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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 15, 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
EXTENSITY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7372 68-0368868
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
2200 POWELL STREET, SUITE 400
EMERYVILLE, CALIFORNIA 94608
(510) 594-5700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT A. SPINNER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EXTENSITY, INC.
2200 POWELL STREET, SUITE 400
EMERYVILLE, CALIFORNIA 94608
(510) 594-5700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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HOWARD S. ZEPRUN, ESQ. JOHN W. CAMPBELL III, ESQ.
CAINE T. MOSS, ESQ. CRAIG S. MORDOCK, ESQ.
WILSON SONSINI GOODRICH & ROSATI BRANDON C. PARRIS, ESQ.
PROFESSIONAL CORPORATION MORRISON & FOERSTER LLP
650 PAGE MILL ROAD 19900 MACARTHUR BOULEVARD, 12TH FLOOR
PALO ALTO, CALIFORNIA 94304 IRVINE, CALIFORNIA 92612
(650) 493-9300 (949) 251-7500
</TABLE>
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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. [ ]
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 delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO AGGREGATE OFFERING REGISTRATION
BE REGISTERED PRICE(1) FEE
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Common Stock, $0.001 par value per share.................... $57,500,000 $15,985.00
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a)
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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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES NOR DOES
IT SEEK OFFERS TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER
OR SALE IS NOT PERMITTED.
Subject to Completion, Dated November 15, 1999
[LOGO]
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SHARES
COMMON STOCK
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This is the initial public offering of Extensity, Inc. and we are offering
shares of our common stock. We anticipate that the initial public offering price
will be between $ and $ per share. We have applied to list our common
stock on the Nasdaq National Market under the symbol "EXTN."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS EXTENSITY
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to additional
shares to cover over-allotments.
DEUTSCHE BANC ALEX. BROWN
BEAR, STEARNS & CO. INC.
HAMBRECHT & QUIST
THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE> 3
DESCRIPTION OF GRAPHICS FOR FRONT-INSIDE COVER
Centered at the top of the page appears the Extensity logo and to the right of
the logo appears "Extensity." Centered below the Extensity logo and name is the
phrase "Internet-Based Workforce Optimization Software." Centered in the middle
of the page is an oval. The center of the oval contains the phrase "Extensity
Integrated Application Suite." There are four diagonal lines leading from the
centered oval each to a different oval. The diagonal lines lead from the
centered oval to each of the upper-left, lower-left, upper-right and
lower-right. The phrase "Expense Reporting" appears at the top of the upper-left
oval. Underneath the oval appears a brief description of Extensity's
application, Extensity Expense Reports. The phrase "Procurement" appears at the
top of the lower-left oval. Underneath the oval appears a brief description of
Extensity's application, Extensity Purchase Reqs. The phrase "Business Travel
Planning" appears at the top of the upper-right oval. Underneath the oval
appears a brief description of Extensity's application, Extensity Travel Plans.
The phrase "Billable Time Capture" appears above the lower-right oval.
Underneath the oval appears a brief description of Extensity's application,
Extensity Timesheets. Centered below the ovals appears three bullet points. The
first bullet point contains a phrase to its right that states "Improving
Employee Productivity and Satisfaction." Underneath this bullet appears the
second bullet point which contains a phrase to its right that states "Enhancing
Enterprise Operating Efficiency." Underneath this bullet appears the third
bullet point which contains a phrase to its right that states "Enhancing
Enterprise Operating Efficiency." Below these graphics appears the table of
contents.
DESCRIPTION OF GRAPHICS FOR BACK-INSIDE COVER
Centered at the top of the page appears the Extensity logo and to the right of
the logo appears "Extensity." On the left margin below the extensity logo and
name are five arrows of equal length, which create a half-circle. The
half-circle originates and ends on the left margin of the page. "Day in the Life
of an Employee Using Extensity Applications" appears in the center of the
half-circle. To the upper-right of the half circle appears text which states "1.
Obtain Internal Travel Expense Approval." To the right of this text appears the
graphic of an Extensity Expense Reports user-interface. Below and to the right
of the Extensity Expense Reports user-interface graphic appears a graphic of a
user-interface for GetThere.com displaying a modified version of Extensity
Travel Plans. To the left of this graphic appears text which states "2. Book
Airline Tickets and Hotel Reservations through Travel Service Partner." Below
and to the right of the GetThere.com user-interface graphic appears a graphic of
the OnTheRoad.com user-interface. To the left of this graphic appears text which
states "3. Plan Business Entertainment through Content Partner." Below and to
the lower-left of the OnTheRoad.com user-interface graphic appears a graphic of
the Palm Pilot user-interface displaying a modified version of Extensity
Timesheets. To the left of this graphic appears text which states "4. Track
Billable Time." Below and to the right of the Palm Pilot user-interface graphic
appears a graphic for the Extensity Purchase Req user-interface. To the left of
this graphic appears text which states "5. Requisition Computer Hardware for
New Hire."
DESCRIPTION OF GRAPHICS FOR GATEFOLD
Centered at the top of the page appears the Extensity logo and to the right of
the logo appears "Extensity." Centered below the Extensity logo and name is the
phrase "End-to-End Solutions for the Enterprise Workforce." Centered below the
phrase appears three blocks of text. The first block of text is titled
"Extensity Network of our Customers' Employees." Below this title appears the
phrase "1000s of Employees Across Multiple Organizations Leveraging Extensity's
Integrated Suite of Applications." The second block of text is to the right of
the first block of text. The second block of text is titled "Extensity Content
and Commerce Gateway." Below this title appears the phrase "Integrated Point of
Exchange Between Employees and Content Providers." The third block of text is to
the right of the second block of text. The third block of text is titled
"Extensity Partner Network." Below this title appears the phrase "3rd Party
Content, Service and Commerce Providers Helping Employees Do Their Jobs Better."
Underneath and to the left of the three blocks of text is a graphic of a large
circle that is outlined by a dotted line. In the center of the dotted circle is
an oval. In the center of the oval appears the phrase "Extensity Integrated
Application Suite." There are four diagonal lines leading from the centered oval
each to a different oval all within the dotted circle. The diagonal lines lead
from the centered oval to each of the upper-left, lower-left,
<PAGE> 4
upper-right and lower-right. The phrase "Extensity Expense Reports" appears at
the bottom of the upper-left oval. Above the oval appears a brief description of
how Extensity Expense Reports operates. The phrase "Extensity Purchase Reqs"
appears at the bottom of the lower-left oval. Underneath the phrase appears a
brief description of how Extensity Purchase Reqs operates. The phrase "Extensity
Travel Plans" appears at the bottom of the upper-right oval. Above the oval
appears a brief description of how Extensity Travel Plans operates. The phrase
"Extensity Timesheets" appears below the lower-right oval. Underneath the phrase
appears a brief description how Extensity Timesheets operates. Centered below
the center oval appears two bullet points. The first bullet point contains a
phrase to its right that states "Common Interface." Underneath this bullet
appears the second bullet point which contains a phrase to its right that states
"Seamless Backend Integration." Sitting on the top of the dotted circle appears
the graphic of a building and four human figures. Sitting on the lower-left of
the dotted circle appears the graphic of a building and three human figures.
Sitting on the lower-right of the dotted circle is the graphic of a building and
three humans. The graphics of all humans and buildings are connected by solid
lines depicting "networking" to all of the ovals within the dotted circle.
To the right of the dotted circle appears two arrows. The first arrow points
from the dotted circle to the right towards the three ovals. The second arrow
points from the three ovals to the left towards the dotted circle. The first
oval contains the title "Content," the second oval contains the title "Content,"
and the third oval contains the title "Services." Below the three ovals is a
description of the content, commerce and services depicted by the ovals. In the
middle of the two arrows is a cloud that contains the text "Internet." Above and
to the right of the cloud is text explaining how the Internet connects Extensity
applications to the content, commerce and services. Below and to the left of the
cloud is text explaining how the Internet delivers content, commerce and
services to Extensity's customers through the Extensity Applications.
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.................... 1
Risk Factors.......................... 4
Special Note Regarding Forward-
Looking Statements and Industry
Data................................ 17
Use of Proceeds....................... 18
Dividend Policy....................... 18
Capitalization........................ 19
Dilution.............................. 20
Selected Consolidated Financial
Data................................ 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 33
</TABLE>
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PAGE
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Management............................ 49
Certain Transactions.................. 58
Principal Stockholders................ 61
Description of Capital Stock.......... 63
Shares Eligible for Future Sale....... 66
Underwriting.......................... 68
Legal Matters......................... 70
Experts............................... 70
Where You Can Find Additional
Information......................... 70
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
<PAGE> 6
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should carefully read the
entire prospectus, including "Risk Factors" and the financial statements, before
making an investment decision.
OUR BUSINESS
Extensity is a leading provider of Internet-based workforce optimization
software applications designed to improve the productivity of employees across
the enterprise and to enhance enterprise operating efficiency. We sell an
integrated application suite that automates expense reporting, travel
management, procurement and billable time management. Our solution streamlines
traditionally inefficient and largely paper-based processes, captures cost
savings by automatically enforcing spending policies and tracks valuable
management information.
In the intensely competitive global business environment, businesses have
increasingly adopted the Internet to streamline their business processes and
make their employees more productive. Giga Information Group estimates that in
1998, businesses worldwide realized $17.6 billion in e-commerce driven cost
savings and forecasts that by 2002 these savings will total $1.25 trillion
annually. According to International Data Corporation, the worldwide market for
workforce management applications will grow from $766 million in 1998 to $4.0
billion in 2003, and the Internet commerce procurement applications market will
grow from $147 million in 1998 to $5.4 billion in 2003.
Our objective is to become the leading content and commerce gateway for the
enterprise workforce. We have designed our applications to be readily integrated
with Internet-based third-party content, commerce and services. This will enable
us and our partners to deliver relevant and timely content and
business-to-business services targeted at the specific needs of employees. For
example, a consultant planning an engagement can obtain internal travel expense
approval, book airline tickets and hotel reservations through a travel service
partner, plan business entertainment through a content partner, track billable
time and record additional expenses for rapid approval and reimbursement - all
through our integrated application suite accessible at the office or on the
road. The growing network of organizations and employees using our applications
will constitute a valuable target market for our Internet-based content,
commerce and service partners.
Our applications can be readily integrated with enterprise resource
planning and other legacy information technology systems. Further, our
applications are universally accessible through a variety of devices including
networked and mobile PCs and handheld devices. The architecture of our products
enables us to generally implement and deploy our solutions in less than 90 days.
Since the introduction of our first application in 1998, we have licensed our
products to 58 customers including AirTouch, BEA Systems, Cendant Business
Services, Cisco Systems, Clarify, Documentum, Gelco Information Network, Genesys
Telecommunications, Home Box Office, Sara Lee, Sybase, TransCanada PipeLines and
the University of California.
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THE OFFERING
Common stock offered by
Extensity.......................... shares
Common stock to be outstanding
after this offering................ shares
Use of proceeds.................... For general corporate purposes, including
working capital, expansion of our sales
and marketing efforts and, potentially,
for acquisition opportunities that may
arise in the future.
Proposed Nasdaq National Market
Symbol............................. EXTN
The number of shares to be outstanding upon completion of this offering is
based on shares outstanding as of September 30, 1999. This number assumes the
conversion into common stock of all of our preferred stock outstanding on that
date and excludes:
- 7,000,000 shares of common stock that will be reserved for issuance under
our 1996 Stock Option Plan upon completion of this offering, of which
2,682,693 shares are subject to outstanding options;
- 500,000 shares of common stock that will be reserved for issuance under
our Employee Stock Purchase Plan 2000 upon completion of this offering;
- 183,888 shares subject to outstanding warrants to purchase preferred stock
which will convert into warrants to purchase common stock upon completion
of this offering.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
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1996 1997 1998 1998 1999
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CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Licenses............................... $ -- $ -- $ 718 $ 542 $ 2,476
Services and maintenance............... -- -- 409 183 1,575
------ ------- -------- ------- --------
Total revenues.................. -- -- 1,127 725 4,051
Gross profit (loss)...................... -- -- (517) (301) 832
Loss from operations..................... (854) (3,335) (11,013) (7,330) (14,995)
Net loss................................. (830) (3,228) (10,985) (7,328) (14,976)
Net loss per share:
Basic and diluted...................... $(3.79) $ (4.35) $ (8.28) $ (5.85) $ (5.58)
Weighted average shares................ 219 742 1,326 1,252 2,683
Pro forma net loss per share (unaudited):
Basic and diluted...................... $ (1.12) $ (1.08)
Weighted average shares................ 9,766 13,822
</TABLE>
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SEPTEMBER 30, 1999
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $22,282 $22,282
Working capital............................................. 16,277 16,277
Total assets................................................ 27,953 27,953
Notes payable and capital lease obligations, noncurrent
portion................................................... 1,692 1,692
Mandatorily redeemable convertible preferred stock.......... 43,648 --
Total stockholders' equity (deficit)........................ (27,144) 16,504
</TABLE>
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- - The pro forma column gives effect to the conversion of our preferred stock
outstanding as of September 30, 1999 into common stock upon the closing of
this offering. See Note 7 of Notes to Consolidated Financial Statements.
- - The pro forma as adjusted column also reflects the receipt of the net proceeds
from the sale of shares of common stock offered by us at an assumed
initial public offering price of $ per share and the application of the net
proceeds from the offering, after deducting underwriting discounts and
commissions and estimated offering expenses. For more information on how we
will use the proceeds from this offering.
2
<PAGE> 8
We were incorporated in Delaware as Celerity, Inc. on November 13, 1995,
changed our name to At Large Software, Inc. on April 12, 1996 and changed our
name to Extensity, Inc. on September 2, 1997. Our principal executive offices
are located at 2200 Powell Street, Suite 400, Emeryville, California 94608. Our
telephone number at that location is (510) 594-5700. References in the
prospectus to "we," "our" and "us" refer to Extensity. Our website is located at
www.extensity.com. The information contained on our website does not constitute
part of this prospectus.
