayed.
9. CONSENT OF MASTER LESSOR.
9.1 If the Master Lease requires that Sublessor obtain the
consent of Master Lessor to any subletting by Sublessor, then this Sublease
shall not be effective unless, within thirty (30) days of full execution of this
Sublease, Master Lessor signs this Sublease, thereby giving its consent to this
Subletting.
9.2 Notwithstanding anything to the contrary contained in this
Sublease, if Master Lessor's consent is not obtained within thirty (30) days
after the date of full execution of the Sublease, Sublessor or Sublessee shall
have the right to terminate the Sublease, and Sublessor promptly shall return to
Sublessee all sums paid by Sublessee to Sublessor in connection with its
execution of the Sublease.
9.3 If the obligations of Sublessor under the Master Lease have
been guaranteed by third parties, then neither this Sublease nor the Master
Lessor's consent shall be effective unless, within ten (10) days of the date
hereof, said guarantors sign this Sublease, thereby giving their consent to this
Sublease.
9.4 If Master Lessor does give such consent, then:
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<PAGE> 6
(a) Such consent shall not release Sublessor or its
obligations or alter the primary liability of Sublessor to pay the Rent and
perform and comply with all of the obligations of Sublessor to be performed
under the Master Lease.
(b) The acceptance of Rent by Master Lessor from Sublessee
or anyone else liable under the Master Lease shall not be deemed a waiver by
Master Lessor of any provisions of the Master Lease.
(c) The consent to this Sublease shall not constitute a
consent to any subsequent subletting or assignment.
(d) In the event of any Default of Sublessor under the
Master Lease, Master Lessor may proceed directly against Sublessor, any
guarantors or anyone 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.
(e) Master Lessor may consent to subsequent sublettings
and assignments of the Master Lease or this Sublease or any amendments or
modifications thereto without notifying Sublessor or anyone else liable under
the Master Lease and without obtaining their consent and such action shall not
relieve such persons from liability.
(f) If Sublessor shall default 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 event
Master Lessor shall undertake the obligations of Sublessor under this Sublease
from the time of the exercise of said option to termination of this Sublease but
in no event shall Master Lessor be liable for any prepaid Rent or any Security
Deposit paid by Sublessee unless such amounts shall have been transferred by
Sublessor to Master Lessor, nor shall Master Lessor be liable for any other
Defaults of the Sublessor under the Sublease.
9.5 The signatures at the end of this document of Master Lessor
and any Guarantors of Sublessor shall constitute their consent to the terms of
this Sublease.
9.6 Master Lessor acknowledges that, to the best of Master
Lessor's knowledge, no Default of obligations to be performed by Sublessor or by
Master Lessor presently exists under the Master Lease and that the Master Lease
is in full force and effect.
9.7 If 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, within ten (10) days
after service of such notice of default on Sublessee, to cure any Default of
Sublessor described in any such notice of default. If such Default is cured by
Sublessee, then Sublessee shall have the right of reimbursement and offset from
and against Sublessor.
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<PAGE> 7
10. BROKERS FEE. Upon execution hereof by all parties, Sublessor shall
pay to CB Richard Ellis and Grubb & Ellis/Colliers International, licensed real
estate brokers (collectively, "Broker") a fee as set forth in a separate
agreement between Sublessor and Broker.
11. ATTORNEY'S FEES. If any party or the Broker named herein brings an
action to enforce the terms hereof or to declare rights hereunder, the
prevailing party in any such action, on trial and appeal, shall be entitled to
his reasonable attorney's fees to be paid by the losing party as fixed by the
Court.
12. CONDITIONS OF PREMISES/SUBLESSOR'S WORK.
12.1 The Premises shall be delivered to Sublessee in good
condition and repair, and major building systems will be in good working order
on the Commencement Date.
12.2 Sublessor shall install carpeting in the Premises as
depicted in Exhibit 2. Sublessee shall be responsible, at Sublessor's election,
provided to Sublessee in writing not less than thirty (30) days prior to the
expiration of the Term, for removing the carpet and repairing any damage
incurred by its removal in Rooms A, B and C as depicted in Exhibit 2. Carpet
shall match Subtenant's existing carpet in 48664 Milmont Drive, Fremont.
12.3 Sublessor shall arrange for full janitorial service for the
Premises prior to Subtenant's occupancy thereof.
12.4 Sublessor shall provide Sublessee with use of alarm system
currently located on the Premises. Sublessee shall be responsible for
contracting for service, in its own name, with the security company.
12.5 Sublessor shall provide a building standard window and door
indicated on Exhibit 3 attached hereto and incorporated herein by this
reference. Should Sublessee elect to install a non-standard window, Sublessee
shall be responsible for any increase in cost.
12.6 Sublessor's Work as described in this Paragraph 12 shall be
constructed in accordance with Exhibit 2 and all applicable law, in a good and
workmanlike manner, free of defects and using new materials and equipment of
good quality. Within thirty (30) days after the Commencement Date, Sublessee
shall have the right to submit a written "punch list" to Sublessor, setting
forth any alleged defective item of construction, and, if Sublessor reasonably
agrees with the need to correct any such item, Sublessor shall promptly cause
such items to be corrected at Sublessor's sole cost and expense.
13. SIGNAGE. Sublessee shall have to the right to use its proportionate
share (i.e. 42.7%) of signage currently granted to Sublessor pursuant to the
Master Lease.
14 PARKING. Sublessee shall have the right to use ninety-six (96)
nonexclusive and undesignated parking spaces located in the common area on the
real property on which the Building is situated.
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<PAGE> 8
15. SUBLESSOR'S RETAINED PREMISES. Sublessee acknowledges that the
Premises comprise less than the entirety of the real property leased to
Sublessor pursuant to the Master Lease. That portion of such real property not
leased to Sublessee herein is referred to as the "Tiled Warehouse." Sublessee
has been advised that the Tiled Warehouse and the Premises share common utility
service, and Sublessee hereby agrees not to take any action during the Term that
results in or is likely to result in any interruption in utility service to the
Tiled Warehouse.
16. INDEMNIFICATION.
16.1 SUBLEASE'S INDEMNIFICATION. Except to the extent caused
solely by Sublessor's active negligence or willful misconduct, Sublessee shall
indemnify, protect, defend with counsel reasonably acceptable to Sublessor and
hold harmless Sublessor from and against any and all claims, liabilities,
judgments, causes of action, damages, costs and expenses (including reasonable
attorneys' and experts' fees), caused by or arising in connection with: (i) the
use, occupancy or condition of the Premises; (ii) the negligence or willful
misconduct of Sublessee or its employees, contractors, agents, or invitees;
(iii) a breach of Sublessee's obligations under this Sublease; (iv) a breach of
Sublessee's obligations under the Master Lease; or (v) any Hazardous Material
(as defined in Section 32(a) of the Master Lease) used, stored, released,
disposed of, generated or transported by Sublessee, its agents, employees,
contractors or invitees in, on or about the Premises or the Building.
16.2 SUBLESSOR'S INDEMNIFICATION. Except to the extent caused
solely by Sublessee's active negligence or willful misconduct, Sublessor shall
indemnify, protect, defend with counsel reasonably acceptable to Sublessee and
hold harmless Sublessee from and against any and all claims, liabilities,
judgments, causes of action, damages, costs and expenses (including reasonable
attorneys' and experts' fees), caused solely by or arising solely in connection
with any termination of the Sublease as a result of a voluntary act or a default
by Sublessor under the Sublease or the Master Lease; provided, however that
Sublessor's liability pursuant to such indemnification shall not exceed the sum
of (a) Sublessee's out-of-pocket moving costs to new space in the Bay Area and
associated rewiring costs, in an amount not to exceed Five Thousand Dollars
($5,000.00) and (b) Sublessee's out-of-pocket rent increases an amount equal to
the differential between one year's rent for the Premises (in the lease year of
said termination) and one year's rent for new space Sublessee is required to
lease as a result of such termination of the Sublease.
16.3 SURVIVAL OF INDEMNIFICATION. The foregoing indemnification
shall survive the expiration or earlier termination of this Sublease.
17. DELAY IN DELIVERY. Notwithstanding anything to the contrary
contained in this SUBLEASE, if Sublessor has not delivered possession of the
Premises to Sublessee by May 1, 1999 for any reason other than an act or
omission of Sublessee, Sublessee shall have the right to terminate this
Sublease, and Sublessor promptly shall return to Sublessee all sums paid by
Sublessee to Sublessor in connection with its execution of the Sublease.
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<PAGE> 9
18. MASTER LEASE PROVISIONS EXCEEDED. Notwithstanding anything to the
contrary contained in this Sublease, the following provisions of the Master
Lease hereby are expressly excluded from the Sublease; Basic Lease Information
(except for "Premises Address", "Project", "Building", and "Permitted Use",
which are hereby incorporated in this Sublease); Sections 2, 3, 4(a), 7, the
first sentence of Section 8(a), and Sections 9 and 38; Exhibits A, B, C and G;
and Addendum 1. With respect to Section 15(a), references to "Landlord" shall
mean only Master Lessor. With respect to Sections 22(a)(3), 22(f)(A) and 23,
Sublessor shall not exercise the termination rights set forth therein without
obtaining the prior written consent of Sublessee, which consent shall not be
unreasonably withheld or delayed.
19. SURRENDER OBLIGATIONS. Notwithstanding anything to the contrary
contained in this Sublease, in no event shall Sublessee's obligation to
surrender the Premises require Sublessee to repair or restore the Premises to a
condition better than the condition in which the Premises existed as of the
Commencement Date. Additionally, Sublessee shall not be required to remove, at
the expiration of the Term or otherwise, alterations or improvements in the
Premises made by or for the account of Sublessor or any predecessor to Sublessor
prior to the Commencement Date.
20. WAIVER OF SUBROGATION. Sublessor shall request Master Lessor to
obtain a subrogation waiver from Master Lessor's insurer for the benefit of
Sublessee; provided, however, that Sublessor shall have no liability to
Sublessee if such subrogation waiver is not obtained from Master Lessor's
insurer.
21. AMENDMENT OR MODIFICATION. Any modification or amendment of the
Master Lease by Sublessor and Master Lessor shall be subject to Sublessee's
right of quiet enjoyment, as provided in Paragraph 22 of this Sublease.
22. QUIET ENJOYMENT, RIGHT TO CURE. So long as Sublessee is not in
default of this Sublease and provided further that Sublessee pays all Base Rent
and Additional Rent and performs all of Sublessee's covenants and agreements
contained herein, Sublessee shall peacefully have, hold and enjoy the Premises,
subject to the terms and conditions of this Sublease. If, however, Sublessor
defaults in the performance or observance of any of Sublessor's Remaining
Obligations or fails to perform Sublessor's stated obligations under this
Sublease to enforce, for Sublessee's benefit, Master Lessor's obligations under
the Master Lease, then Sublessee shall give Sublessor notice specifying in what
manner Sublessor has defaulted, and if such default shall not be cured by
Sublessor within thirty (30) days thereafter (except that if such default cannot
be cured within said thirty (30)-day period, this period shall be extended for
an additional reasonable time, provided that Sublessor commences to cure such
default within such thirty (30)-day period and proceeds diligently thereafter to
effect such cure as quickly as possible), then, in addition, Sublessee shall be
entitled, at Sublessee's option, to cure such default and promptly collect from
Sublessor Sublessee's reasonable expenses in so doing (including, without
limitation, reasonable attorneys' fees and court costs). Sublessee shall not be
required, however, to wait the entire cure period described herein if earlier
action is required to comply with the Master Lease or with any applicable
governmental law, regulation or order. Sublessor
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<PAGE> 10
shall promptly provide to Sublessee copies of all notices, including notices of
default, received by Sublessor from Master Lessor.
23. HAZARDOUS MATERIALS. Notwithstanding anything to the contrary
contained in this Sublease, except to the extent that the Hazardous Material in
question was released, emitted, used, stored, manufactured, transported or
discharged by Sublessee, or its agents, employees, contractors or invitees,
Sublessee shall not be responsible for and hereby is released from any and all
losses, costs (including reasonable attorneys' fees), damages, claims, suits,
actions and causes of action with respect to any Hazardous Material present on
or about the Premises, the Building or the surrounding property, or the soil,
groundwater or surface water thereof, that was released, emitted, used, stored,
manufactured, transported or discharged by Sublessor, its agents, employees,
contractors or invitees. In addition, to the extent that Master Lessor
indemnifies Sublessor for the cost of remediation or cleanup work required by
any governmental agency to be performed on the Premises as a result of any
Hazardous Materials existing on the Premises on the commencement date of the
Master Lease, Sublessee shall be so indemnified by Sublessor.
24. BINDING EFFECT. This Sublease will be binding on and will inure to
the benefit of the Sublessor and Sublessee, their respective heirs, executors,
administrators, successors-in-interest and assigns.
25. AMENDMENT. This Sublease may not be modified or amended except by an
instrument in writing approved by Sublessor, Sublessee and Master Landlord and
signed on their behalf.
26. HEADINGS. The headings in this Sublease are for purposes of
reference only and will not limit or define the meaning of any provision of this
Sublease.
27. SUBLESSOR'S RIGHT OF ENTRY. Sublessor reserves the right to enter
the Premises on reasonable notice and at reasonable times to Sublessee to
inspect the Premises or the performance by Sublessee of the terms and conditions
of this Sublease. In an emergency, no prior notice will be required for
Sublessor's entry.
28. LATE PAYMENT. The late payment of any rent will cause Sublessor to
incur additional costs, including the cost to maintain in full force the Master
Lease, administration and collection costs, and processing and accounting
expenses. If Sublessor has not received any installment of Base Rent or
Additional Rent within five (5) days alter receipt of written notice from
Sublessor that said amount is due, Sublessee will pay five percent (5%) of the
delinquent amount, which the parties agree represents a reasonable estimate of
the cost incurred by Sublessor. In addition, all delinquent amounts will bear
interest from the date the amount was due until paid in full at a rate per annum
("Applicable Interest Rate") equal to the greater of (a) five percent (5%) per
annum plus the then federal discount rate on advances to member banks in effect
at the Federal Reserve Bank of San Francisco on the 25th day of the month
preceding the date of the Sublease or (b) ten percent (10%). However, in no
event will the Applicable Interest Rate exceed the maximum interest rate
permitted by law that may be charged under these circumstances. Sublessor and
Sublessee recognize that the damage Sublessor will suffer in the
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<PAGE> 11
event of Sublessee's failure to pay this amount is difficult to ascertain and
that the late charge and interest are the best estimate of the damage that
Sublessor will suffer. If a late charge becomes payable for any three (3)
installments or Rent within any twelve (12) month period, the Base Rent will
automatically become payable quarterly in advance.
29. ENTIRE AGREEMENT. This Sublease and the Exhibits hereto sets forth
all the agreements between Sublessor and Sublessee concerning the Premises, and
there are no other agreements either oral or written other than as set forth in
this Sublease and, to the extent incorporated herein, the Master Lease.
30. TIME. Time is of the essence of this Sublease.
31. INTERPRETATION. This Sublease has been fully negotiated at
arms-length between the parties and after advice by counsel and other
representatives chosen by the parties, and the parties are fully informed with
respect thereto. No party shall be deemed the scrivener of this Sublease and the
provisions of this Sublease and the Exhibits hereto shall be construed as a
whole according to their common meaning and not strictly for or against any
party.
NOW, THEREFORE, Sublessor and Sublessee have executed this Sublease as
of the date and year first hereinabove written.
"SUBLESSOR" "SUBLESSEE"
PREMISYS COMMUNICATIONS, INC., a ACCRUE SOFTWARE, INC., a
Delaware corporation Delaware corporation
By: /s/ Nicholas J. Williams By: /s/ Richard D. Kreysar
------------------------------ ----------------------------------
Its: Its: President and Chief Executive Officer
------------------------------ ----------------------------------
By: By:
------------------------------ ----------------------------------
Its: Its:
------------------------------ ----------------------------------
"MASTER LESSOR"
AETNA LIFE INSURANCE COMPANY, a
Connecticut corporation
By: Allegis Realty Investors, LLC
------------------------------
Its: Investment Advisor
------------------------------
By: /s/ Syliva Milikian
------------------------------
Its: Senior Vice President
------------------------------
11
<PAGE> 12
LEASE AGREEMENT
BY AND BETWEEN
AETNA LIFE INSURANCE COMPANY,
A CONNECTICUT CORPORATION
AS LANDLORD
AND
PREMISYS COMMUNICATIONS, INC.,
A DELAWARE CORPORATION
As TENANT
DATED JUNE 4, 1998
<PAGE> 13
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
BASIC LEASE INFORMATION...............................................................4
1. Demise....................................................................1
2. Premises..................................................................1
3. Term......................................................................1
4. Rent......................................................................1
5. Late Charge...............................................................3
6. Security Deposit..........................................................3
7. Possession................................................................4
8. Use of Premises...........................................................4
9. Acceptance of Premises....................................................4
10. Surrender.................................................................4
11. Alterations and Additions.................................................5
12. Maintenance of Premises...................................................5
13. Landlord's Insurance......................................................6
14. Tenant's Insurance........................................................6
15. Indemnification...........................................................7
16. Subrogation...............................................................7
l7. Abandonment...............................................................7
18. Free From Liens...........................................................8
19. Advertisements and Signs..................................................8
20. Utilities.................................................................8
21. Entry by Landlord.........................................................8
22. Destruction and Damage....................................................8
23. Condemnation.............................................................11
24. Assignment And Subletting................................................11
25. Tenant's Default.........................................................11
26. Landlord's Remedies......................................................12
27. Attorney's Fees..........................................................14
28. Taxes....................................................................14
29. Effect of Conveyance.....................................................14
30. Tenant's Estoppel Certificate............................................14
31. Subordination............................................................15
32. Environmental Covenants..................................................15
</TABLE>
<PAGE> 14
<TABLE>
<S> <C>
33. Notice...................................................................17
34. Waiver...................................................................17
35. Holding Over.............................................................17
36. Successors and Assigns...................................................17
37. Time.....................................................................17
38. Brokers..................................................................18
39. Limitation of Liability..................................................18
40. Financial Statements.....................................................18
41. Rules and Regulations....................................................18
42. Mortgagee Protection.....................................................18
43. Entire Agreement.........................................................19
44. Interest.................................................................19
45. Construction.............................................................19
46. Representations and Warranties of Tenant.................................19
</TABLE>
EXHIBIT
A Diagram of the Premises
B Tenant Improvements
B-1 Final Plans and Specifications for Tenant Improvements
(Intentionally omitted)
C Commencement and Expiration Date Memorandum
D Rules and Regulations
E Sign Criteria (Intentionally omitted)
F Hazardous Materials Disclosure Certificate
G Tenant Improvements Loan Amortization Memorandum (Intentionally omitted)
ADDENDA Addendum 1: Option to Extend the Lease
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<PAGE> 15
LEASE AGREEMENT
BASIC LEASE INFORMATION
Lease Date: June 4, 1998
Landlord: AETNA LIFE INSURANCE COMPANY,
a Connecticut corporation
Landlord's Address: c/o Allegis Realty Investors LLC
455 Market Street, Suite 1540
San Francisco, California 94105
All notices sent to Landlord under this
Lease shall be sent to the above address,
with copies to:
LPC MS Inc.,
101 Lincoln Center Drive, 4th Floor
Foster City, California 94404
Tenant: Premisys Communications, Inc.,
a Delaware corporation
Tenant's Address and 48664 Milmont Drive, Fremont, California 94538
Telephone Number: (510) 353-4588
Premises Square Footage: Approximately twenty nine thousand eight hundred
forty (29,840) rentable square feet
Premises Address: 48634 Milmont Drive, Fremont, California 94538
Project: Sutter Hill Business Park - 174 RESA, together
with the land on which the Project is situated
and all Common Areas
Building (if not the same as
the Project): 48630-48634 Milmont Drive, Fremont, California
94538
Tenant's Proportionate Share
of Project: 52.2%
Tenant's Proportionate Share
of Building: 52.2%
Length of Term: Eighty four (84) months
Estimated Commencement
Date: January 3, 1999
Estimated Expiration Date: December 31, 2005
<TABLE>
<CAPTION>
Monthly Base Rent: Monthly Base Monthly
Months Sq. Ft. Rate Base Rent
<S> <C> <C> <C>
01-12 29,840 x $1.30 = $38,792.00
13-24 29,840 x $1.34 = $39,985.60
25-36 29,840 x $1.38 = $41,179.20
37-48 29,840 x $1.42 = $42,372.80
49-60 29,840 x $1.46 = $43,566.40
61-72 29,840 x $1.50 = $44,760.00
73-84 29,840 x $1.54 = $45,953.60
</TABLE>
<PAGE> 16
Month to which Prepaid Base
Rent and Additional Rent will
be Applied: First (1st) month of the Term
Security Deposit: Forty five thousand nine hundred fifty three
and 60/100 dollars ($45,953.60)
Permitted Use: General office and administration,
telecommunications, computers, software,
electronic and biomedical research and
development, light manufacturing and
assembly of components, but only to the
extent permitted by the City of Fremont
and all agencies and governmental
authorities having jurisdiction thereof.
Unreserved Parking Spaces: One hundred nineteen (119) nonexclusive and
undesignated parking spaces
Broker(s): Bishop Hawk for Tenant
LPC MS, Inc. for Landlord
Tenant Improvements Twenty nine thousand eight hundred forty and
Allowance: 00/100 dollars ($29,840.00)
Architect: N/A
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<PAGE> 17
LEASE AGREEMENT
This Lease Agreement is made and entered into by and between Landlord
and Tenant on the Lease Date. The defined terms used in this Lease which are
defined in the Basic Lease Information set forth on page 1 of this Lease
Agreement ("Basic Lease Information") shall have the meaning and definition
given them in the Basic Lease Information. The Basic Lease Information, the
exhibit(s), the addendum or addenda described in the Basic Lease Information,
and this Lease Agreement are and shall be construed as a single instrument and
are referred to herein as the "Lease".
1. DEMISE
In consideration for the rents and all other charges and payments payable by
Tenant, and for the agreements, terms and conditions to be performed by Tenant
in this Lease, LANDLORD DOES HEREBY LEASE TO TENANT, AND TENANT DOES HEREBY HIRE
AND TAKE FROM LANDLORD, the Premises described below (the "Premises"), upon the
agreements, terms and conditions of this Lease for the Term hereinafter stated.
2. PREMISES
The Premises demised by this Lease is the square footage of space specified in
the Basic Lease Information and has the address specified in the Basic Lease
Information. The Premises are a part of and are contained in the Building
specified in the Basic Lease Information. The location and dimensions of the
Premises are depicted on Exhibit A, which is attached hereto and incorporated
herein by this reference. Tenant shall have the nonexclusive right to use the
parking and other common areas on the real property on which the Building is
situated (the "Property"). No easement for light or air is incorporated in the
Premises.
The Premises demised by this Lease shall also include the Tenant Improvements
(as that term is defined in Exhibit B, attached hereto and incorporated herein
by this reference) to be constructed by Landlord within the interior of the
Premises. Landlord shall construct the Tenant Improvements on the terms and
conditions set forth in Exhibit B. Landlord and Tenant agree to and shall be
bound by the terms and conditions of Exhibit B.
3. TERM
The term of this Lease (the "Term") shall be for the period of months specified
in the Basic Lease Information, commencing on the earliest to occur of the
following dates (the "Commencement Date"):
(a) The date the Tenant Improvements are approved by the appropriate
governmental agency as being in accordance with its building code and the
building permit issued for such improvements, as evidenced by the issuance
of a final building inspection approval; or
(b) The date Landlord's architect and general contractor have both
certified in writing to Tenant that the Tenant Improvements have been
substantially completed in accordance with the plans and specifications
therefor, or
(c) The date Tenant commences occupancy of the Premises;
when the Commencement Date has been determined pursuant to the foregoing,
Landlord and Tenant shall promptly execute a Commencement Date Memorandum in the
form attached hereto as Exhibit C.
4. RENT
(a) BASE RENT. Tenant shall pay to Landlord, in advance on the first day
of each month, without further notice or demand and without offset or
deduction, the monthly installments of rent specified in the Basic Lease
Information (the "Base Rent").
Upon execution of this Lease, Tenant shall pay to Landlord the Prepaid
Rent specified in the Basic Lease Information to be applied toward Base
Rent for the month of the Term specified in the Basic Lease Information.
<PAGE> 18
(b) ADDITIONAL RENT. In addition to the Base Rent, Tenant shall pay to
Landlord, in accordance with this Paragraph 4, Tenant's proportionate share
(which is hereby agreed to be Tenant's Proportionate Share as specified in
the Basic Lease Information) of the following items related to the
Building, the Property, and/or the Outside Areas (as defined in Paragraph
4(b)(3)) (the "Additional Rent"):
(1) TAXES AND ASSESSMENTS. All real estate taxes and assessments
shall include any form of assessment, license, fee, tax, levy, penalty
(if a result of Tenant's delinquency), or tax (other than net income,
estate, succession, inheritance, transfer or Real estate taxes and
franchise taxes), imposed by any authority having the direct or indirect
power to tax, or by any city, county, state or federal government or any
improvement or other district or division thereof, whether such tax is
(i) determined by the area of the Premises, the Building or the
Property, or any part thereof, or the Rent and other sums payable
hereunder by Tenant or by other tenants, including, but not limited to,
any gross income or excise tax levied by any of the foregoing
authorities with respect to receipt of Rent or other sums due under this
Lease; (ii) upon any legal or equitable interest of Landlord in the
Premises, the Building or the Property, or any part thereof; (iii) upon
this transaction or any document to which Tenant is a party creating or
transferring any interest in the Premises, the Building or the Property;
(iv) levied or assessed in lieu of, in substitution for, or in addition
to, existing or additional taxes against the Premises, the Building or
the Property, whether or not now customary or within the contemplation
of the parties; or (v) surcharged against the parking area. Tenant and
Landlord acknowledge that Proposition 13 was adopted by the voters of
the State of California in the June, 1978 election and that assessments,
taxes, fees, levies and charges may be imposed by governmental agencies
for such purposes as fire protection, street, sidewalk, road, utility
construction and maintenance, refuse removal and for other governmental
services which may formerly have been provided without charge to
property owners or occupants. It is the intention of the parties that
all new and increased assessments, taxes, fees, levies and charges due
to Proposition 13 or any other cause are to be included within the
definition of real property taxes for purposes of this Lease.
(2) INSURANCE. All insurance premiums, including premiums for "all
risk," fire and extended coverage (including earthquake endorsements)
insurance for the Building, public liability insurance, other insurance
as Landlord reasonably deems necessary, and any deductibles paid under
policies of any such insurance.
(3) OUTSIDE AREAS EXPENSES. All reasonable costs to maintain,
repair, replace, supervise, insure (including provision of public
liability insurance) and administer the areas outside of the Building
("Outside Areas"), including parking areas, landscaping (including
maintenance contracts), sprinkler systems, sidewalks, driveways, curbs,
lighting systems, and utilities for Outside Areas.
(4) PARKING CHARGES. Any parking charges or other costs levied,
assessed or imposed by, or at the direction of, or resulting from
statutes or regulations, or interpretations thereof, promulgated by any
governmental authority or insurer (not affiliated with Landlord) in
connection with the use or occupancy of the Building, the Outside Areas
and/or the Property.
(5) MAINTENANCE AND REPAIR OF BUILDING. All reasonable costs to
maintain, repair, and replace, the roof coverings, the floor slab, and
the painting of the exterior walls of the Building, the heating,
ventilation, and air conditioning ("HVAC") systems serving the Building
and/or the Premises (including the cost of maintenance contracts), and
all reasonable costs to maintain, repair and replace all utility and
plumbing systems, fixtures and equipment located outside the Building.
Notwithstanding the foregoing, Tenant shall be responsible for the cost
of replacement of capital expenditures described in this subparagraph
4(b)(5) only on a pro rata basis corresponding to the portion of the
useful life of the capital expenditure that will be exhausted during the
remainder of the Term.
(6) MANAGEMENT AND ADMINISTRATION. All reasonable costs for
management and administration of the Building and the Property,
including a property management fee, accounting, auditing, billing,
postage, employee benefits, payroll taxes, etc.
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<PAGE> 19
(c) PAYMENT OF ADDITIONAL RENT.
(1) Upon commencement of this Lease, Landlord shall submit to
Tenant an estimate of monthly Additional Rent for the period between the
Commencement Date and the following December 31 and Tenant shall pay
such estimated Additional Rent on a monthly basis concurrently with the
payment of the Base Rent. Tenant shall continue to make said monthly
payments until notified by Landlord of a change therein. By March 1 of
each calendar year, Landlord shall endeavor to provide to Tenant a
statement showing the actual Additional Rent due to Landlord for the
prior calendar year, prorated from the Commencement Date during the
first year. If the total of the monthly payments of Additional Rent that
Tenant has made for the prior calendar year (or portion thereof during
which this Lease was in effect) is less than the actual Additional Rent
chargeable to Tenant for such prior calendar year, then Tenant shall pay
the difference in a lump sum within ten (10) business days after receipt
of such statement from Landlord. Any overpayment by Tenant of Additional
Rent for the prior calendar year shall be credited towards the
Additional Rent next due.
(2) The actual Additional Rent for the prior calendar year shall be
used for purposes of calculating Tenant's monthly payment of estimated
Additional Rent for the current year, subject to adjustment as provided
above, except that in any year in which resurfacing of the parking area
or material roof repairs are planned, Landlord may include the estimated
cost of such work in the estimated monthly Additional Rent. Landlord
shall make the final determination of Additional Rent for the year in
which this Lease terminates as soon as possible after termination of
such year. Tenant shall remain liable for payment of any amount due to
Landlord in excess of the estimated Additional Rent previously paid by
Tenant, and, conversely, Landlord shall promptly return to Tenant any
overpayment, even though the Term has expired and Tenant has vacated the
Premises. Failure of Landlord to submit statements as called for herein
shall not be deemed a waiver of Tenant's obligation to pay Additional
Rent as herein provided.
(d) GENERAL PAYMENT TERMS. The Base Rent, Additional Rent and all other
sums payable by Tenant to Landlord hereunder are referred to as the "Rent".
All Rent shall be paid without deduction, offset or abatement in lawful
money of the United States of America. Checks are to be made payable to
AEtna Property Services and shall be mailed to: AEtna Property Services,
Kodak Center, 1740 Technology Drive, #600, San Jose, California 95110, or
to such other person or place as Landlord may, from time to time, designate
to Tenant in writing. Rent for any partial month during the Term shall be
prorated for the portion thereof falling due within the Term.
5. LATE CHARGE
Notwithstanding any other provision of this Lease, Tenant hereby acknowledges
that late payment to Landlord of Rent, or other amounts due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult to ascertain. If any Rent or other sums due
from Tenant are not received by Landlord or by Landlord's designated agent
within ten (10) days after their due date, then Tenant shall pay to Landlord a
late charge equal to five percent (5%) of such overdue amount, plus any
reasonable attorneys' fees incurred by Landlord by reason of Tenant's failure to
pay Rent and/or other charges when due hereunder. Landlord and Tenant hereby
agree that such late charges represent a fair and reasonable estimate of the
cost that Landlord will incur by reason of Tenant's late payment. Landlord's
acceptance of such late charges shall not constitute a waiver of Tenant's
default with respect to such overdue amount or estop Landlord from exercising
any of the other rights and remedies granted under this Lease.
6. SECURITY DEPOSIT
Concurrently with Tenant's execution of the Lease, Tenant shall deposit with
Landlord the Security Deposit specified in the Basic Lease Information as
security for the full and faithful performance of each and every term, covenant
and condition of this Lease. Landlord may use, apply or retain the whole or any
part of the Security Deposit as may be reasonably necessary (a) to remedy
Tenant's default in the payment of any Rent, (b) to repair damage to the
Premises caused by Tenant, (c) to clean the Premises upon termination of this
Lease, (d) to reimburse Landlord for the payment of any amount which Landlord
may reasonably spend or be required to spend by reason of Tenant's default, or
(e) to compensate Landlord for any other loss or damage which Landlord may
suffer by
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<PAGE> 20
reason of Tenant's default. Should Tenant faithfully and fully comply with all
of the terms, covenants and conditions of this Lease, within twenty (20) days
following the expiration of the Term, the Security Deposit or any balance
thereof shall be returned to Tenant or, at the option of Landlord, to the last
assignee of Tenant's interest in this Lease. Landlord shall not be required to
keep the Security Deposit separate from its general funds and Tenant shall not
be entitled to any interest on such deposit. If Landlord so uses or applies all
or any portion of said deposit, within five (5) days after written demand
therefor Tenant shall deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to the full extent of the above amount, and
Tenant's failure to do so shall be a default under this Lease. In the event
Landlord transfers its interest in this Lease, Landlord shall transfer the then
remaining amount of the Security Deposit to Landlord's successor in interest,
and thereafter Landlord shall have no further liability to Tenant with respect
to such Security Deposit.
7. POSSESSION
(a) TENANT'S RIGHT OF POSSESSION. Subject to Paragraph 7(b), Tenant
shall be entitled to possession of the Premises upon commencement of the
Term.
(b) DELAY IN DELIVERING POSSESSION. If for any reason whatsoever,
Landlord cannot deliver possession of the Premises to Tenant at the
commencement of the Term, this Lease shall not be void or voidable, nor
shall Landlord, or Landlord's agents, be liable to Tenant for any loss or
damage resulting therefrom. Tenant shall not be liable for Rent until
Landlord delivers possession of the Premises to Tenant. The expiration date
of the Term shall be extended by the same number of days that Tenant's
possession of the Premises was delayed.
8. USE OF PREMISES
(a) PERMITTED USES. The Premises shall be used for the Permitted Uses
specified in the Basic Lease Information and no other. The Premises shall
not be used to create any nuisance or trespass, for any illegal purpose,
for any purpose not permitted by applicable laws and regulations, or for
any purpose that would vitiate the insurance or increase the premiums for
insurance on the Premises or the Building. Tenant agrees not to overload
the floor(s) of the Building.
(b) COMPLIANCE WITH GOVERNMENTAL REGULATIONS. Tenant shall, at Tenant's
expense, faithfully observe and comply with all Municipal, State and
Federal statutes, rules, regulations, ordinances, requirements. and orders,
now in force or which may hereafter be in force pertaining to the Premises
or Tenant's use thereof, including without limitation, any statutes, rules,
regulations, ordinances, requirements, or orders requiring, as a result of
Tenant's use of the Premises, installation of fire sprinkler systems,
seismic reinforcement and related alterations, whether substantial in cost
or otherwise, and all recorded covenants, conditions and restrictions
affecting the Property ("Private Restrictions") now in force or which may
hereafter be in force; provided, however, that Tenant shall not be required
to make structural changes to the Premises or Building not related to
Tenant's specific use of the Premises unless the requirement for such
changes is imposed as a result of any improvements or additions made or
proposed to be made at Tenant's request. The judgment of any court of
competent jurisdiction, or the admission of Tenant in any action or
proceeding against Tenant, whether Landlord be a party thereto or not, that
Tenant has violated any such rule, regulation, ordinance, statute or
Private Restrictions, shall be conclusive of that fact as between Landlord
and Tenant.
9. ACCEPTANCE OF PREMISES
By entry hereunder, Tenant accepts the Premises as suitable for Tenant's
intended use and as being in good and sanitary operating order, condition and
repair, AS IS, and without representation or warranty by Landlord as to the
condition, use or occupancy which may he made thereof. Any exceptions to the
foregoing must be by written agreement executed by Landlord and Tenant.
10. SURRENDER
Tenant agrees that on the last day of the Term, or on the sooner termination of
this Lease, Tenant shall surrender the Premises to Landlord (a) in good
condition and repair (damage by Acts of God, fire, and normal wear and tear
excepted), but with all interior walls cleaned so they appear painted, any
carpets cleaned, and with all floors cleaned, together with all alterations,
additions and improvements which may have been made in or on the Premises;
except that Tenant shall remove trade fixtures put in at the expense of Tenant
and any
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<PAGE> 21
improvements as to which Landlord has, prior to the date of surrender, consented
to or requested removal; and (b) otherwise in accordance with Paragraph 32(f).
Tenant shall repair all damage caused by such removal and otherwise restore the
Premises in accordance with the preceding sentence at Tenant's sole cost and
expense. On or before the expiration or sooner termination of this Lease, Tenant
shall remove all of Tenant's personal property from the Premises. All property
of Tenant not so removed, unless such non-removal is consented to by Landlord,
shall be deemed abandoned by Tenant, provided that in such event Tenant shall
remain liable to Landlord for all costs incurred in storing and disposing of
such abandoned property of Tenant. If the Premises are not surrendered at the
end of the Term or sooner termination of this Lease, and in accordance with the
provisions of this Paragraph 10 and of Paragraph 32(f), Tenant hereby
indemnifies Landlord against loss or liability resulting from delay by Tenant in
so surrendering the Premises including, without limitation, any claims made by
any succeeding tenant founded on such delay.
11. ALTERATIONS AND ADDITIONS
(a) Tenant shall not make, or permit to be made, any alteration or
addition to the Premises, or any part thereof, without the prior written
consent of Landlord, such consent not to be unreasonably withheld,
provided, however, Tenant without Landlord's consent, shall be entitled to
make interior, non-structural alterations or additions to the Premises not
requiring any permits which separately or in the aggregate over each twelve
(12) month period of the Term do not exceed five thousand dollars
($5,000.00).
(b) Any alteration or addition to the Premises shall be at Tenant's sole
cost and expense, in compliance with all applicable laws and requirements
requested by Landlord, and in accordance with plans and specifications
approved in writing by Landlord.
(c) In the event Landlord consents to a proposed alteration or addition,
such consent shall include Landlord's advice in writing, whether or not
such proposed alteration or addition shall be required to be removed at the
expiration or termination of this Lease. If Landlord fails so to advise
Tenant regarding whether or not a proposed alteration or addition may be
removed at the expiration or termination of this Lease, then Tenant, may,
at Tenant's option, remove the alteration or addition, or surrender the
alteration or addition to Landlord with the Premises, without compensation
to Tenant, at the expiration or termination of this Lease. All additions,
alterations or improvements, including, but not limited to, heating,
lighting, electrical, air conditioning, fixed partitioning, drapery, wall
covering and paneling, built-in cabinet work and carpeting installations
made by Tenant, together with all property that has become an integral part
of the Building, shall at once be and become the property of Landlord, and
shall not be deemed trade fixtures.
(d) Tenant agrees not to proceed to make such alterations or additions,
notwithstanding consent from Landlord to do so, until five (5) days after
Tenant's receipt of such consent, in order that Landlord may post
appropriate notices to avoid any liability to contractors or material
suppliers for payment for tenant's improvements. Tenant will at all times
permit such notices to be posted and to remain posted until the completion
of work.
12. MAINTENANCE OF PREMISES
(a) MAINTENANCE BY TENANT. Throughout the Term, Tenant shall, at its
sole expense, (1) keep and maintain in good order and condition, repair,
and replace the Premises, and every part thereof, including glass, windows,
window frames, skylights, interior and exterior doors and door frames, and
the interior of the Premises, (excepting only those portions of the
Building to be maintained by Landlord, as provided in Paragraph 12(c)
below), (2) keep and maintain in good order and condition, repair, and
replace all utility and plumbing systems, fixtures and equipment, including
without limitation, electricity, gas, water, and sewer, located in or on
the Premises. Tenant shall be responsible for these costs of replacement
only on a pro rata basis corresponding to the portion of the useful life of
the capital expenditure that will be exhausted during the remainder of the
Term, (3) furnish all expendables, including light bulbs, paper goods and
soaps, used in the Premises, (4) repair all damage to the Premises, the
Building or the Outside Areas caused by the negligence or willful
misconduct of Tenant or its agents, employees, contractors or invitees.
Tenant shall not do anything to cause any damage, deterioration or
unsightliness to the Building and the Outside Areas.
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<PAGE> 22
(b) LANDLORD'S RIGHT TO MAINTAIN AND REPAIR AT TENANT'S EXPENSE.
Notwithstanding the foregoing, Landlord shall have the right, but not the
obligation, at Tenant's expense, to enter the Premises and perform Tenant's
maintenance, repair and replacement work. Within ten (10) days after
invoice therefor from Landlord, Tenant shall pay all reasonable costs and
expenses incurred by Landlord in connection with such maintenance, repair
and replacement work.
(c) MAINTENANCE BY LANDLORD. Subject to the provisions of Paragraphs
12(a), 22 and 23, and further subject to Tenant's obligation under
Paragraph 4 to reimburse Landlord, in the form of Additional Rent, for
Tenant's Proportionate Share of the cost and expense of the following
items, Landlord agrees to repair and maintain the following items: the
structural portions of the roof and the roof coverings (provided that
Tenant installs no additional air conditioning or other equipment on the
roof that damages structural portions of the roof or the roof coverings),
the foundation, the floor slab, the load bearing walls, and the exterior
walls (excluding any glass therein but including the painting thereof) of
the Building; the HVAC systems serving the Building and/or the Premises;
the utility and plumbing systems, fixtures, and equipment located outside
the Building; and the parking areas, landscaping, sprinkler systems,
sidewalks, driveways, curbs, and lighting systems in the Outside Areas.
Landlord shall not be required to repair or maintain conditions created due
to any act, negligence or omission of Tenant or its agents, contractors,
employees or invitees. Landlord's obligation hereunder to repair and
maintain is subject to the condition precedent that Landlord shall have
received written notice of the need for such repairs and maintenance.
Tenant shall promptly report in writing to Landlord any defective condition
known to it which Landlord is required to repair, and failure to so report
such defects shall make Tenant responsible to Landlord for any liability
incurred by Landlord by reason of such condition.
(d) TENANT'S WAIVER OF RIGHTS. Tenant hereby expressly waives all rights
to make repairs at the expense of Landlord or to terminate this Lease, as
provided for in California Civil Code Sections 1941 and 1942, and 1932(1),
respectively, and any similar or successor statute or law in effect or any
amendment thereof during the Term.
13. LANDLORD'S INSURANCE
Landlord shall purchase and keep in force fire, extended coverage and "all risk"
insurance covering the Building in an amount equal to eighty percent (80%) of
the replacement cost of the Building. Tenant shall, at its sole cost and
expense, comply with any and all reasonable requirements pertaining to the
Premises of any insurer necessary for the maintenance of reasonable fire and
public liability insurance, covering the Building and appurtenances. Landlord,
at Tenant's Cost, may maintain "Loss of Rents" insurance, insuring that the Rent
will be paid in a timely manner to Landlord for a period of at least twelve (12)
months if the Premises are destroyed or rendered unusable or inaccessible by any
cause insured against under this Lease.
14. TENANT'S INSURANCE
(a) PUBLIC LIABILITY INSURANCE. Tenant shall, at Tenant's expense,
secure and keep in force a "broad form" public liability insurance and
property damage policy covering the Premises and the Outside Areas,
insuring Tenant, and naming Landlord and its lenders as additional
insureds, against any liability arising out of the ownership, use,
occupancy or maintenance of the Premises and all Outside Areas. The minimum
limit of coverage of such policy shall be in the amount of not less than
Two Million Dollars ($2,000,000.00) for injury or death of one person in
any one accident or occurrence and in the amount of not less than Two
Million Dollars ($2,000,000.00) for injury or death of more than one person
in any one accident or occurrence, shall include an extended liability
endorsement providing contractual liability coverage (which shall include
coverage for Tenant's indemnification obligations in this Lease), and shall
contain a severability of interest clause or a cross liability endorsement.
Such insurance shall further insure Landlord and Tenant against liability
for property damage of at least One Million Dollars ($1,000,000.00). The
limit of any insurance shall not limit the liability of Tenant hereunder.
No policy shall be cancelable or subject to reduction of coverage, and loss
payable clauses shall be subject to Landlord's approval. Such policies of
insurance shall be issued as primary policies and not contributing with or
in excess of coverage that Landlord may carry, by an insurance company
authorized to do business in the State of California for the issuance of
such type of insurance coverage and rated A:XIII or better in Best's Key
Rating Guide. A copy of
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<PAGE> 23
said policy or a certificate evidencing to Landlord's reasonable
satisfaction that such insurance is in effect shall be delivered to
Landlord upon commencement of the Term, and thereafter whenever Landlord
shall reasonably request.
(b) PERSONAL PROPERTY INSURANCE. Tenant shall maintain in full force and
effect on all of its fixtures and equipment on the Premises, a policy or
policies of fire and extended coverage insurance with standard coverage
endorsement to the extent of the full replacement cost thereof. During the
term of this Lease the proceeds from any such policy or policies of
insurance shall be used for the repair or replacement of the fixtures and
equipment so insured. Landlord shall have no interest in the insurance upon
Tenant's equipment and fixtures and will sign all documents reasonably
necessary in connection with the settlement of any claim or loss by Tenant.
Landlord will not carry insurance on Tenant's possessions. Tenant shall
furnish Landlord with a certificate evidencing to Landlord's reasonable
satisfaction that such insurance is in effect, and whenever required, shall
satisfy Landlord that such policy is in full force and effect.
15. INDEMNIFICATION
(a) OF LANDLORD. Tenant shall indemnify and hold harmless Landlord and
agents, employees, partners, shareholders, directors, invitees, and
independent contractors (collectively "Agents") of Landlord against and
from any and all claims, liabilities, judgments, costs, demands, causes of
action and expenses (including, without limitation, reasonable attorneys'
fees) arising from (1) Tenant's use of the Premises or from any activity
done, permitted or suffered by Tenant in or about the Premises, the
Building or the Property, and (2) any act, neglect, fault, willful
misconduct or omission of Tenant, or Tenant's Agents or from any breach or
default in the terms of this Lease by Tenant, and (3) any action or
proceeding brought on account of any matter in items (1) or (2), except to
the extent caused by the sole active negligence or willful misconduct by
Landlord or its agents. If any action or proceeding is brought against
Landlord by reason of any such claim, upon notice from Landlord, Tenant
shall defend the same at Tenant's expense by counsel reasonably
satisfactory to Landlord. As a material part of the consideration to
Landlord, Tenant hereby assumes all risk of damage to property or injury to
persons in or about the Premises from any cause whatsoever (except that
which is caused by the sole active negligence or willful misconduct by
Landlord or its Agents or by the failure of Landlord to observe any of the
terms and conditions of this Lease, if such failure has persisted for an
unreasonable period of time after written notice of such failure), and
Tenant hereby waives all claims in respect thereof against Landlord. The
obligations of Tenant under this Paragraph 15 shall survive any termination
of this Lease.
(b) NO IMPAIRMENT OF INSURANCE. The foregoing indemnity shall not
relieve any insurance carrier of its obligations under any policies
required to be carried by either party pursuant to this Lease, to the
extent that such policies cover the peril or occurrence that results in the
claim that is subject to the foregoing indemnity.
16. SUBROGATION
Landlord and Tenant hereby mutually waive any claim against the other for any
loss or damage to any of their property located on or about the Premises, the
Building or the Property that is caused by or results from perils covered by
property insurance carried by the respective parties, to the extent of the
proceeds of such insurance actually received with respect to such loss or
damage, whether or not due to the negligence of the other party or its agents.
Because the foregoing waivers will preclude the assignment of any claim by way
of subrogation to an insurance company or any other person, each party now
agrees to immediately give to its insurer written notice of the terms of these
mutual waivers and shall have their insurance policies endorsed to prevent the
invalidation of the insurance coverage because of these waivers. Nothing in this
Paragraph 16 shall relieve a party of liability to the other for failure to
carry insurance required by this Lease.
17. ABANDONMENT
Tenant shall not abandon the Premises at any time during the Term. In the event
of abandonment, the rights and remedies of Tenant and Landlord shall be
determined in accordance with the applicable California statutes in effect at
the time of abandonment.
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<PAGE> 24
18. FREE FROM LIENS
Tenant shall keep the Premises and the Property, free from any liens arising out
of any work performed, materials furnished, or obligations incurred by or for
Tenant.
19. ADVERTISEMENTS AND SIGNS
Tenant shall not place or permit to be placed in, upon, or about the Premises or
the Property any signs, advertisements or notices without obtaining Landlord's
prior written consent, which consent shall not be unreasonably withheld, or
without complying with applicable law, and will not conduct, or permit to be
conducted, any sale by auction on the Premises or otherwise on the Property.
Tenant shall remove any sign, advertisement or notice placed on the Premises by
Tenant upon the expiration of the Term or sooner termination of this Lease, and
Tenant shall repair any damage or injury to the Premises or the Property caused
thereby, all at Tenant's expense. If any signs are not removed, or necessary
repairs not made, Landlord shall have the right to remove the signs and repair
any damage or injury to the Premises at Tenant's sole cost and expense.
20. UTILITIES
Tenant shall pay for all water, gas, heat, light, power, telephone service and
all other materials and services supplied to the Premises. If Tenant fails to
pay for any of the foregoing when due, Landlord may pay the same and add such
amount to the Rent.
21. ENTRY BY LANDLORD
Tenant shall permit Landlord and its Agents to enter into and upon the Premises
at all reasonable times, upon reasonable notice (except in the case of an
emergency, for which no notice shall be required), and subject to Tenant's
reasonable security arrangements, for the purpose of inspecting the same or
showing the Premises to prospective purchasers, lenders or tenants or to alter,
improve, maintain and repair the Premises as required or permitted of Landlord
under the terms hereof, without any rebate of Rent and without any liability to
Tenant for any loss of occupation or quiet enjoyment of the Premises thereby
occasioned (except for actual damages resulting from the negligence or willful
misconduct of Landlord or its agents); and Tenant shall permit Landlord to post
notices of non-responsibility and ordinary "for sale" or "for lease" signs,
provided that Landlord may post such "for lease" signs and exhibit the Premises
to prospective tenants only during the six (6) months prior to termination of
this Lease. No such entry shall be construed to be a forcible or unlawful entry
into, or a detainer of, the Premises, or an eviction of Tenant from the
Premises.
22. DESTRUCTION AND DAMAGE
(a) If the Building is damaged by fire or other perils covered by
extended coverage insurance, Landlord shall, at Landlord's option:
(1) In the event of total destruction (which shall mean destruction
or damage in excess of twenty-five percent (25%) of the full insurable
value thereof) of the Premises, elect either to commence promptly to
repair and restore the Premises and prosecute the same diligently to
completion, in which event this Lease shall remain in full force and
effect; or not to repair or restore the Premises, in which event this
Lease shall terminate. Landlord shall give Tenant written notice of its
intention within sixty (60) days after the date (the "Casualty Discovery
Date") Landlord obtains actual knowledge of such destruction. If
Landlord elects not to restore the Premises, this Lease shall be deemed
to have terminated as of the date of such total destruction.
(2) In the event of a partial destruction (which shall mean
destruction or damage to an extent not exceeding twenty-five percent
(25%) of the full insurable value thereof) of the Premises for which
Landlord will receive insurance proceeds sufficient to cover the cost to
repair and restore such partial destruction and, if the damage thereto
is such that the Premises may be substantially repaired or restored to
its condition existing immediately prior to such damage or destruction
within one hundred eighty (180) days from the Casualty Discovery Date,
Landlord shall commence and proceed diligently with the work of repair
and restoration, in which event the Lease shall continue in full force
and effect. If such repair and restoration requires longer than one
hundred eighty (180) days or if the insurance proceeds therefor (plus
any amounts Tenant may elect or is obligated to contribute) are not
sufficient to cover the cost of such
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<PAGE> 25
repair and restoration, Landlord may elect either to so repair and
restore, in which event the Lease shall continue in full force and
effect, or not to repair or restore, in which event the Lease shall
terminate. In either case, Landlord shall give written notice to Tenant
of its intention within sixty (60) days after the Casualty pursuant to
the provisions of this Lease, and (2) the rent and any additional rent
payable by the assignee or sublessee to Tenant, after deducting the
costs incurred by Tenant in connection with any such assignment or
sublease. The assignment or sublease agreement, as the case may be,
after approval by Landlord, shall not be amended without Landlord's
prior written consent, and shall contain a provision directing the
assignee or subtenant to pay the rent and other sums due thereunder
directly to Landlord upon receiving written notice from Landlord that
Tenant is in default under this Lease with respect to the payment of
Rent. Landlord's collection of such rent and other sums shall not
constitute an acceptance by Landlord of attornment by such assignee or
subtenant. A consent to one assignment, subletting, occupation or use
shall not be deemed to be a consent to any other or subsequent
assignment, subletting, occupation or use, and consent to any assignment
or subletting shall in no way relieve Tenant of any liability under this
Lease. Any assignment or subletting without Landlord's consent shall be
void, and shall, at the option of Landlord, constitute a Default under
this Lease.
(d) Tenant shall pay Landlord's reasonable fees, not to exceed Five
Hundred Dollars ($500) per transaction, incurred in connection with
Landlord's review and processing of documents regarding any proposed
assignment or sublease.
(e) Tenant acknowledges and agrees that the restrictions,
conditions and limitations imposed by this Paragraph 24 on Tenant's
ability to assign or transfer this Lease or any interest herein, to
sublet the Premises or any part thereof, to transfer or assign any right
or privilege appurtenant to the Premises, or to allow any other person
to occupy or use the Premises or any portion thereof, are, for the
purposes of California Civil Code Section 1951.4, as amended from time
to time, and for all other purposes, reasonable at the time that the
Lease was entered into, and shall be deemed to be reasonable at the time
that Tenant seeks to assign or transfer this Lease or any interest
herein, to sublet the Premises or any part thereof, to transfer or
assign any right or privilege appurtenant to the Premises, or to allow
any other person to occupy or use the Premises or any portion thereof.
Discovery Date. If Landlord elects not to restore the Premises, this
Lease shall be deemed to have terminated as of the date of such partial
destruction.
(3) Notwithstanding anything to the contrary contained in this
Paragraph 22, in the event of damage to the Premises occurring during
the last twelve (12) months of the Term, Landlord may elect to terminate
this Lease by written notice of such election given to Tenant within
thirty (30) days after the Casualty Discovery Date. Tenant at is option
shall have up to 120 days to vacate, from date of Landlord's notice;
provided, however, that Tenant shall pay the full scheduled monthly base
rent without offset, except for those portions of the Premises that
Landlord is occupying or making unusable to Tenant as a result of
Landlord's reconstruction or repair of the Premises, while Tenant is in
occupancy of the Premises.
(b) If the Premises is damaged by any peril not covered by extended
coverage insurance, and the cost to repair such damage exceeds any
Amount Tenant may agree to contribute, Landlord may elect either to
commence promptly to repair and restore the Premises and prosecute the
same diligently to completion, in which event this Lease shall remain in
full force and effect; or not to repair or restore the Premises, in
which event this Lease shall terminate. Landlord shall give Tenant
written notice of its intention within sixty (60) days after the
Casualty Discovery Date. If Landlord elects not to restore the Premises,
this Lease shall be deemed to have terminated as of the date on which
Tenant surrenders possession of the Premises to Landlord, except that if
the damage to the Premises materially impairs Tenant's ability to
continue its business operations in the Premises, then this Lease shall
he deemed to have terminated as of the date such damage occurred.
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(e) Notwithstanding anything to the contrary in this Paragraph 22,
Landlord shall have the option to terminate this Lease, exercisable by
notice to Tenant within sixty (60) days after the Casualty Discovery
Date, in each of the following instances:
(1) If more than twenty-five percent (25%) of the full
insurable value of the Building or the Project is damaged or destroyed,
regardless of whether or not the Premises are destroyed.
(2) If the Building or the Project or any portion thereof is
damaged or destroyed and the repair and restoration of such damage
requires longer than one hundred eighty (180) days from the Casualty
Discovery Date.
(3) If the Building or the Project or any portion thereof is
damaged or destroyed and the insurance proceeds therefor are not
sufficient to cover the costs of repair and restoration.