Extensity, Extensity Expense Reports, Extensity Travel Plans, Extensity
Timesheets and Extensity Purchase Reqs are trademarks of Extensity. All other
brand names or trademarks appearing in this prospectus are the property of their
respective holders.
------------------------
Unless otherwise indicated, all information in this prospectus assumes:
- that the underwriters have not exercised their option to purchase
additional shares;
- conversion of all shares of preferred stock into shares of common stock
upon completion of this offering; and
- the filing of an amended and restated certificate of incorporation after
the closing of this offering.
3
<PAGE> 9
RISK FACTORS
Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide
whether to buy our common stock. If any of the following risks actually occur,
our business, results of operations and financial condition could suffer
significantly. In any such case, the market price of our common stock could
decline, and you may lose all or part of the money you paid to buy our common
stock.
RISKS RELATED TO OUR BUSINESS
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE AN EXTREMELY LIMITED
OPERATING HISTORY.
We were incorporated in 1995 and commenced licensing of our software
applications in March 1998. Accordingly, we have an extremely limited operating
history. An investor in our common stock must consider the risks, uncertainties,
expenses and difficulties frequently encountered by companies in their early
stages of development, particularly companies in new and rapidly evolving
markets such as the market for Internet-based software applications. These risks
and difficulties include our ability to:
- expand our base of customers with fully installed and deployed systems
that can serve as reference accounts for our ongoing sales efforts;
- expand our pipeline of sales prospects in order to promote greater
predictability in our period-to-period sales levels;
- continue to offer new products that complement our existing product line,
in order to make our suite of applications more attractive to customers;
- continue to develop and upgrade our technology to add additional features
and functionality;
- continue to attract and retain qualified personnel;
- expand sales channels through geographic expansion and the development of
indirect channels such as relationships with OEM customers and
application service providers;
- increase awareness of our brand; and
- maintain our current, and develop new, third-party relationships.
We also depend on general economic conditions and upon the growth of the
market for workforce optimization applications. We cannot assure you that our
business strategy will be successful or that we will successfully address these
risks or difficulties. If we fail to adequately address these risks or
difficulties, our business would likely suffer.
WE HAVE A HISTORY OF LOSSES AND NEGATIVE CASH FLOW AND EXPECT THIS TO CONTINUE
FOR THE FORESEEABLE FUTURE.
Our business is new; we have offered products for a relatively short period
of time; and our base of customers and prospective customers is still relatively
small. We have spent significant funds to date to develop our current products
and to develop our sales and market resources. We have incurred significant
operating losses and have not achieved profitability. As of September 30, 1999,
we had an accumulated deficit of $30.0 million. We expect to continue to
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<PAGE> 10
invest in research and development to enhance current products and develop
future products. We also plan to continue to grow our sales force and to spend
significant funds in marketing to promote our company and our products. We
expect to continue to hire additional people in all other areas of our company
in order to support our growing business. As a result, we will need to
significantly increase our revenues to achieve profitability. Because we expect
to continue to invest in our business ahead of anticipated future revenues, we
expect that we will continue to incur operating losses for the foreseeable
future.
OUR BUSINESS IS CHANGING RAPIDLY, WHICH COULD CAUSE OUR QUARTERLY OPERATING
RESULTS TO VARY AND OUR STOCK PRICE TO FLUCTUATE.
Our revenues and operating results may vary significantly from quarter to
quarter due to a number of factors, many of which are beyond our control. We
expect to continue to expend significant sums in all areas of our business,
particularly in our sales and marketing operations, in order to promote future
growth. Because the expenses associated with these activities are relatively
fixed in the short-term, we may be unable to adjust spending quickly enough to
offset any unexpected shortfall in revenue growth or any decrease in revenue
levels.
We seek to develop and maintain a significant pipeline of potential sales
prospects, but it is difficult to predict when individual customer orders will
be closed. Our base of customers and the number of additional customer licenses
we enter into each quarter are still relatively small. Accordingly, the loss or
deferral of a small number of anticipated large customer orders in any quarter
could result in a significant shortfall in revenues for that quarter.
Important factors which could cause our quarterly results to fluctuate
materially include:
- our ability to attract and retain customers and maintain customer
satisfaction for our existing and future applications;
- the timing of customer orders from quarter to quarter;
- the timing of new services or products introduced by us or our
competitors;
- our ability to attract, train and integrate new personnel in a timely and
effective manner;
- our ability to successfully manage sales through third parties,
potentially including application service providers and application
vendors who offer our products on an OEM basis;
- our ability to expand our implementation and consulting resources through
third-party relationships;
- technical difficulties or "bugs" affecting the operation of our software;
and
- our ability to successfully integrate operations and technologies from
any possible acquisitions, joint ventures or other business combinations
or investments.
Due to our limited operating history, the early stage of our market and the
factors discussed above, quarter-to-quarter comparisons of our results of
operations should not be relied upon as indicators of future performance. It is
possible that in some future periods our operating results may be below the
expectations of public market analysts and investors. In this event, the price
of our common stock may underperform or fall.
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<PAGE> 11
OUR BUSINESS WILL SUFFER IF WE DO NOT SIGNIFICANTLY EXPAND OUR SALES
CAPABILITIES.
We sell our workforce optimization applications primarily through our
direct sales force. We must significantly expand our direct sales operations to
increase our revenues. We cannot be certain that we will be successful in these
efforts. Our products and services require sophisticated sales efforts and our
ability to increase our direct sales operation will depend on our ability to
recruit, train and retain top sales people with effective sales skills and
advanced technical knowledge. Competition for qualified personnel is intense in
our industry. Moreover, new sales personnel require training and take time to
achieve full productivity. If we are unable to hire or retain qualified sales
personnel, if newly hired personnel fail to develop the necessary skills, or if
they reach productivity more slowly than anticipated, our business could be
harmed.
WE FACE INTENSE COMPETITION, WHICH COULD AFFECT OUR ABILITY TO INCREASE REVENUE,
MAINTAIN OUR MARGINS AND INCREASE OUR MARKET SHARE.
The market for our Internet-based workforce optimization applications is
intensely competitive and we expect competition to increase in the future.
Increased competition may result in price reductions, reduced margins and loss
of market share, any one of which could seriously harm our business. Competitors
vary in size and in the scope and breadth of the products and services they
offer. Companies offering one or more products directly competitive with our
products include Ariba, Captura Software, Concur Technologies and IBM. We also
expect to encounter competition in the near future from major enterprise
software vendors such as Oracle, PeopleSoft and SAP, to the extent they enhance
their existing product offerings with competitive workforce optimization
applications. As a result of the large market opportunity for workforce
optimization applications, we also expect competition from other established and
emerging companies. For example, as the emergence of the application service
provider (ASP) market enables hosted solutions from our competitors to become
broadly available, our future success may also depend upon our ability to
establish successful relationships with leading ASPs.
Many of our current and potential 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 us. In addition, many of our competitors have well-established
relationships with our current and potential customers and have extensive
knowledge of our industry. Current and potential competitors have established or
may establish cooperative relationships among themselves or with third parties
to increase the ability of their products to address customer needs.
Accordingly, it is possible that new competitors or alliances among competitors
may emerge and rapidly acquire significant market share. We also expect that
competition will increase as a result of industry consolidation. We may fail to
successfully compete against our current and future competitors.
IN ORDER TO INCREASE OUR BASE OF CUSTOMERS, WE MUST PROVIDE SOFTWARE
APPLICATIONS AND RELATED SERVICES THAT MEET THE CHANGING DEMANDS OF THOSE USERS.
To successfully implement our business strategy, we have to provide
software applications and related services that meet the demands of our
customers and prospective customers as the market and customer requirements
evolve. We expect that competitive factors will create a continuing need for us
to improve and add to our suite of software applications. Not only will we have
to expend significant funds and other resources to continue to improve our
existing suite of applications, but we must also properly anticipate, address
and respond to consumer preferences and demands. As organizations' needs change
with respect to their enterprise applications, our existing suite of software
applications may become obsolete or inefficient relative to our competitors'
offerings and may require modifications or improvements. The
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addition of new products and services will also require that we continue to
improve the technology underlying our applications. These requirements could be
significant, and we may fail to fulfill them quickly and efficiently. If we fail
to expand the breadth of our applications quickly in response to customer needs,
or if these offerings fail to achieve market acceptance, our business may suffer
significantly.
Our workforce optimization software products and related services have
accounted for all of our revenues to date. We anticipate that revenues from
these products and related services will continue to constitute substantially
all of our revenues for the foreseeable future. Consequently, the failure of our
applications to achieve market acceptance, a decline in the demand for our
applications, or any price declines could seriously harm our business. Our
future financial performance will depend, in significant part, upon the
successful development, introduction and customer acceptance of enhanced
versions of our workforce optimization applications and any new products or
services that we may develop or acquire. We cannot assure you that we will be
successful in enhancing, upgrading or continuing to effectively market our
workforce optimization applications, or that any new products or services that
we may develop or acquire will achieve market acceptance.
OUR REVENUES HAVE BEEN DERIVED FROM A RELATIVELY SMALL NUMBER OF CUSTOMERS.
We licensed our first workforce optimization application in March 1998 and
have fully implemented our applications for only a limited number of customers
to date. As of September 30, 1999 we had licensed our applications to a total of
54 customers and had implemented the solutions for a total of 29 of these
customers. Moreover, as of September 30, 1999, we had not completed an
implementation of our Extensity Purchase Reqs or Extensity Timesheets
applications for any customers. We expect that we will continue to derive a
significant portion of our revenues from a relatively small number of customers
in the future. Accordingly, the loss of a major customer could materially and
adversely affect our business, and the deferral or loss of anticipated orders
from a small number of prospective customers could materially and adversely
impact our revenues and operating results in any period.
WE HAVE LIMITED EXPERIENCE WITH LARGE-SCALE DEPLOYMENTS, WHICH ARE IMPORTANT TO
OUR FUTURE SUCCESS.
We have limited experience in implementing and deploying our applications
on a large scale. As of September 30, 1999, our largest implementation has been
deployed to 3,000 employee users. We believe that the ability of large customers
to roll-out our products across large numbers of users is critical to our future
success. If our customers cannot successfully implement large-scale deployments,
or if they determine for any reason that our products cannot accommodate
large-scale deployment, our business could be harmed.
OUR STRATEGY DEPENDS IN PART UPON OUR ABILITY TO BUILD A CONTENT AND COMMERCE
GATEWAY BETWEEN OUR CUSTOMERS' EMPLOYEES AND THIRD-PARTY PROVIDERS.
A key component of our business strategy includes establishing an
integrated point of access, or gateway, between the network of customer
employees that utilize our workforce optimization solution and third-party
content, commerce and service providers who consider this employee base to be
potentially valuable business customers. We have only begun to establish this
gateway and, to date, we have only established relationships with two content
providers from which we have not yet derived revenues. We cannot assure you that
we will be successful in developing this gateway. Moreover, we cannot assure you
that our customers will consider a content and commerce gateway to be a valuable
feature of our workforce optimization applications, or that third-party
providers will choose to access our network of
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customer employees to generate e-commerce. If a market for such a gateway
develops and we are unable to establish a compelling product offering within
this market, or if we build a gateway and the market for such an offering fails
to mature, our business could be seriously harmed.
We expect to depend increasingly on a number of third parties to expand our
content and commerce gateway and thereby generate revenues. We cannot assure you
that third parties will regard our relationship with them as important to their
own respective businesses and operations. They may choose not to partner with us
or, after having established a partnership with us, they may reassess their
commitment to us at any time in the future and may develop their own competitive
services or products. Also, we cannot assure you that the content, products or
services of those companies that provide access or links to our network will
achieve market acceptance or commercial success. Accordingly, we cannot assure
you that our existing or prospective relationships will result in sustained
business partnerships, successful product or service offerings or the generation
of significant revenues for us.
WE NEED TO EXPAND OUR RELATIONSHIPS WITH THIRD PARTIES THAT CAN PROVIDE
IMPLEMENTATION AND CONSULTING SERVICES TO OUR CUSTOMERS.
In order for us to focus more effectively on our core business of
developing and licensing software solutions, we need to establish relationships
with third parties that can provide implementation and consulting services to
our customers. Third-party implementation and consulting firms can also be
influential in the choice of workforce optimization applications by new
customers. If we are unable to establish and maintain effective, long-term
relationships with implementation and consulting providers, or if these
providers do not meet the needs or expectations of our customers, our business
could be seriously harmed. As a result of the limited resources and capacities
of many third-party implementation providers, we may be unable to attain
sufficient focus and resources from the third-party providers to meet all of our
customers' needs, even if we establish relationships with these third parties.
If sufficient resources are unavailable, we will be required to provide these
services internally, which could limit our ability to expand our base of
customers. A number of our competitors have significantly more well-established
relationships with these third parties and, as a result, these third parties may
be more likely to recommend competitors' products and services rather than our
own. Even if we are successful in developing relationships with third-party
implementation and consulting providers, we will be subject to significant risk,
as we cannot control the level and quality of service provided by third-party
implementation and consulting partners.
CUSTOMER SATISFACTION AND DEMAND FOR OUR PRODUCTS WILL DEPEND ON OUR ABILITY TO
EXPAND OUR PROFESSIONAL SERVICES ORGANIZATION.
We believe that growth in our product sales depends on our ability to
provide our customers with professional services to assist with support,
training, consulting and initial implementation and deployment of our products
and to educate third-party systems integrators in the use of our products. As a
result, we plan to increase the number of professional services personnel to
meet these needs. New professional services personnel will require training and
take time to reach full productivity. We may not be able to attract or retain a
sufficient number of highly qualified professional services personnel.
Competition for qualified professional services personnel is intense due to the
limited number of people who have the requisite knowledge and skills. To meet
our customers' needs for professional services, we may also need to use more
costly third-party consultants to supplement our own professional services
group. In addition, we could experience delays in recognizing revenue if our
professional services group fails to complete implementations in a timely
manner. Our margins on service revenues to date have been negative and are
expected to continue to be negative for the
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foreseeable future. We cannot assure you that we will achieve positive margins
on our service revenues. Failure to achieve positive margins on service revenues
could cause our business to suffer.
OUR EXPECTATIONS OF FUTURE GROWTH DEPEND ON OUR ABILITY TO EXPAND
INTERNATIONALLY AND FACTORS SPECIFIC TO OUR INTERNATIONAL EXPANSION MAY PREVENT
US FROM ACHIEVING OUR ANTICIPATED GROWTH.
We intend to expand our international operations to achieve our anticipated
growth, but we may face significant challenges to our international expansion.
The expansion of our existing international operations and entry into additional
international markets will require significant management attention and
financial resources. To achieve broad acceptance in international markets, our
products must be internationalized to handle a variety of factors specific to
each international market, such as tax laws and local regulations. The
incorporation of these factors into our products is a complex process and often
requires assistance from third parties. We have limited experience in
internationalizing our products and we may not adequately address all of the
factors necessary to achieve broad acceptance in our target international
markets. Further, to achieve broad usage by employees across international
organizations, our products must be localized to handle native languages in each
international market. Localizing our products is also a complex process and we
intend to work with third parties to develop localized products. To date, we
have not localized our products for any international market and we cannot
assure you that our localization efforts will be successful.
We have only a limited history of marketing, selling and supporting our
products and services internationally. In the second quarter of 1999, we opened
a sales office in the United Kingdom and established a relationship with an
international reseller. As of September 30, 1999, we had two employees in the
United Kingdom office. To date, we have not derived any revenues from our
international operations. To expand internationally we must hire and train
experienced international personnel as well as export qualified domestic
personnel to staff and manage our international operations. However, we may
experience difficulties in recruiting and training an international staff. We
must also be able to enter into strategic relationships with companies in
international markets. If we are not able to maintain successful strategic
relationships internationally or recruit additional companies to enter into
strategic relationships, our future growth could be limited.
We also face other risks inherent in conducting business internationally,
such as:
- difficulties and costs of staffing and managing international operations;
- language and cultural differences;
- difficulties in collecting accounts receivable and longer collection
periods;
- seasonal business activity in certain parts of the world;
- fluctuations in currency exchange rates;
- legal and governmental regulatory requirements;
- trade barriers; and
- potentially adverse tax consequences.
Any of these factors could seriously harm our international operations and,
consequently, our business.
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WE ARE GROWING RAPIDLY, AND OUR FAILURE TO MANAGE THIS GROWTH COULD HARM OUR
BUSINESS.
We have experienced and are currently experiencing a period of significant
growth. Our full-time employees increased from 35 at December 31, 1997 to 83 at
December 31, 1998 to 145 at September 30, 1999. This growth has placed a
significant strain on our resources. We expect that any future growth would
cause similar or increased strains on our resources. As part of this growth, we
will have to implement new operational and financial systems and procedures and
controls; expand, train and manage our employee base; and maintain close
coordination among our technical, accounting, finance, marketing and sales
staffs. If we are unable to manage our growth effectively, our business, results
of operations and financial condition could be adversely affected.
Several members of our senior management joined us in 1999, including David
Yarnold, our Vice President of Business Development and Mark Oney, our Vice
President of Engineering. Although we believe that these individuals are
currently integrated with the other members of our management team, we cannot
assure you that our management team will be able to continue to work together
effectively or to manage our growth successfully. We believe that the successful
integration of our management team is critical to our ability to effectively
manage our operations and support our anticipated future growth.
IN ORDER TO EXECUTE OUR GROWTH PLAN WE MUST ATTRACT AND RETAIN HIGHLY SKILLED
EMPLOYEES.
Our ability to execute our growth plan and be successful also depends on
our continuing ability to attract and retain highly skilled employees. We depend
on the continued services of senior management and other personnel, particularly
Robert A. Spinner, our Chief Executive Officer. As we continue to grow, we will
need to hire additional personnel in all operational areas. Competition for
personnel in our industry is intense. We have in the past experienced, and we
expect to continue to experience in the future, difficulty in hiring and
retaining highly skilled employees with appropriate qualifications. If we do not
succeed in attracting or retaining personnel, our business could be adversely
affected.
BECAUSE THE MARKET FOR OUR PRODUCTS IS NEW, OUR SALES CYCLES ARE LONG AND
UNPREDICTABLE.
Because the market for our workforce optimization software products and
related services is new, we experience long and unpredictable sales cycles. The
sales cycle for our workforce optimization applications typically ranges from
two to six months. In the early stages of this market, our customers have
frequently viewed the purchase of our products as part of a long-term strategic
decision regarding the management of their workforce-related operations and
expenditures. This decision process has sometimes resulted in customers taking a
long period of time to assess alternative solutions by our competitors or
deferring a purchase decision until the market evolves. Sales cycles continue to
be long and the timing of purchase decisions by individual customers remains at
times uncertain. We must continue to educate potential customers on the use and
benefits of our products and services, as well as the integration of our
products and services with additional software applications utilized by the
individual customers. Because the sales cycle is long and the time of individual
orders is uncertain, our period-to-period revenues are difficult to predict.
EVOLVING TECHNOLOGICAL DEVELOPMENTS AND EMERGING INDUSTRY STANDARDS WILL REQUIRE
US TO ENHANCE THE FUNCTIONALITY OF OUR WORKFORCE OPTIMIZATION APPLICATIONS.
Because the market for our products is emerging and subject to rapid
technological change and evolving industry standards, the life cycles of our
products are difficult to predict. Competitors may introduce new products or
enhancements to existing products employing new
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technologies, which could render our existing products and services obsolete and
unmarketable. For example, our currently available software applications are
written entirely in the Java computer language. While we believe that this
provides our solution with significant advantages in terms of functionality and
flexibility, the market for Java-based software is still relatively new and it
is not clear whether Java-based systems will continue to maintain commercial
acceptance.
To be successful, our products and services must keep pace with
technological developments and emerging industry standards, address the
ever-changing and increasingly sophisticated needs of our customers and achieve
market acceptance. If we are unable to develop new software product enhancements
on a timely and cost-effective basis, or if new products or enhancements do not
achieve market acceptance, our business would be seriously harmed.
In developing new products and services, we may:
- fail to develop and market products that respond to technological changes
or evolving industry standards in a timely or cost-effective manner;
- encounter products, capabilities or technologies developed by others that
render our products and services obsolete or non-competitive or that
shorten the life cycles of our existing products and services;
- experience difficulties that could delay or prevent the successful
development, introduction and marketing of these new products and
services; or
- fail to develop products and services that adequately meet the
requirements of the marketplace or achieve market acceptance.
IF WE FAIL TO RELEASE OUR PRODUCTS OR PRODUCT ENHANCEMENTS IN A TIMELY MANNER,
OR IF OUR PRODUCTS DO NOT ACHIEVE MARKET ACCEPTANCE, OUR BUSINESS WOULD BE
SERIOUSLY HARMED.
We may fail to introduce or deliver new product offerings or enhancements
of our current products on a timely basis or at all. We have in the past
experienced delays in the introduction of some of our products and product
enhancements. If releases of potential new products are delayed or do not
achieve market acceptance, we could experience implementation delays, loss of
revenues or customer frustration. Customers may delay purchases of our solutions
in anticipation of future releases and related services we may develop. If
customers defer material orders of our products in anticipation of new releases
or new product introductions, our results of operations in a particular period
could be seriously harmed.
SOFTWARE DEFECTS COULD LEAD TO LOSS OF REVENUE OR DELAY THE MARKET ACCEPTANCE OF
OUR APPLICATIONS.
Our enterprise applications software is complex and, accordingly, may
contain undetected errors or failures when first introduced or as new versions
are released. This may result in loss of, or delay in, market acceptance of our
products. We have in the past discovered software errors in our new releases and
new products after their introduction. In the event that we experience
significant software errors in future releases, we could experience delays in
release, customer dissatisfaction and potentially lost revenues during the
period required to correct these errors. We may in the future discover errors,
including Year 2000 errors and additional scalability limitations, in new
releases or new products after the commencement of commercial shipments.
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WE MAY BECOME INCREASINGLY DEPENDENT ON THIRD-PARTY SOFTWARE INCORPORATED IN OUR
PRODUCTS.
We incorporate third-party software into our products. Currently, the
third-party software we use includes application server software that we license
from BEA Systems. We expect to incorporate additional third-party software into
our products as we expand our product line and broaden the content and services
accessible through our gateway. The operation of our products would be impaired
if errors occur in the third-party software that we license. It may be more
difficult for us to correct any errors in third-party software because the
software is not within our control. Accordingly, our business would be adversely
affected in the event of any errors in this software. Furthermore, it may be
difficult for us to replace any third-party software if a vendor seeks to
terminate our license to the software.
POTENTIAL YEAR 2000 ISSUES COULD INVOLVE SIGNIFICANT TIME AND EXPENSE AND MAY
AFFECT OUR OPERATIONS.
The risks posed by Year 2000 issues could adversely affect our business in
a number of significant ways. We believe after examining and testing our
products that our internally developed technology, as well as the third-party
technology incorporated into our products, is Year 2000 compliant. Nonetheless,
our products could experience unexpected Year 2000 issues that cause our
products to be substantially impaired or cease to operate. We also use
third-party financial and other systems in our internal business operations.
Although we have received assurances from most of our vendors that these systems
are Year 2000 compliant, these systems could suffer from unexpected Year 2000
issues. Any such Year 2000 issues could materially adversely affect our
business. Moreover, we may in the future be required to defend our products or
services in litigation or arbitration proceedings involving our products or
services related to Year 2000 compliance issues, or to negotiate resolutions of
claims based on Year 2000 issues. Defending or resolving Year 2000-related
disputes, regardless of the merits of such disputes, and any liability we have
for Year 2000-related damages, including consequential damages, could be
expensive. Additionally, the Internet could face serious disruptions arising
from the Year 2000 issue, which could severely harm our business.
Many of our customers and potential customers have implemented policies
that prohibit or strongly discourage making changes or additions to their
internal computer systems until after they have resolved all potential or actual
Year 2000 issues. We will experience fewer sales if potential customers, who
might otherwise purchase our software solutions delay the purchase and
implementation of our solutions, until they have assured themselves that their
internal computer systems cope adequately with the Year 2000 issue or in the
event their information technology budgets have been diverted to address Year
2000 issues. If our potential customers delay purchasing or implementing
solutions as a result of the Year 2000 issue, our business would be seriously
harmed.
We cannot guarantee that any of our participating partners or other
Internet vendors will be Year 2000 compliant in a timely manner, or that there
will not be significant interoperability problems among information technology
systems. We also cannot guarantee that our customers will be able to utilize our
software solutions without disruptions arising from the Year 2000 issue. Given
the pervasive nature of the Year 2000 issue, we cannot guarantee that
disruptions in other industries and market segments will not adversely affect
our business. Moreover, the costs related to Year 2000 compliance, which thus
far have not been material, could ultimately be significant. In the event that
we experience disruptions as a result of the Year 2000 issue, our business could
be seriously harmed. For more information regarding the state of our Year 2000
readiness, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
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OUR PROTECTION OF OUR INTELLECTUAL PROPERTY MAY BE INADEQUATE, AND WE MAY FACE
COSTLY LITIGATION FOR INFRINGING UPON THE INTELLECTUAL PROPERTY OF OTHERS.
Our success depends in large part upon our proprietary technology. We rely
on a combination of copyright, trademark and trade secret protection,
confidentiality and nondisclosure agreements and licensing arrangements to
establish and protect our intellectual property rights. We license rather than
sell our solutions and require our customers to enter into license agreements,
which impose restrictions on their ability to utilize the software. In addition,
we seek to avoid disclosure of our trade secrets through a number of means,
including requiring those persons with access to our proprietary information to
execute nondisclosure 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 have no patents or current patent applications pending. Our future
patents, if any, may be successfully challenged or may not provide us with any
competitive advantages. We may not develop proprietary products or technologies
that are patentable.
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.
Our means of protecting our proprietary rights may not be adequate and our
competitors may independently develop similar technology, duplicate our
products, or design around our proprietary intellectual property.
There has been a substantial amount of litigation in the software industry
and the Internet industry regarding intellectual property rights. It is possible
that in the future, third parties may claim that we or our current or potential
future products infringe upon their intellectual property. We expect that
software product developers and providers of Internet-based software
applications will increasingly be subject to infringement claims as the number
of products and competitors in our industry segment grows and the functionality
of products in different industry segments overlaps. Any claims, with or without
merit, could be time consuming, result in costly litigation, cause product
shipment delays or require us to enter into royalty or licensing agreements.
Royalty or licensing agreements, if required, may not be available on terms
acceptable to us or at all, which could seriously harm our business.
ANY FUTURE ACQUISITIONS OF COMPANIES OR TECHNOLOGIES MAY RESULT IN DISTRACTION
OF OUR MANAGEMENT AND DISRUPTIONS TO OUR BUSINESS.
We may acquire or make investments in complementary businesses,
technologies, services or products if appropriate opportunities arise. From time
to time we may engage in discussions and negotiations with companies regarding
our acquiring or investing in such companies' businesses, products, services or
technologies. We cannot make assurances that we will be able to identify future
suitable acquisition or investment candidates, or if we do identify suitable
candidates, that we will be able to make such acquisitions or investments on
commercially acceptable terms or at all. If we acquire or invest in another
company, we could have difficulty assimilating that company's personnel,
operations, technology or products and service offerings. In addition, the key
personnel of the acquired company may decide not to work for us. These
difficulties could disrupt our ongoing business, distract our management and
employees, increase our expenses and adversely affect our results of operations.
Furthermore, we may incur indebtedness or issue equity securities to pay for any
future acquisitions. The
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issuance of equity securities could be dilutive to our existing stockholders. As
of the date of this prospectus, we have no agreement to enter into any material
investment or acquisition transaction.
WE HAVE ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND IN OUR CONTRACTS THAT COULD
DELAY OR PREVENT AN ACQUISITION OF OUR COMPANY, EVEN IF SUCH AN ACQUISITION
WOULD BE BENEFICIAL TO OUR STOCKHOLDERS.