(4) If the Building or the Project or any portion thereof is
damaged or destroyed during the last twelve (12) months of the Term.
(d) In the event of repair and restoration as herein provided, the
monthly installments of Base Rent shall be abated proportionately in the
ratio which Tenant's use of the Premises is impaired during the period
of such repair or restoration, provided, however, that Tenant shall not
be entitled to such abatement to the extent that such damage or
destruction resulted from the acts or inaction of Tenant or Tenant's
Agents. Except as expressly provided in the immediately preceding
sentence with respect to abatement of Base Rent, Tenant shall have no
claim against Landlord for, and hereby releases Landlord and Landlord's
Agents from responsibility for and waives its entire claim of recovery
for any cost, loss or expense suffered or incurred by Tenant as a result
of any damage to or destruction of the Premises, the Building or the
Project or the repair or restoration thereof, including, without
limitation, any cost, loss or expense resulting from any loss of use of
the whole or any part of the Premises, the Building or the Project
and/or any inconvenience or annoyance occasioned by such damage, repair
or restoration, however, that Tenant shall not be entitled to any
compensation or damages for loss of use of the whole or any part of the
Premises and/or any inconvenience or annoyance occasioned by such
damage, repair or restoration.
(e) If Landlord is obligated to or elects to repair or restore as
herein provided, Landlord shall repair or restore only the initial
tenant investments, if any, constructed by Landlord in the Premises
pursuant to the terms of this Lease, substantially to their condition
existing immediately prior to the occurrence of the damage or
destruction; and Tenant shall promptly repair and restore, at Tenant's
expense. Tenant's Alterations which were not constructed by Landlord.
(f) Tenant hereby waives the provisions of California Civil Code
Section 1932(2) and Section 1933(4) which permit termination of a lease
upon destruction of the leased premises, and the provisions of any
similar law now or hereinafter in effect, and the provisions of this
Paragraph 22 shall govern exclusively in case of such destruction.
Notwithstanding anything to the contrary contained in the Lease:
A. If the Premises are substantially damaged or impaired by fire
(25% or more) or other casualty as reasonably determined by Landlord,
and the Premises cannot be restored within two hundred ten (210) days
after the date of such damage, Tenant may terminate this Lease.
B. If this Lease is not terminated by Landlord as provided herein,
Landlord shall restore the Premises and all Tenant Improvements
installed by Landlord to the condition in which they existed immediately
prior to the casualty.
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23. CONDEMNATION
If twenty-five percent (25%) or more of the Building or the parking area for the
Premises is taken for any public or quasi-public purpose by any lawful
governmental power or authority, by exercise of the right of appropriation,
inverse condemnation, condemnation, or eminent domain, or sold to prevent such
taking (each such event being referred to as a "Condemnation"), Landlord may, at
its option, terminate this Lease as of the date title vests In the condemning
party. If the Building after any Condemnation and any repairs by Landlord would
be untenantable for the conduct of Tenant's business operations, Tenant shall
have the right to terminate this Lease as of the date title vests in the
condemning party. If either party elects to terminate this Lease as provided
herein, such election shall be made by written notice to the other party given
within thirty (30) days after the nature and extent of such Condemnation have
been finally determined. Tenant shall not because of such taking assert any
claim against Landlord. Landlord shall be entitled to receive the proceeds of
all Condemnation awards, and Tenant hereby assigns to Landlord all of its
interest in such awards. If less than twenty-five percent (25%) of the Building
or the parking area is taken, Landlord at its option may terminate this Lease.
If neither Landlord nor Tenant elects to terminate this Lease to the extent
permitted above, Landlord shall promptly proceed to restore the Premises, to the
extent of any Condemnation award received by Landlord, to substantially their
same condition as existed prior to such Condemnation, allowing for the
reasonable effects of such Condemnation, and a proportionate abatement shall be
made to the Base Rent corresponding to the time during which, and to the portion
of the floor area of the Building (adjusted for any increase thereto resulting
from any reconstruction) of which, Tenant is deprived on account of such
Condemnation and restoration. The provisions of California Code of Civil
Procedure Section 1265.130, which allows either party to petition the Superior
Court to terminate the Lease in the event of a partial taking of the Premises,
and any other applicable law now or hereafter enacted, are hereby waived by
Landlord and Tenant
24. ASSIGNMENT AND SUBLETTING
(a) Tenant shall not voluntarily or by operation of law, (1) mortgage,
pledge, hypothecate or encumber this Lease or any interest herein, (2) assign or
transfer this Lease or any interest herein, sublet the Premises or any part
thereof, or any right or privilege appurtenant hereto, or allow any other person
(the employees, agents and invitees of Tenant excepted) to occupy or use the
Premises, or any portion thereof, without first obtaining the written consent of
Landlord, which consent shall not be withheld unreasonably. When Tenant requests
Landlord's consent to such assignment or subletting, it shall notify Landlord in
writing of the name and address of the proposed assignee or subtenant and the
nature and character of the business of the proposed assignee or subtenant and
shall provide current financial statements for the proposed assignee or
subtenant prepared in accordance with generally accepted accounting principles.
Tenant shall also provide Landlord with a copy of the proposed sublet or
assignment agreement, including all material terms and conditions thereof.
Landlord shall have the option, to be exercised within thirty (30) days of
receipt of the foregoing, to (1) cancel this Lease as of the commencement date
stated in the proposed sublease or assignment, (2) acquire from Tenant the
interest, or any portion thereof, in this Lease and/or the Premises that Tenant
proposes to assign or sublease, on the same terms and conditions as stated in
the proposed sublet or assignment agreement, (3) consent to the proposed
assignment or sublease, or (4) refuse its consent to the proposed assignment or
sublease, providing that such consent shall not be unreasonably withheld.
(b) Without otherwise limiting the criteria upon which Landlord may
withhold its consent, Landlord may take into account the reputation and credit
worthiness of the proposed assignee or subtenant, the character of the business
proposed to be conducted in the Premises or portion thereof sought to be
subleased, and the potential impact of the proposed assignment or sublease on
the economic value of the Premises. In any event, Landlord may reasonably
withhold its consent to any assignment or sublease, if (l) the actual use
proposed to be conducted in the Premises or portion thereof conflicts with the
provisions of Paragraph 8(a), unless such actual use proposed is consented to by
Landlord, which consent shall not be withheld unreasonably, or 8(b) above or
with any other lease which restricts the use to which may space in the Building
may be put, or (2) the proposed assignment or sublease requires alterations,
improvements or additions to the Premises or portions thereof, which Landlord
does not consent to, which consent shall not be unreasonably withheld.
(c) If Landlord approves an assignment or subletting as herein provided,
Tenant shall pay to Landlord, as Additional Rent, seventy-five percent (75%) of
the difference, if any, between (1) the Base
25. TENANT'S DEFAULT
The occurrence of any one of the following events shall constitute an event of
default on the part of Tenant ("Default"):
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(a) The abandonment of the Premises by Tenant;
(b) Failure to pay any installment of Rent or any other monies due and
payable hereunder, said failure continuing for a period of three (3) days
after written notice that said Rent or other monies have not been paid;
however, said notice shall constitute the Three-Day Notice to Pay Rent or
Quit required under California Law;
(c) A general assignment by Tenant for the benefit of creditors:
(d) The filing of a voluntary petition in bankruptcy by Tenant, the
filing of a voluntary petition for an arrangement, the filing of a
petition, voluntary or involuntary, for reorganization, or the filing of an
involuntary petition by Tenant's creditors, said involuntary petition
remaining undischarged for a period of sixty (60) days;
(e) Receivership, attachment, or other judicial seizure of substantially
all of Tenant's assets on the Premises, such attachment or other seizure
remaining undisguised or undischarged for a period of sixty (60) days after
the levy thereof;
(f) Failure of Tenant to execute and deliver to Landlord any estoppel
certificate, subordination agreement, or lease amendment within the time
periods and in the manner required by Paragraph 30 or 31 or 42;
(g) An assignment or sublease, or attempted assignment or sublease, of
this Lease or the Premises by Tenant contrary to the provision of Paragraph
24, unless such assignment or sublease is expressly conditioned upon Tenant
having received Landlord's consent thereto;
(h) Failure of Tenant to restore the Security Deposit to the amount and
within the time period provided in Paragraph 6 above;
(i) Failure in the performance of any of Tenant's covenants, agreements
or obligations hereunder (except those failures specified as events of
Default in other Paragraphs of this Paragraph 25, which shall be governed
by such other Paragraphs), which failure continues for ten (10) days after
written notice thereof from Landlord to Tenant provided that, if Tenant has
exercised reasonable diligence to cure such failure and such failure cannot
be cured within such ten (10) day period despite reasonable diligence,
Tenant shall not be in default under this subparagraph unless Tenant fails
thereafter diligently and continuously to prosecute the cure to completion;
and
(j) Chronic delinquency by Tenant in the payment of Rent, or any other
periodic payments required to be paid by Tenant under this Lease. "Chronic
delinquency" shall mean failure by Tenant to pay Rent, or any other
payments required to be paid by Tenant under this Lease for any three (3)
months (consecutive or nonconsecutive) during any twelve (12) month period.
In the event of a Chronic Delinquency, in addition to Landlord's other
remedies for Default provided in this Lease, at Landlord's option, Landlord
shall have the right to require that Rent be paid by Tenant quarterly, in
advance.
Tenant agrees that any notice given by Landlord pursuant to Paragraph
25(b), (i) or (j) above shall satisfy the requirements for notice under
California Code of Civil Procedure Section 1161, and Landlord shall not be
required to give any additional notice in order to be entitled to commence
an unlawful detainer proceeding.
26. LANDLORD'S REMEDIES
(a) TERMINATION. In the event of any Default by Tenant, then in addition
to any other remedies available to Landlord at law or in equity and under
this Lease, Landlord shall have the immediate option to terminate this
Lease and all rights of Tenant hereunder by giving written notice of such
intention to terminate. In the event that Landlord shall elect to so
terminate this Lease then Landlord may recover from Tenant:
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(1) the worth at the time of award of any unpaid Rent and any other
sums due and payable which have been earned at the time of such
termination; plus
(2) the worth at the time of award of the amount by which the
unpaid Rent and any other sums due and payable which would have been
earned after termination until the time of award exceeds the amount of
such rental loss Tenant proves could have been reasonably avoided; plus
(3) the worth at the time of award of the amount by which the
unpaid Rent and any other sums due and payable for the balance of the
term of this Lease after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided; plus
(4) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course would be
likely to result therefrom, including, without limitation, any costs or
expenses incurred by Landlord (i) in retaking possession of the
Premises; (ii) in maintaining, repairing, preserving, restoring,
replacing, cleaning, altering or rehabilitating the Premises or any
portion thereof, including such acts for reletting to a new tenant or
tenants; (iii) for leasing commissions; or (iv) for any other costs
necessary or appropriate to relet the Premises; plus
(5) such reasonable attorneys' fees incurred by Landlord as a
result of a Default, and costs in the event suit is filed by Landlord to
enforce such remedy; and plus
(6) at Landlord's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by
applicable law.
As used in subparagraphs (1) and (2) above, the "worth at the time of award" is
computed by allowing interest at an annual rate equal to twelve percent (12%)
per annum or the maximum rate permitted by law, whichever is less. As used in
subparagraph (3) above, the "worth at the time of award" is 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 (1%). Tenant waives redemption
or relief from forfeiture under California Code of Civil Procedure Sections 1174
and 1179, or under any other present or future law, in the event Tenant is
evicted or Landlord takes possession of the Premises by reason of any Default of
Tenant hereunder.
(b) CONTINUATION OF LEASE. In the event of any Default by Tenant, then
in addition to any other remedies available to Landlord at law or in equity
and under this Lease, Landlord shall have the remedy described in
California Civil Code Section 1951.4 (Landlord may continue this Lease in
effect after Tenant's Default and abandonment and recover Rent as it
becomes due, provided Tenant has the right to sublet or assign, subject
only to reasonable limitations).
(c) RE-ENTRY. In the event of any Default by Tenant, Landlord shall also
have the right, with or without terminating this Lease, in compliance with
applicable law, to re-enter the Premises and remove all persons and
property from the Premises; such property may be removed and stored in a
public warehouse or elsewhere at the cost of and for the account of Tenant.
(d) RELETTING. In the event of the abandonment of the Premises by Tenant
or in the event that Landlord shall elect to re-enter as provided in
Paragraph 26(c) or shall take possession of the Premises pursuant to legal
proceeding or pursuant to any notice provided by law, then if Landlord does
not elect to terminate this Lease as provided in Paragraph 26(a), Landlord
may from time to time, without terminating this Lease, relet the Premises
or any part thereof for such term or terms and at such rental or rentals
and upon such other terms and conditions as Landlord in its sole discretion
may deem advisable with the right to make alterations and repairs to the
Premises. In the event that Landlord shall elect to so relet, then rentals
received by Landlord from such reletting shall be applied in the following
order: (1) reasonable attorneys' fees incurred by Landlord as a result of a
Default and costs in the event suit is filed by Landlord to enforce such
remedies; (2) to the payment of any indebtedness other than Rent due
hereunder from Tenant to Landlord; (3) to the payment of any costs
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of such reletting; (4) to the payment of the costs of any alterations and
repairs to the Premises; (5) to the payment of Rent due and unpaid
hereunder; and (6) the residue, if any, shall be held by Landlord and
applied in payment of future Rent and other sums payable by Tenant
hereunder as the same may become due and payable hereunder. Should that
portion of such rentals received from such reletting during any month,
which is applied to the payment of Rent hereunder, be less than the Rent
payable during the month by Tenant hereunder, then Tenant shall pay such
deficiency to Landlord. Such deficiency shall be calculated and paid
monthly. Tenant shall also pay to Landlord, as soon as ascertained, any
costs and expenses incurred by Landlord in such reletting or in making such
alterations and repairs not covered by the rentals received from such
reletting.
(e) TERMINATION. No re-entry or taking of possession of the Premises by
Landlord pursuant to this Paragraph 26 shall be construed as an election to
terminate this Lease unless a written notice of such intention is given to
Tenant or unless the termination thereof is decreed by a court of competent
jurisdiction. Notwithstanding any reletting without termination by Landlord
because of any Default by Tenant, Landlord may at any time after such
reletting elect to terminate this Lease for any such Default.
(f) CUMULATIVE REMEDIES. The remedies herein provided are not exclusive
and Landlord shall have any and all other remedies provided herein or by
law or in equity.
(g) NO SURRENDER. No act or conduct of Landlord, whether consisting of
the acceptance of the keys to the Premises, or otherwise, shall be deemed
to be or constitute an acceptance of the surrender of the Premises by
Tenant prior to the expiration of the Term, and such acceptance by Landlord
of surrender by Tenant shall only flow from and must be evidenced by a
written acknowledgment of acceptance of surrender signed by Landlord. The
surrender of this Lease by Tenant, voluntarily or otherwise, shall not work
a merger unless Landlord elects in writing that such merger take place, but
shall operate as an assignment to Landlord of any and all existing
subleases, or Landlord may, at its option, elect in writing to treat such
surrender as a merger terminating Tenant's estate under this Lease, and
thereupon Landlord may terminate any or all such subleases by notifying the
sublessee of its election so to do within five (5) days after such
surrender.
27. ATTORNEY'S FEES
In the event any legal action or proceeding, including arbitration and
declaratory relief, is commenced for the purpose of enforcing any rights or
remedies pursuant to this Lease, the prevailing party shall be entitled to
recover from the non-prevailing party reasonable attorneys' fees, as well as
costs of suit, in said action or proceeding, whether or not such action is
prosecuted to judgment.
28. TAXES
Tenant shall be liable for and shall pay, prior to delinquency, all taxes levied
against personal property and trade or business fixtures of Tenant. If any
alteration, addition or improvement installed by Tenant pursuant to Paragraph
11, or any personal property, trade fixture or other property of Tenant, is
assessed and taxed with the Property, Tenant shall pay such taxes to Landlord
within ten (10) days after delivery to Tenant of a statement therefor.
29. EFFECT OF CONVEYANCE
The term "Landlord" as used in this Lease, means only the owner for the time
being of the Property containing the Building, so that, in the event of any sale
of the Property or the Building. Landlord shall be and hereby is entirely freed
and relieved of all covenants and obligations of Landlord hereunder accruing
from and after the transfer, and it shall be deemed and construed, without
further agreement between the parties and the purchaser at any such sale, that
the purchaser of the Property or the Building has assumed and agreed to carry
out any and all covenants and obligations of Landlord hereunder.
30. TENANT'S ESTOPPEL CERTIFICATE
From time to time, upon written request of Landlord, Tenant shall execute,
acknowledge and deliver to Landlord or its designee, a written certificate
stating (a) the date this Lease was executed, the Commencement Date of the Term
and the date the Term expires; (b) the date Tenant entered into occupancy of the
Premises; (c) the amount of Rent and the date to which such Rent has been
paid; (d) that this lease is in full force and effect and has not been
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assigned, modified, supplemented or amended in any way (or, if assigned,
modified, supplemented or amended, specifying the date and terms of any
agreement so affecting this lease); (e) that this lease represents the entire
agreement between the parties with respect to Tenant's right to use and occupy
the Premises (or specifying such other agreements, if any); (f) that all
obligations under this Lease to be performed by Landlord as of the date of such
certificate have been satisfied (or specifying those as to which Tenant claims
that Landlord has yet to perform); (g) that all required contributions by
Landlord to Tenant on account of Tenant's improvements have been received (or
stating exceptions thereto); (h) that on such date there exist no defenses or
offsets that Tenant has against the enforcement of this Lease by Landlord (or
stating exceptions thereto); (i) that no Rent or other sum payable by Tenant
hereunder has been paid more than one (1) month in advance (or stating
exceptions thereto); (j) that security has been deposited with Landlord, stating
the amount thereof, and (k) any other matters evidencing the status of this
Lease that may be required either by a lender making a loan to Landlord to be
secured by a deed of trust covering the Premises or by a purchaser of the
Premises. Any such certificate delivered pursuant to this Paragraph 30 may be
relied upon by a prospective purchaser of Landlord's interest or a mortgagee of
Landlord's interest or assignee of any mortgage upon Landlord's interest in the
Premises. If Tenant shall fail to provide such certificate within ten (10) days
of receipt by Tenant of a written request by Landlord as herein provided, such
failure shall, at Landlord's election, constitute a Default under this Lease,
and Tenant shall be deemed to have given such certificate as above provided
without modification and shall be deemed to have admitted the accuracy of any
information supplied by Landlord to a prospective purchaser or mortgagee.
31. SUBORDINATION
Landlord shall have the right to cause this Lease to be and remain subject and
subordinate to any and all mortgages, deeds of trust and ground leases, if any
("Encumbrances") that are now or may hereafter be executed covering the
Premises, or any renewals, modifications, consolidations, replacements or
extensions thereof, for the full amount of all advances made or to be made
thereunder and without regard to the time or character of such advances,
together with interest thereon and subject to all the terms and provisions
thereof; provided only, that in the event of termination of any such ground
lease or upon the foreclosure of any such mortgage or deed of trust, so long as
Tenant is not in default, the holder thereof ("Holder") shall agree to recognize
Tenant's rights under this Lease as long as Tenant shall pay the Rent and
observe and perform all the provisions of this Lease to be observed and
performed by Tenant. Within ten (10) days after Landlord's written request,
Tenant shall execute, acknowledge and deliver any and all reasonable documents
required by Landlord or the Holder to effectuate such subordination. If Tenant
fails to do so, such failure shall constitute a Default by Tenant under this
Lease. Notwithstanding anything to the contrary set forth in this Paragraph 31,
Tenant hereby attorns and agrees to attorn to any person or entity purchasing or
otherwise acquiring the Premises at any sale or other proceeding or pursuant to
the exercise of any other rights, powers or remedies under such Encumbrance.
32. ENVIRONMENTAL COVENANTS
(a) As used herein, the term "Hazardous Material" shall mean any
substance or material which has been determined by any state, federal or
local governmental authority to be capable of posing a risk of injury to
health, safety or property, including all of those materials and substances
designated as hazardous or toxic by the city in which the Premises are
located, the U.S. Environmental Protection Agency, the Consumer Product
Safety Commission, the Food and Drug Administration, the California Water
Resources Control Board, the Regional Water Quality Control Board, San
Francisco Bay Region, the California Air Resources Board, CAL/OSHA
Standards Board, Division of Occupational Safety and Health, the California
Department of Food and Agriculture, the California Department of Health
Services, and any federal agencies that have overlapping jurisdiction with
such California agencies, or any other governmental agency now or hereafter
authorized to regulate materials and substances in the environment. Without
limiting the generality of the foregoing, the term "Hazardous Material"
shall include all of those materials and substances defined as "hazardous
materials" or "hazardous waste" in Sections 66680 through 66685 of Title 22
of the California Administrative Code, Division 4, Chapter 30, as the same
shall be amended from time to time, petroleum, petroleum-related substances
and the by-products, fractions, constituents and sub-constituents of
petroleum or petroleum-related substances, asbestos, and any other
materials requiring remediation now or in the future under federal, state
or local statutes, ordinances, regulations or policies.
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(b) Tenant represents, warrants and covenants (i) that it will use and
store in, on or about the Premises, only those Hazardous Materials that are
necessary for Tenant to conduct its business activities on the Premises,
(ii) that, with respect to any such Hazardous Materials, Tenant shall
comply with all applicable federal, state and local laws, rules,
regulations, policies and authorities relating to the storage, use,
disposal or cleanup of Hazardous Materials, including, but not limited to,
the obtaining of proper permits, and (iii) that it will not dispose of any
Hazardous Materials in, on or about the Premises under any circumstances.
(c) Tenant shall immediately notify Landlord of any inquiry, test,
investigation or enforcement proceeding by or against Tenant, Landlord or
the Premises concerning a Hazardous Material. Tenant acknowledges that
Landlord, as the owner of the Premises, shall have the right, as its
election, in its own name or as Tenant's agent, to negotiate, defend,
approve and appeal, at Tenant's expense, any action taken or order issued
with regard to a Hazardous Material by an applicable governmental
authority.
(d)If Tenant's storage, use or disposal of any Hazardous Material in,
on or adjacent to the Premises results in any contamination of the
Premises, the soil or surface or groundwater (1) requiring remediation
under federal, state or local statutes, ordinances, regulations, or
policies, or (2) at levels which are unacceptable to Landlord, in
Landlord's reasonable judgment, Tenant agrees to clean up said
contamination. Tenant further agrees to indemnify, defend and hold Landlord
harmless from and against any claims, liabilities, losses, suits, causes of
action, costs, expenses or fees, including attorneys' fees and costs,
arising out of or in connection with any remediation, cleanup work, inquiry
or enforcement proceeding in connection therewith, and any Hazardous
Materials currently or hereafter used, stored or disposed of by Tenant or
its agents, employees, contractors or invitees in, on or adjacent to the
Premises.
(e) Notwithstanding any other right of entry granted to Landlord under
this Lease, Landlord shall have the right to enter the Premises or to have
consultants enter the Premises throughout the term of this Lease, at
reasonable times and upon reasonable notice, for the purpose of (1)
determining whether the Premises are in conformity with federal, state and
local statutes, regulations, ordinances, and policies including those
pertaining to the environmental condition of the Premises, (2) conducting
an environmental audit or investigation of the Premises for purposes of
sale, transfer, conveyance or financing, (3) determining whether Tenant has
complied with this Paragraph 32, and (4) determining the corrective
measures, if any, required of Tenant to ensure the safe use, storage and
disposal of Hazardous Materials, or to remove Hazardous Materials (except
to the extent used. stored or disposed of by Tenant or its agents,
employees, contractors or invitees in compliance with applicable law).
Tenant agrees to provide access and reasonable assistance for such
inspections. Such inspections may include, but are not limited to, entering
the Premises or adjacent property with drill rigs or other machinery for
the purpose of obtaining laboratory samples. Landlord shall not be limited
in the number of such inspections during the term of this Lease. To the
extent such inspections disclose the presence of Hazardous Materials used,
stored or disposed of by Tenant or its agents, employees, contractors or
invitees, Tenant shall reimburse Landlord for the cost of such inspections
within ten (10) days of receipt of a written statement thereof. If such
consultants determine that the Premises are contaminated with Hazardous
Materials used, stored or disposed of by Tenant or its agents, employees
contractors or invitees, Tenant shall, in a timely manner, at its expense,
remove such Hazardous Materials or otherwise comply with the
recommendations of such consultants to the reasonable satisfaction of
Landlord and any applicable governmental agencies. The right granted to
Landlord herein to inspect the Premises shall not create a duty on
Landlord's part to inspect the Premises, or liability of Landlord for
Tenant's use, storage or disposal of Hazardous Materials, it being
understood that Tenant shall be solely responsible for all liability in
connection therewith.
(f) Tenant shall surrender the Premises to Landlord upon the expiration
or earlier termination of this Lease free of debris, waste and Hazardous
Materials used, stored or disposed of by Tenant or its agents, employees,
contractors or invitees, and in a condition which complies with all
governmental statutes, ordinances, regulations and policies,
recommendations of consultants hired by Landlord, and such other reasonable
requirements as may be imposed by Landlord.
(g) Tenant's obligations under this Paragraph 32 shall survive
termination of this Lease.
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<PAGE> 33
(h) Landlord hereby discloses to Tenant that the Premises and the
Property are or may be in an area in which contamination of soils or
groundwater by Hazardous Materials may exist. If Tenant desires more
definite information regarding the existence or possible existence of
contamination by Hazardous Materials of soils or groundwater of or beneath
the Premises, the Property, or other real property in the general area of
the Property, then Tenant shall investigate such matters.
(i) Landlord will not charge Tenant for, and Tenant shall not be
obligated to Landlord under any provision of this lease with respect to (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 in, on or about the Premises or the Building, or the soil,
groundwater or surface water thereof, prior to the Commencement Date; or
(ii) the removal, investigation, monitoring or remediation of any Hazardous
Material present on or about the Premises or the Building, or the soil,
groundwater or surface water thereof, caused by any source, including third
parties other than Tenant, prior to the Commencement Date as a result of or
in connection with the acts or omissions of persons other than Tenant or
its parent, subsidiaries, affiliates, divisions, directors, officers,
agents, employees, contractors, customers, invitees, subtenants or assigns
(all such parties collectively hereinafter referred to in this subparagraph
as "Tenant"); provided, however, Tenant shall be fully obligated to
Landlord under the provisions of this Lease for all claims incurred by
Landlord to the extent that (a) Tenant contributes to the presence of such
Hazardous Materials or Tenant exacerbates the conditions of the conditions
caused by such Hazardous Materials, or (b) Tenant allows or permits such
persons to cause such Hazardous Materials to be present in, on, under,
through or about the Premises or the Property.
33. NOTICE
All notices and demands which may or are to be required or permitted to be given
to either party by the other hereunder shall be in writing and shall be sent by
United States mail, postage prepaid, certified, or by personal delivery or
overnight courier, addressed to the addressee at the address for such addressee
as specified in the Basic Lease Information, or to such other place as such
party may from time to time designate in a notice to the other party given as
provided herein, or by telex or telecopy at the number therefor designated by
the addressee in a written notice given as provided herein. Notice shall be
deemed given upon the earlier of actual receipt or the third day following
deposit in the United States mail in the manner described above.
34. WAIVER
The waiver of any breach of any term, covenant or condition of this Lease shall
not be deemed to be a waiver of such term, covenant or condition or any
subsequent breach of the same or any other term, covenant or condition herein
contained. The subsequent acceptance of Rent by Landlord shall not be deemed to
be a waiver of any preceding breach by Tenant, other than the failure of Tenant
to pay the particular rental so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such Rent. No delay or
omission in the exercise of any right or remedy of Landlord on any Default by
Tenant shall impair such a right or remedy or be construed as a waiver. Any
waiver by Landlord of any Default must be in writing and shall not be a waiver
of any other Default concerning the same or any other provisions of this Lease.