Provisions of our certificate of incorporation, our bylaws, Delaware law
and the employment agreements of some of our key executives could make it more
difficult for a third party to acquire us, even if doing so might be beneficial
to our stockholders. Please see "Description of Capital Stock" and "Certain
Transactions -- Officer Transactions -- Officer Employment Arrangements."
OUR BUSINESS MAY FACE ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO
US WHICH COULD CAUSE OUR BUSINESS TO SUFFER.
In addition to the risks specifically identified in this Risk Factors
section or elsewhere in this prospectus, we may face additional risks and
uncertainties not presently known to us or that we currently deem immaterial
which ultimately may impair our business, results of operations and financial
condition.
RISKS RELATED TO OUR INDUSTRY
OUR SUCCESS WILL DEPEND UPON THE GROWTH AND ACCEPTANCE OF THE MARKET WE ADDRESS
AND OUR ABILITY TO MEET THE NEEDS OF THE EMERGING MARKET FOR OUR SOLUTIONS.
The market for our workforce optimization applications and services is at
an early stage of development. Our success will depend upon the continued
development of this market and the increasing acceptance by customers of the
benefits to be provided by workforce optimization applications and services. In
addition, as the market evolves, it is unclear whether the market will accept
our suite of applications as a preferred solution for workforce optimization
needs. Accordingly, our products and services may not achieve significant market
acceptance or realize significant revenue growth. Unless a critical mass of
organizations and their suppliers use our solutions and recommend them to new
customers, our solutions may not achieve widespread market acceptance, which may
cause our business to suffer.
CUSTOMERS MUST ACCEPT THE INTERNET AS A MEANS TO ACCESS ENTERPRISE APPLICATIONS
FOR OUR BUSINESS MODEL TO BE SUCCESSFUL.
To date, enterprises have generally managed operational functions through
internal computer systems rather than over the Internet. Our business model
assumes that enterprises and their employees will increasingly adopt the
Internet or corporate intranets as a means of managing important business
functions. This business model is not yet proven, and if we are unable to
successfully implement our business model, our business will be materially
adversely affected.
SECURITY RISKS AND CONCERNS MAY DETER THE USE OF THE INTERNET FOR CONDUCTING
ELECTRONIC COMMERCE.
A significant barrier to electronic commerce and communications is the
secure transmission of confidential information over public networks. Advances
in computer capabilities, new
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discoveries in the field of cryptography or other events or developments could
result in compromises or breaches of our security systems or those of other
websites to protect proprietary information. If any well-publicized compromises
of security were to occur, it could have the effect of substantially reducing
the use of the Internet for commerce and communications. Anyone who circumvents
our security measures could misappropriate proprietary information or cause
interruptions in our services or operations. The Internet is a public network,
and data is sent over this network from many sources. In the past, computer
viruses and software programs that disable or impair computers have been
distributed and have rapidly spread over the Internet. Computer viruses could be
introduced into our systems or those of our customers or suppliers, which could
disrupt our software solutions or make them inaccessible to customers or
suppliers. We may be required to expend significant capital and other resources
to protect against the threat of security breaches or to alleviate problems
caused by breaches. To the extent that our activities may involve the storage
and transmission of proprietary information, such as credit card numbers,
security breaches could expose us to a risk of loss or litigation and possible
liability. Our security measures may be inadequate to prevent security breaches,
and our business would be harmed if we do not prevent them.
INCREASING GOVERNMENT REGULATION COULD LIMIT THE MARKET FOR, OR IMPOSE SALES AND
OTHER TAXES ON THE SALE OF, OUR PRODUCTS AND SERVICES.
As Internet commerce evolves, we expect that federal, state or foreign
agencies will adopt regulations covering issues such as user privacy, pricing,
taxation of goods and services provided over the Internet, and content and
quality of products and services. It is possible that legislation could expose
companies involved in electronic commerce to liability, which could limit the
growth of electronic commerce generally. Legislation could dampen the growth in
Internet usage and decrease its acceptance as a communications and commercial
medium. If enacted, these laws, rules or regulations could limit the market for
our products and services.
RISKS RELATED TO THIS OFFERING
INVESTORS WILL BE RELYING ON OUR MANAGEMENT'S JUDGMENT REGARDING THE USE OF
PROCEEDS FROM THIS OFFERING.
Our management will have broad discretion with respect to the use of the
net proceeds from this offering, and investors will be relying on the judgment
of our management regarding the application of these proceeds. Presently,
anticipated uses include expansion of our sales and marketing operations and
other general corporate purposes, such as broadening our product and service
offerings, advertising, brand promotion and working capital. We may also use a
portion of the proceeds for strategic alliances and acquisitions. These
investments may not yield a favorable return. We have not yet determined the
amount of net proceeds to be used specifically for each of the foregoing
purposes.
THE LIQUIDITY OF OUR COMMON STOCK IS UNCERTAIN SINCE IT HAS NOT BEEN PUBLICLY
TRADED.
There has not been a public market for our common stock. We cannot predict
the extent to which investor interest in our company will lead to the
development of an active, liquid trading market. Active trading markets
generally result in lower price volatility and more efficient execution of buy
and sell orders for investors. The initial public offering price for the shares
will be determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in the
trading market.
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OUR NEED FOR ADDITIONAL FINANCING IS UNCERTAIN AS IS OUR ABILITY TO RAISE
FURTHER FINANCING IF REQUIRED.
We currently anticipate that our available cash resources, combined with
the net proceeds from this offering, will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least 12 months
after the date of this prospectus. We may need to raise additional funds,
however, to respond to business contingencies which may include the need to:
- fund more rapid expansion;
- fund additional marketing expenditures;
- develop new or enhance existing products and services;
- enhance our operating infrastructure;
- hire additional personnel;
- respond to competitive pressures; or
- acquire complementary businesses or necessary technologies.
If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of our stockholders will
be reduced, and these newly-issued securities may have rights, preferences or
privileges senior to those of existing stockholders, including those acquiring
shares in this offering. We cannot assure you that additional financing will be
available on terms favorable to us, or at all. If adequate funds are not
available or are not available on acceptable terms, our ability to fund our
operations, take advantage of unanticipated opportunities, develop or enhance
our products and services or otherwise respond to competitive pressures would be
significantly limited.
MARKET PRICES OF INTERNET AND TECHNOLOGY COMPANIES HAVE BEEN HIGHLY VOLATILE,
AND THE MARKET FOR OUR STOCK MAY EXHIBIT VOLATILITY AS WELL.
The stock market has experienced significant price and trading volume
fluctuations, and the market prices of technology companies generally, and
Internet-related companies particularly, have been extremely volatile. Recent
initial public offerings by technology companies have been accompanied by
exceptional share price and trading volume changes in the first days and weeks
after the securities were released for public trading. Investors may not be able
to resell their shares at or above the initial public offering price. In the
past, following periods of volatility in the market price of a public company's
securities, securities class action litigation has often been instituted against
that company. Such litigation could result in substantial costs and a diversion
of management's attention and resources.
NEW INVESTORS WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION IN THE TANGIBLE NET
BOOK VALUE OF THEIR SHARES.
We expect the initial public offering price to be substantially higher than
the net tangible book value per share of the common stock. The net tangible book
value of a share of common stock purchased at an assumed initial public offering
price of $ per share will be only $ . Additional dilution may be
incurred if holders of stock options, whether currently outstanding or
subsequently granted, exercise their options or if warrantholders exercise their
warrants to purchase common stock.
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THE LARGE NUMBER OF SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD
CAUSE OUR STOCK PRICE TO DECLINE.
The market price of our common stock could decline as a result of sales by
our existing stockholders of a large number of shares of our common stock in the
market after this offering or the perception that such sales could occur. These
sales also might make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate. Please see "Shares
Eligible for Future Sale" for a description of sales that may occur in the
future.
MANY CORPORATE ACTIONS WILL BE CONTROLLED BY OFFICERS, DIRECTORS AND AFFILIATED
ENTITIES REGARDLESS OF THE OPPOSITION OF OTHER INVESTORS OR THE DESIRE OF OTHER
INVESTORS TO PURSUE AN ALTERNATIVE CAUSE OF ACTION.
Our executive officers, directors and entities affiliated with them will,
in the aggregate, beneficially own approximately % of our common stock
following this offering. If they were to act together, these stockholders would
be able to exercise control over most matters requiring approval by our
stockholders, including the election of directors and approval of significant
corporate transactions. This concentration of ownership may also have the effect
of delaying or preventing a change in control of our company, which could have a
material adverse effect on our stock price. These actions may be taken even if
they are opposed by the other investors, including those who purchase shares in
this offering.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND INDUSTRY DATA
We make many statements in this prospectus under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere that are
forward-looking and are not based on historical facts. These statements relate
to our future plans, objectives, expectations and intentions. We may identify
these statements by the use of words such as "believe," "expect," "will,"
"anticipate," "intend" and "plan" and similar expressions. These forward-
looking statements involve a number of risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those we discuss in "Risk
Factors" and elsewhere in this prospectus. These forward-looking statements
speak only as of the date of this prospectus, and we caution you not to rely on
these statements without also considering the risks and uncertainties associated
with these statements and our business that are addressed in this prospectus.
This prospectus contains estimates of market growth related to the Internet
and e-commerce, as well as cost savings expected to be realized through
e-commerce. These estimates have been included in studies published by the
market research and other firms including AMR Research, American Express,
Forrester Research, Giga Information Group, International Data Corporation and
Killen & Associates. These estimates assume that certain events, trends and
activities will occur. If any of these market research firms is wrong about any
of its assumptions, then its market estimates may also be wrong.
17
<PAGE> 23
USE OF PROCEEDS
The net proceeds to us from the sale of the shares being
offered by us at an assumed initial public offering price of $ per share,
after deducting estimated underwriting discounts and commissions and estimated
offering expenses, are estimated to be $ , or $ if the
underwriters' over-allotment option is exercised in full. We expect to use the
net proceeds of this offering for working capital and general corporate
purposes, including increased spending on sales and marketing, customer support,
research and development, expansion of our operational and administrative
infrastructure, and the leasing of additional facilities. Specific amounts for
these purposes have not yet been determined. In addition, we may use a portion
of the net proceeds to acquire or invest in complementary businesses,
technologies, product lines or products. However, we have no current plans,
agreements or commitments with respect to any such acquisition, and we are not
currently engaged in any negotiations with respect to any such transaction.
Pending these uses, we intend to invest the net proceeds in short-term,
interest-bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on shares of our capital
stock and do not intend to do so in the foreseeable future. The payment of
dividends is within the discretion of our board of directors and will depend on
our earnings, capital requirements and operating and financial condition, among
other factors. In addition, our credit facility with Comdisco Ventures restricts
our ability to declare dividends.
18
<PAGE> 24
CAPITALIZATION
The following table sets forth the following information:
- our actual capitalization as of September 30, 1999;
- our pro forma capitalization as of that date after giving effect to the
conversion of all outstanding shares of convertible preferred stock into
14,094,549 shares of common stock upon completion of this offering; and
- our pro forma capitalization as adjusted to reflect the receipt of the
net proceeds from our sale of shares of common stock at an assumed
initial public offering price of $
per share in this offering, less underwriting discounts and commissions
and estimated offering expenses payable by us.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Notes payable and capital lease obligations,
noncurrent........................................... $ 1,692 $ 1,692
Mandatorily redeemable convertible preferred stock;
14,094,549 shares issued and outstanding actual;
none issued and outstanding pro forma and pro forma
as adjusted........................................ 43,648 --
Stockholders' equity (deficit):
Common stock; $0.001 par value, 30,000,000 shares
authorized, 3,753,198 shares issued and
outstanding actual; 17,847,747 shares issued and
outstanding pro forma and shares
issued and outstanding pro forma as adjusted.... 4 18
Additional paid-in capital........................... 6,710 50,344
Notes receivable from stockholders................... (230) (230)
Deferred stock compensation.......................... (3,607) (3,607)
Accumulated deficit.................................. (30,021) (30,021)
-------- --------
Total stockholders' equity (deficit)............ (27,144) 16,504
-------- --------
Total capitalization.......................... $ 18,196 $ 18,196
======== ========
</TABLE>
This table does not include:
- 2,682,693 shares subject to outstanding options as of September 30, 1999
at a weighted average exercise price of $0.62.
- 1,422,820 additional shares available for grant as of September 30, 1999
under our 1996 Stock Option Plan which will increase to 2,322,820 shares
available as of that date pursuant to an amendment of the Plan effective
upon completion of this offering.
- 183,888 shares of common stock subject to outstanding warrants at a
weighted average exercise price of $3.08.
- 500,000 shares to be available for grant under our Employee Stock
Purchase Plan 2000 upon completion of this offering.
- The amendment to our certificate of incorporation upon completion of this
offering to increase our authorized common stock and to decrease our
authorized preferred stock.
Upon completion of this offering, each share of convertible preferred stock
will convert into one share of common stock.
19
<PAGE> 25
DILUTION
Our pro forma net tangible book value as of September 30, 1999, after
giving effect to the automatic conversion of our preferred stock upon the
closing of this offering, was $ , or $ per share of common stock. Net
tangible book value per share is determined by dividing our tangible book value
(total tangible assets less total liabilities) by the number of outstanding
shares of common stock at that date. After giving effect to the sale of the
shares of our common stock offered hereby at an assumed initial public
offering price of $ per share and after deducting estimated underwriting
discounts and commissions and estimated offering expenses, our net tangible book
value at September 30, 1999 would have been $ , or $
per share. This represents an immediate increase in net tangible book value to
existing stockholders of $ per share and an immediate dilution to new
investors of $ per share. The following table illustrates the per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of September
30, 1999.................................................... $
Increase per share attributable to new investors..........
------
Pro forma net tangible book value per share after this
offering..................................................
------
Net tangible book value dilution per share to new
investors................................................. $
======
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1999, the differences between the number of shares of common stock purchased
from us, the total consideration paid and the average price per share paid by
the existing stockholders and by the new public investors (based upon an assumed
initial public offering price of $ per share and before deducting estimated
underwriting discounts and commissions and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... % $ % $
New public investors................
----- --- ------ --- ------
Total............................. 100% $ 100% $
===== === ====== === ======
</TABLE>
The above discussion and tables assume no exercise of stock options or
warrants outstanding as of September 30, 1999 and gives effect to the conversion
of all outstanding shares of our preferred stock into common stock upon
completion of this offering. As of September 30, 1999, there were options
outstanding to purchase a total of 2,682,693 shares of common stock at a
weighted average exercise price of $0.62 per share under our 1996 Stock Plan,
1,422,820 additional shares were reserved for grant of future options under such
plan which will increase to 2,322,820 shares available as of that date pursuant
to an amendment of the Plan effective upon completion of this offering, and an
aggregate of 500,000 shares of our common stock will be reserved for issuance
under our Employee Stock Purchase Plan 2000 upon completion of the offering. To
the extent that any of these options or warrants are exercised, there will be
further dilution to the new public investors. See "Capitalization,"
"Management -- Compensation Plans" and Notes 8 and 10 of Notes to Consolidated
Financial Statements.
20
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read
together with the consolidated financial statements and related notes,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the other information contained in this prospectus. The statement
of operations data set forth below with respect to the years ended December 31,
1996, 1997 and 1998 and the nine months ended September 30, 1998 and 1999 and
the balance sheet data at December 31, 1997, 1998 and September 30, 1999 are
derived from, and are qualified by reference to, the audited consolidated
financial statements included elsewhere in this prospectus. The selected balance
sheet data at December 31, 1996 are derived from our audited balance sheet not
included herein. The statement of operations data for the period from inception
(November 13, 1995) to December 31, 1995 and the balance sheet data at December
31, 1995 are immaterial and therefore are not included herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ------------------
1996 1997 1998 1998 1999
------ ------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
REVENUES:
Licenses............................................... $ -- $ -- $ 718 $ 542 $ 2,476
Services and maintenance............................... -- -- 409 183 1,575
------ ------- -------- ------- --------
Total revenues....................................... -- -- 1,127 725 4,051
------ ------- -------- ------- --------
COST OF REVENUES:
Licenses............................................... 90 37 145
Services and maintenance............................... 1,554 989 3,074
------ ------- -------- ------- --------
Total cost of revenues............................... -- -- 1,644 1,026 3,219
------ ------- -------- ------- --------
Gross profit (loss)...................................... -- -- (517) (301) 832
OPERATING EXPENSES:
Sales and marketing.................................... 102 1,082 4,703 3,266 6,406
Research and development............................... 519 1,713 4,401 2,865 4,986
General and administrative............................. 233 540 1,392 898 1,956
Amortization of non-cash stock-based compensation...... -- -- -- -- 2,479
------ ------- -------- ------- --------
Total operating expenses............................. 854 3,335 10,496 7,029 15,827
------ ------- -------- ------- --------
Loss from operations................................. (854) (3,335) (11,013) (7,330) (14,995)
Interest income, net..................................... 24 107 28 2 19
------ ------- -------- ------- --------
Net loss........................................... $ (830) $(3,228) $(10,985) $(7,328) $(14,976)
====== ======= ======== ======= ========
Net loss per share:
Basic and diluted...................................... $(3.79) $ (4.35) $ (8.28) $ (5.85) $ (5.58)
====== ======= ======== ======= ========
Weighted average shares................................ 219 742 1,326 1,252 2,683
Pro forma net loss per share (unaudited):
Basic and diluted $ (1.12) $ (1.08)
======== ========
Weighted average shares 9,766 13,822
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- SEPTEMBER 30,
1996 1997 1998 1999
------- ------ ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 32 $2,560 $10,883 $ 22,282
Working capital........................................... 26 2,061 7,319 16,277
Total assets.............................................. 197 3,584 13,811 27,953
Notes payable and capital lease obligations, noncurrent... -- -- 2,471 1,692
Mandatorily redeemable convertible preferred stock........ 1,000 6,983 21,269 43,648
Total stockholders' deficit............................... (841) (4,040) (15,012) (27,144)
</TABLE>
21
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and
results of operations should be read together with "Selected Consolidated
Financial Data" and our financial statements and related notes appearing
elsewhere in this prospectus. This discussion and analysis contains forward-
looking statements that involve risks, uncertainties and assumptions. The actual
results may differ materially from those anticipated in these forward-looking
statements as a result of many factors, including but not limited to those set
forth under "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
Extensity is a leading provider of Internet-based workforce optimization
software applications designed to improve the productivity of employees across
the enterprise and to enhance enterprise operating efficiency. We sell an
integrated suite of applications that automates expense reporting, business
travel planning, procurement and billable time management. Our solution
streamlines traditional paper-based processes associated with internal
procedures and delivers relevant content, commerce and services from external
providers.
We were formed in November 1995 and introduced our first commercial product
for general availability in March 1998. During this period, our operating
activities consisted of the design and development of our product architecture
and our first application, the building of our corporate infrastructure, and the
development of our professional services and customer support organizations. Our
first application, Extensity Expense Reports, was released for general
availability in March 1998. We released Extensity Travel Plans in December 1998,
and Extensity Timesheets and Extensity Purchase Reqs in July 1999.
We generate revenue principally from licensing our applications and
providing related services, including product installation, maintenance and
support, consulting and training. We license our applications individually or as
an integrated suite of products. Our list prices provide for separate server
fees, seat license fees and fees for our administration tools and systems
interface modules, with total fees generally based on seat volume. License
revenues comprised 64% and 61% of our total revenues in the year ended December
31, 1998 and in the nine months ended September 30, 1999, while services and
other revenues comprised 36% and 39% of our total revenues for the same periods.
Prior to the July 1999 release of Version 4.0 of our Extensity Application
Suite, we recognized revenues from customer contracts using the completed
contract method because, given our lack of history implementing our products, it
was difficult to reliably estimate the costs and efforts necessary to complete
product implementations. This recognition policy is consistent with the American
Institute of Certified Public Accountants Statement of Position 97-2, Software
Revenue Recognition, or SOP 97-2, as amended by Statements of Position 98-4 and
98-9, and the American Institute of Certified Public Accountants Statement of
Position 81-1, Accounting for Performance of Construction Type and Certain
Production Type Contracts, or SOP 81-1.
Following the introduction of the current version of our application suite,
Version 4.0, we determined that the costs and efforts necessary to complete the
implementation of our products is reasonably estimable. At the same time,
however, we believe that our limited contracting history does not provide
sufficient vendor-specific objective evidence for the allocation of revenues to
the various elements of our contracts. SOP 97-2 requires revenues to be
recognized ratably over the maintenance period in circumstances where
vendor-specific objective evidence of the fair values of the respective elements
of the contract do not exist and the only remaining undelivered element of such
contract are the maintenance services. Accordingly, for contracts in which we
commenced implementation after our July 1999 product
22
<PAGE> 28
release, we recognize revenues from both licenses and related services ratably
over the maintenance period, which is typically one year. This recognition
policy is consistent with SOP 97-2, as amended by SOP 98-4 and SOP 98-9.
Payments received in advance of permitted revenue recognition are recorded
as deferred revenues until recognized. Our deferred revenues balances were $2.5
million and $5.6 million at December 31, 1998 and September 30, 1999. At
September 30, 1999, this deferred revenues balance included $1.7 million of
amounts to be recognized under the completed contract method. All of our
customers enter into one-year maintenance and support contracts when they
purchase their initial Extensity applications and have the option to purchase
additional contracts after completion of the initial contract period.
We promote and sell our software products through our direct sales force
and through indirect channels, including third-party outsourcers of expense
management services. We also have co-marketing arrangements with a number of
companies including Cisco Systems, First USA, GetThere.com and Netscape. We have
derived, and expect to continue to derive, the substantial majority of our
revenues through our direct channel.
In the second quarter of 1999, we expanded our presence in international
markets by opening a sales office in the United Kingdom and by establishing a
relationship with a provider of enterprise financial applications. We hired our
Vice President and General Manager of European Operations in July 1999. We have
continued to hire staff in our United Kingdom office and expect to continue to
do so in advance of anticipated revenues. Hence, we expect our costs for
establishing international sales to exceed related revenues as we invest in
international operations. We have derived no revenues from international sales
to date.
We have incurred substantial research and development costs since inception
and have more recently invested in our sales and marketing and professional
services organizations in order to support our long-term growth strategy. Our
full-time employees increased from 35 at December 31, 1997 to 83 at December 31,
1998 to 145 at September 30, 1999. As a result of these investments, we have
incurred net losses in each fiscal quarter since inception and, as of September
30, 1999, we had an accumulated deficit of $30.0 million. We anticipate that our
operating expenses will continue to increase as we continue to expand our
product development and sales and marketing efforts. Accordingly, we expect to
continue to incur quarterly net losses for the foreseeable future.
23
<PAGE> 29
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited consolidated statement of
operations data for the six quarters following the general availability of our
products in March 1998 through September 30, 1999, as well as this information
expressed as a percentage of total revenues for the periods indicated. This
information has been derived from our unaudited consolidated financial
statements. The unaudited consolidated quarterly financial statements have been
prepared on the same basis as the audited consolidated financial statements
contained in this prospectus and include all adjustments, consisting only of
normal recurring adjustments, that we considered necessary for a fair
presentation of such information when read in conjunction with our audited
consolidated financial statements and related notes. Operating results for any
quarter are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1998 1998 1998 1999 1999 1999
-------- --------- -------- --------- -------- ---------
(IN THOUSANDS, UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Licenses.................................... $ 75 $ 160 $ 176 $ 220 $ 800 $ 1,456
Service and maintenance..................... 49 118 226 206 673 696
------- ------- ------- ------- ------- -------
Total revenues........................ 124 278 402 426 1,473 2,152
Cost of revenues:
Licenses.................................... 9 22 55 28 40 77
Services and maintenance.................... 344 475 564 758 1,087 1,229
------- ------- ------- ------- ------- -------
Total cost of revenues................ 353 497 619 786 1,127 1,306
Gross profit (loss)........................... (229) (219) (217) (360) 346 846
Operating expenses:
Sales and marketing......................... 1001 1,263 1,436 1,319 2,009 3,079
Research and development.................... 860 1,268 1,537 1,408 1,727 1,851
General and administrative.................. 295 376 495 427 658 870
Amortization of non-cash stock-based
compensation.............................. -- -- -- 315 578 1,586
------- ------- ------- ------- ------- -------
Total operating expenses.............. 2,156 2,907 3,468 3,469 4,972 7,386
------- ------- ------- ------- ------- -------
Loss from operations.......................... (2,385) (3,126) (3,685) (3,829) (4,626) (6,540)
Interest income (expense), net................ (62) 57 27 (27) (49) 94
------- ------- ------- ------- ------- -------
Net loss...................................... $(2,447) $(3,069) $(3,658) $(3,856) $(4,675) $(6,446)
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1998 1998 1998 1999 1999 1999
-------- --------- -------- --------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PERCENTAGE OF REVENUES:
Revenues:
Licenses................................... 60% 58% 44% 52% 54% 68%
Service and maintenance.................... 40 42 56 48 46 32
------ ------ ---- ---- ---- ----
Total revenues....................... 100 100 100 100 100 100
Cost of revenues:
Licenses................................... 7 8 14 7 3 4
Services and maintenance................... 277 171 140 178 74 57
------ ------ ---- ---- ---- ----
Total cost of revenues............... 285 179 154 185 77 61
Gross profit (loss).......................... (185) (79) (54) (85) 23 39
------ ------ ---- ---- ---- ----
Operating expenses:
Sales and marketing........................ 807 454 357 310 136 143
Research and development................... 694 456 382 331 117 86
General and administrative................. 238 135 123 100 45 40
Amortization of non-cash stock-based
compensation............................. -- -- -- 74 39 74
------ ------ ---- ---- ---- ----
Total operating expenses............. 1,739 1,046 863 814 338 343
------ ------ ---- ---- ---- ----
Loss from operations......................... (1,923) (1,124) (917) (899) (314) (304)
Interest income (expense), net............... (50) 20 7 (6) (3) 4
------ ------ ---- ---- ---- ----
Net loss..................................... (1,973)% (1,104)% (910)% (905)% (317)% (300)%
====== ====== ==== ==== ==== ====
</TABLE>
24
<PAGE> 30
SIX QUARTERS ENDED SEPTEMBER 30, 1999
REVENUES
License Revenues. Our license revenues have increased in every quarter
following the introduction of our first product in March 1998. These increases
are attributable to the increasing market awareness of the benefits of workforce
optimization software and increasing market acceptance of our solutions. License
revenues in the quarters ended June 30 and September 30, 1999 in particular have
increased significantly as we have established a more visible market presence
and expanded our sales and marketing resources.
Service and Maintenance Revenues. Our service and maintenance revenues have
increased in each quarter in the periods presented, except for the first quarter
of 1999. The generally increasing trend resulted from increases in the number of
installations being completed for our growing customer base, and to a lesser
extent, a growing base of maintenance revenues. The increase in service revenues
on an absolute dollar basis and as a percentage of revenues from the quarter
ended September 30, 1998 to the quarter ended December 31, 1998 resulted from an
unusually high mix of service revenues for contracts completed in the quarter
ended December 31, 1998. The decrease in service revenues as a percentage of
revenues in the quarter ended September 30, 1999 as compared to the preceding
quarter was due to an unusually low mix of service revenues for contracts
completed in the quarter ended September 30, 1999.
COST OF REVENUES
Cost of License Revenues. Cost of license revenues consists primarily of
third-party license and support fees and, to a lesser extent, costs of
duplicating media and documentation. This cost has fluctuated within a small
absolute dollar range of $9,000 to $77,000 for the six quarters ended September
30, 1999. With a more substantial level of license revenues during the second
and third quarters of 1999, our cost of license revenues as a percentage of
license revenues has been less than 6%.