35. HOLDING OVER
Any holding over after the expiration of the Term, without the express written
consent of Landlord, shall constitute a Default and, without limiting Landlord's
remedies provided in this Lease, such holding over shall be construed to be a
tenancy at sufferance, at a rental rate of one hundred fifty thirty-five percent
(150%) (135%) of the Base Rent last due in this Lease, plus Additional Rent, and
shall otherwise be on the terms and conditions herein specified, so far as
applicable.
36. SUCCESSORS AND ASSIGNS
The terms, covenants and conditions of this Lease shall, subject to the
provisions as to assignment. apply to and bind the heirs, successors, executors,
administrators and assigns of all of the parties hereto. If Tenant shall consist
of more than one entity or person, the obligations of Tenant under this Lease
shall be joint and several.
37. TIME
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Time is of the essence of this Lease and each and every term, condition and
provision herein.
38. BROKERS
Landlord and Tenant each represents and warrants to the other that neither it
nor its officers or agents nor anyone acting on its behalf has dealt with any
real estate broker except the Broker(s) specified in the Basic Lease Information
in the negotiating or making of this Lease, and each party agrees to indemnify
and hold harmless the other from any claim or claims, and costs and expenses,
including attorneys' fees, incurred by the indemnified party in conjunction with
any such claim or claims of any other broker or brokers to a commission in
connection with this Lease as a result of the actions of the indemnifying party.
39. LIMITATION OF LIABILITY
Tenant agrees that, in the event of any default or breach by Landlord with
respect to any of the terms of the Lease to be observed and performed by
Landlord (a) Tenant shall look solely to the estate and property of Landlord or
any a successor in interest in the Property and the Building, for the
satisfaction of Tenant's remedies for the collection of a judgment (or other
judicial process) requiring the payment of money by Landlord; (b) no other
property or assets of Landlord, its partners, shareholder, officers, directors
or any successor in interest shall be subject to levy, execution or other
enforcement procedure for the satisfaction of Tenant's remedies; (c) no personal
liability shall at any time be asserted or enforceable against Landlord's
partners or successors in interest (except to the extent permitted in (a)
above), or against Landlord's shareholders, officers or directors, or their
respective partners, shareholders, officers, directors or successors in
interest; and (d) no judgment will be taken against any partner, shareholder,
officer or director of Landlord. The provisions of this section shall apply only
to the Landlord and the parties herein described, and shall not be for the
benefit of any insurer nor any other third party.
40. FINANCIAL STATEMENTS
Within thirty (30) days after Landlord's request, but not more than once in any
calendar year, Tenant shall deliver to Landlord the then current financial
statements of Tenant (including interim periods following the end of the last
fiscal year for which annual statements are available), prepared or compiled by
a certified public accountant, including a balance sheet and profit and loss
statement for the most recent prior year, all prepared in accordance with
generally accepted accounting principles consistently applied.
41. RULES AND REGULATIONS
Tenant agrees to comply with such reasonable rules and regulations as Landlord
may adopt from time to time for the orderly and proper operating of the Building
and parking and other common areas. Such rules may include but shall not be
limited to the following: (a) restriction of employee parking to a limited,
designated area or areas, and (b) regulation of the removal, storage and
disposal of Tenant's refuse and other rubbish at the sole cost and expense of
Tenant. The rules and regulations shall be binding upon Tenant upon delivery of
a copy of them to Tenant. Landlord shall not be responsible to Tenant for the
failure of any other person to observe and abide by any of said rules and
regulations.
42. MORTGAGEE PROTECTION
(a) Modifications for Lender. If, in connection with obtaining financing
for the Premises or any portion thereof, Landlord's lender shall request
reasonable modifications to this Lease as a condition to such financing,
Tenant shall not unreasonably withhold, delay or defer its consent to such
modifications, provided such modifications do not adversely affect Tenant's
rights or increase Tenant's obligations under this Lease.
(b) Rights to Cure. Tenant agrees to give to any trust deed or mortgage
holder ("Holder"), by registered mail, at the same time as it is given to
Landlord, a copy of any notice of default given to Landlord, provided that
prior to such notice Tenant has been notified, in writing, (by way of
notice of assignment of rents and leases, or otherwise) of the address of
such Holder. Tenant further agrees that if Landlord shall have failed to
cure such default within the time provided for in this Lease, then the
Holder shall have an additional twenty (20) days after expiration of such
period, or after receipt of such notice from Tenant (if such notice to the
Holder is required by this Paragraph 42(b)), whichever shall last occur,
within which to cure such default or if such default cannot be cured within
that time, then such additional time as may be necessary if within such
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<PAGE> 35
twenty (20) days, any Holder has commenced and is diligently pursuing the
remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings, if necessary to effect such cure),
in which event this Lease shall not be terminated.
43. ENTIRE AGREEMENT
This Lease, including the-Exhibits and any Addenda attached hereto, which are
hereby incorporated herein by this reference, contains the entire agreement of
the parties hereto, and no representations, inducements, promises or agreements,
oral or otherwise, between the parties, not embodied herein or therein, shall be
of any force and effect.
44. INTEREST
Any installment of Rent and any other sum due from Tenant under this Lease which
is not received by Landlord within ten (10) days from when the same is due shall
bear interest from such tenth (10th) day until paid at an annual rate equal to
the maximum rate of interest permitted by law. Payment of such interest shall
not excuse or cure any Default by Tenant. In addition, Tenant shall pay all
costs and attorneys' fees incurred by Landlord in collection of such amounts.
45. CONSTRUCTION
This Lease shall be construed and interpreted in accordance with the laws of the
State of California. The parties acknowledge and agree that no rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall be employed in the interpretation of this Lease, including
the Exhibits and any Addenda attached hereto. All captions in this Lease are for
reference only and shall not be used in the interpretation of this Lease.
Whenever required by the context of this Lease, the singular shall include the
plural, the masculine shall include the feminine, and vice versa. If any
provision of this Lease shall he determined to be illegal or unenforceable, such
determination shall not affect any other provision of this Lease and all such
other provisions shall remain in full force and effect.
46. REPRESENTATIONS AND WARRANTIES OF TENANT
Tenant hereby makes the following representations and warranties, each of which
is material and being relied upon by Landlord, is true in all respects as of the
date of this Lease, and shall survive the expiration or termination of the
Lease.
(a) If Tenant is an entity, Tenant is duly organized, validly existing
and in good standing under the laws of the state of its organization and
the persons executing this Lease on behalf of Tenant have the full right
and authority to execute this Lease on behalf of Tenant and to bind Tenant
without the consent or approval of any other person or entity. Tenant has
full power, capacity, authority and legal right to execute and deliver this
Lease and to perform all of its obligations hereunder. This Lease is a
legal, valid and binding obligation of Tenant, enforceable in accordance
with its terms.
(b) Tenant has not (1) made a general assignment for the benefit of
creditors, (2) filed any voluntary petition in bankruptcy or suffered the
filing of an involuntary petition by any creditors, (3) suffered the
appointment of a receiver to take possession of all or substantially all of
its assets, (4) suffered the attachment or other judicial seizure of all or
substantially all of its assets, (5) admitted in writing its inability to
pay its debts as they come due, or (6) made an offer of settlement,
extension or composition to its creditors generally.
Landlord and Tenant have executed and delivered this Lease as of the Lease
Date specified in the Basic Lease Information.
TENANT:
Premisys Communications, Inc.,
a Delaware Corporation
By: /s/ Nicholas J. Williams
------------------------------
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<PAGE> 36
Date: 6/26/98
------------------------------
LANDLORD:
AETNA LIFE INSURANCE COMPANY,
a Connecticut corporation
By: Allegis Realty Investors, LLC
Its Investment Advisor
By: /s/ Syliva Milikian
------------------------------
Date: 8/20/98
------------------------------
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<PAGE> 37
EXHIBIT A
DIAGRAM OF THE PREMISES
<PAGE> 38
EXHIBIT B TO LEASE AGREEMENT
TENANT IMPROVEMENTS
This exhibit, entitled "Tenant Improvements", is and shall constitute EXHIBIT B
to that certain Lease Agreement dated June 4, 1998 (the "Lease"), by and between
AEtna Life Insurance Company, a Connecticut corporation ("Landlord"), and
Premisys Communications, Inc., a Delaware corporation ("Tenant"), for the
leasing of certain premises located at 48634 Milmont Drive, Fremont, California
(the "Premises"). The terms, conditions and provisions of this EXHIBIT B are
hereby incorporated into and are made a part of the Lease. Any capitalized terms
used herein and not otherwise defined herein shall have the meaning ascribed to
such terms as set forth in the Lease:
1. TENANT TO CONSTRUCT TENANT IMPROVEMENTS. Subject to the provisions
below, Tenant shall be solely responsible for the planning, construction and
completion of the interior tenant improvements ("Tenant Improvements") to the
Premises in accordance with the terms and conditions of this Exhibit B. The
Tenant Improvements shall not include any of Tenant's personal property, trade
fixtures, furnishings, equipment or similar items.
2. TENANT IMPROVEMENT PLANS.
A. PRELIMINARY PLANS AND SPECIFICATIONS. Promptly after execution
of the Lease, Tenant shall retain a licensed and insured architect ("Architect")
to prepare preliminary working architectural and engineering plans and
specifications ("Preliminary Plans and Specifications") for the Tenant
Improvements. Tenant shall deliver the Preliminary Plans and Specifications to
Landlord. The Preliminary Plans and Specifications shall be in sufficient detail
to show locations, types and requirements for all heat loads, people loads,
floor loads, power and plumbing, regular and special HVAC needs, telephone
communications, telephone and electrical outlets, lighting, lighting fixtures
and related power, and electrical and telephone switches. Landlord shall
reasonably approve or disapprove the Preliminary Plans and Specifications within
five (5) days after Landlord receives the Preliminary Plans and Specifications
and, if disapproved, Landlord shall return the Preliminary Plans and
Specifications to Tenant, who shall make all necessary revisions within ten (10)
days after Tenant's receipt thereof. This procedure shall be repeated until
Landlord approves the Preliminary Plans and Specifications. The approved
Preliminary Plans and Specifications, as modified, shall be deemed the "Final
Preliminary Plans and Specifications".
B. FINAL PLANS AND SPECIFICATIONS. After the Final Preliminary
Plans and Specifications are approved by Landlord and are deemed to be the Final
Preliminary Plans and Specifications, Tenant shall cause the Architect to
prepare in twenty (20) days following Landlord's approval of the Final
Preliminary Plans and Specifications the final working architectural and
engineering plans, specifications and drawings, ("Final Plans and
Specifications") for the Tenant Improvements. Tenant shall then deliver the
Final Plans and Specifications to Landlord. Landlord shall reasonably approve or
disapprove the Final Plans and Specifications within five (5) days after
Landlord receives the Final Plans and Specifications and, if disapproved,
Landlord shall return the Final Plans and Specifications to Tenant who shall
make all necessary revisions within ten (10) days after Tenant's receipt
thereof. This procedure shall be repeated until Landlord approves, in writing,
the Final Plans and Specifications. The approved Final Plans and Specifications,
as modified, shall be deemed the "Construction Documents".
C. MISCELLANEOUS. All deliveries of the Preliminary Plans and
Specifications, the Final Preliminary Plans and Specifications, the Final Plans
and Specifications, and the Construction Documents shall be delivered by
messenger service, by personal hand delivery or by overnight parcel service.
While Landlord has the right to approve the Preliminary Plans and
Specifications, the Final Preliminary Plans and Specifications, the Final Plans
and Specifications, and the Construction Documents, Landlord's interest in doing
so is to protect the Premises, the Building and Landlord's interest.
Accordingly, Tenant shall not rely upon Landlord's approvals and Landlord shall
not be the guarantor of, nor responsible for, the adequacy and correctness or
accuracy of the Preliminary Plans and Specifications, the Final Preliminary
Plans and Specifications, the Final Plans and Specifications, and the
Construction Documents, or the compliance thereof with applicable laws, and
Landlord shall incur no liability of any kind by reason of granting such
approvals.
<PAGE> 39
D. BUILDING STANDARD WORK. The Construction Documents shall
provide that the Tenant Improvements to be constructed in accordance therewith
must be at least equal, in quality, to Landlord's building standard materials,
quantities and procedures then in use by Landlord ("Building Standards")
attached hereto as Exhibit B-2, and shall consist of improvements which are
generic in nature.
E. CONSTRUCTION AGREEMENT. Tenant hereby covenants and agrees
that a provision shall be included in each and every agreement made with the
Architect and the Contractor with respect to the Tenant Improvements specifying
that Landlord shall be a third party beneficiary thereof, including without
limitation, a third party beneficiary of all covenants, representations,
indemnities and warranties made by the Architect and/or Contractor.
3. PERMITS. Tenant at its sole cost and expense (subject to the
provisions of Paragraph 5 below) shall obtain all governmental approvals of the
Construction Documents to the full extent necessary for the issuance of a
building permit for the Tenant Improvements based upon such Construction
Documents. Tenant at its sole cost and expense shall also cause to be obtained
all other necessary approvals and permits from all governmental agencies having
jurisdiction or authority for the construction and installation of the Tenant
Improvements in accordance with the approved Construction Documents. Tenant at
its sole cost and expense (subject to the provisions of Paragraph 5 below) shall
undertake all steps necessary to insure that the construction of the Tenant
Improvements is accomplished in strict compliance with all statutes, laws,
ordinances, codes, rules, and regulations applicable to the construction of the
Tenant Improvements and the requirements and standards of any insurance
underwriting board, inspection bureau or insurance carrier insuring the Premises
and/or the Building.
4. CONSTRUCTION.
A. Tenant shall be solely responsible for the construction,
installation and completion of the Tenant Improvements in accordance with the
Construction Documents approved by Landlord and is solely responsible for the
payment of all amounts when payable in connection therewith without any cost or
expense to Landlord, except for Landlord's obligation to contribute the Tenant
Improvement Allowance in accordance with the provisions of Paragraph 5 below.
Tenant shall diligently proceed with the construction, installation and
completion of the Tenant Improvements in accordance with the Construction
Documents and the completion schedule reasonably approved by Landlord. No
material changes shall be made to the Construction Documents and the completion
schedule approved by Landlord without Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed.
B. Tenant at its sole cost and expense (subject to the provisions
of Paragraph 5 below) shall employ a licensed, insured and bonded general
contractor ("Contractor") to construct the Tenant Improvements in accordance
with the Construction Documents. The construction contracts between Tenant and
the Contractor and between the Contractor and subcontractors shall be subject to
Landlord's prior written approval, which approval shall not be unreasonably
withheld or delayed. Proof that the Contractor is licensed in California, is
bonded as required under California law, and has the insurance specified in
Exhibit B-1, attached hereto and incorporated herein by this reference, shall be
provided to Landlord at the time that Tenant requests approval of the Contractor
from Landlord. Tenant shall comply with or cause the Contractor to comply with
all other terms and provisions of Exhibit B-1.
C. Prior to the commencement of the construction and installation
of the Tenant Improvements, Tenant shall provide the following to Landlord, all
of which shall be to Landlord's reasonable satisfaction:
(i) An estimated budget and cost breakdown for the Tenant
Improvements.
(ii) Estimated completion schedule for the Tenant
Improvements.
(iii) Copies of all required approvals and permits from
governmental agencies having jurisdiction or authority for the construction and
installation of the Tenant Improvements; provided,
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<PAGE> 40
however, if prior to commencement of the construction and installation of Tenant
Improvements Tenant has not received the electrical, plumbing or mechanical
permits, Tenant shall only be required to provide Landlord with evidence that
Tenant has made application therefor, and, upon receipt by Tenant of such
permits, Tenant shall promptly provide Landlord with copies thereof.
(iv) Evidence of Tenant's procurement of insurance
required to be obtained pursuant to the provisions of Paragraphs 4~B and 4.G.
D. Landlord shall at all reasonable times have a right to inspect
the Tenant Improvements (provided Landlord does not materially interfere with
the work being performed by the Contractor or its subcontractors) and Tenant
shall immediately cease work upon written notice from Landlord if the Tenant
Improvements are not in compliance with the Construction Documents approved by
Landlord. If Landlord shall give notice of faulty construction or any other
deviation from the Construction Documents, Tenant shall cause the Contractor to
make corrections promptly. However, neither the privilege herein granted to
Landlord to make such inspections, nor the making of such inspections by
Landlord, shall operate as a waiver of any rights of Landlord to require good
and workmanlike construction and improvements constructed in accordance with the
Construction Documents.
E. Subject to Landlord complying with its obligations in
Paragraph 5 below, Tenant shall pay and discharge promptly and fully all claims
for labor done and materials and services furnished in connection with the
Tenant Improvements. The Tenant Improvements shall not be commenced until five
(5) business days after Landlord has received notice from Tenant stating the
date the construction of the Tenant Improvements is to commence so that Landlord
can post and record any appropriate Notice of Nonresponsibility.
F. Tenant acknowledges and agrees that the agreements and
covenants of Tenant in Sections 10 and 37 of the Lease shall be fully applicable
to Tenant's construction of the Tenant Improvements.
G. Tenant shall maintain, and cause to be maintained, during the
construction of the Tenant Improvements, at its sole cost and expense, insurance
of the types and in the amounts specified in Exhibit B-1 and in Section 12 of
the Lease, together with builders' risk insurance for the amount of the
completed value of the Tenant Improvements on an all-risk non-reporting form
covering all improvements under construction, including building materials, and
other insurance in amounts and against such risks as the Landlord shall
reasonably require in connection with the Tenant Improvements.
H. No materials, equipment or fixtures shall be delivered to or
installed upon the Premises pursuant to any agreement by which another party has
a security interest or rights to remove or repossess such items, without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld.
I. Landlord reserves the right to establish reasonable rules and
regulations for the use of the Building during the course of construction of the
Tenant Improvements, including, but not limited to, construction parking,
storage of materials, hours of work, use of elevators, and clean-up of
construction related debris.
J. Upon completion of the Tenant Improvements, Tenant shall
deliver to Landlord the following, all of which shall be to Landlord's
reasonable satisfaction:
(i) A cost breakdown itemizing all expenses for the Tenant
Improvements, together with invoices and receipts for the same or other evidence
of payment.
(ii) Final and unconditional mechanic's lien waivers for
all the Tenant improvements.
(iii) A true and complete copy of all as-built plans and
drawings for the Tenant improvements.
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<PAGE> 41
5. TENANT IMPROVEMENT ALLOWANCE.
A. Subject to Tenant's compliance with the provisions of this
Exhibit B, Landlord shall provide to Tenant an allowance in the amount of twenty
nine thousand eight hundred forty and 00/100 dollars and ($29,840.00) (the
"Tenant Improvement Allowance") to construct and install only the Tenant
Improvements. The Tenant Improvement Allowance shall be used to design, prepare,
plan, obtain the approval of, construct and install the Tenant Improvements and
for no other purpose. Except as otherwise expressly provided herein, Landlord
shall have no obligation to contribute the Tenant Improvement Allowance unless
and until the Construction Documents have been approved by Landlord and Tenant
has complied with all requirements set forth in Paragraph 4.C. of this Exhibit
B. The costs to be paid out of the Tenant Improvement Allowance shall include
all reasonable costs and expenses associated with the design, preparation,
approval, planning, construction and installation of the Tenant Improvements
(the "Tenant Improvement Costs"), including all of the following:
(i) All costs of the Preliminary Plans and Specifications,
the Final Plans and Specifications, and the Construction Documents, and
engineering costs associated with completion of the State of California energy
utilization calculations under Title 24 legislation;
(ii) All costs of obtaining building permits and other
necessary authorizations from local governmental authorities;
(iii) All costs of interior design and finish schedule
plans and specifications including as-built drawings, if applicable;
(iv) All direct and indirect costs of procuring,
constructing and installing the Tenant Improvements in the Premises, including,
but not limited to, the construction fee for overhead and profit and the cost of
all on-site supervisory and administrative staff, office, equipment and
temporary services rendered by the Contractor in connection with the
construction of the Tenant Improvements; provided, however, that the
construction fee for overhead and profit, the cost of all on-site supervisory
and administrative staff, office, equipment and temporary services shall not
exceed amounts which are reasonable and customary for such items in the local
construction industry;
(v) All fees payable to the Architect and any engineer if
they are required to redesign any portion of the Tenant Improvements following
Tenant's and Landlord's approval of the Construction Documents;
(vi) Utility connection fees;
(vii) Inspection fees and filing fees payable to local
governmental authorities, if any;
(viii) All costs of all permanently affixed equipment and
non-trade fixtures provided for in the Construction Documents, including the
cost of installation; and,
The Tenant Improvement Allowance shall be the maximum contribution by Landlord
for the Tenant Improvement Costs, and the disbursement of the Tenant Improvement
Allowance is subject to the terms contained herein below.
Landlord will make payments to Tenant from the Tenant Improvement Allowance to
reimburse Tenant for Tenant Improvement Costs paid or incurred by Tenant.
Payment of the CM Fee shall be the first payment from the Tenant Improvement
Allowance and shall be made by means of a deduction or credit against the Tenant
Improvement Allowance. All other payments of the Tenant Improvement Allowance
shall be by progress payments not more frequently than once per month and only
after satisfaction of the following conditions precedent: (a) receipt by
Landlord of conditional mechanics' lien releases for the work completed and to
be paid by said progress payment, conditioned only on the payment of the sums
set forth in the mechanics' lien release, executed by the Contractor and all
subcontractors, labor suppliers and materialmen; (b) receipt by Landlord of
unconditional mechanics' lien releases from the Contractor and all
subcontractors, labor suppliers and materialmen for all work other than that
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<PAGE> 42
being paid by the current progress payment previously completed by the
Contractor, subcontractors, labor suppliers and materialmen and for which Tenant
has received funds from the Tenant Improvement Allowance to pay for such work;
(c) receipt by Landlord of any and all documentation reasonably required by
Landlord detailing the work that has been completed and the materials and
supplies used as of the date of Tenant's request for the progress payment,
including, without limitation, invoices, bills, or statements for the work
completed and the materials and supplies used; and (d) completion by Landlord or
Landlord's agents of any inspections of the work completed and materials and
supplies used as deemed reasonably necessary by Landlord. Except for the CM Fee
payment (credit), Tenant Improvement Allowance progress payments shall be paid
to Tenant within fourteen (14) days from the satisfaction of the conditions set
forth in the immediately preceding sentence. The preceding notwithstanding, all
Tenant Improvement Costs paid or incurred by Tenant prior to Landlord's approval
of the Construction Documents in connection with the design and planning of the
Tenant Improvements by Architect shall be paid from the Tenant Improvement
Allowance, without any retention, within fourteen (14) days following Landlord's
receipt of invoices, bills or statements from Architect evidencing such costs.
Notwithstanding the foregoing to the contrary, Landlord shall be entitled to
withhold and retain five percent (5%) of the Tenant Improvement Allowance or of
any Tenant Improvement Allowance progress payment until the lien-free expiration
of the time for filing of any mechanics' liens claimed or which might be filed
on account of any work ordered by Tenant or the Contractor or any subcontractor
in connection with the construction and installation of the Tenant Improvements.
B. Landlord shall not be obligated to pay any Tenant Improvement
Allowance progress payment or the Tenant Improvement Allowance retention if on
the date Tenant is entitled to receive the Tenant Improvement Allowance progress
payment or the Tenant Improvement Allowance retention Tenant is in default of
this Lease. Such payments shall resume upon Tenant curing any such default
within the time periods which may be provided for in the Lease.
C. Should the total cost of constructing the Tenant Improvements
be less than the Tenant Improvement Allowance, the Tenant Improvement Allowance
shall be automatically reduced to the amount equal to said actual cost.
6. TERMINATION. If the Lease is terminated prior to the date on which
the Tenant Improvements are completed, for any reason due to the default of
Tenant hereunder, in addition to any other remedies available to Landlord under
the Lease, Tenant shall pay to Landlord as Additional Rent under the Lease,
within five (5) days of receipt of a statement therefor, any and all costs
incurred by Landlord and not reimbursed or otherwise paid by Tenant through the
date of termination in connection with the Tenant Improvements to the extent
planned, installed and/or constructed as of such date of termination, including,
but not limited to, any costs related to the removal of all or any portion of
the Tenant Improvements and restoration costs related thereto. Subject to the
provisions of Section 10.2 of the Lease, upon the expiration or earlier
termination of the Lease, Tenant shall not be required to remove the Tenant
Improvements it being the intention of the parties that the Tenant Improvements
are to be considered incorporated into the Building.
7. LEASE PROVISIONS, CONFLICT. The terms and provisions of the Lease,
insofar as they are applicable, in whole or in part, to this EXHIBIT B, are
hereby incorporated herein by reference, and specifically including all of the
provisions of Section 31 of the Lease. In the event of any conflict between the
terms of the Lease and this EXHIBIT B, the terms of this EXHIBIT B shall
prevail. Any amounts payable by Tenant to Landlord hereunder shall be deemed to
be Additional Rent under the Lease and, upon any default in the payment of same,
Landlord shall have all rights and remedies available to it as provided for in
the Lease.
-5-
<PAGE> 43
EXHIBIT B-1
CONSTRUCTION INSURANCE REQUIREMENTS
Before commencing work, the contractor shall procure and maintain at its sole
cost and expense until completion and final acceptance of the work, at least the
following minimum levels of insurance.
A. Workers' Compensation in statutory amounts and Employers Liability
Insurance in the minimum amounts of $100,000 each accident for bodily
injury by accident and $100,000 each employee for bodily injury by disease
with a $500,000 policy limit, covering each and every worker used in
connection with the contract work.
B. Comprehensive General Liability Insurance on an occurrence basis including,
but not limited to, protection for Premises/Operations Liability, Broad
Form Contractual Liability, Owner's and Contractor's Protective, and
Products/Completed Operations Liability*, in the following minimum limits
of liability.
Bodily Injury, Property Damage, and
Personal Injury Liability $2,000,000/each occurrence
$3,000,000/aggregate
* Products/Completed Operations Liability Insurance is to be provided for a
period of at least one (1) year after completion of work.
Coverage should include protection for Explosion, Collapse and Underground
Damage.
C. Comprehensive Automobile Liability Insurance with the following minimum
limits of liability.
Bodily Injury and Property $1,000,000/each occurrence
Damage Liability $2,000,000/aggregate
This insurance will apply to all owned, non-owned or hired automobiles to
be used by the Contractor in the completion of the work.
D. Umbrella Liability Insurance in a minimum amount of five million dollars
($5,000,000), providing excess coverage on a following-form basis over the
Employer's Liability limit in Paragraph A and the liability coverages
outlined in Paragraphs B and C.
E. Equipment and Installation coverages in the broadest form available
covering Contractor's tools and equipment and material not accepted by
Tenant. Tenant will provide Builders Risk Insurance on all accepted and
installed materials.
All policies of insurance, duplicates thereof or certificates evidencing
coverage shall be delivered to Landlord prior to commencement of any work and
shall name Landlord, and its partners and lenders as additional insureds as
their interests may appear. All insurance policies shall (1) be issued by a
company or companies licensed to be business in the state of California, (2)
provide that no cancellation, non-renewal or material modification shall be
effective without thirty (30) days prior written notice provided to Landlord,
(3) provide no deductible greater than $15,000 per occurrence, (4) contain a
waiver to subrogation clause in favor of Landlord, and its partners and lenders,
and (5) comply with the requirements of Sections 12.2, 12.3 and I 2,4 of the
Lease to the extent such requirements are applicable.
<PAGE> 44
EXHIBIT B-2
BUILDING STANDARDS
OUTLINE SPECIFICATION FOR
NEW OFFICE BUILD-OUT IN R & D BUILDINGS
OFFICE AREA
DEMISING PARTITION AND CORRIDOR WALLS:
Note: One hr. rated walls where required based on occupancy group.
A. 6" 20-gage metal studs at 24" O.C. (or as required by code based on roof
height) framed full height from finish floor to surface above.
B. One (1) LAYER 5/8" drywall Type "X" both sides of wall, fire taped only.
INTERIOR PARTITIONS:
A. 3 5/8" 25 gage metal studs at 24" O.C. to bottom of T-Bar ceiling grid
approximately 9' 0' high.
B. One (1) layer 5/8" drywall both sides of wall, smooth ready for paint.
C. 3 5/8" metal studs including all lateral bracing as required by code.
PERIMETER DRYWALL (AT OFFICE AREAS):
A. 3 5/8" metal studs @ 24" O.C. to 12'0" above finished floor. (or as
required by Title-24 for full height envelope then use demising wall spec.)
B. One (1) layer 5/8" Type "X" drywall taped smooth and ready for paint.
COLUMN FURRING:
A. Furring channel all sides of 2 1/2" metal studs per details.
B. One (1) layer 5/8" drywall taped smooth and ready for paint.
C. Columns within walls shall be furred-out.
ACOUSTICAL CEILINGS:
Note: Gyp. Bd. ceiling at all restrooms Typ.
A. 2' X 4" standard white T-Bar grid system as manufactured by Chicago
Metallic of equal.
B. 2' X 4" X 5/8" white, no-directional acoustical tile to be regular second
look as manufactured by Armstrong or equal.
PAINTING:
A. Sheetrock walls within office to receive two (2) coats of interior latex
paint as manufactured by Kelly Moore or equal. Some portions of second coat
to be single accent color.
<PAGE> 45
B. Semigloss paint all restrooms and lunch rooms.
WINDOW COVERING:
A. 1" aluminum mini-blinds as manufactured by Levelor, Bali or equal, color to
be selected by L.P.C. (brushed aluminum or white).
B. Blinds to be sized to fit window module.
VCT:
A. VCT to be 1/8" x 12" x 12" as manufactured by Armstrong -Excelon Series or
equal.
B. Slabs shall be water proofed per manufacturer recommendations, at sheet
vinyl or VCT areas.
LIGHT FIXTURES:
A. 2" X 4" T-bar lay in 3-tube energy efficient fixture with cool white
fluorescent tubes with parabolic lens as manufactured by Lithonia or equal.
(Approximately 50 F.C.)
LIGHT SWITCHES:
A. Switching as required by Title 24.
B. Switch assembly to be Levinton or equal, color - White.
ELECTRICAL OUTLET:
A. 110V duplex outlet in demising or interior partitions only, as manufactured
by Leviton or equal, color to be White.
B. Maximum eight (8) outlets per circuit, spacing to meet code or minimum 2
per office, conference room, reception and 2 dedicated over cabinet at
lunch room junction boxes above ceiling for large open area with furniture
partitions.
C. Transformers to be a minimum of 20% or over required capacity.
D. Contractors to inspect electric room and to include all necessary metering
cost.
E. No aluminum wiring is acceptable.
TELEPHONE/DATA OUTLET:
A. One (l) single outlet box in wall with pullwire from outlet box to area
above T-bar ceiling per office.
B. Cover plate for phone outlets by telephone/data vendors.
FIRE SPRINKLERS:
As required by fire codes.
TOPSET BASE:
A. 4" rubber base as manufactured by Burke or equal, standard colors only.
-2-
<PAGE> 46
B. 4" rubber base at VCT areas.
TOILET AREAS:
Wet walls to receive Duraboard or Wonder Board and ceramic tile up to 48".
Floors to receive ceramic tile with self coved base as required by code.
CARPET:
Note any of the following carpets are acceptable.
Designweave: Alumni 28 oz., Windswept Classic 30 oz. or Stratton Design Series
III 30 oz, Structure II 28 oz.
WOOD DOORS:
Shall be 3' 0" x 9' 0" x 13/4" (unless otherwise specified) solid core,
prefinished harmony (rotary N. birch).
DOOR FRAMES:
Shall be ACI or equal, 3 3/4" or 4 7/8" throat, brushed, standard aluminum,
snap-on trim.
HARDWARE:
1 1/2 pr. butts F179 Stanley, Latchset D10S Rhodes Schlage, Lockset D53PD Rhodes
Schlage, Dome Type floor stop Gylnn Johnson FBI 3, Closer 4110LCN (where
required) brushed chrome.
INSULATION:
By Title 24 insulation.
PLUMBING:
A. Shall comply with all local codes and handicapped code requirements.
Fixtures shall be either "American Standard", "Kohler" or "Norris". All
toilet accessories and grab bars shall be "Bobrick" or equal and approved
by owner.
B. Plumbing bid shall include 5 gallon minimum hot water heater, or insta hot
with mixer valve including all connections.
TOILET PARTITIONS:
Shall be as manufactured by Fiat, global or equal if approved by owner. Color to
be white or gray.
HVAC:
HVAC units per specifications.
Five (5) year warranty provided on all HVAC compressor units. All penetrations
including curbs and sleepers to be hot moped to LPC standard.
WAREHOUSE AREAS:
Floor - seal concrete with water base clear acrylic sealer. Fire Extinguishers -
2A 10 BC surface mount by code x by S.F.
-3-
<PAGE> 47
400 W metal halide lighting at warehouse minimum 5-7 foot candles.
Note: All high pile storage requirements are excluded for standard building T.l.
<PAGE> 48
EXHIBIT C
COMMENCEMENT AND EXPIRATION DATE MEMORANDUM
LANDLORD: AETNA LIFE INSURANCE COMPANY, a Connecticut corporation
TENANT: Premisys Communications, Inc., a Delaware corporation
LEASE DATE: June 4, 1998
PREMISE: Located at 48634 Milmont Drive, Fremont, California 94538
Tenant hereby accepts the Premises as being in
the condition required under the Lease, with
all Tenant Improvements completed (except for
minor punchlist items which Landlord agrees to
complete).
The Commencement Date of the Lease is hereby established as
_________________________________ and the Expiration Date is
_________________________________.
TENANT: Premisys Communications, Inc.,
a Delaware corporation
By:
-------------------------------------
Print Name:
-----------------------------
Its:
------------------------------------
Approved and Agreed:
LANDLORD:
AETNA LIFE INSURANCE COMPANY,
a Connecticut corporation
By: Allegis Realty Investors, LLC
Its Investment Advisor
By:
-----------------------------
Date:
-----------------------------
<PAGE> 49
EXHIBIT D - RULES & REGULATIONS
Page 1 of 2
Industrial Lease Agreement dated June 4, 1998, between
Premisys Communications, Inc.,
a Delaware Corporation
("Tenant"),
and
AEtna LIFE INSURANCE COMPANY,
a Connecticut corporation
("Landlord")
1. No advertisement, picture or sign of any sort shall be displayed on or
outside the Premises without the prior written consent of Lessor, which
shall not be unreasonably withheld. Lessor shall have the right to
remove any such unapproved item without notice and at Lessee's expense.
2 Lessee shall not regularly park motor vehicles in designated parking
areas after the conclusion of daily business activity.
3. Lessee shall not use any method of heating or air conditioning other
than that supplied by Lessor without the consent of Lessor.
4. All window coverings installed by Lessee and visible from the outside of
the building require the prior written approval of Lessor.
5. Lessee shall not use, keep or permit to be used or kept any foul or
noxious gas or substance or any flammable or combustible materials on or
around the Premises.
6. Lessee shall not alter any lock or install any new locks or bolts on any
door at the Premises without the prior consent of Lessor.
7. Lessee shall park motor vehicles in those general parking areas as
designated by Lessor except for loading and unloading. During those
periods of loading and unloading, Lessee shall not unreasonably
interfere with traffic flow within the Project and loading and unloading
areas of other Lessees.
8. Lessee shall not disturb, solicit or canvas any occupant of the Building
or Project and shall cooperate to prevent same.
9. No person shall go on the roof without Lessor's permission.
10. Business machines and mechanical equipment belonging to Lessee which
cause noise or vibration that may be transmitted to the structure of the
Building, to such a degree as to be objectionable to Lessor or other
Lessees, shall be placed and maintained by Lessee, at Lessee's expense,
on vibration eliminators or other devices sufficient to eliminate noise
or vibration.
11. All goods including material used to store goods, delivered to the
Premises of Lessee shall be Immediately moved into the Premises and
shall not be left in parking or receiving areas overnight.
12. Tractor trailers which must be unhooked or parked with dolly wheels
beyond the concrete loading areas must use steel plates or wood blocks
under the dolly wheels to prevent damage to the asphalt paving
<PAGE> 50
surfaces. No parking or storing of such trailers will be permitted in
the auto parking areas of the Project or on streets adjacent thereto.
13. Forklifts which operate on asphalt paving areas shall not have solid
rubber tires and shall only use tires that do not damage the asphalt.
14. Lessee is responsible for the storage and removal of all trash and
refuse. All such trash and refuse shall be contained in suitable
receptacles stored behind screened enclosures at locations approved by
Lessor.
l5. Lessee shall not store or permit the storage or placement of goods or
merchandise in or around the common areas surrounding the Premises. No
displays or sales or merchandise shall be allowed in the parking lots or
other common areas.
-2-
<PAGE> 51
EXHIBIT F
HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the
information provided by you in this Hazardous Materials Disclosure Certificate
is necessary for the Landlord to evaluate your proposed uses of the premises
(the "Premises") and to determine whether to enter into a lease agreement with
you as tenant. If a lease agreement is signed by you and the Landlord (the
"Lease Agreement"), on an annual basis in accordance with the provisions of
Paragraph 32 of the Lease Agreement, you are to provide an update to the
information initially provided by you in this certificate. Any questions
regarding this certificate should be directed to, and when completed, the
certificate should be delivered to:
Landlord: c/o Allegis Realty Investors LLC
455 Market Street., Suite 1540
San Francisco, California 94105
Attention: Rod Chu
Phone: (415) 538-4800
Name of (Prospective) Tenant: Premisys Communications, Inc., a Delaware
corporation
Mailing Address: 48664 Milmont Drive, Fremont, California 94538
Contact Person, Title and Telephone Number(s):
-------------------------
Contact Person for Hazardous Waste Materials Management and Manifests
and Telephone Number(s):
-----------------------------------------------
-----------------------------------------------------------------------
Address of (Prospective) Premises: 48634 Milmont Drive, Fremont,
California 94538
Length of (Prospective) initial Term: Eighty four (84) months
1. GENERAL INFORMATION:
Describe the proposed operations to take place in, on, or about the
Premises, including, without limitation, principal products processed,
manufactured or assembled, and services and activities to be provided or
otherwise conducted. Existing tenants should describe any proposed
changes to on-going operations.
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS
2.1 Will any Hazardous Materials (as hereinafter defined) be used,
generated, treated, stored or disposed of in, on or about the
Premises? Existing tenants should describe any Hazardous Materials
which continue to be used, generated, treated, stored or disposed of
in, on or about the Premises.
Wastes Yes [ ] No [ ]
Chemical Products Yes [ ] No [ ]
Other Yes [ ] No [ ]
If Yes is marked, please explain:
----------------------------------
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<PAGE> 52
2.2 If Yes is marked in Section 2.1, attach a list of any Hazardous
Materials to be used, generated, treated, stored or disposed of in,
on or about the Premises, including the applicable hazard class and
an estimate of the quantities of such Hazardous Materials to be
present on or about the Premises at any given time; estimated annual
throughput; the proposed location(s) and method of storage
(excluding nominal amounts of ordinary household cleaners and
janitorial supplies which are not regulated by any Environmental
Laws, as hereinafter defined); and the proposed location(s) and
method(s) of treatment or disposal for each Hazardous Material,
including, the estimated frequency, and the proposed contractors or
subcontractors. Existing tenants should attach a list setting forth
the information requested above and such list should include actual
data from on-going operations and the identification of any
variations in such information from the prior year's certificate.
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage or treatment of gasoline,
diesel, petroleum, or other Hazardous Materials in tanks or sumps
proposed in, on or about the Premises? Existing tenants should
describe any such actual or proposed activities.
Yes [ ] No [ ]
If Yes, please explain:
--------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste Generator I.D.
Number? Existing tenants should describe any additional
identification numbers issued since the previous certificate.
Yes [ ] No [ ]
4.2 Has your company filed a biennial or quarterly reports as a
hazardous waste generator? Existing tenants should describe any new
reports filed.
Yes [ ] No [ ]
If yes, attach a copy of the most recent report filed.
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
_____ storm drain? _____ sewer?
_____ surface water? _____ no wastewater or other wastes
discharged.
Existing tenants should indicate any actual discharges. If so,
describe the nature of any proposed or actual discharge(s).
-------------------------------------------------------------------
-------------------------------------------------------------------
-2-
<PAGE> 53
5.2 Will any such wastewater or waste be treated before discharge?
Yes [ ] No [ ]
If yes, describe the type of treatment proposed to be conducted.
Existing tenants should describe the actual treatment conducted.
-------------------------------------------------------------------
-------------------------------------------------------------------
6. AIR DISCHARGES
6.1 Do you plan for any air filtration systems or stacks to be used in
your company's operations in, on or about the Premises that will
discharge into the air; and will such air emissions be monitored?
Existing tenants should indicate whether or not there are any such
air filtration systems or stacks in use in, on or about the Premises
which discharge into the air and whether such air emissions are
being monitored.
Yes [ ] No [ ]
If Yes, please explain:
--------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
6.2 Do you propose to operate any of the following types of equipment,
or any other equipment requiring an air emissions permit? Existing
tenants should specify any such equipment being operated in, on or
about the Premises.
_____ Spray booth(s) _____ Incinerator(s)
______ Dip tank(s) _____ Other (Please describe)
_____ Drying oven(s) _____ No Equipment Requiring Air
Permits
If Yes, please explain:
--------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
6.3 Please describe (and submit copies of with this Hazardous Materials
Disclosure Certificate) any reports you have filed in the past
[thirty-six] months with any governmental or quasi-governmental
agencies or authorities related to air discharges or clean air
requirements and any such reports which have been issued during such
period by any such agencies or authorities with respect to you or
your business operations.
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required to prepare a
Hazardous Materials management plan ("Management Plan") or Hazardous
Materials Business Plan and Inventory ("Business Plan") pursuant to
Fire Department or other governmental or regulatory agencies'
requirements? Existing tenants should indicate whether or not a
Management Plan is required and has been prepared.
Yes [ ] No [ ]
-3-
<PAGE> 54
If yes, attach a copy of the Management Plan or Business Plan.
Existing tenants should attach a copy of any required updates to the
Management Plan or Business Plan.
7.2 Are any of the Hazardous Materials, and in particular chemicals,
proposed to be used in your operations in, on or about the Premises
listed or regulated under Proposition 65? Existing tenants should
indicate whether or not there are any new Hazardous Materials being
so used which are listed or regulated under Proposition 65.
Yes [ ] No [ ]
If Yes, please explain:
--------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws, has your
company ever been subject to any agency enforcement actions,
administrative orders, or consent decrees or has your company
received requests for information, notice or demand letters, or any
other inquiries regarding its operations? Existing tenants should
indicate whether or not any such actions, orders or decrees have
been, or are in the process of being, undertaken or if any such
requests have been received.
Yes [ ] No [ ]
If yes, describe the actions, orders or decrees and any continuing
compliance obligations imposed as a result of these actions, orders
or decrees and also describe any requests, notices or demands, and
attach a copy of all such documents. Existing tenants should
describe and attach a copy of any new actions, orders, decrees,
requests, notices or demands not already delivered to Landlord
pursuant to the provisions of Paragraph 32 of the Lease Agreement.
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
8.2 Have there ever been, or are there now pending, any lawsuits against
your company regarding any environmental or health and safety
concerns?
Yes [ ] No [ ]
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and other documents
related thereto as requested by Landlord. Existing tenants should
describe and attach a copy of any new complaint(s),
cross-complaint(s), pleadings and other related documents not
already delivered to Landlord pursuant to the provisions of
Paragraph 32 of the Lease Agreement.
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
8.3 Have there been any problems or complaints from adjacent tenants,
owners or other neighbors at your company's current facility with
regard to environmental or health and safety concerns? Existing
tenants should indicate whether or not there have been any such
problems or complaints from
-4-
<PAGE> 55
adjacent tenants, owners or other neighbors at, about or near the
Premises and the current status of any such problems or complaints.
Yes [ ] No [ ]
If yes, please describe. Existing tenants should describe any such
problems or complaints not already disclosed to Landlord under the
provisions of the signed Lease Agreement and the current status of
any such problems or complaints.
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
9. PERMITS AND LICENSES
9.1 Attach copies of all permits and licenses issued to your company
with respect to its proposed operations in, on or about the
Premises, including, without limitation, any Hazardous Materials
permits, wastewater discharge permits, air emissions permits, and
use permits or approvals. Existing tenants should attach copies of
any new permits and licenses as well as any renewals of permits or
licenses previously issued.
As used herein, "Hazardous Materials" shall mean and include any
substance that is or contains (a) any "hazardous substance" as now or hereafter
defined in Section 101(14) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA") (42 U.S.C.
Section 9601 et seq.) or any regulations promulgated under CERCLA; (b) any
"hazardous waste" as now or hereafter defined in the Resource Conservation and
Recovery Act, as amended ("RCRA") (42 U.S.C. Section 6901 et seq.) or any
regulations promulgated under RCRA; (c) any substance now or hereafter regulated
by the Toxic Substances Control Act, as amended ("TSCA") (15 U.S.C. Section 2601
et seq.) or any regulations promulgated under TSCA; (d) petroleum, petroleum
by-products, gasoline, diesel fuel, or other petroleum hydrocarbons; (e)
asbestos and asbestos-containing material, in any form, whether friable or
non-friable; (f) polychlorinated biphenyls; (g) lead and lead-containing
materials; or (h) any additional substance, material or waste (A) the presence
of which on or about the Premises (i) requires reporting, investigation or
remediation under any Environmental Laws (as hereinafter defined), (ii) causes
or threatens to cause a nuisance on the Premises or any adjacent property or
poses or threatens to pose a hazard to the health or safety of persons on the
Premises or any adjacent property, or (iii) which, if it emanated or migrated
from the Premises, could constitute a trespass, or (B) which is now or is
hereafter classified or considered to be hazardous or toxic under any
Environmental Laws; and "Environmental Laws" shall mean and include (a) CERCLA,
RCRA and TSCA; and (b) any other federal, state or local laws, ordinances,
statutes, codes, rules, regulations, orders or decrees now or hereinafter in
effect relating to (i) pollution, (ii) the protection or regulation of human
health, natural resources or the environment, (iii) the treatment, storage or
disposal of Hazardous Materials, or (iv) the emission, discharge, release or
threatened release of Hazardous Materials into the environment.
The undersigned hereby acknowledges and agrees that this Hazardous
Materials Disclosure Certificate is being delivered to Landlord in connection
with the evaluation of a Lease Agreement and, if such Lease Agreement is
executed, will be attached thereto as an exhibit. The undersigned further
acknowledges and agrees that if such Lease Agreement is executed, this hazardous
Materials Disclosure Certificate will be updated from time to time in accordance
with Paragraph 32 of the Lease Agreement. The undersigned further acknowledges
and agrees that the Landlord and its partners, lenders and representatives may,
and will, rely upon the statements, representations, warranties, and
certifications made herein and the truthfulness thereof in entering into the
Lease Agreement and the continuance thereof throughout the term, and any
renewals thereof, of the Lease Agreement. I [print name] ______________________
acting with full authority to bind the (proposed) Tenant and on behalf of the
(proposed) Tenant, certify, represent and warrant that the information contained
in this certificate is true and correct.
(PROSPECTIVE) TENANT:
-5-
<PAGE> 56
By:
------------------------
Title:
------------------------
Date:
------------------------
-6-
<PAGE> 57
ADDENDUM 1
OPTION TO EXTEND THE LEASE
This Addendum l ("Addendum") is incorporated as a part of that certain
Lease Agreement dated June 4, 1998 (the "Lease"), by and between Premisys
Communications, Inc., a Delaware corporation ("Tenant"), and AEtna Life
Insurance Company, a Connecticut corporation ("Landlord"), for the leasing of
those certain premises located at 48634 Milmont Drive, Fremont, California 94538
as more particularly described in Exhibit A to the Lease (the "Premises"). Any
capitalized terms used herein and not otherwise defined herein shall have the
meaning ascribed to such terms as set forth in the Lease.
1. GRANT OF EXTENSION OPTION. Subject to the provisions, limitations and
conditions set forth in Paragraph 5 below, Tenant shall have an Option
("Option") to extend the term of the Lease for five (5) years (the "Extended
Term").
2. TENANT'S OPTION NOTICE. If Landlord does not receive written notice
from Tenant of its exercise of this Option on a date which is not more than
three hundred sixty (360) days nor less than two hundred forty (240) days prior
to the end of the initial term of the Lease (the "Option Notice"), all rights
under this Option shall automatically terminate and shall be of no further force
or effect.
3. ESTABLISHING THE INITIAL MONTHLY BASE RENT FOR THE EXTENDED TERM. The
initial monthly Base Rent for the Extended Term shall be the then current market
rent for similar space within the competitive market area of the Premises (the
"Fair Rental Value"). "Fair Rental Value" of the Premises means the fair market
rental value of the Premises as of the commencement of the Extended Term, taking
into consideration all relevant factors, including length of term, the uses
permitted under the Lease, the quality, size, design and location of the
Premises, including the condition and value of existing tenant improvements, and
the monthly base rent paid by tenants for premises comparable to the Premises,
and located within the competitive market area of the Premises as reasonably
determined by Landlord.
Neither Landlord nor Tenant shall have the right to have a court or any
other third party entity establish the Fair Rental Value. If Landlord and Tenant
are unable to agree on the Fair Rental Value for the Extended Term within ten
(10) business days of receipt by Landlord of the Option Notice, Landlord and
Tenant being obligated only to act in good faith, this Option shall
automatically terminate and the Lease shall terminate at the end of its initial
term.
In no event shall the monthly Base Rent for any period of the Extended
Term be less than the highest monthly Base Rent charged during the initial term
of the Lease. Upon determination of the initial monthly Base Rent for the
Extended Term in accordance with the terms outlined above, Landlord and Tenant
shall immediately execute, at Landlord's sole option, either the standard lease
agreement then in use by Landlord, or an amendment to this Lease. Such new
<PAGE> 58
lease agreement or amendment, as the case may be, shall set forth among other
things, the initial monthly Base Rent for the Extended Term and the actual
commencement date and expiration date of the Extended Term. Tenant shall have no
other right to extend the term of the Lease under this Addendum unless Landlord
and Tenant otherwise agree in writing.
4. CONDITION OF PREMISES AND BROKERAGE COMMISSIONS FOR THE EXTENDED
TERM. If Tenant timely and properly exercises this Option, in strict accordance
with the terms contained herein: (1) Tenant shall accept the Premises in its
then "As-Is" condition and, accordingly, Landlord shall not be required to
perform any additional improvements to the Premises; and (2) Tenant hereby
agrees that it will be solely responsible for any and all brokerage commissions
and finder's fees payable to any broker now or hereafter procured or hired by
Tenant or who otherwise claims a commission based on any act or statement of
Tenant ("Tenant's Broker") in connection with the Option; and Tenant hereby
further agrees that Landlord shall in no event or circumstance be responsible
for the payment of any such commissions and fees to Tenant's Broker.
5. LIMITATIONS ON, AND CONDITIONS TO, EXTENSION OPTION. This Option is
personal to Tenant and may not be assigned, voluntarily or involuntarily,
separate from or as part of the Lease. At Landlord's option, all rights of
Tenant under this Option shall terminate and be of no force or effect if any of
the following individual events occur or any combination thereof occur: (1)
Tenant has been in default at any time during the initial term of the Lease, or
is currently in default of any provision of the Lease; and/or (2) Tenant has
assigned its rights and obligations under all or part of the Lease or Tenant has
subleased all or part of the Premises; and/or (3) Tenant's financial condition
is unacceptable to Landlord at the time the Option Notice is delivered to
Landlord; and/or (4) Tenant has failed to properly exercise this Option in a
timely manner in strict accordance with the provisions of this Addendum; and/or
(5) Tenant no longer has possession of all or any part of the Premises under the
Lease, or if the Lease has been terminated earlier, pursuant to the terms of the
Lease.
6. TIME IS OF THE ESSENCE. Time is of the essence with respect to each
and every time period described in this Addendum.
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<PAGE> 59
CHANGE OF COMMENCEMENT DATE
This First Amendment to Lease Agreement (the "Amendment") is made and entered
into to be effective as of July 20, 1998, by and between AEtna Life Insurance
Company, a Connecticut corporation ("Landlord"), and Premisys Communications,
Inc., a Delaware corporation ("Tenant"), with reference to the following facts:
RECITALS
A. Landlord and Tenant have entered into that certain Lease Agreement dated
June 4, 1998 (the "Lease"), for the leasing of certain premises
containing approximately 29,840 rentable square feet of space located at
48634 Milmont Drive, Fremont, California (the "Premises") as such
Premises are more fully described in the Lease.
B. Landlord and Tenant wish to amend the Commencement Date of the Lease.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:
1. Recitals: Landlord and Tenant agree that the above recitals are true and
correct.
2. The Commencement Date of the Lease shall be August 1, 1998.
3. The last day of the Term of the Lease (the "Expiration Date") shall be
December 31, 2005.
4. The dates on which the Base Rent will be adjusted are:
for the period August 1, 1998 to July 31, 1999 the monthly Base Rent
shall be $38,792.00; for the period August 1, 1999 to July 31, 2000 the
monthly Base Rent shall be $39,985.60; for the period August 1, 2000 to
July 31, 2001 the monthly Base Rent shall be $41,179.20; for the period
August 1, 2001 to July 31, 2002 the monthly Base Rent shall be
$42,372.80; for the period August 1, 2002 to July 31, 2003 the monthly
Base Rent shall be $43,566.40; for the period August 1, 2003 to July 31,
2004 the monthly Base Rent shall be $44,760.00; for the period August 1,
2004 to July 31, 2005 the monthly Base Rent shall be $45,953.60; and for
the period August 1, 2005 to December 31, 2005 the monthly Base Rent
shall be $47,147.20.
5. Effect of Amendment: Except as modified herein, the terms and conditions
of the Lease shall remain unmodified and continue in full force and
effect. In the event of any conflict between the terms and conditions of
the Lease and this Amendment, the terms and conditions of this Amendment
shall prevail.
6. Definitions: Unless otherwise defined in this Amendment, all terms not
defined in this Amendment shall have the meaning set forth in the Lease.
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<PAGE> 60
7. Authority: Subject to the provisions of the Lease. this Amendment shall
be binding upon and inure to the benefit of the parties hereto, their
respective heirs, legal representatives, successors and assigns. Each
party hereto and the persons signing below warrant that the person
signing below on such party's behalf is authorized to do so and to bind
such party to the terms of this Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and
year first above written.
TENANT:
Premisys Communications, Inc.,
a Delaware corporation
By:
----------------------------
Its:
----------------------------
Date:
----------------------------
By:
----------------------------
Its:
----------------------------
Date:
----------------------------
LANDLORD:
AEtna Life Insurance Company,
a Connecticut corporation
By: Allegis Realty Investors, LLC,
Its Investment Advisor
By: /s/ Sylvia Milikian
---------------------------
Date: 8/20/98
--------------------------
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<PAGE> 1
EXHIBIT 10.13
INFORMIX Contract # ________________
ORIGINAL EQUIPMENT MANUFACTURER AGREEMENT
Informix Software, Inc. ("Informix"), and the person or entity listed
in the signature block below ("Licensee") hereby agree that, after execution of
this agreement (this "Agreement") by the parties, the terms and conditions of
Part I and Part II, shall apply to Licensee's use of the Products. All
capitalized terms used herein and not otherwise defined are defined in Part II,
section H.
PART I.
1. APPOINTMENT OF LICENSEE:
(a) Informix appoints Licensee to act as an "Original Equipment Manufacturer" or
"OEM". An OEM develops, owns and licenses, to more than one Reseller or End
User, an End Item with the OEM's Application and a Product so embedded in the
End Item that the Product is invisible to the End User.