Cost of Service and Maintenance Revenues. Cost of service and maintenance
revenues consists of compensation and related overhead costs for personnel
engaged in consulting, training, maintenance and support services for our
customers as well as costs for third parties contracted to provide such services
to our customers. This cost has increased each quarter in the six quarters ended
September 30, 1999. The increase in cost of service revenues as a percentage of
revenues in the quarter ended March 31, 1999 was attributable to the expansion
of our professional services organization in advance of recognized revenues from
implementations during that period. Cost of service revenues has significantly
exceeded our service revenues as we have built our consulting and customer
support groups in advance of growing contract volume. Although cost of service
revenues has declined as a percentage of service revenues over time, this cost
continues to exceed the amount of related service revenues. We are seeking to
reduce our cost of service revenues and are also seeking to engage third parties
to provide a substantial portion of services related to our applications. We
expect, however, that cost of service revenues will continue to exceed service
revenues for the foreseeable future. In addition, we have not yet established
significant relationships with any third-party service provider, and we may not
be successful in doing so in the future.
Our bundled service revenues are generally recognized ratably over a
one-year period. However, implementation services typically represent a large
proportion of total cost of service revenues and are typically completed within
the first two quarters of that one-year period. This timing difference results
in higher cost of service revenues as a percentage of recognized service
revenues in the early portion of each contract. In addition, we plan to continue
to build our services capability, both internally and through third-party
implementation and consulting
25
<PAGE> 31
providers in advance of targeted revenue increases. We expect that cost of
service revenues will continue to exceed service revenues for the foreseeable
future. Furthermore, the mix of license versus service revenues may cause our
overall costs of service revenues as a percentage of total revenues to
fluctuate.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses consist primarily of
compensation and related costs for sales and marketing personnel, including
commissions and marketing program costs. Sales and marketing expenses have
increased steadily since the commercial introduction of our products in March
1998 as we have continued to build our sales and marketing resources. The
primary reasons for these increases are increased personnel and associated sales
commissions, expanded marketing programs, expansion of regional sales offices
and the addition of an international sales office. Our sales and marketing
expenses decreased slightly to $1.3 million in the first quarter of 1999 from
$1.4 million in the last quarter of 1998 due primarily to larger commissions and
bonuses in the fourth quarter of 1998. The increase in sales and marketing
expenses as a percentage of revenues in the quarter ended September 30, 1999 was
attributable to increased advertising expenditures relating to our first
national marketing program, and coincided with the roll-out of Version 4.0 of
our Extensity Application Suite. We expect our sales and marketing expenses to
increase in absolute dollars for the foreseeable future.
Research and Development. Research and development expenses consist
primarily of compensation and related personnel costs and fees associated with
contractors. Research and development expenses continued to grow during the six
quarters ended September 30, 1999 as we continued to build on our underlying
technology platform, develop new applications and enhance existing applications.
General and Administrative. General and administrative expenses consist
primarily of compensation and related costs for our executive, finance and
administrative personnel and other related expenses. General and administrative
expenses have generally grown consistently during the six quarters ended
September 30, 1999. We have continued to increase the number of general and
administrative personnel to support our growing organization and transaction
volume. We expect general and administrative costs to increase in absolute
dollars as we continue to build the infrastructure necessary to support the
growth of our business and to operate as a public company.
Amortization of Non-Cash Stock-Based Compensation. We have recorded
compensation expense in each of the three quarters ended September 30, 1999 as
discussed below.
You should not rely on quarter-to-quarter comparisons of our results of
operations as indicators of future performance due to our limited operating
history, the early stage of our market and the factors discussed in the section
entitled "Risk Factors" above. In particular, because our base of customers and
the number of additional customer licenses we enter into each quarter are still
relatively small, the loss or deferral of a small number of anticipated large
customer orders in any quarter could result in a significant shortfall in
revenues for that quarter. If in some future periods our operating results are
below the expectations of public market analysts and investors, the price of our
common stock may underperform or fall.
26
<PAGE> 32
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the statement of
operations data as a percentage of total revenues.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
YEAR ENDED ----------------
DECEMBER 31, 1998 1998 1999
----------------- ------ ----
<S> <C> <C> <C>
Revenues:
Licenses.......................................... 64% 75% 61%
Services and maintenance........................ 36 25 39
---- ------ ----
Total revenues............................... 100 100 100
---- ------ ----
Cost of revenues:
Licenses........................................ 8 5 4
Services and maintenance........................ 138 137 76
---- ------ ----
Total cost of revenues....................... 146 142 79
---- ------ ----
Gross profit (loss)............................... (46) (42) 21
---- ------ ----
Operating expenses:
Sales and marketing............................. 417 450 158
Research and development........................ 391 395 123
General and administrative...................... 124 124 48
Amortization of non-cash stock-based
compensation................................. -- -- 61
---- ------ ----
Total operating expenses..................... 931 970 391
---- ------ ----
Loss from operations.............................. (977) (1,011) (370)
Interest income, net.............................. 2 0 0
---- ------ ----
Net loss.......................................... (975)% (1,011)% (370)%
==== ====== ====
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
REVENUES
Total revenues increased to $4.1 million for the nine months ended
September 30, 1999 from $725,000 for the nine months ended September 30, 1998.
License Revenues. Our license revenues increased to $2.5 million for the
nine months ended September 30, 1999 from $542,000 for the nine months ended
September 30, 1998. This increase was due to increased market awareness of the
benefits of workforce optimization software and increasing market acceptance of
our solutions.
Service and Maintenance Revenues. Our service and maintenance revenues
increased to $1.6 million for the nine months ended September 30, 1999 from
$183,000 for the nine months ended September 30, 1998. This increase was
attributable to consulting fees associated with new customer installations, and
to a lesser extent, maintenance and support fees associated with a growing
customer base.
For the nine months ended September 30, 1998, sales to Scopus Technology,
Franklin Templeton, RELTEC Corporation and Excite@Home accounted for 30%, 19%,
12% and 11% of our total revenues. For the nine months ended September 30, 1999,
sales to Sara Lee, Gelco Information Network and Cisco Systems accounted for
19%, 18% and 11% of our total revenues.
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COST OF REVENUES
Total cost of revenues increased to $3.2 million for the nine months ended
September 30, 1999 from $1.0 million for the nine months ended September 30,
1998.
Cost of License Revenues. Cost of license revenues increased to $145,000
for the nine months ended September 30, 1999 from $37,000 for the nine months
ended September 30, 1998. As a percentage of license revenues, cost of license
revenues decreased from 6.8% to 5.9% for the nine months ended September 30,
1998 and 1999. Cost of license revenues as a percentage of total license
revenues may increase if we incorporate additional third-party software into our
products.
Cost of Service and Maintenance Revenues. Cost of service and maintenance
revenues increased to $3.1 million for the nine months ended September 30, 1999
from $989,000 for the nine months ended September 30, 1998. As a percentage of
service revenues, cost of service revenues decreased from 540% to 195% for the
nine months ended September 30, 1998 and 1999.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses increased to $6.4 million
for the nine months ended September 30, 1999 from $3.3 million for the nine
months ended September 30, 1998, an increase of 96%. The increase was primarily
attributable to increased compensation, commissions and other related costs
associated with hiring additional sales representatives, management and
marketing personnel, as well as increased spending on marketing programs. Sales
and marketing expenses as a percentage of total revenues were 450% and 158% for
the nine months ended September 30, 1998 and 1999. We expect that the absolute
dollar amount of sales and marketing expenses will continue to increase as we
expand our domestic and international sales force and marketing efforts.
Research and Development. Research and development expenses increased to
$5.0 million for the nine months ended September 30, 1999 from $2.9 million for
the nine months ended September 30, 1998, an increase of 74%. The increase was
primarily attributable to the addition of personnel to our research and
development organization as we continued to develop new products and new
versions of existing products. Research and development expenses as a percentage
of total revenues were 395% and 123% for the nine months ended September 30,
1998 and 1999. We expect that the absolute dollar amount of research and
development expenses will continue to increase as we make additional investments
in our technology and products.
General and Administrative. General and administrative expenses increased
to $2.0 million for the nine months ended September 30, 1999 from $898,000 for
the nine months ended September 30, 1998, an increase of 118%. The increase was
primarily attributable to hiring additional executive and financial personnel as
well as incurring additional general expenses, such as consulting and
professional service fees. General and administrative expenses as a percentage
of total revenues were 124% and 48% for the nine months ended September 30, 1998
and 1999. We expect that the absolute dollar amount of general and
administrative expenses will continue to increase as we expand our operations
and incur the typical incremental costs of a public company.
Amortization of Non-Cash Stock-Based Compensation. We granted certain stock
options to our officers and employees at prices deemed to be below fair value of
the underlying stock. The cumulative differential between the fair value of the
underlying stock at the date the options were granted and the exercise price of
the granted options was $6.1 million at September 30, 1999. This amount is being
amortized, on an accelerated basis, over the four year vesting
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period of the granted options. Accordingly, our results from operations will
include deferred compensation expense at least through 2003. During the nine
months ended September 30, 1999, $2.5 million was recognized as expense.
INTEREST INCOME, NET
Net interest income was $19,000 for the nine months ended September 30,
1999, and $2,000 for the nine months ended September 30, 1998. The nominal
income for the nine months ended September 30, 1998 resulted primarily from the
interest generated from funds raised in our May 1998 equity offering, partially
offset by interest expense from our subordinated debt facility and capital
equipment loans and leases. Interest income for the nine months ended September
30, 1999 primarily resulted from interest earned on the proceeds from both our
May 1998 and July 1999 equity offerings, partially offset by interest expense
from these same debt facilities.
FISCAL YEARS ENDED DECEMBER 31, 1998 AND 1997
REVENUE AND COST OF REVENUES
We recognized $1.1 million of revenues for the year ended December 31,
1998, consisting of $718,000 in license revenues and $409,000 in service and
maintenance revenues. The 1998 revenue resulted from licenses and related
services for Extensity Expense Reports, released in March 1998. We did not
recognize any revenues in 1997. For the year ended December 31, 1998 sales to
Scopus Technology, Baltimore Gas & Electric and Gelco Information Network
accounted for 20%, 19% and 14% of total revenues. Total cost of revenues was
$1.6 million for the year ended December 31, 1998. Cost of license revenues was
$90,000, or 13% of license revenues, for the year ended December 31, 1998. Cost
of service revenues was $1.6 million, or 380% of service revenues, for the year
ended December 31, 1998. Total cost of service revenues significantly exceeded
related revenues as we built our service and support group in advance of
revenues.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses increased to $4.7 million
for the year ended December 31, 1998 from $1.1 million for the year ended
December 31, 1997. The increase was primarily attributable to building our sales
and marketing capabilities for our newly launched products, including increased
compensation, commissions and other related costs for sales representatives,
marketing personnel and management and, to a lesser degree, increased spending
on marketing programs. Sales and marketing expenses as a percentage of total
revenues were 417% for the year ended December 31, 1998.
Research and Development. Research and development expenses increased to
$4.4 million for the year ended December 31, 1998 from $1.7 million for the year
ended December 31, 1997. The increase was primarily attributable to the addition
of personnel to our research and development organization in connection with
development of new products and enhancement of existing products. Research and
development expenses as a percentage of total revenues were 391% for the year
ended December 31, 1998.
General and Administrative. General and administrative expenses increased
to $1.4 million for the year ended December 31, 1998 from $540,000 for the year
ended December 31, 1997, an increase of 158%. The increase was attributable to
hiring additional executive and financial personnel as well as incurring
additional general expenses, such as consulting and professional service fees.
General and administrative expenses as a percentage of total revenues were 124%
for the year ended December 31, 1998.
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Amortization of Non-Cash Stock-Based Compensation. Our results of
operations will include amortization of deferred non-cash stock-based
compensation expense at least through 2003. There was no amortization of
deferred non-cash stock-based compensation in 1997 or 1998.
INTEREST INCOME, NET
Net interest income was $107,000 for the year ended December 31, 1997 and
$28,000 for the year ended December 31, 1998. These nominal income amounts
resulted primarily from the interest generated from funds raised in our prior
equity offerings, partially offset by interest expense.
INCOME TAXES
Since inception, we have incurred net losses for federal and state tax
purposes and have not recognized any material tax provision or benefit. As of
December 31, 1998, we had net operating loss carryforwards of approximately
$14.1 million and $8.7 million for federal and state income tax purposes,
respectively. The federal and state net operating loss carryforwards, if not
utilized, expire through 2018 and 2003, respectively. We also have research and
development credit carryforwards of approximately $220,000 and $145,000 for
federal and state tax purposes. Federal and state tax laws impose significant
restrictions on the utilization of net operating loss carryforwards in the event
of a shift in our ownership that constitutes an ownership change, as defined in
Section 382 of the Internal Revenue Code. See Note 4 of Notes to Consolidated
Financial Statements for additional information regarding these carryforwards.
We have placed a valuation allowance against our net deferred tax assets
due to the uncertainty of the realization of these assets. The allowance totaled
$5.8 million at December 31, 1998, resulting in no net deferred asset. We
evaluate on a quarterly basis the recoverability of net deferred tax assets and
the level of the valuation allowance. When we have determined that it is more
likely than not that the net deferred tax assets are realizable, we will reduce
the valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations and funded our capital
expenditures through the private sale of equity securities, supplemented by loan
facilities and equipment leases. Aggregate net proceeds to date from equity
financings total $42.3 million. As of September 30, 1999, we had $22.3 million
in cash, cash equivalents and short term investments and $16.3 million in
working capital.
Net cash used in operating activities was $779,000 in 1996, $2.5 million in
1997, $8.6 million in 1998 and $9.6 million for the nine months ended September
30, 1999. For such periods, net cash used in operating activities was primarily
used to fund ongoing operations including increases in deferred revenues.
Net cash used in investing activities was $195,000 in 1996, $917,000 in
1997, $6.1 million in 1998 and $2.2 million for the nine months ended September
30, 1999.
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Investing activities consisted primarily of purchases of short term investments
and capital expenditures.
We received no financing in 1996. Net cash provided by financing activities
was $6.0 million in 1997, $17.4 million in 1998 and $21.8 million for the nine
months ended September 30, 1999, and consisted primarily of proceeds from the
issuance of preferred stock and proceeds from loans as offset by repayments on
loans and capital leases. During 1998, we entered into a loan and security
agreement with Comdisco Ventures for $3.5 million and borrowed the total amount.