(b) The Products may be distributed worldwide ("Territory").
(c) The term of this Agreement shall commence on January 1, 1999 and continue
through March 31, 2000. Thereafter, the Agreement shall automatically renew for
two additional one year terms unless earlier terminated in accordance with Part
II, section F.
(d) Licensee shall manufacture the object code portion of the Runtime Products
in accordance with Part II, section A.7.
2. SERVICES.
For Products used by Licensee in accordance with the terms of this Agreement,
Licensee shall purchase from Informix INFORMIX-OpenLine for Development Products
and INFORMIX-Assurance for Runtime Products (INFORMIX-Assurance and
INFORMIX-OpenLine are referred to collectively as "Services").
3. PRODUCTS AND SYSTEMS.
(a) The Products as such are made generally commercially available from Informix
are licensed for use in accordance with the User Documentation and this
Agreement. The Products and or their successors will be commercially available
and supported by Informix for the term of the Agreement.
(b) The Products may only be used on the computers on which Informix has made
the Products generally commercially available ("Computer Systems").
4. INFORMIX'S FEES.
(a) (i) For each copy of the Application that Licensee licenses to a reseller or
a customer, Licensee shall pay a fee to Informix [*].
5. PAYMENT.
(a) During the calendar year of 1999, Licensee will pay Informix the [*], due in
connection to the previous license of the Products specified in Exhibit A, for
calendar years 1997 and 1998, [*]
<TABLE>
<CAPTION>
Payment Date
------- ----
<S> <C>
[*] [*]
</TABLE>
(b) Upon execution of the Agreement, Licensee shall report and pay Informix
license fees for the months of January 1999 and February 1999.
(c) The fees for the renewal of the existing support services, which also
include the Services as set forth in Part I, Section 2. above, shall be [*].
Payments will be made [*].
- --------------------------------------------------------------------------------
LICENSEE:
ACCRUE SOFTWARE, INC.
- -------------------------------------------------------------------------------
1275 Orleans Drive
- -------------------------------------------------------------------------------
Sunnyvale, CA. 94089-1138
- -------------------------------------------------------------------------------
Attn: C. Lexis King, Controller
- -------------------------------------------------------------------------------
Phone: (408) 542-8906
- -------------------------------------------------------------------------------
/s/ Rick Kreysar
- -------------------------------------------------------------------------------
Signature
Rick Kreysar CEO
- -------------------------------------------------------------------------------
Printed Name/Title
3/29/99
- -------------------------------------------------------------------------------
Date
INFORMIX:
INFORMIX SOFTWARE INC.
4100 Bohannon Drive
Menlo Park, California 94025
Attn: General Counsel
(650) 926-6300
/s/ Elizabeth E. Hoyt
- -------------------------------------------------------------------------------
Signature
Elizabeth E. Hoyt Assistant General Counsel and Assistant Secretary
- -------------------------------------------------------------------------------
Printed Name/Title
3/31/99
- ----------------
Effective Date
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 2
6. ADDITIONAL PROVISIONS.
(a) Licensee and its authorized resellers shall have "Demonstration Rights"
solely to demonstrate the Runtime version of the Product for use in conjunction
with the Application to prospective customers.
(b) Licensee and its authorized resellers shall have evaluation sublicensing
rights, for evaluation purposes only, to sublicense the Runtime version for use
in conjunction with the Application by prospective customers. [*]
(c) Licensee may elect to have data warehouse consulting services or training
courses provided by Informix [*].
(d) Informix and Licensee hereby agree to hold Product update and account review
meetings every calendar quarter on a mutually agreed schedule.
(e) The Products and/or their successors will be commercially available and
supported by Informix throughout the term of the Agreement.
PART II
A. Licensee's rights, representations and obligations.
1. Informix hereby grants and Licensee hereby accepts the nonexclusive,
nontransferable, royalty-bearing right and license within the Territory and in
accordance with the User Documentation and this Agreement:
(a) to internally use the Products on the Computer Systems to develop its End
Item; (b) to distribute the Products on the Computer Systems with, and for use
by End Users Solely as a component in, the End Item and not as a component in or
for use with any other end item, solution, or application; and
(b) to manufacture the object code of the Products as specified in Part I.
2. (a) Licensee shall never distribute Products on a stand alone basis. (b) The
object code of Products shall be distributed in unaltered form.
3. All fees charged by Licensee shall be in Licensee's sole discretion.
4. Licensee may make 1 back-up copy of Products used internally to develop End
Items.
5. No Products shall be distributed, either directly or indirectly, to an End
User or to a Reseller, prior to Licensee ensuring that both the End User and the
Reseller (at each tier) are bound by provisions which are as equally protective
of Informix's rights as those set forth in Part II, sections A, "Licensee's
Rights, Representations and Obligations" (and including limiting the End User to
using the Products solely as a component in the End Item and not as a component
in any other end item, solution, or application), B, "Confidentiality," D,
"Limited Warranties and Remedies, and F, "Termination." At Informix's request,
Licensee shall supply Informix with a copy of the form(s) of each such written
agreement, including an English translation if the agreement is written in a
language other than English.
6. Except as specifically permitted by this Agreement, Licensee shall not
directly or indirectly (a) use any Confidential Information of Informix to
create any computer software program or user documentation which is
substantially similar to any Product; (b) reverse engineer, disassemble or
decompile, or otherwise attempt to derive the source code for, any Product; (c)
encumber, time-share, rent or lease the rights granted by this Agreement; or (d)
copy, manufacture, adapt, create derivative works of, translate, localize, port
or otherwise modify any Products or other Confidential Information of Informix
or grant anyone a license to engage in similar conduct. Results of any benchmark
or other performance tests run on the Products may not be disclosed to any third
party without Informix's prior written consent.
7. As Licensee distributes the Products as part of an End Item such that the
proprietary notices are not visible to an End User, the manual accompanying the
End Item shall contain the following notice: "Portions of this product are based
upon copyrighted materials of Informix Software, Inc.," or such other phrase as
the parties may mutually agree, which states that the Application contains
Licensed Software.
8. Licensee does not have, and shall not claim that it has, any right in or to
any of the Products or the Confidential Information received from Informix other
than as specifically granted by this Agreement. Licensee shall promptly notify
Informix of any actual or suspected unauthorized use of the Products or use or
disclosure of the Confidential Information received from Informix, and shall
provide reasonable assistance to Informix (at Informix's expense) in the
investigation and prosecution of such unauthorized use or disclosure.
9. If Licensee is located in a member state of the European Economic Community,
it may engage in such conduct as is necessary to ensure the interoperability of
the Products in accordance with the European Community's Directive on Protection
of Computer Software (Brussels 14 May 1991) and local enactment thereof.
Additionally, use of the Products as described in the User Documentation,
including creation of an Application, shall not be considered using the Products
to create derivative works but shall be considered a modification of the
Products for purposes of Informix's limited warranty in section D.
10. Licensee shall comply with the Export Laws. Licensee hereby assures Informix
that it will not export or re-export directly or indirectly (including via
remote access) any part of the Product(s) or any Confidential Information to any
country for which a validated license is required under the Export Laws without
first obtaining a validated license. If at any time Informix determines the laws
of any country are or become insufficient to protect Informix's intellectual or
proprietary rights in the Products, Informix reserves the right to restrict or
terminate Licensee's and its Resellers' rights to use or distribute Products or
Confidential Information in that country. Licensee shall take all actions
reasonably necessary to enforce this restriction or termination and protect
Informix's rights.
11. Products acquired with United States Federal Government funds or intended
for use within or for any United States federal agency are provided with
"Restricted Rights" as defined in DFARS 252.227-7013(c)(l)(ii) or FAR 52.227-19.
B. Confidentiality.
1. Except for the specific rights granted by this Agreement, neither party shall
use or disclose any Confidential Information of the other party. A party
receiving Confidential Information from the other shall use the highest
commercially reasonable degree of care to protect that Confidential Information,
including ensuring that its employees have agreed in writing not to disclose
Confidential Information. Within fifteen (15) days of the request of the
disclosing party, and in its sole discretion, the receiving party shall either
return to the disclosing party originals and copies of any Confidential
Information and all information, records and materials developed from them by
the
- ---------------
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE> 3
receiving party, or destroy the same. Either party may only disclose the general
nature, but not the specific financial terms, of this Agreement without the
prior consent of the other party.
2. Notwithstanding the foregoing, nothing herein shall prevent a receiving party
from disclosing all or part of the Confidential Information which is necessary
to disclose pursuant to the lawful requirement of a governmental agency or when
disclosure is required by operation of law, provided, however, that prior to any
such disclosure, the receiving party shall (a) promptly notify the disclosing
party in writing of such requirement to disclose, and (b) cooperate fully with
the disclosing party in protecting against any such disclosure and/or obtaining
a protective order.
3. Money damages will not be an adequate remedy if this section is breached and
therefore, either party may, in addition to any other legal or equitable
remedies, seek an injunction or similar equitable relief against such breach.
C. Services.
1. Regardless of whether a Reseller or an End User purchases a Service, Licensee
shall provide the appropriate first level of support, skilled instruction and
assistance to Resellers and End Users using or distributing the End Items. In
any event, Licensee must provide all support for its Application(s).
D. Limited Warranties and Remedies.
1. Informix warrants that: (a) the use or distribution of unmodified Products
will not violate the intellectual property rights of any third party under
copyright, trademark or trade secret law of the United States or any country
which is a party to the Berne Convention; (b) it has full power and right to
enter into this Agreement; (c) during the first ninety (90) days from the date
Licensee receives an unmodified Product ("Warranty Period") manufactured by
Informix, the media for those Products will, under normal use, be free of
defects in materials and workmanship and the Development Products will
substantially conform to the User Documentation.
2. EXCEPT FOR THESE EXPRESS LIMITED WARRANTIES, LICENSEE ACCEPTS THE PRODUCTS
"AS IS," WITH NO OTHER EXPRESS OR IMPLIED WARRANTIES OR CONDITIONS OF ANY KIND,
INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. INFORMIX MAKES NO WARRANTIES REGARDING THE APPLICATION(S) OR
THE MEDIA OF THE PRODUCTS MANUFACTURED BY LICENSEE. Some jurisdictions do not
allow limitations on how long an implied warranty lasts, so the above limitation
may not apply to Licensee.
3. In the case of an alleged breach of sections D.1.(a) or (b), Informix shall,
at its expense, indemnify, defend, save and hold harmless Licensee from and
against any claim, loss, expense or judgment (including reasonable attorney
fees) provided (a) Licensee promptly gives Informix written notice of the claim;
(b) Licensee provides all reasonable assistance to defend against the claim; and
(c) Informix has the right to control the defense or settlement of the claim.
4. Licensee's sole remedy for Informix's breach of section D.1.(c) shall be that
during the Warranty Period, Informix shall, in its sole discretion, provide
modifications to keep the Products in substantial conformance with the related
User Documentation, replace the Products, or refund the license fees paid to
Informix for the defective Products.
5.(A) INFORMIX'S LIABILITY TO LICENSEE OR ANY THIRD PARTY FOR A CLAIM OF ANY
KIND RELATED TO THIS AGREEMENT, ANY PRODUCT OR ANY PRODUCT SERVICE, WHETHER FOR
BREACH OF CONTRACT OR WARRANTY, STRICT LIABILITY, NEGLIGENCE OR OTHERWISE, SHALL
NOT EXCEED THE AGGREGATE OF FEES PAID TO INFORMIX FOR THE PRODUCT OR SERVICE
INVOLVED IN THE CLAIM. (B) IN NO EVENT WILL INFORMIX BE LIABLE FOR INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, LOST REVENUES
OR PROFITS, LOST DATA, WORK STOPPAGE, COMPUTER FAILURE OR MALFUNCTION), EVEN IF
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. Some jurisdictions do not allow the
exclusion or limitation of incidental or consequential damages, so the above
limitation or exclusion may not apply to Licensee. NO ACTION, REGARDLESS OF
FORM, ARISING OUT OF THE TRANSACTIONS UNDER THIS AGREEMENT MAY BE BROUGHT BY
LICENSEE MORE THAN 1 YEAR AFTER THE EVENTS WHICH GAVE RISE TO THE CAUSE OF
ACTION OCCURRED.
6. Licensee shall, at its expense, indemnify, defend, save and hold harmless
Informix from and against any claim, loss, expense, or judgment (including
reasonable attorneys' fees) which arises (a) from any asserted failure by
Licensee or a Reseller to act in accordance with this Agreement; (b)
misrepresentations made by Licensee or a Reseller; (c) any warranties granted in
excess of those made by Informix in this section D.; (d) inadequate
installation, maintenance or support by Licensee or a Reseller; (e) the
marketing of the Products by Licensee or a Reseller; or (f) from any other act
or failure to act by Licensee, its employees or agents.
E. Records, Audits, Payments, Discounts.
1. Licensee shall maintain complete and accurate records ("Copy Records")
[*]. Licensee shall deliver to Informix the Copy Records [*] accompanied by any
payment due to Informix relating to such Copy Records.
2. No more than once each year, at Informix's expense and with thirty (30) days'
prior written notice, Informix may audit all records of Licensee relating to
this Agreement during Licensee's normal business hours. If an audit reveals that
the amount which should have been paid to Informix is five percent (5%) or more
greater than the amount reported by Licensee, Licensee shall pay the cost of the
audit to Informix. Any shortfall uncovered as a result of an audit, as well as
the cost of the audit, if required by the preceding sentence, shall be paid by
Licensee to Informix within thirty (30) days of the date Informix notifies
Licensee that an amount is due.
3. Notwithstanding section E.2. above, if Informix reasonably suspects that
sections B.1. or E1. have been breached, Informix may audit Licensee's Product
related activities upon twenty-four (24) hours notice.
4. (a) Licensee shall pay any amounts owed to Informix on the date specified and
according to the terms of this Agreement. If a due date is not specified, that
payment shall be paid by Licensee within thirty (30) days of the date of
Informix's invoice. If Informix determines that Licensee's credit rating does
not support "net-30" terms, Licensee shall prepay all fees. Each party is solely
responsible for its own expenses
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* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
-3-
<PAGE> 4
incurred in the performance of this Agreement. (b) If Licensee fails to make any
payment when due, Informix may suspend delivery of Products, Services or other
services until the past due payment is made.
5. (a) Payments will be in United States dollars. Any overdue amount shall bear
interest at the maximum rate allowed by law. Costs of conversion, outside
collection and related bank charges shall be paid by Licensee. (b) Licensee
shall be responsible for all taxes, tariffs and transportation costs related to
this Agreement (including any value added or sales taxes) other than taxes on
Informix's income. All shipments by Informix shall be F.O.B. origin.
F. Termination.
1. This Agreement will terminate: (a) for breach of the terms of this Agreement
or for failure to pay any amount when due, upon thirty (30) days prior written
notice by either party to the other, unless the cause is susceptible of being
and is cured within the thirty (30) day notice period; (b) immediately upon
written notice to Licensee in the event Licensee breaches sections A.6. or B.1.;
(c) immediately and automatically if a receiver or other liquidating officer is
appointed for substantially all of the assets or business of licensee or if
Licensee makes an assignment for the benefit of creditors or if Licensee becomes
insolvent; or (d) upon written notice given by either party to the other at
least six (6) months prior to the end of the then current term. The date
termination becomes effective is called the "Termination Date."
2. (a) If this Agreement is terminated because of a breach of sections A.6. or
B.1., all rights granted under this Agreement will terminate. (b) If this
Agreement is terminated for any other reason, all rights granted under this
Agreement shall terminate, except for (i) Licensee's continued right to use the
Products for the sole purpose of fulfilling any contractual obligations for
Services to Resellers or End Users, and (ii) End Users' continued right to use
the Products for which the license fees have been paid to Informix. Use after
the Termination Date shall be subject to those provisions of this Agreement
which survive termination.
3. Subject to section F.2.(b), within thirty (30) days of the Termination Date,
all Products and related materials in Licensee's possession or control shall be
returned to Informix, or, upon Informix's written request, destroyed by
Licensee.
4. On the earlier of the date notice of termination is sent or the Termination
Date, all outstanding obligations to pay any amounts to Informix will become
immediately due and payable.
5. Sections A.4., 6., 8., 9., 10. and 11.; B.; D.; E.; F.; G.5. and G.7. shall
survive any termination of this Agreement.
G. General Provisions.
1. Informix and Licensee are independent contractors and shall so represent
themselves in all regards. Neither party may bind the other in any way.
2. This Agreement may not be assigned by Licensee without the prior written
consent of Informix, which consent shall not be unreasonably withheld. Any
purported assignment in contravention of this section is null and void. A
transfer of a controlling interest in the equity of Licensee shall be deemed an
assignment for purposes of this subsection. Subject to the foregoing, this
Agreement shall bind and inure to the benefit of any successors or assigns.
3. Neither party will be responsible for failure of performance, other than for
an obligation to pay money, due to causes beyond its control, including, without
limitation, acts of Cod or nature; labor disputes; sovereign acts of any
federal, state or foreign government; or shortage of materials.
4. Notices will be delivered to a party's address stated in the signature block
of this Agreement, or to another address which a party properly notified the
other that notices should be sent.
5. This Agreement is the complete and exclusive statement of the parties to this
Agreement on these subjects, and supersedes all prior written or oral proposals
and understandings relating thereto. This Agreement may only be modified by a
writing signed by an officer of the party to be bound. This Agreement takes
precedence over any purchase order issued by Licensee, which is accepted by
Informix for administrative convenience only. If any court of competent
jurisdiction determines that any provision of this Agreement is invalid, the
remainder of the Agreement will continue in full force and effect. The offending
provision shall be interpreted to whatever extent possible to give effect to its
stated intent.
6. Failure to require performance of any provision or waiver of a breach of a
provision does not waive a party's right to subsequently require full and proper
performance of that provision. Singular terms will be construed as plural, and
vice versa. Section headings are for convenience only and will not be considered
part of this Agreement.
7. This Agreement is governed by the laws of the State of California without
giving effect to its conflict of law provisions. The United Nations Convention
on Contracts for the International Sale of Goods will not apply to this
Agreement. Each party submits to the jurisdiction of the appropriate state or
federal courts in California. Informix may seek to enforce or prevent a breach
of any term of this Agreement in the appropriate courts of any state or country
in which the Products are deployed by Licensee or in which Licensee maintains an
office. The prevailing party in any suit under this Agreement shall recover all
costs, expenses and reasonable attorney fees incurred in such action. Nothing in
this Agreement will be deemed a waiver by either party of any and all available
legal or equitable remedies.
8. This Agreement supersedes any prior or contemporaneous agreement between the
parties. The agreement dated November 27, 1996, between the parties, is hereby
terminated.
H. Definitions.
"Affiliate" means any person, corporation or other entity which, directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, another person, corporation or entity.
"Aggregate Revenue" means all amounts recognized from initial licensing fees,
and all renewal, upgrade and/or transfer fees of the application, excluding
Licensee's revenue from annual support fee or an Application not incorporating
the Products.
"Application" means a value-added application computer program which is
developed by Licensee.
"Confidential Information" means Informix pricing or information concerning new
Informix products, trade secrets and other proprietary rights; and any business,
marketing or technical information disclosed by Informix or Licensee and
identified in writing as confidential by, or proprietary to, the disclosing
party. Confidential Information does not include information (a) already in the
possession of the receiving party without an obligation of confidentiality, (b)
hereafter rightfully furnished to the receiving party by a third party without a
breach of any separate nondisclosure obligation, (c) publicly available without
breach
-4-
<PAGE> 5
of this Agreement (i.e., information in the public domain), (d) furnished by the
disclosing party to a third party without restriction on subsequent disclosure,
or (e) independently developed by the receiving party without reliance on the
Confidential Information.
"Development Product" means the standard proprietary Informix computer software
packages made generally commercially available by Informix within the Territory,
which include the object code form of the computer programs on magnetic media,
User Documentation and an End User Agreement.
"Effective Date" means the date reflected in the signature block of this
Agreement.
"End Item" means an Application together with a Product where the Product(s)
is(are) deeply imbedded such that the Product(s) is(are) not visible to the End
User.
"End User" means any third party individual, business or governmental customer
of Licensee or Licensee's Reseller which acquires one or more copies of the
Products for personal or internal business use, and not for transfer to others.
An End User may not be an Affiliate of Licensee.
"Export Laws" means all laws, administrative regulations, and executive orders
of any applicable jurisdiction relating to the control of imports and exports of
commodities and technical data, including, without limitation, the Export
Administration Regulations of the U.S. Department of Commerce, the International
Traffic in Arms Regulations of the US. Department of State, and the Enhanced
Proliferation Control Initiative.
"INFORMIX-Assurance" means The North America INFORMIX-Assurance Program, the
terms of which are attached hereto as Exhibit B.
"INFORMIX-OpenLine" means The North America INFORMIX-OpenLine Program, the terms
of which are attached hereto as Exhibit C.
"New Product" means a release and any associated User Documentation which
Informix in its sole discretion designates as a New Product; is made generally
commercially available by Informix; and is marketed by Informix as a New Product
even if it is capable of being integrated with a Product.
"Price List" means the Informix price list for the United States and Canada, in
effect at the time Licensee orders Products from Informix. The price for
Products deployed within the United States and Canada shall be as set forth in
the Price List. The price for Products deployed outside the United States and
Canada shall be 1.25 times the price set forth in the Price List.
"Product" means the Products set forth in Exhibit A.
"Reseller" means, as the context requires, either Licensee or a third party
appointed by Licensee or a third party appointed by Licensee's Resellers
pursuant to this Agreement, which distributes computer software to other
Resellers or to End Users. A Reseller may not be an Affiliate of Licensee and
may only distribute Products within the Territory.
"Run-rate" means Licensee's total net Product license fees paid by Licensee
during the 12 month period preceding Informix's review.
"Runtime Product" means a portion of a Development Product which is composed of
various modules and libraries made generally commercially available by Informix
within the Territory as either runtime files or files which are included only in
a linked form.
"User Documentation" means the Informix user manual(s) and other written
materials on proper installation and use of, and which are normally distributed
with, the software portion of the Products.
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<PAGE> 6
EXHIBIT A
LICENSED PRODUCTS
Sets forth below are those Informix and/or Red Brick products to be provided to
licensee under the terms and conditions set forth in the Agreement:
Products
Red Brick Warehouse VPT
Platforms, Red Brick Warehouse
become available.
Administration Utilities:
Auto Aggregate Load Option
RISQL Reporter
Backup/Restore
SQL-BackTrack
Enterprise Control & Coordination
Parallel TMU
Red Brick Warehouse Connect
The above products shall include only the U.S. versions of such products.
Additional products may be added to this list as they become available.
Operating System Platform
All supported Unix (excluding MPP) & Windows NT
Other Red-Brick-supported platforms as they
become available.
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<PAGE> 7
EXHIBIT B
THE NORTH AMERICA INFORMIX-ASSURANCE PROGRAM
("PROGRAM")
Informix Software, Inc. ("INFORMIX") is engaged in the business of designing,
developing, marketing, licensing, supporting, and maintaining computer software
programs and related user manuals ("Products"). The terms and conditions of the
Program follow.
1. DEFINITIONS.
"ENHANCEMENT RELEASE" means a new version of a Product that contains feature
additions, and may contain new fixes to software defects. An Enhancement Release
includes features and defect fixes from the prior version of the Product and is
designated as 1.1, 1.2, etc.
"MAINTAINED SOFTWARE" means the Product(s) designated on the Maintenance Serial
Number Label that accompanies this Program description.
"MAINTENANCE SERIAL NUMBER LABEL" means the label that accompanies this Program
description and that specifies the Maintained Software, the serial number(s),
and the Effective Date (as defined below).
"MAINTENANCE RELEASE" means a new version of Product that contains fixes to
software defects and is designated as 1.01, 1.02, etc.
"MAJOR RELEASE" means a new version of a Product that contains major feature
additions that may require architectural changes to the Product and is
designated as 1.0, 2.0, etc.
"NEW PRODUCT" means a Product which is designated and marketed by INFORMIX, in
its sole discretion, as a separate and distinct computer program, even if the
New Product is capable of being integrated with other Products, or is similar to
the Maintained Software.
"TECHINFO CENTER" means the interactive information service provided
electronically by INFORMIX.
2. RESPONSIBILITIES OF INFORMIX.
UPDATE. On your request, you will receive one (1) copy at no additional charge
of each Enhancement Release and Maintenance made generally commercially
available for UNIX, XENIX, Windows, or NetWare Maintained Software, including
shipping and handling, or one (1) copy of each Enhancement Release and
Maintenance made generally commercially available for DOS Maintained Software at
a nominal fee for media, documentation, shipping and handling. INFORMIX will
issue updates, as it determines are needed, at its sole discretion.
UPGRADE. On your request, you will receive one (1) copy of each Major Release
made generally commercially available for UNIX, XENIX, DOS, Windows, or NetWare
Maintained Software in accordance with INFORMIX's then current upgrade policy.
INFORMIX will issue upgrades, as it determines are needed, at its sole
discretion.
TECHINFO CENTER. INFORMIX will provide you, at no additional fee, with access to
Tech Info Center via the worldwide web.
MISCELLANEOUS. If you increase the number of users, move to a larger hardware
platform, or move to a different operating system within three (3) years of
original purchase, INFORMIX will provide you with a new license of the
Maintained Software in accordance with INFORMIX's standard policies. However,
INFORMIX reserves the right to modify or rescind this option in its sole
discretion upon 90 days prior written notice to you.
3. LIMITATIONS OF SOFTWARE MAINTENANCE.
INFORMIX has no obligation to provide telephone technical support or product
problem resolution under this Program, but will accept software defect reports
via telephone to INFORMIX's technical support department. INFORMIX can provide
telephone technical support and product problem resolution under a separate
INFORMIX-OpenLine Program.
4. FEES.
Unless otherwise agreed to in writing by you and INFORMIX, you agree to pay
INFORMIX the current list price for INFORMIX-Assurance services for the
Maintained Software. INFORMIX reserves the right to change the list price at any
time, without prior notice to you, but no change made after the Effective Date
(as defined below) shall be applicable to you unless the Program is extended for
a subsequent term.
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<PAGE> 8
EXHIBIT C
THE NORTH AMERICA INFORMIX-OPENLINE PROGRAM ("PROGRAM")
Informix Software, Inc. ("INFORMIX") is engaged in the business of designing,
developing, marketing, licensing, supporting, and maintaining computer software
programs and related user manuals ("Products"). The terms and conditions of the
Program follow.
1. DEFINITIONS.
"ENHANCEMENT RELEASE" means a new version of a Product that contains feature
additions, and may contain new fixes to software defects. An Enhancement Release
includes features and defect fixes from the prior version of the Product and is
designated as 1.1, 1.2, etc.
"MAINTENANCE RELEASE" means a new version of a Product that contains fixes to
software defects and is designated as 1.01, 1.02, etc.
"MAJOR RELEASE" means a new version of a Product that contains major feature
additions that may require architectural changes to the Product and is
designated as 1.0, 2.0, etc.
"NEW PRODUCT" means a Product which is designated and marketed by INFORMIX, in
its sole discretion, as a separate and distinct computer program, even if the
New Product is capable of being integrated with other Products, or is similar to
the Supported Software.
"PRODUCT PROBLEM" means Supported Software which is not functioning according to
the specifications in the user manual.
"SUPPORT CONTACT" means the persons you select in North America to communicate
with INFORMIX technical support. You may designate up to four (4) individuals,
and change the names at any time by written notice to INFORMIX technical
support. Support Contacts must be knowledgeable about how the Supported Software
is being used and the operating environment.
"SUPPORTED SOFTWARE" means the development version of Product(s) designated on
the Support Serial Number Label that accompanies this Program.
"SUPPORT SERIAL NUMBER LABEL" means the label that accompanies this Program and
that specifies the Supported Software, the serial number(s), and the Effective
Date (as defined below).
"TECHINFO CENTER" means the interactive information service provided
electronically by INFORMIX.
2. RESPONSIBILITIES OF INFORMIX.
TELEPHONE SUPPORT. INFORMIX will provide your Support Contact(s) telephone
access to technical support engineers in North America during normal business
hours between 7:00 am and 7:00 pm CST for assistance in the proper installation
or usage of the Supported Software, and to report and resolve Product Problems.
Alternatively, your Support Contact(s) may use mail, e-mail, facsimile (fax), or
Tech Info Center to communicate with INFORMIX.
PRODUCT PROBLEM RESOLUTION. INFORMIX will investigate and resolve all Product
Problems reported by Support Contact(s). INFORMIX requires detailed Product
Problem descriptions from Support Contacts. Product Problem resolution may be,
but is not limited to, a description of the Supported Software functional
operation, suggested alternative uses of the Supported Software, a temporary
method of circumventing the Product Problem, or a recommendation of the
installation of a Enhancement Release or Maintenance that corrects the Product
Problem. When requested to resolve a Product Problem, INFORMIX may require
access to your computer system via modem and telephone lines.
UPDATE. On your request, you will receive one (1) free copy of each Enhancement
Release and Maintenance made generally commercially available for UNIX, XENIX,
Windows, or NetWare Supported Software, including shipping and handling, or one
(1) copy of each Enhancement Release and Maintenance made generally commercially
available for DOS Supported Software at a nominal fee for media, documentation,
shipping and handling. INFORMIX will issue updates, as it determines are needed,
at its sole discretion.
UPGRADE. On your request, you will receive one (1) copy of each Major Release
made generally commercially available for UNIX, XENIX, DOS, Windows, or NetWare
Supported Software in accordance with INFORMIX's standard policies. INFORMIX
will issue upgrades, as it determines are needed, at its sole discretion.
TECHINFO CENTER. INFORMIX will provide you, at no additional fee, with access to
Tech Info Center via the worldwide web.
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<PAGE> 9
MISCELLANEOUS. If you increase the number of users, move to a larger hardware
platform, or move to a different operating system within three (3) years of
original purchase, INFORMIX will provide you with a new license of the Supported
Software in accordance with INFORMIX's standard policies. However, INFORMIX
reserves the right to modify or rescind this option in its sole discretion upon
ninety (90) days prior written notice to you.
3. YOUR RESPONSIBILITIES.
Support Contacts agree to use INFORMIX support services when the Supported
Software fails to function as described in the user manuals. Support Contacts
agree to provide required Product Problem descriptions in a detailed form
acceptable to INFORMIX in its sole DISCRETION. Support Contacts agree to provide
reasonable assistance to INFORMIX in duplicating and/or correcting the Product
Problem, which includes providing an INFORMIX technical support engineer with
access to your computer system via telephone and modem.
4. LIMITATIONS OF SOFTWARE SUPPORT.
INFORMIX has no obligation to provide support services for:
A. Altered or modified Supported Software;
B. Derivative works;
C. Third party software or application being used in conjunction with the
Supported Software;
D. Product Problems which arise as a result of your negligence or fault, or from
malfunctions of your computer or its operating system;
E. Product Problems that result from changes to your operating environment which
make it incompatible with the operating environment for the Supported Software
when they were originally licensed. This could include, but is not limited to,
additions or changes to hardware, operating system, compilers, or co-resident
software.
INFORMIX has no obligation to provide support services under this Program for
any New Product, nor to assist you in developing or debugging applications which
use the Supported Software.
5. FEES.
Unless otherwise agreed to in writing by you and INFORMIX, you agree to pay
INFORMIX the current list price for INFORMIX-OpenLine services for the Supported
Software. INFORMIX reserves the right to change the list price at any time,
without prior notice to you, but no change made after the Effective Date(as
defined below) shall be applicable to you unless this Program is extended for a
subsequent term.
Both INFORMIX and you will bear the cost of all normal communications to each
other, whether by telephone, mail or fax. INFORMIX, however, reserves the right
to charge you for unusual or excessive costs incurred by INFORMIX for telephone,
shipping, handling, media, user manuals or other expenses arising out of the
services to be provided under this Program. In all cases, INFORMIX will provide
you with advance notice of these costs.
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<PAGE> 1
EXHIBIT 10.14
ACCRUE SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock
Purchase Plan of Accrue Software, Inc. Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
(a) "BOARD" means the Board of Directors of the Company.
(b) "CODE" means the Internal Revenue Code of 1986, as
amended.
(c) "COMMON STOCK" means the Common Stock of the Company.
(d) "COMPANY" means Accrue Software, Inc., a Delaware
corporation.
(e) "COMPENSATION" means total cash compensation received by
an Employee from the Company or a Designated Subsidiary. By way of illustration,
but not limitation, Compensation includes regular compensation such as salary,
wages, overtime, shift differentials, bonuses, commissions and incentive
compensation, but excludes relocation, expense reimbursements, tuition or other
reimbursements and income realized as a result of participation in any stock
option, stock purchase, or similar plan of the Company or any Designated
Subsidiary.
(f) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of
any interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of (i) sick leave;
(ii) military leave; (iii) any other leave of absence approved by the
Administrator, provided that such leave is for a period of not more than 90
days, unless reemployment upon the expiration of such leave is guaranteed by
contract or statute, or unless provided otherwise pursuant to Company policy
adopted from time to time; or (iv) in the case of transfers between locations of
the Company or between the Company and its Designated Subsidiaries.
(g) "CONTRIBUTIONS" means all amounts credited to the
account of a participant pursuant to the Plan.
(h) "CORPORATE TRANSACTION" means a sale of all or
substantially all of the Company's assets, or a merger, consolidation or other
capital reorganization of the Company with or into another corporation.
<PAGE> 2
(i) "DESIGNATED SUBSIDIARIES" means the Subsidiaries which
have been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan; provided however that the Board shall only
have the discretion to designate Subsidiaries if the issuance of options to such
Subsidiary's Employees pursuant to the Plan would not cause the Company to incur
adverse accounting charges.
(j) "EMPLOYEE" means any person, including an Officer, who
is customarily employed for at least twenty (20) hours per week and more than
five (5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(k) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(l) "OFFERING DATE" means the first business day of each
Offering Period of the Plan.
(m) "OFFERING PERIOD" means a period of twenty-four (24)
months commencing on February 1 and August 1 of each year, except for the first
Offering Period as set forth in Section 4(a).
(n) "OFFICER" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(o) "PLAN" means this Employee Stock Purchase Plan.
(p) "PURCHASE DATE" means the last day of each Purchase
Period of the Plan.
(q) "PURCHASE PERIOD" means a period of six (6) months
within an Offering Period, except for the first Purchase Period as set forth in
Section 4(b).
(r) "PURCHASE PRICE" means with respect to a Purchase Period
an amount equal to 85% of the Fair Market Value (as defined in Section 7(b)
below) of a Share of Common Stock on the Offering Date or on the Purchase Date,
whichever is lower; provided, however, that in the event (i) of any increase in
the number of Shares available for issuance under the Plan as a result of a
stockholder-approved amendment to the Plan, and (ii) all or a portion of such
additional Shares are to be issued with respect to one or more Offering Periods
that are underway at the time of such increase ("Additional Shares"), and (iii)
the Fair Market Value of a Share of Common Stock on the date of such increase
(the "Approval Date Fair Market Value") is higher than the Fair Market Value on
the Offering Date for any such Offering Period, then in such instance the
Purchase Price with respect to Additional Shares shall be 85% of the Approval
Date Fair Market Value or the Fair Market Value of a Share of Common Stock on
the Purchase Date, whichever is lower.
(s) "SHARE" means a share of Common Stock, as adjusted in
accordance with Section 19 of the Plan.
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<PAGE> 3
(t) "SUBSIDIARY" means a corporation, domestic or foreign,
of which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
3. ELIGIBILITY.
(a) Any person who is an Employee as of the Offering Date of
a given Offering Period shall be eligible to participate in such Offering Period
under the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code; provided however that eligible Employees
may not participate in more than one Offering Period at a time.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) if,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or of any subsidiary of
the Company, or (ii) if such option would permit his or her rights to purchase
stock under all employee stock purchase plans (described in Section 423 of the
Code) of the Company and its Subsidiaries to accrue at a rate which exceeds
Twenty-Five Thousand Dollars ($25,000) of the Fair Market Value (as defined in
Section 7(b) below) of such stock (determined at the time such option is
granted) for each calendar year in which such option is outstanding at any time.
4. OFFERING PERIODS AND PURCHASE PERIODS.
(a) OFFERING PERIODS. The Plan shall be implemented by a
series of Offering Periods of twenty-four (24) months' duration, with new
Offering Periods commencing on or about February 1 and August 1 of each year (or
at such other time or times as may be determined by the Board of Directors). The
first Offering Period shall commence on the beginning of the effective date of
the Registration Statement on Form S-1 for the initial public offering of the
Company's Common Stock (the "IPO Date") and continue until July 31, 2001. The
Plan shall continue until terminated in accordance with Section 19 hereof. The
Board of Directors of the Company shall have the power to change the duration
and/or the frequency of Offering Periods with respect to future offerings
without stockholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected.
(b) PURCHASE PERIODS. Each Offering Period shall consist of
four (4) consecutive purchase periods of six (6) months' duration. The last day
of each Purchase Period shall be the "Purchase Date" for such Purchase Period. A
Purchase Period commencing on February 1 shall end on the next July 31. A
Purchase Period commencing on August 1 shall end on the next January 31. The
first Purchase Period shall commence on the IPO Date and shall end on January
31, 2000. The Board of Directors of the Company shall have the power to change
the duration and/or frequency of Purchase Periods with respect to future
purchases without stockholder approval if such change is announced at least five
(5) days prior to the scheduled beginning of the first Purchase Period to be
affected.
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<PAGE> 4
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement on the form provided by the Company
and filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given Offering Period. The
subscription agreement shall set forth the percentage of the participant's
Compensation (subject to Section 6(a) below) to be paid as Contributions
pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll
following the Offering Date and shall end on the last payroll paid on or prior
to the last Purchase Period of the Offering Period to which the subscription
agreement is applicable, unless sooner terminated by the participant as provided
in Section 10.
6. METHOD OF PAYMENT OF CONTRIBUTIONS.
(a) A participant shall elect to have payroll deductions
made on each payday during the Offering Period in an amount not less than one
percent (1%) and not more than twenty percent (20%) (or such greater percentage
as the Board may establish from time to time before an Offering Date) of such
participant's Compensation on each payday during the Offering Period. All
payroll deductions made by a participant shall be credited to his or her account
under the Plan. A participant may not make any additional payments into such
account.
(b) A participant may discontinue his or her participation
in the Plan as provided in Section 10, or, on one occasion only during a
Purchase Period may increase and on one occasion only during a Purchase Period
may decrease the rate of his or her Contributions with respect to the Offering
Period by completing and filing with the Company a new subscription agreement
authorizing a change in the payroll deduction rate. The change in rate shall be
effective as of the beginning of the next calendar month following the date of
filing of the new subscription agreement, if the agreement is filed at least ten
(10) business days prior to such date and, if not, as of the beginning of the
next succeeding calendar month.
(c) Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code and Section 3(b) herein, a
participant's payroll deductions may be decreased during any Purchase Period to
0%. Payroll deductions shall re-commence at the rate provided in such
participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10.
7. GRANT OF OPTION.
(a) On the Offering Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Purchase Date a number of Shares of the Company's
Common Stock determined by dividing such Employee's Contributions accumulated
prior to such Purchase Date and retained in the participant's account as of the
Purchase Date by the applicable Purchase Price; provided however
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<PAGE> 5
that the maximum number of Shares an Employee may purchase during each Purchase
Period shall be 2,000 Shares (subject to any adjustment pursuant to Section 19
below), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 13.
(b) The fair market value of the Company's Common Stock on a
given date (the "Fair Market Value") shall be determined by the Board in its
discretion based on the closing sales price of the Common Stock for such date
(or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported by the National Association of
Securities Dealers Automated Quotation (Nasdaq) National Market or, if such
price is not reported, the mean of the bid and asked prices per share of the
Common Stock as reported by Nasdaq or, in the event the Common Stock is listed
on a stock exchange, the Fair Market Value per share shall be the closing sales
price on such exchange on such date (or, in the event that the Common Stock is
not traded on such date, on the immediately preceding trading date), as reported
in The Wall Street Journal. For purposes of the Offering Date under the first
Offering Period under the Plan, the Fair Market Value of a share of the Common
Stock of the Company shall be the Price to Public as set forth in the final
prospectus filed with the Securities and Exchange Commission pursuant to Rule
424 under the Securities Act of 1933, as amended.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan
as provided in Section 10, his or her option for the purchase of Shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full Shares subject to the option will be purchased at the
applicable Purchase Price with the accumulated Contributions in his or her
account. No fractional Shares shall be issued. The Shares purchased upon
exercise of an option hereunder shall be deemed to be transferred to the
participant on the Purchase Date. During his or her lifetime, a participant's
option to purchase Shares hereunder is exercisable only by him or her.
9. DELIVERY. As promptly as practicable after each Purchase Date of
each Offering Period, the Company shall arrange the delivery to each
participant, as appropriate, the Shares purchased upon exercise of his or her
option. No fractional Shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full Share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 below. Any other amounts left over in a
participant's account after a Purchase Date shall be returned to the
participant.
10. VOLUNTARY WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current period will be automatically terminated, and no further
Contributions for the purchase of Shares will be made during the Offering
Period.
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<PAGE> 6
(b) Upon termination of the participant's Continuous Status
as an Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous
Status as an Employee of the Company for at least twenty (20) hours per week
during the Offering Period in which the employee is a participant, he or she
will be deemed to have elected to withdraw from the Plan and the Contributions
credited to his or her account will be returned to him or her and his or her
option terminated.
(d) A participant's withdrawal from an offering will not
have any effect upon his or her eligibility to participate in a succeeding
offering or in any similar plan which may hereafter be adopted by the Company.
11. AUTOMATIC WITHDRAWAL. If the Fair Market Value of the Shares on
any Purchase Date of an Offering Period is less than the Fair Market Value of
the Shares on the Offering Date for such Offering Period, then every participant
shall automatically (i) be withdrawn from such Offering Period at the close of
such Purchase Date and after the acquisition of Shares for such Purchase Period,
and (ii) be enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Period. [Participants shall automatically be
withdrawn as of July 31, 1999 from the Offering Period beginning on the IPO Date
and re-enrolled in the Offering Period beginning on August 1, 1999 if the Fair
Market Value of the Shares on the IPO Date is greater than the Fair Market Value
of the Shares on July 31, 1999, unless a participant notifies the Administrator
prior to July 31, 1999 that he or she does not wish to be withdrawn and
re-enrolled.]
12. INTEREST. No interest shall accrue on the Contributions of a
participant in the Plan.
13. STOCK.
(a) Subject to adjustment as provided in Section 19, the
maximum number of Shares which shall be made available for sale under the Plan
shall be 500,000 Shares, plus an annual increase on the first day of each of the
Company's fiscal years beginning in 2000, 2001, 2002, 2003 and 2004 equal to the
lesser of (i) 200,000 Shares, (ii) one percent (1%) of the Shares outstanding on
the last day of the immediately preceding fiscal year, or (iii) such lesser
number of Shares as is determined by the Board. If the Board determines that, on
a given Purchase Date, the number of shares with respect to which options are to
be exercised may exceed (i) the number of shares of Common Stock that were
available for sale under the Plan on the Offering Date of the applicable
Offering Period, or (ii) the number of shares available for sale under the Plan
on such Purchase Date, the Board may in its sole discretion provide (x) that the
Company shall make a pro rata allocation of the Shares of Common Stock available
for purchase on such Offering Date or Purchase Date, as applicable, in as
uniform a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising
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<PAGE> 7
options to purchase Common Stock on such Purchase Date, and continue all
Offering Periods then in effect, or (y) that the Company shall make a pro rata
allocation of the shares available for purchase on such Offering Date or
Purchase Date, as applicable, in as uniform a manner as shall be practicable and
as it shall determine in its sole discretion to be equitable among all
participants exercising options to purchase Common Stock on such Purchase Date,
and terminate any or all Offering Periods then in effect pursuant to Section 20
below. The Company may make pro rata allocation of the Shares available on the
Offering Date of any applicable Offering Period pursuant to the preceding
sentence, notwithstanding any authorization of additional Shares for issuance
under the Plan by the Company's stockholders subsequent to such Offering Date.
(b) The participant shall have no interest or voting right
in Shares covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
will be registered in the name of the participant or in the name of the
participant and his or her spouse.
14. ADMINISTRATION. The Board, or a committee named by the Board,
shall supervise and administer the Plan and shall have full power to adopt,
amend and rescind any rules deemed desirable and appropriate for the
administration of the Plan and not inconsistent with the Plan, to construe and
interpret the Plan, and to make all other determinations necessary or advisable
for the administration of the Plan.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a
beneficiary who is to receive any Shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to the end of a Purchase Period but prior to delivery to him or her
of such Shares and cash. In addition, a participant may file a written
designation of a beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death prior to the
Purchase Date of an Offering Period. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant (and his or her spouse, if any) at any time by written notice. In
the event of the death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such Shares and/or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such Shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
16. TRANSFERABILITY. Neither Contributions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive Shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws
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<PAGE> 8
of descent and distribution, or as provided in Section 15) by the participant.
Any such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw funds in accordance with Section 10.
17. USE OF FUNDS. All Contributions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such Contributions.
18. REPORTS. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees at least annually, which statements will set forth the amounts of
Contributions, the per Share Purchase Price, the number of Shares purchased and
the remaining cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE
TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each option under
the Plan which has not yet been exercised and the number of Shares which have
been authorized for issuance under the Plan but have not yet been placed under
option (collectively, the "Reserves"), as well as the maximum number of shares
of Common Stock which may be purchased by a participant in a Purchase Period,
the number of shares of Common Stock set forth in Section 13(a)(i) above, and
the price per Share of Common Stock covered by each option under the Plan which
has not yet been exercised, shall be proportionately adjusted for any increase
or decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common Stock
(including any such change in the number of Shares of Common Stock effected in
connection with a change in domicile of the Company), or any other increase or
decrease in the number of Shares effected without receipt of consideration by
the Company; provided however that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an option.
(b) CORPORATE TRANSACTIONS. In the event of a dissolution or
liquidation of the Company, any Purchase Period and Offering Period then in
progress will terminate immediately prior to the consummation of such action,
unless otherwise provided by the Board. In the event of a Corporate Transaction,
each option outstanding under the Plan shall be assumed or an equivalent option
shall be substituted by the successor corporation or a parent or Subsidiary of
such successor corporation. In the event that the successor corporation refuses
to assume or substitute for outstanding options, each Purchase Period and
Offering Period then in progress shall be shortened and a new Purchase Date
shall be set (the "New Purchase Date"), as of which date any Purchase Period and
Offering Period then in progress will terminate. The New Purchase Date shall be
on or before the date of consummation of the transaction and the Board shall
notify each participant in writing, at least ten (10) days prior to the New
Purchase Date, that
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<PAGE> 9
the Purchase Date for his or her option has been changed to the New Purchase
Date and that his or her option will be exercised automatically on the New
Purchase Date, unless prior to such date he or she has withdrawn from the
Offering Period as provided in Section 10. For purposes of this Section 19, an
option granted under the Plan shall be deemed to be assumed, without limitation,
if, at the time of issuance of the stock or other consideration upon a Corporate
Transaction, each holder of an option under the Plan would be entitled to
receive upon exercise of the option the same number and kind of shares of stock
or the same amount of property, cash or securities as such holder would have
been entitled to receive upon the occurrence of the transaction if the holder
had been, immediately prior to the transaction, the holder of the number of
Shares of Common Stock covered by the option at such time (after giving effect
to any adjustments in the number of Shares covered by the option as provided for
in this Section 19); provided however that if the consideration received in the
transaction is not solely common stock of the successor corporation or its
parent (as defined in Section 424(e) of the Code), the Board may, with the
consent of the successor corporation, provide for the consideration to be
received upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in Fair Market Value to the per Share
consideration received by holders of Common Stock in the transaction.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per Share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of Shares of its outstanding Common
Stock, and in the event of the Company's being consolidated with or merged into
any other corporation.
20. AMENDMENT OR TERMINATION.
(a) The Board may at any time and for any reason terminate
or amend the Plan. Except as provided in Section 19, no such termination of the
Plan may affect options previously granted, provided that the Plan or an
Offering Period may be terminated by the Board on a Purchase Date or by the
Board's setting a new Purchase Date with respect to an Offering Period and
Purchase Period then in progress if the Board determines that termination of the
Plan and/or the Offering Period is in the best interests of the Company and the
stockholders or if continuation of the Plan and/or the Offering Period would
cause the Company to incur adverse accounting charges as a result of a change
after the effective date of the Plan in the generally accepted accounting rules
applicable to the Plan. Except as provided in Section 19 and in this Section 20,
no amendment to the Plan shall make any change in any option previously granted
which adversely affects the rights of any participant. In addition, to the
extent necessary to comply with Rule 16b-3 under the Exchange Act, or under
Section 423 of the Code (or any successor rule or provision or any applicable
law or regulation), the Company shall obtain stockholder approval in such a
manner and to such a degree as so required.
(b) Without stockholder consent and without regard to
whether any participant rights may be considered to have been adversely
affected, the Board (or its committee) shall be entitled to change the Offering
Periods and Purchase Periods, limit the frequency and/or number
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<PAGE> 10
of changes in the amount withheld during an Offering Period, establish the
exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant's
Compensation, and establish such other limitations or procedures as the Board
(or its committee) determines in its sole discretion advisable which are
consistent with the Plan.
21. NOTICES. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements of
any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective
upon the IPO Date. It shall continue in effect for a term of twenty (20) years
unless sooner terminated under Section 20.
24. ADDITIONAL RESTRICTIONS OF RULE 16b-3. The terms and conditions
of options granted hereunder to, and the purchase of Shares by, persons subject
to Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the Shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
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<PAGE> 11
ACCRUE SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the
Accrue Software, Inc. 1999 Employee Stock Purchase Plan (the "Plan") for the
Offering Period ______________, ____ to _______________, ____, and subscribe to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 20% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during
the Offering Period at the rate stated in Item 2 of this Subscription Agreement.
I understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the
Purchase Date my participation in the Plan as provided in Section 10 of the
Plan. I also understand that I can increase or decrease the rate of my
Contributions on one occasion only with respect to any increase and one occasion
only with respect to any decrease during any Purchase Period by completing and
filing a new Subscription Agreement with such increase or decrease taking effect
as of the beginning of the calendar month following the date of filing of the
new Subscription Agreement, if filed at least ten (10) business days prior to
the beginning of such month. Further, I may change the rate of deductions for
future Offering Periods by filing a new Subscription Agreement, and any such
change will be effective as of the beginning of the next Offering Period. In
addition, I acknowledge that, unless I discontinue my participation in the Plan
as provided in Section 10 of the Plan, my election will continue to be effective
for each successive Offering Period.
<PAGE> 12
5. I have received a copy of the Company's most recent description
of the Plan and a copy of the complete "Accrue Software, Inc. 1999 Employee
Stock Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.
6. Shares purchased for me under the Plan should be issued in the
name(s) of (name of employee or employee and spouse only):
---------------------------------------
---------------------------------------
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) ---------------------------------------
(First) (Middle) (Last)
- -------------------- ---------------------------------------
(Relationship) (Address)
---------------------------------------
8. I understand that if I dispose of any shares received by me
pursuant to the Plan within 2 years after the Offering Date (the first day of
the Offering Period during which I purchased such shares) or within 1 year after
the Purchase Date, I will be treated for federal income tax purposes as having
received ordinary compensation income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares on the
Purchase Date over the price which I paid for the shares, regardless of whether
I disposed of the shares at a price less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
I hereby agree to notify the Company in writing within 30 days after the
date of any such disposition, and I will make adequate provision for federal,
state or other tax withholding obligations, if any, which arise upon the
disposition of the Common Stock. The Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the
2-year and 1-year holding periods, I understand that I will be treated for
federal income tax purposes as having received compensation income only to the
extent of an amount equal to the lesser of (1) the excess of the fair market
value of the shares at the time of such disposition over the purchase price
which I paid for the shares under the option, or (2) 15% of the fair market
value of the
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<PAGE> 13
shares on the Offering Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.
I understand that this tax summary is only a summary and is subject to
change. I further understand that I should consult a tax advisor concerning the
tax implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
SIGNATURE:
------------------------------
SOCIAL SECURITY #:
----------------------
DATE:
-----------------------------------
SPOUSE'S SIGNATURE (necessary if beneficiary is not spouse):
- ----------------------------------------
(Signature)
- ----------------------------------------
(Print name)
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<PAGE> 14
ACCRUE SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, __________________________, hereby elect to withdraw my participation
in the Accrue Software, Inc. 1999 Employee Stock Purchase Plan (the "Plan") for
the Offering Period that began on _________ ___, _____. This withdrawal covers
all Contributions credited to my account and is effective on the date designated
below.
I understand that all Contributions credited to my account will be paid
to me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
Dated:
---------------------- ----------------------------------------
Signature of Employee
----------------------------------------
Social Security Number
<PAGE> 1
EXHIBIT 10.15
ACCRUE SOFTWARE, INC.
1999 DIRECTORS' STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Directors' Stock Option
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CHANGE OF CONTROL" means a sale of all or substantially all
of the Company's assets, or any merger or consolidation of the Company with or
into another corporation other than a merger or consolidation in which the
holders of more than 50% of the shares of capital stock of the Company
outstanding immediately prior to such transaction continue to hold (either by
the voting securities remaining outstanding or by their being converted into
voting securities of the surviving entity) more than 50% of the total voting
power represented by the voting securities of the Company, or such surviving
entity, outstanding immediately after such transaction.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMON STOCK" means the Common Stock of the Company.
(e) "COMPANY" means Accrue Software, Inc., a Delaware corporation.
(f) "CONTINUOUS STATUS AS A DIRECTOR" means the absence of any
interruption or termination of service as a Director.
(g) "CORPORATE TRANSACTION" means a dissolution or liquidation of
the Company, a sale of all or substantially all of the Company's assets, or a
merger, consolidation or other capital reorganization of the Company with or
into another corporation.
(h) "DIRECTOR" means a member of the Board.
(i) "EMPLOYEE" means any person, including any officer or
Director, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
<PAGE> 2
(k) "OPTION" means a stock option granted pursuant to the Plan.
All options shall be nonstatutory stock options (i.e., options that are not
intended to qualify as incentive stock options under Section 422 of the Code).
(l) "OPTIONED STOCK" means the Common Stock subject to an Option.
(m) "OPTIONEE" means an Outside Director who receives an Option.
(n) "OUTSIDE DIRECTOR" means a Director who is not an Employee.
(o) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(p) "PLAN" means this 1999 Directors' Stock Option Plan.
(q) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(r) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 250,000, plus an annual increase on the first day of each
of the Company's fiscal years beginning in 2000, 2001, 2002, 2003 and 2004 equal
to the lesser of (i) 100,000 Shares, (ii) one-half of one percent (0.5%) of the
Shares outstanding on the last day of the immediately preceding fiscal year, or
(iii) such lesser number of Shares as is determined by the Board. Shares of
Common Stock (the "Pool"). The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan has been terminated, become available for future
grant under the Plan. In addition, any Shares of Common Stock that are retained
by the Company upon exercise of an Option in order to satisfy the exercise price
for such Option, or any withholding taxes due with respect to such exercise,
shall be treated as not issued and shall continue to be available under the
Plan. If Shares that were acquired upon exercise of an Option are subsequently
repurchased by the Company, such Shares shall not in any event be returned to
the Plan and shall not become available for future grant under the Plan.
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) ADMINISTRATOR. Except as otherwise required herein, the Plan
shall be administered by the Board.
(b) PROCEDURE FOR GRANTS. All grants of Options hereunder shall be
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
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<PAGE> 3
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 50,000 Shares (the "First Option") on the date on which such
person first becomes an Outside Director after the effective date of this Plan,
whether through election by the shareholders of the Company or appointment by
the Board of Directors to fill a vacancy.