These borrowings bear an average annual interest rate of approximately 11.4% and
are payable in equal monthly installments through 2001. We have also entered
into capital lease agreements with Comdisco to finance up to $1,750,000 of
capital expenditures. Interest accrues under the terms of these agreements at an
average of approximately 7.4% per annum based on the outstanding utilized
capital lease line. Each borrowing under the capital lease line shall have a
term of up to four years, with interest and principal payable monthly. As of
September 30, 1999, we had drawn approximately $1,736,000 of these lines. In
connection with these financings, we issued to Comdisco warrants to purchase a
total of 160,303 shares of our Series D Preferred Stock, each at an exercise
price of $3.30 per share, subject to adjustments.
As we execute our strategy, we expect significant increases in our
operating expenses, especially in sales, marketing and engineering. Presently,
we anticipate that our existing capital resources and the proceeds from this
offering will meet our operating and investing needs for at least the next 12
months. After that time, we cannot be certain that additional funding will be
available on acceptable terms or at all. If we require additional capital
resources to grow our business, execute our operating plans, or acquire
complimentary technologies or businesses at any time in the future, we may seek
to sell additional equity or debt securities or secure additional lines of
credit, which may result in additional dilution to our stockholders.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field and cannot reliably
distinguish dates beginning on January 1, 2000 from dates prior to 2000. Many
companies' software and computer systems may need to be upgraded or replaced in
order to correctly process dates beginning in 2000.
Assessment. We define Year 2000 compliance to mean that systems or products
can accurately process date data from, into and between the years 1999 and 2000,
including leap years, provided that all other products with which they are used,
such as hardware, software, operating systems and firmware, properly exchange
date data with the systems or products.
We designed all of our products from inception for Year 2000 compliance and
have tested our applications for Year 2000 compliance. We have tested software
obtained from third parties that is incorporated into our applications and
obtained assurances from our vendors that licensed software is Year 2000
compliant. We have received assurances from our vendors of financial systems,
databases, development tools, groupware and hardware systems regarding Year 2000
compliance. We were unable to obtain assurances from the vendor of our customer
support and defect tracking system regarding Year 2000 compliance, but have
performed internal testing and detected no material errors. We have
substantially completed our Year 2000 compliance initiatives and have not become
aware of any material errors in our applications, the third-party software
incorporated into our products or our internal management systems. However,
despite our testing and assurances from our vendors, we cannot be certain that
our applications or the products we use to run our business do not contain
undetected errors associated with processing date-sensitive data.
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Costs. We have not incurred any material costs directly associated with
Year 2000 compliance efforts, except for compensation costs for certain
employees who have dedicated time to our assessment of Year 2000 compliance and
associated remedies. We do not expect to incur additional material costs
associated with Year 2000 compliance; however, in the event that we have not
identified and corrected any significant Year 2000 compliance issues, such
unresolved issues could materially harm our business.
Risks. Numerous risks associated with Year 2000 issues could negatively
impact our business. These risks include, but are not limited to:
- reduced contract sales during the last quarter of 1999 or first quarter
of 2000 as potential or existing customers prepare for 2000 or are
focused on remedying potential issues;
- inability of our products to process date-sensitive information, despite
our efforts to ensure Year 2000 compliance of our products;
- claims from our customers asserting our liability, with potential legal
costs or settlements, regardless of whether our applications have Year
2000 compliance issues;
- diversion of information system, engineering or management resources to
remedy unanticipated problems;
- management information system failures; infrastructure failures,
including our phone system; or external system failures, including
utilities and transportation, that would hinder our operations; or
- damage to our reputation resulting from any of the above.
The most significant potential adverse situation would include the
inability of our customers to use our products, material legal fees or
settlements, or system failures that render us unable to run our business.
Contingency Plans. We have not developed contingency plans for the Year
2000 compliance risks previously discussed, either because our assessments have
not detected material issues or because we have not determined cost effective
solutions in light of our assessment of the risks. In the event that we
encounter significant Year 2000 compliance issues for which we have not
developed contingency plans, our business and financial condition could be
materially harmed.
MARKET RISK
We develop products in the United States and market our products in North
America and, to a lesser extent, in Europe and the rest of the world. As a
result, our financial results could be affected by factors such as changes in
foreign currency rates or weak economic conditions in foreign markets. Because
all of our revenues are currently denominated in U.S. dollars, a strengthening
of the dollar could make our products less competitive in foreign markets.
INTEREST RATE RISK
We have an investment portfolio of money market funds and fixed income
certificates of deposit. The fixed income certificates of deposit, like all
fixed income securities, are subject to interest rate risk and will fall in
value if market interest rates increase. We attempt to limit this exposure by
investing primarily in short-term securities. In view of the nature and mix of
our total portfolio, a 10% movement in market interest rates would not have a
significant impact on the total value of our portfolio as of September 30, 1999.
Our interest expense is not sensitive to changes in the general level of
U.S. interest rates because all of our debt arrangements are based on fixed
rates of interest.
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BUSINESS
OVERVIEW
Extensity is a leading provider of Internet-based workforce optimization
software applications designed to improve the productivity of employees across
the enterprise and to enhance enterprise operating efficiency. We sell an
integrated application suite that automates expense reporting, travel
management, procurement and billable time management. Our solution streamlines
traditionally inefficient and largely paper-based processes, captures cost
savings by automatically enforcing spending policies and tracks valuable
management information.
We designed our software from inception to leverage the ease-of-use,
accessibility and open architecture of the Internet. As a result, our
applications can be readily integrated with enterprise resource planning, or
ERP, and other legacy information technology systems. Furthermore, our
applications are universally accessible through a variety of devices including
networked and mobile PCs and handheld devices. The architecture of our products
enables us to generally implement and deploy our solutions in less than 90 days.
Since the introduction of our first application in 1998, we have licensed our
products to 58 customers including AirTouch, BEA Systems, Cendant Business
Services, Cisco Systems, Clarify, Documentum, Gelco Information Network, Genesys
Telecommunications, Home Box Office, Sara Lee, Sybase, TransCanada PipeLines and
the University of California.
Our objective is to become the leading content and commerce gateway for the
enterprise workforce. We have designed our applications to be readily integrated
with Internet-based third-party content, commerce and services. This will enable
us and our partners to deliver relevant and timely content and
business-to-business services targeted at the specific needs of employees. For
example, a consultant planning an engagement can obtain internal travel expense
approval, book airline tickets and hotel reservations through a travel service
partner, plan business entertainment through a content partner, track billable
time and record additional expenses for rapid approval and reimbursement - all
through our integrated application suite accessible at the office or on the
road. In addition, the growing network of organizations and employees using our
applications constitute a valuable target market for our Internet-based content,
commerce and service partners.
INDUSTRY BACKGROUND
Growth of the Internet as a Platform for Efficient Business-to-Business
E-Commerce
The Internet has emerged as a universal communications medium and has
become a catalyst for fundamental business change for companies of all sizes.
The efficient, pervasive and interactive nature of the Internet make it a
necessary platform for relevant content exchange and e-commerce transactions
from business to business. Forrester Research estimates that
business-to-business e-commerce will generate $1.3 trillion in revenues by 2003.
In the intensely competitive global business environment, businesses have
increasingly adopted the Internet to streamline their business processes and
make their employees more productive. Giga Information Group estimates that in
1998, businesses worldwide realized $17.6 billion in e-commerce driven cost
savings and forecasts that by 2002 these savings will total $1.25 trillion
annually. According to International Data Corporation, the worldwide market for
workforce management applications will grow from $766 million in 1998 to $4.0
billion in 2003, and the Internet commerce procurement applications market will
grow from $147 million in 1998 to $5.4 billion in 2003.
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Traditional Areas of Business Process Automation
Businesses have traditionally made significant investments in ERP and other
enterprise software applications to automate processes in functions such as
manufacturing, sales, human resources and finance. These systems typically have
been focused on specific individual functional areas and only address the
business processes unique to each functional area. Also, they offer limited
integration of information across functional areas. These systems have been
significantly limited in their ability to integrate information external to the
enterprise. ERP and other enterprise software systems have also traditionally
required lengthy and expensive customization and implementation and are
expensive to maintain because their client-server architecture requires
installation and continued maintenance on each desktop. While these systems are
in place in many companies, they have not focused historically on certain
pervasive business processes, such as expense reporting, travel management,
procurement and billable time management, which touch large numbers of employees
in any organization.
These employee-centric business processes have been left largely
unautomated to date, resulting in processes that are time-consuming, inefficient
and costly. Most organizations today conduct travel expense, procurement and
billable time management through paper-based processes that require actions by
many individuals both inside and outside the enterprise. These processes involve
re-keying of data, manual tracking of forms, limited data capture and reporting,
and limitations on the ability to track and enforce corporate spending policies.
Without business process automation, expense reporting, procurement and time
management transactions can have significant processing costs. For example,
American Express has estimated that companies spend an average of $36 to
generate each paper-based expense report, and AMR Research has estimated that
companies typically spend between $75 to $175 to generate each paper-based
procurement requisition. In addition, traditional processes do not generally
feature automated spending and procurement controls and, as a result, may fail
to direct spending to preferred vendors and may permit spending on unapproved
goods and services. The inefficiencies associated with traditional processes can
involve significant total cost, as operating resource expenditures typically
represent 33% of a company's total revenues, according to Killen & Associates.
Opportunity for Workforce Optimization Applications
A significant market opportunity exists for workforce optimization
applications that streamline processes within the organization and across the
extended enterprise and provide integrated access to third-party content,
commerce and services. At the same time, the rapid adoption of the Internet by
businesses has radically changed the business environment. The growth of the
Internet in conjunction with increasing business globalization and technological
advancements has increased competitive pressures for all businesses by lowering
barriers to market entry, rewarding innovative business models and providing an
easily accessible commerce channel over the Internet. Accordingly, the rapid
growth of the Internet has both enabled the introduction of Internet-based
workforce optimization solutions and made their adoption a strategic imperative.
A comprehensive workforce optimization solution must provide benefits
inside and outside a business organization, to employee users, business managers
and third-party content, commerce and service providers. Such a solution must:
- give companies a highly scalable, easily implemented and widely
accessible set of applications that streamlines workforce processes by
linking employees, approvers and administrative personnel;
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- reduce the time employees spend on general workforce management tasks,
freeing them to focus on their core responsibilities;
- provide data to business managers for contract negotiation and for
enforcing discounts with preferred vendors;
- provide business managers with information on individual employee and
overall workforce utilization, in order to better manage employee
productivity and profitability;
- enable business administrators to enforce policies actively and
efficiently; and
- provide an end-to-end solution by connecting the employee to third-party
content, commerce and service providers over the Internet.
A comprehensive workforce optimization solution should benefit both
employees and third-party providers by directing information, services and
focused commerce opportunities to employees while delivering valuable business
customers and business spending to participating providers. We refer to this
integrated point of exchange between employees and third-party providers as a
content and commerce gateway.
THE EXTENSITY SOLUTION
We provide an integrated suite of Internet-based, workforce optimization
software applications designed to improve the productivity of employees across
the enterprise and to enhance enterprise operating efficiency. Our Extensity
Application Suite currently includes applications for expense reporting,
business travel, procurement and billable time management. In addition, our
solution can leverage the Internet to serve as a gateway between employees and
third-party content, commerce and service providers through buying exchanges,
online marketplaces, specialized portals and supplier sites. We believe our
solution makes our customers' employees more productive and companies more
efficient, while providing better information to management.
The Extensity Application Suite
Our application suite is currently comprised of the Extensity Expense
Reports, Extensity Travel Plans, Extensity Timesheets and Extensity Purchase
Reqs applications and the Extensity System Administration Tool. The application
suite is fully integrated so that each application works with and shares
information with all the other applications. In addition, our applications
aggregate and integrate information for management reporting and analysis. Our
applications are easy to learn for the user, as users can access all
applications through a common, intuitive, browser-based user interface. The
integration of the suite to online services such as travel bookings, credit card
feeds and content services provides a true end-to-end workforce optimization
solution. Our applications are designed to be rapidly implemented,
cost-effectively deployed and scalable for organizations of all sizes. We offer
a guarantee to all of our customers that we will complete a standard
implementation for each application within 90 days.
Our workforce optimization solution provides direct and indirect cost
savings by:
- streamlining and automating traditional paper-based processes, thereby
reducing the time and personnel requirements associated with processing
expense reports, travel plans, purchase requisitions and timesheets;
- increasing accuracy through automation of error-checking, data import and
business rule compliance;
- providing greater control of expenditure policy administration and
enforcement;
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- supporting analysis of business purchasing and utilization patterns to
enhance decision-making capabilities and to increase leverage in
negotiating vendor and service provider contracts; and
- promoting and enforcing the use of preferred vendors.
Our workforce optimization solution also increases productivity throughout
the enterprise by:
- reducing employee time spent on tasks outside of their core
responsibilities;
- providing a consistent, intuitive, browser-based user interface to all
applications;
- supporting remote access via Palm Pilot and other mobile computing
devices; and
- enabling exception-based management that allows business managers to
review only those expenditures which fall outside of a company's
policies.
The Extensity Partner Network
We have recently begun to develop our Extensity Partner Network to
establish an Internet gateway between a company's workforce and third-party
content, commerce and service providers. We believe this network will benefit
both our customers' employees and third-party providers by directing relevant
information, services and focused commerce opportunities to our customers'
employees while delivering valuable business customers and spending to
participating providers.
We will continue to develop this gateway to provide benefits to employees
and third-party providers by:
- providing users with seamless, integrated access to relevant content,
services and e-commerce capabilities;
- delivering to our partners access to a network of employees that are
likely to engage in specific commerce transactions;
- reducing transaction costs to both our customers' employees and content,
commerce and service providers by utilizing the Internet to enhance
information flow; and
- enabling open access to multiple online markets to minimize reliance on a
single marketplace.
As more companies implement our solution, the Extensity network of our
customers' employees continues to grow. We believe that this network of
employees will become a valuable aggregated base of potential customers for
additional third-party content, commerce and service providers. As these
providers offer additional products and services through our network, customers
are encouraged to join, establishing a cycle that increases the value of the
Extensity solution to both our customers and third-party providers.