(iii) Each Outside Director, including an Outside Director who
did not receive a First Option grant, shall be automatically granted an Option
to purchase 5,000 Shares (the "Subsequent Option") on the date of each Annual
Meeting of the Company's stockholders immediately following which such Outside
Director is serving on the Board, provided that, on such date, he or she shall
have served on the Board for at least six (6) months prior to the date of such
Annual Meeting.
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, in the event that a grant would cause the number of Shares subject
to outstanding Options plus the number of Shares previously purchased upon
exercise of Options to exceed the Pool, then each such automatic grant shall be
for that number of Shares determined by dividing the total number of Shares
remaining available for grant by the number of Outside Directors receiving an
Option on the automatic grant date. Any further grants shall then be deferred
until such time, if any, as additional Shares become available for grant under
the Plan through action of the stockholders to increase the number of Shares
which may be issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any grant of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 17 hereof.
(vii) The terms of each option granted hereunder shall be as
follows:
(1) each option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 below;
(2) the exercise price per Share shall be 100% of the
fair market value per Share on the date of grant of each option, determined in
accordance with Section 8 hereof;
(3) each Option shall vest and be exercisable as to
1/48th of the Shares subject to the option on each month after the date of
grant.
(c) POWERS OF THE BOARD. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its discretion:
(i) to determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the
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<PAGE> 4
Common Stock; (ii) to determine the exercise price per Share of Options to be
granted, which exercise price shall be determined in accordance with Section 8
of the Plan; (iii) to interpret the Plan; (iv) to prescribe, amend and rescind
rules and regulations relating to the Plan; (v) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the grant
of an Option previously granted hereunder; and (vi) to make all other
determinations deemed necessary or advisable for the administration of the Plan.
(d) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) SUSPENSION OR TERMINATION OF OPTION. If the Chief Executive
Officer or his or her designee reasonably believes that an Optionee has
committed an act of misconduct, such officer may suspend the Optionee's right to
exercise any option pending a determination by the Board (excluding the Outside
Director accused of such misconduct). If the Board (excluding the Outside
Director accused of such misconduct) determines an Optionee has committed an act
of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company rules
resulting in loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential information,
engages in any conduct constituting unfair competition, induces any Company
customer to breach a contract with the Company or induces any principal for whom
the Company acts as agent to terminate such agency relationship, neither the
Optionee nor his or her estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Board of Directors (excluding the
Outside Director accused of such misconduct) shall act fairly and shall give the
Optionee an opportunity to appear and present evidence on Optionee's behalf at a
hearing before the Board or a committee of the Board.
5. ELIGIBILITY. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) above. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect
to continuation of service as a Director or nomination to serve as a Director,
nor shall it interfere in any way with any rights which the Director or the
Company may have to terminate his or her directorship at any time.
6. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective on
the effectiveness of the registration statement under the Securities Act of
1933, as amended, relating to the Company's initial public offering of
securities. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 13 of the Plan.
7. TERM OF OPTIONS. The term of each Option shall be ten (10) years
from the date of grant thereof unless an Option terminates sooner pursuant to
Section 9 below.
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<PAGE> 5
8. EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per Share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be 100% of the fair market
value per Share on the date of grant of the Option.
(b) FAIR MARKET VALUE. The fair market value shall be determined
by the Board; provided however that in the event the Common Stock is traded on
the Nasdaq National Market or listed on a stock exchange, the fair market value
per Share shall be the closing sales price on such system or exchange on the
date of grant of the Option (or, in the event that the Common Stock is not
traded on such date, on the immediately preceding trading date), as reported in
The Wall Street Journal, or if there is a public market for the Common Stock but
the Common Stock is not traded on the Nasdaq National Market or listed on a
stock exchange, the fair market value per Share shall be the mean of the bid and
asked prices of the Common Stock in the over-the-counter market on the date of
grant, as reported in The Wall Street Journal (or, if not so reported, as
otherwise reported by the National Association of Securities Dealers Automated
Quotation ("Nasdaq") System). For purposes of the First Options granted on the
effective date of this Plan, the fair market value per Share shall be the Price
to Public as set forth in the final prospectus filed with the Securities
Exchange Commission pursuant to Rule 424 under the Securities Act of 1933, as
amended.
(c) FORM OF CONSIDERATION. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) above; provided however that no Options shall be exercisable prior to
stockholder approval of the Plan in accordance with Section 17 below has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to
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<PAGE> 6
the Optioned Stock, notwithstanding the exercise of the Option. A share
certificate for the number of Shares so acquired shall be issued to the Optionee
as soon as practicable after exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. If an Outside
Director ceases to serve as a Director, he or she may, but only within ninety
(90) days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (to the extent
he or she was entitled to exercise) within the time specified above, the Option
shall terminate and the Shares underlying the unexercised portion of the Option
shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 9(b) above, in
the event a Director is unable to continue his or her service as a Director with
the Company as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), he or she may, but only within twelve (12)
months from the date of such termination, exercise his or her Option to the
extent he or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that he or she was not
entitled to exercise the Option at the date of termination, or if he or she does
not exercise such Option (to the extent he or she was entitled to exercise)
within the time specified above, the Option shall terminate and the Shares
underlying the unexercised portion of the Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee:
(A) during the term of the Option who is, at the time of his or her death, a
Director of the Company and who shall have been in Continuous Status as a
Director since the date of grant of the Option, or (B) three (3) months after
the termination of Continuous Status as a Director, the Option may be exercised,
at any time within twelve (12) months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of death or the date of termination, as applicable.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that an Optionee was not
entitled to exercise the Option at the date of death or termination or if he or
she does not exercise such Option (to the extent he or she was entitled to
exercise) within the time specified above, the Option shall terminate and the
Shares underlying the unexercised portion of the Option shall revert to the
Plan.
-6-
<PAGE> 7
10. NONTRANSFERABILITY OF OPTIONS. The Option may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent or distribution or pursuant to a
qualified domestic relations order (as defined by the Code or the rules
thereunder). The designation of a beneficiary by an Optionee does not constitute
a transfer. An Option may be exercised during the lifetime of an Optionee only
by the Optionee or a transferee permitted by this Section.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE
TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, the number of Shares of Common Stock set forth in
Sections 4(b)(ii), (iii) and (iv) above, and the number of Shares of Common
Stock which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per Share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued Shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock (including any such change
in the number of Shares of Common Stock effected in connection with a change in
domicile of the Company) or any other increase or decrease in the number of
issued Shares of Common Stock effected without receipt of consideration by the
Company; provided however that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.
(b) CORPORATE TRANSACTIONS; CHANGE OF CONTROL. In the event of a
Corporate Transaction, including a Change of Control, and except as otherwise
provided in a Stock Option Agreement issued under the Plan, each outstanding
Option shall be assumed or an equivalent option shall be substituted by the
successor corporation or a Parent or Subsidiary of such successor corporation,
unless the successor corporation does not agree to assume the outstanding
Options or to substitute equivalent options, in which case the Options shall
terminate upon the consummation of the transaction.
For purposes of this Section 11(b), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon such Corporate Transaction or Change of Control, each
Optionee would be entitled to receive upon exercise of an Option the same number
and kind of shares of stock or the same amount of property, cash or securities
as the Optionee would have been entitled to receive upon the occurrence of such
transaction if the Optionee had been, immediately prior to such transaction, the
holder of the number of Shares of Common Stock covered by the Option at such
time (after giving effect to any adjustments in the number of Shares covered by
the Option as provided for in this Section 11); provided however that if such
consideration received in the transaction was
-7-
<PAGE> 8
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon exercise of the Option to be solely common
stock of the successor corporation or its Parent equal to the Fair Market Value
of the per Share consideration received by holders of Common Stock in the
transaction.
(c) CERTAIN DISTRIBUTIONS. In the event of any distribution to
the Company's stockholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the stockholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any other
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the legal requirements relating to the administration
of stock option plans under applicable U.S. state corporate laws, U.S. federal
and applicable state securities laws, the Code, any stock exchange or Nasdaq
rules or regulations to which the Company may be subject and the applicable laws
of any other country or jurisdiction where Options are granted under the Plan,
as such laws, rules, regulations and requirements shall be in place from time to
time (the "Applicable Laws"). Such compliance shall be determined by the Company
in consultation with its legal counsel.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares
-8-
<PAGE> 9
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. STOCKHOLDER APPROVAL. If required by the Applicable Laws,
continuance of the Plan shall be subject to approval by the stockholders of the
Company. Such stockholder approval shall be obtained in the manner and to the
degree required under the Applicable Laws.
-9-
<PAGE> 10
ACCRUE SOFTWARE, INC.
1999 DIRECTORS' STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
<<Optionee>>
<<OptioneeAddress1>>
<<OptioneeAddress2>>
You have been granted an option to purchase Common Stock of Accrue
Software, Inc. (the "Company") as follows:
Date of Grant <<GrantDate>>
Vesting Commencement Date <<VestingStartDate>>
Exercise Price per Share <<ExercisePrice>>
Total Number of Shares Granted <<SharesGranted>>
Total Exercise Price <<TotalExercisePrice>>
Expiration Date <<ExpirDate>>
Vesting Schedule: This Option may be exercised, in whole or in part,
in accordance with the following schedule and the Acceleration of
Vesting Schedule set forth below: 25% of the Shares subject to the
Option shall vest on the twelve (12) month anniversary of the Vesting
Commencement Date and 1/48th of the total number of Shares subject to
the Option shall vest on the <<MonthVestDate>> of each month
thereafter.
Acceleration of Vesting Schedule: In the event Optionee's Continuous
Status as a Director is terminated without Cause in connection with
or within three (3) months following a Change of Control, an
additional 25% of the Shares subject to the Option shall vest.
Notwithstanding the foregoing, in no event shall Optionee be entitled
to exercise a number of shares under this Option in excess of the
Total Number of Shares Granted set forth above.
-10-
<PAGE> 11
Definitions:
For purposes of this Agreement, "Change of Control" shall
have the meaning set forth in Section 2(b) of the 1999 Directors'
Stock Option Plan.
For purposes of this Agreement, "Cause" for Optionee's
termination of Continuous Status as a Director will exist at any time
after the happening of one or more of the following events:
(a) Optionee's willful misconduct or gross
negligence in performance of his duties hereunder;
(b) Dishonest or fraudulent conduct, a deliberate
attempt to do an injury to the Company, or conduct that
materially discredits the Company or is materially
detrimental to the reputation of the Company, including
conviction of a felony; or
(c) Optionee's incurable material breach of any
element of the Company's Confidential Information and
Invention Assignment Agreement, including without
limitation, Optionee's theft or other misappropriation of
the Company's proprietary information.
Termination Period: This Option may be exercised for 90 days after termination
of Optionee's Continuous Status as a Director, or such longer period as may be
applicable upon death or Disability of Optionee as provided in the Plan, but in
no event later than the Expiration Date as provided above.
By your signature and the signature of the Company's representative
below, you and the Company agree that this option is granted under and governed
by the terms and conditions of the 1999 Directors' Stock Option Plan and the
Nonstatutory Stock Option Agreement, all of which are attached and made a part
of this document.
OPTIONEE: ACCRUE SOFTWARE, INC.
- -------------------------- By:
Signature --------------------------
- -------------------------- Title:
Print Name -----------------------
-11-
<PAGE> 12
ACCRUE SOFTWARE, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
1. GRANT OF OPTION. The Board of Directors of the Company hereby
grants to the Optionee named in the Notice of Stock Option Grant attached as
Part I of this Agreement (the "Optionee"), an option (the "Option") to purchase
a number of Shares, as set forth in the Notice of Stock Option Grant, at the
exercise price per share set forth in the Notice of Stock Option Grant (the
"Exercise Price"'), subject to the terms and conditions of the 1999 Directors'
Stock Option Plan (the "Plan"), which is incorporated herein by reference.
(Capitalized terms not defined herein shall have the meanings ascribed to such
terms in the Plan.) In the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Nonstatutory Stock Option
Agreement, the terms and conditions of the Plan shall prevail.
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during
its term in accordance with the Vesting Schedule set out in the Notice of Stock
Option Grant and the applicable provisions of the Plan and this Nonstatutory
Stock Option Agreement. In the event of Optionee's death, disability or other
termination of Optionee's employment or consulting relationship, the
exercisability of the Option is governed by the applicable provisions of the
Plan and this Nonstatutory Stock Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by
delivery of an exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by
the Company pursuant to the provisions of the Plan. The Exercise Notice shall be
signed by the Optionee and shall be delivered in person or by certified mail to
the Secretary of the Company. The Exercise Notice shall be accompanied by
payment of the aggregate Exercise Price as to all Exercised Shares. This Option
shall be deemed to be exercised upon receipt by the Company of such fully
executed Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with all relevant provisions
of law and the requirements of any stock exchange or quotation service upon
which the Shares are then listed. Assuming such compliance, for income tax
purposes the Exercised Shares shall be considered transferred to the Optionee on
the date the Option is exercised with respect to such Exercised Shares.
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall
be by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
-12-
<PAGE> 13
(b) check;
(c) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (ii) have a Fair Market
Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.
4. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
or pursuant to a domestic relations order (as defined by the Code or the rules
thereunder) and may be exercised during the lifetime of Optionee only by the
Optionee or a transferee permitted by Section 10 of the Plan. The terms of the
Plan and this Nonstatutory Stock Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
5. TERM OF OPTION. This Option may be exercised only within the term
set out in the Notice of Stock Option Grant, and may be exercised during such
term only in accordance with the Plan and the terms of this Nonstatutory Stock
Option Agreement.
6. TAX CONSEQUENCES. Set forth below is a brief summary of certain
federal tax consequences relating to this Option under the law in effect as of
the date of grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT HIS OR HER OWN TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISING THE OPTION. Since this Option does not
qualify as an incentive stock option under Section 422 of the Code, the Optionee
may incur regular federal income tax liability upon exercise. The Optionee will
be treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the fair market value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price.
(b) DISPOSITION OF SHARES. If the Optionee holds the Option
Shares for more than one year, gain realized on disposition of the Shares will
be treated as long-term capital gain for federal income tax purposes. The
long-term capital gain will be taxed for federal income tax purposes at a
maximum rate of 20 percent.
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<PAGE> 14
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Nonstatutory Stock Option
Agreement. Optionee has reviewed the Plan and this Nonstatutory Stock Option
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Nonstatutory Stock Option Agreement and fully
understands all provisions of the Plan and Nonstatutory Stock Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Nonstatutory Stock Option Agreement.
ACCRUE SOFTWARE, INC.
- -------------------------- By:
<<Optionee>> --------------------------
Title:
-----------------------
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Nonstatutory Stock Option Agreement.
In consideration of the Company's granting his or her spouse the right to
purchase Shares as set forth in the Plan and this Nonstatutory Stock Option
Agreement, the undersigned hereby agrees to be irrevocably bound by the terms
and conditions of the Plan and this Nonstatutory Stock Option Agreement and
further agrees that any community property interest shall be similarly bound.
The undersigned hereby appoints the undersigned's spouse as attorney-in-fact for
the undersigned with respect to any amendment or exercise of rights under the
Plan or this Nonstatutory Stock Option Agreement.
--------------------------
Spouse of Optionee
-14-
<PAGE> 15
EXHIBIT A
NOTICE OF EXERCISE
To: Accrue Software, Inc.
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Stock Option
This is official notice that the undersigned ("Optionee") intends to
exercise Optionee's option to purchase __________ shares of Accrue Software,
Inc. Common Stock, under and pursuant to the Company's 1999 Directors' Stock
Option Plan and the Nonstatutory Stock Option Agreement dated _______________,
as follows:
Grant Number: __________________________________________
Date of Purchase: __________________________________________
Number of Shares: __________________________________________
Purchase Price: __________________________________________
Method of Payment of
Purchase Price: __________________________________________
Social Security No.: __________________________________________
The shares should be issued as follows:
Name: __________________________
Address: __________________________
__________________________
__________________________
__________________________
__________________________
Signed: __________________________
Date: __________________________
-15-
<PAGE> 1
EXHIBIT 10.17
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: Accrue Software, Inc., a Delaware Corporation
Number of Shares: 7% Warrant Coverage (see below)
Class of Stock: Common Stock, but if the Company's initial public offering
("IPO") does not close on or before October 31, 1999, the Class of Stock shall
be Series E Preferred unless the Company closes its Series F preferred offering
on or before October 31, 1999, in which case the Class of Stock shall be Series
F Preferred.
Initial Exercise Price: If Common Stock, the price per share given
to the shares at the Company's IPO; if the Series E preferred, the price per
share paid by the holders of the Series E shares; and if the Series F Preferred,
the price per share paid by the Holders of the Series F shares.
Issue Date: May 25, 1999
Expiration Date: The later of (i) May 25, 2004 or (ii) five years from the date
of the Company's IPO.
Warrant Coverage: The Number of Shares shall be derived as follows: $2,000,000
divided by the Initial Exercise Price multiplied by the applicable Warrant
Coverage.
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth in this Warrant. Notwithstanding the
foregoing, or anything to the contrary provided herein, in the event the Company
requests an advance under its Loan and Security Agreement by and between Holder
and Company prior to the Company's IPO, Holder shall be entitled to an
additional 3% Warrant Coverage. Accordingly, should the Company's IPO occur on
or before October 31, 1999, Holder will not be entitled to the additional
Warrant Coverage.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. Holder may exercise this Warrant by
delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as
specified in Section 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant to Section 1.4.
1.3 Intentionally Omitted
1.4 Fair Market Value. If the Shares are traded in a public
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not traded in a public
market, the Board of Directors of the Company shall determine fair market value
in its reasonable good faith judgment. The
<PAGE> 2
foregoing notwithstanding, if Holder advises the Board of Directors in writing
that Holder disagrees with such determination, then the Company and Holder shall
promptly agree upon a reputable investment banking firm to undertake such
valuation. If the valuation of such investment banking firm is greater than that
determined by the Board of Directors, then all fees and expenses of such
investment banking firm shall be paid by the Company. In all other
circumstances, such fees and expenses shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after
Holder exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
1.7.1. "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2. Assumption of Warrant. Upon the closing of any
Acquisition the successor entity may in its discretion assume the obligations of
this Warrant, and this Warrant shall be exercisable for the same securities,
cash, and property as would be payable for the Shares issuable upon exercise of
the unexercised portion of this Warrant as if such Shares were outstanding on
the record date for the Acquisition and subsequent closing. The Warrant Price
shall be adjusted accordingly. If the successor entity does not assume the
obligations of this Warrant, Holder shall have twenty (20) days after receiving
notice of successor entity's decision to exercise this Warrant.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays
a dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for
<PAGE> 3
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares
are combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment, from time to time in the manner
set forth in the Company's Certificate of Incorporation.
2.5 No Impairment. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment.
2.6 Fractional Shares. No fractional Shares shall be issuable
upon exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.
The Company shall, upon written request, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents
and warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws.
(b) The Capitalization table as set forth in the Company's
Registration Statement Form S-1 is true and correct.
3.2 Notice of Certain Events. If the Company proposes at any time
(a) to declare any dividend or distribution upon its common stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to effect any reclassification or recapitalization of common
stock; or (c) to merge or consolidate with or into any other corporation, or
sell, lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; then, in connection with each such event, the
Company shall give Holder (1) at least 20 days prior written notice of the date
on which a record will be taken for such dividend, distribution, or subscription
rights (and specifying the date on which the holders of common stock will be
entitled thereto) or for determining rights to vote, if any, in respect of the
matters referred to in (b) and (c)
<PAGE> 4
above; and (2) in the case of the matters referred to in (b) and (c) above at
least 20 days prior written notice of the date when the same will take place
(and specifying the date on which the holders of common stock will be entitled
to exchange their common stock for securities or other property deliverable upon
the occurrence of such event).
3.3 Information Rights. So long as the Holder holds this Warrant
and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) such other financial statements required under and in accordance with any
loan documents between Holder and the Company (or if there are no such
requirements or if the subject loan(s) no longer are outstanding), then within
forty five (45) days after the end of each of the first three quarters of each
fiscal year, the Company's quarterly, unaudited financial statements. The rights
and obligations under this Section 3.3 shall terminate upon the close of the
Company's IPO.
3.4 Registration Under Securities Act of 1933, as amended. The
Company agrees that the Shares or, if the Shares are convertible into common
stock of the Company, such common stock, shall be subject to the registration
rights set forth in the Company's Second Amended and Restated Investor Rights
Agreement dated August 13, 1998 (the "Rights Agreement"). The Company shall
promptly add Holder as a party to the Rights Agreement.
ARTICLE 4. MISCELLANEOUS.
4.1 Term; Notice of Expiration. This Warrant is exercisable, in
whole or in part, at any time and from time to time on or before the Expiration
Date set forth above. The Company shall give Holder written notice of Holder's
right to exercise this Warrant in the form attached as Appendix 2 not more than
90 days and not less than 30 days before the Expiration Date. If the notice is
not so given, the Expiration Date shall automatically be extended until 30 days
after the date the Company delivers the notice to Holder.
4.2 Legends. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and
the Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder s notice of
proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.3
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) at any time to Silicon Valley Bancshares
or The Silicon Valley Bank Foundation , or, to any other transferree by giving
the Company notice of the portion of the Warrant being transferred setting forth
the name, address and taxpayer identification
<PAGE> 5
number of the transferee and surrendering this Warrant to the Company for
reissuance to the transferee(s) (and Holder if applicable). Unless the Company
is filing financial information with the SEC pursuant to the Securities Exchange
Act of 1934, the Company shall have the right to refuse to transfer any portion
of this Warrant to any person who directly competes with the Company.
4.5 Notices. All notices and other communications from the
Company to the Holder, or vice versa, shall be deemed delivered and effective
when given personally or mailed by first class registered or certified mail,
postage prepaid, or by facsimile, at such address or at such facsimile number as
may have been furnished to the Company or the Holder, as the case may be, in
writing by the Company or such holder from time to time.
4.6 Waiver. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
4.7 Attorneys Fees. In the event of any dispute between the
parties concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other party all
costs incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to its principles regarding conflicts of law.
"COMPANY"
Accrue Software, Inc.
By: /s/ RICK KREYSAR
----------------------------
Name: Rick Kreysar
--------------------------
(Print)
Title: Chairman of the Board, President or Vice President
By: /s/ GREGORY C. WALKER
----------------------------
Name: Gregory C. Walker
--------------------------
(Print)
Title: Chief Financial Officer, Secretary, Assistant Treasurer or Assistant
Secretary
<PAGE> 6
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _______________ shares of
the Common/Preferred Series ___ [Strike one] Stock of Accrue Software, Inc.
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to _____________________ of the Shares covered by the
Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
___________________________________________
(Name)
___________________________________________
(Address)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
___________________________________________
(Signature)
___________________________________________
(Date)
<PAGE> 7
APPENDIX 2
Notice that Warrant Is About to Expire
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear : ______________________
This is to advise you that the Warrant issued to you described below
will expire on _________________________, 19 .
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
(Name of Issuer)
By:
Its:
<PAGE> 1
EXHIBIT 10.18
[ACCRUE SOFTWARE, INC. LOGO]
March 3, 1999
Mr. Gregory C. Walker
511 Benvenue Avenue
Los Altos, CA 94024
Dear Greg:
On behalf of Accrue Software, Inc. (the "Company"), I am pleased to offer you
the position of Vice President and CFO, reporting to me, starting on April 26,
1999. You will be paid a base salary of $15,833.34 per month, annualized to
190,000.00 per year. You will be covered by the Company's standard benefits
package including health insurance and two weeks paid vacation per year,
pro-rated during 1999.
You will be granted an incentive stock option to purchase 260,000 shares of
Common Stock exercisable at the fair market value on the date of grant by the
Company's board of directors. The option will become exercisable at the rate of
25% the shares on year after your commencement of employment and 1/48th of the
shares subject to the option each month thereafter, so that at the end of four
years, the option will be fully vested provided you remain an employee of the
Company. The option will be subject to approval and grant by the Company's
board of directors, which I expect will occur at the first regular board
meeting following the commencement of your employment, and the execution of the
Company's standard Option Agreement under its 1996 Stock Plan. In the event you
are terminated without cause, because of a Change of Control, there will be a
one year acceleration of vesting in addition to what has been vested to date.
You will be required to sign the Company's standard Assignment of Inventions
and Confidentiality Agreement prior to the initiation of your employment. In
addition, you will abide by the Company's strict policy that prohibits any new
employee from using or bringing with him or her from any previous employer any
confidential information, trade secret, or proprietary materials or processes
of such employer.
You will be an employee-at-will and your employment may be terminated at any
time by you or the Company, with or without notice, and with or without cause.
This Agreement constitutes the entire agreement between you and the Company and
supersedes all other agreements or understandings.
This offer will be held open for three (3) days. To accept please sign at the
bottom of this letter.
Again, let me indicate how pleased we all are to extend this offer, and how
much we look forward to working together. Please indicate your acceptance by
signing and returning the enclosed copy of this letter.
Very truly yours,
/s/ Richard Kreysar
Richard Kreysar
President and CEO
Accrue Software, Inc.
The foregoing terms and conditions are hereby accepted:
Signed: /s/ GREGORY C. WALKER Date: 3/5/99
----------------------- -------------------
1275 Orleans Drive, Sunnyvale, CA 94089-1138
[email protected] http://www.accrue.com
tel 408.542.8900 fax 408.541.1874
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
reports dated May 17, 1999, except for Note 11, as to which date is May 25,
1999, relating to the financial statements and financial statement schedule of
Accrue Software, Inc., which appear in such Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
PricewaterhouseCoopers LLP
San Jose, California
May 26, 1999
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 3,599
<SECURITIES> 0
<RECEIVABLES> 43
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,107
<PP&E> 454
<DEPRECIATION> 41
<TOTAL-ASSETS> 4,107
<CURRENT-LIABILITIES> 174
<BONDS> 0
0
5,830
<COMMON> 3
<OTHER-SE> 28
<TOTAL-LIABILITY-AND-EQUITY> 4,107
<SALES> 163
<TOTAL-REVENUES> 182
<CGS> 22
<TOTAL-COSTS> 22
<OTHER-EXPENSES> 2,195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,927)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,927)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,927)
<EPS-BASIC> (0.72)<F1>
<EPS-DILUTED> (0.72)
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 217
<SECURITIES> 0
<RECEIVABLES> 767
<ALLOWANCES> 23
<INVENTORY> 0
<CURRENT-ASSETS> 989
<PP&E> 641
<DEPRECIATION> 159
<TOTAL-ASSETS> 1,471
<CURRENT-LIABILITIES> 1,059
<BONDS> 312
0
5,893
<COMMON> 3
<OTHER-SE> 52
<TOTAL-LIABILITY-AND-EQUITY> 1,471
<SALES> 978
<TOTAL-REVENUES> 1,120
<CGS> 141
<TOTAL-COSTS> 141
<OTHER-EXPENSES> 4,965
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> (3,921)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,921)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,921)
<EPS-BASIC> (1.37)<F1>
<EPS-DILUTED> (1.37)
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 1,600
<SECURITIES> 0
<RECEIVABLES> 1,741
<ALLOWANCES> 105
<INVENTORY> 0
<CURRENT-ASSETS> 3,380
<PP&E> 1,027
<DEPRECIATION> 330
<TOTAL-ASSETS> 4,204
<CURRENT-LIABILITIES> 2,046
<BONDS> 169
0
12,876
<COMMON> 5
<OTHER-SE> 1,599
<TOTAL-LIABILITY-AND-EQUITY> 4,204
<SALES> 2,192
<TOTAL-REVENUES> 2,952
<CGS> 227
<TOTAL-COSTS> 227
<OTHER-EXPENSES> 9,403
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> (6,643)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,643)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,643)
<EPS-BASIC> (2.06)<F1>
<EPS-DILUTED> (2.06)
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