EXTENSITY STRATEGY
Our objectives are to gain broad market acceptance of our workforce
optimization applications and to build the largest Internet-based network of
organizations and employees. By building this network, we plan to become the
leading content and commerce gateway for the enterprise workforce. This will
allow our partners and us to deliver valuable content and business-to-business
services to our growing network.
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Key elements of our growth strategy include:
EXPANDING OUR WORKFORCE OPTIMIZATION SOLUTIONS. We intend to continue
to enhance the Internet-based architecture of our technology platform in
order to provide a comprehensive, functionally-rich solution for
employee-centric business processes. We also intend to continue to enhance
the functionality of our existing application suite and, by leveraging the
existing platform, to introduce additional integrated workforce
optimization applications.
AGGRESSIVELY PENETRATING THE LARGE AND UNTAPPED WORKFORCE OPTIMIZATION
MARKET. We believe that the market for automated workforce optimization
solutions is large and underpenetrated for enterprises of all sizes. In
order to address this market opportunity, we intend to aggressively expand
our direct and indirect sales channels. We plan to focus our direct sales
efforts on large multinational organizations across a variety of
industries. In addition, we plan to address small and mid-size
organizations through a combination of telesales and relationships with
application service providers, OEMs and other resellers.
STRENGTHENING INTERNATIONAL PRESENCE THROUGH STRATEGIC PARTNERSHIPS
AND DIRECT DISTRIBUTION. We plan to capitalize on international market
opportunities by establishing additional international sales offices,
expanding our international direct sales force and building strategic
overseas partnerships. We will continue to staff our international
organization with senior local management and experienced domestic
management with specific product and market expertise. Our application
suite is internationalized and we plan to localize it for certain European
languages during 2000.
INCREASING MARKET ADOPTION THROUGH STRATEGIC PARTNERSHIPS WITH
APPLICATION SERVICE PROVIDERS. Because customers are increasingly utilizing
application service providers to host or outsource their applications, we
intend to partner with application service providers as an additional
indirect sales channel. We believe that our readily-implemented,
Internet-based architecture and easy-to-learn end-user solution is
attractive to application service providers. We currently have two
application service provider partners, Gelco Information Network and
Cendant Business Services, and intend to develop strategic relationships
with others.
OFFERING A SINGLE GATEWAY FOR THE MOST COMPREHENSIVE NETWORK OF
EXTERNAL CONTENT, COMMERCE AND SERVICE PROVIDERS. Our applications are
designed to provide a single, Internet standards-based point of access, or
gateway, for any online provider of indirect goods and services, including
travel and entertainment, office equipment and supplies, professional
services, information and technology equipment, and other repeat purchase
items. This gateway will give our customers flexibility in the suppliers
with which they choose to integrate, without requiring point-to-point
integration or a commitment to a proprietary single solution. We believe
our gateway will provide to our customers a superior e-commerce solution as
online transactions gain market acceptance and as online vertical
marketplaces emerge.
EXTENSITY PRODUCT AND SERVICES
Integrated Suite of Applications
We provide an integrated suite of Internet-based workforce optimization
applications designed to enhance employee productivity and corporate efficiency.
Our product suite currently includes the Extensity Expense Reports, Extensity
Travel Plans, Extensity Timesheets and Extensity Purchase Reqs applications and
the Extensity System Administration Tool. Our applications can be licensed
individually or in any combination to provide a complete solution. All
applications share a consistent and easy-to-use, browser-based graphical user
interface and
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are launched from a unifying screen. The applications share a common underlying
technology architecture and a common data model which allow them to work
together and share information. In addition, our applications are universally
accessible, allowing employees to work anywhere, through desktop or mobile
computing and via Palm Pilots or other handheld devices.
Once deployed, our applications are quickly configured, easily customized,
and easily upgraded, regardless of the degree of customization. Our
Internet-based architecture also keeps system administration costs to a minimum.
For example, customers can automatically install and update new versions via the
Internet.
Our application suite provides real-time comprehensive data regarding
spending, suppliers, policy violations, resource utilization and budgets. We
offer pre-configured reports, and our database approach facilitates further
query and analysis using standard report writing applications. We believe that
this information can improve an organization's strategic management and
decision-making processes and can enhance vendor negotiation.
COMMON FEATURES OF OUR APPLICATIONS
<TABLE>
<CAPTION>
FEATURES DESCRIPTION
-------- -----------
<S> <C>
Employee self service Employees can track in real time the status of any document
that has been submitted, reducing the number of calls and
inquiries to managers and processing departments.
Document linking Documents can be linked -- for example, a travel plan for
conference attendance and an expense report for the trip, a
time sheet and expense report for a project or purchase
requisition and an expense report associated with the
purchase.
Proxy user creation Employees can appoint another person to create documents for
them.
Project and cost center allocation Expenses and time can be allocated across multiple cost
centers and project codes as percentages or absolute dollar
amounts.
Configurable interface and data capture The application suite is fully configurable to incorporate
each organization's specific data capture needs.
Intelligent personalization Each employee's application becomes customized, maintaining
previously used information, such as prior travel
itineraries, cities traveled to, purposes and previously
used vendors.
Online help Context sensitive online help is provided for all
applications.
</TABLE>
EXTENSITY EXPENSE REPORTS. Extensity Expense Reports is a
full-featured application providing automation of the entire expense
reporting process. Extensity Expense Reports brings accuracy, efficiency
and control to this process. Using Extensity Expense Reports, employees,
whether operating as a remote, off-line or local user, can quickly and
easily create an expense report. This process is expedited and made more
accurate through the use of online credit card data for automatic data
entry. Compliance to business policy is checked as the expense report is
created. Compliant reports can be automatically approved, and only
noncompliant reports are routed to managers for approval. In reviewing
noncompliant reports, managers need only focus on highlighted exceptions.
Re-keying data and auditing of expense reports are reduced or eliminated so
the accounting team can spend time analyzing the centralized travel and
entertainment expense data and leveraging that knowledge into cost savings.
Employees can receive reimbursement rapidly through seamless integration
with the organization's financial, payroll and human resources systems.
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<PAGE> 44
<TABLE>
<CAPTION>
FEATURES DESCRIPTION
-------- -----------
<S> <C>
Credit card integration and pre- Uses the data feed from corporate card vendors to enable
population travelers to select charges and automatically populate the
expense report, reducing creation time and avoiding data
entry errors.
Foreign currency support Enables users to complete reports using local currencies.
Itemization and allocation Supports expense itemization for more accurate accounting
and allows allocations to be made at the line item level
without requiring a separate expense report for each
project.
Receipt reconciliation Guides users through itemizing receipts to ensure the
expense is fully allocated.
</TABLE>
EXTENSITY TRAVEL PLANS. Extensity Travel Plans automates the planning,
approval and procurement process for corporate travel. The application
enables users to plan, request and book travel and allows managers to
approve business travel through a streamlined method that enforces
corporate travel policies before travel expenses are incurred. Extensity
Travel Plans provides an immediate link to information and resources needed
by a business traveler, such as corporate travel policies, online booking
systems and general travel information resources. Extensity Travel Plans
can be seamlessly integrated with Extensity Expense Reports for an
end-to-end business travel solution. Through this integration with
Extensity Expense Reports, Extensity Travel Plans is designed to provide a
seamless flow of information, from pre-trip planning to post-trip expense
reimbursement, and a view of projected and actual costs for variance
analysis, providing an efficient and accurate travel management system.
<TABLE>
<CAPTION>
FEATURES DESCRIPTION
-------- -----------
<S> <C>
Industry average cost data Integrates benchmark costs into the product to create an
accurate itinerary for domestic and international travel,
which allows the user to better estimate travel costs.
Policy enforcement Streamlines pre-trip approval process for cost savings and
increased business efficiency, warning the user of
out-of-policy items before costs are incurred.
Integrated with Extensity Expense Reports Automatically approves expense reports that fall within the
specified parameters of an approved travel plan.
</TABLE>
EXTENSITY PURCHASE REQS. Extensity Purchase Reqs automates and
optimizes the requisitioning of non-production goods and services while
enforcing a company's procurement policies. The application is designed to
minimize rogue purchasing and to ensure usage of preferred vendors for
volume discounts. Extensity Purchase Reqs allows employees to quickly and
easily submit purchase requisitions so that materials and services can be
obtained when they are needed. Corporate expenditure policies are
automatically applied, approvals are accelerated and employees can have
their orders fulfilled in a fraction of the time required for paper-based
procurement. Extensity Purchase Reqs centrally captures key purchasing
information that can be analyzed to continually evaluate and improve the
procurement processes for further optimization and savings. Through
automation, Extensity Purchase Reqs significantly reduces administrative
hassle, freeing purchasing professionals to focus on more strategic
activities such as reducing redundant sources, selecting better vendors and
negotiating contracts.
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<PAGE> 45
<TABLE>
<CAPTION>
FEATURES DESCRIPTION
-------- -----------
<S> <C>
Purchase requisition templates Accelerates document creation by pre-populating requests
with a user's most frequent purchases or with template
purchases such as "new hire" packages.
Sourcing requests Generates requests for quotes from professional buyers using
the organization's specific requirements.
Catalog repository Creates a catalog as items are ordered or supports a
centrally created catalog for easy reference by employees.
Default shipment locales Creates default shipping locations from the user profile for
additional control over corporate purchasing. Any change to
a ship-to address can be treated as a policy exception.
</TABLE>
EXTENSITY TIMESHEETS. Extensity Timesheets is a full-featured time
management application that quickly and accurately tracks billable hours.
Extensity Timesheets streamlines processes to ensure timely and accurate
client billing, which helps improve cash flow. Users can quickly identify
charge codes from potentially thousands of options with an easy-to-use
project code chooser. Extensity Timesheets centralizes time and expense
information so that project managers can leverage critical data to evaluate
employee utilization and productivity, as well as profitability on
individual, project and organizational levels. Resources can then be
deployed more effectively and projects can be managed to finish on time and
under budget. Extensity Timesheets integrates with existing financial
systems and with Extensity Expense Reports to ensure accurate bill-back to
clients and reduction of administrative errors. By integrating with
Extensity Expense Reports, Extensity Timesheets provides a complete time
and expense management solution for service organizations.
<TABLE>
<CAPTION>
FEATURES DESCRIPTION
-------- -----------
<S> <C>
Templates for timesheet creation Allows users to create a template with commonly used project
codes, minimizing data entry and eliminating errors.
Drill-down project chooser Enables users to quickly identify detailed project and task
codes from thousands of options using drill-down menus and
business rules to ensure accuracy.
Multiple viewing and data entry options Allows users to enter and track time by line item or
calendar view. Accommodates customized billing periods and
billing rates and multiple work schedules.
</TABLE>
EXTENSITY SYSTEM ADMINISTRATION TOOL. The Extensity System
Administration Tool is a robust application administration tool designed to
allow the business users within an organization to maintain the Extensity
applications, minimizing reliance on the internal information technology
staff. The interface is graphical and easy to use. Single or multiple
administrators can be created for various departments, groups or functional
areas. All systems changes are recorded in an audit log for further
security.
<TABLE>
<CAPTION>
FEATURES DESCRIPTION
-------- -----------
<S> <C>
User and group setup and maintenance Maintains all aspects of user and group information, such as
department identification, group-specific business rules and
individual approval authority. Allows administrators to
perform group-wide editing.
Corporate data setup and maintenance Enables a system administrator to modify corporate data
values such as cost centers, departments, mileage rates and
permitted charge codes.
Business rules setup and maintenance Enables a system administrator to modify business rules and
policies.
Document viewing and modification Allows an administrator to view and modify work items by
reassigning access privileges of a particular document.
</TABLE>
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<PAGE> 46
Services
Our customer satisfaction is essential to our long-term success and we
offer customers a comprehensive selection of implementation services, support
and training. Our professional services organization consisted of 30
professionals as of September 30, 1999.
EXTENSITY EXPRESS -- GUARANTEED 90-DAY IMPLEMENTATION. Extensity
Express is our rapid implementation program that allows us to guarantee to
our customers that we will implement any of our applications within 90
days. A standard implementation requires tailoring of business rules,
configuring the workflow, integrating customer data and integration with a
financial system, a human resources system and an external corporate credit
card system. We guarantee to our customers that, for a standard
implementation, we will complete the process within 90 days, or we will
refund a portion of the implementation fee for each day over 90 days until
completion, up to a full refund of the implementation fee. To date, we have
never failed to meet our implementation guarantee.
ENHANCED IMPLEMENTATION SERVICES. Customizations beyond our standard
implementation, such as integration with more than one financial system,
can be completed by our professional services organization and are billed
based on a daily rate.
CUSTOMER SUPPORT AND MAINTENANCE. We provide support and maintenance
services for each customer to whom we license an application. Support and
maintenance contracts are required for one year and can be renewed by the
customer thereafter. Our customer support provides timely and accurate
resolution of customer inquiries and is available via telephone and e-mail
during normal business hours. We provide self-service Internet support. At
a customer's request and for an additional fee, we provide more
comprehensive 24 hours per day, 7 days per week customer support services.
TRAINING. We offer a comprehensive training program designed to
quickly train our customers' end-users, support staff and internal
trainers. The training program includes an end-user curriculum to teach
end-users how to use all key application features; an application
administration curriculum that teaches accounting personnel, help desk
staff and the implementation team how to modify the dynamic aspects of
Extensity applications; and a trainer curriculum that prepares company
trainers for the roll-out and delivery of our applications within the
organization. The curriculum is also available as computer-based training,
providing convenient access to training for local and remote users, new
employees, travelers and managers.
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<PAGE> 47
CUSTOMERS
We have licensed our applications to 58 customers in a broad range of
industries. The following is a list of our current customers.
<TABLE>
<CAPTION>
TECHNOLOGY FINANCIAL SERVICES CONSUMER PRODUCTS/MANUFACTURING
<S> <C> <C>
BEA Systems Advent International Ademco
Channelpoint Software Atlantic Mutual Insurance Bestfoods
Cisco Systems Eaton Vance Embraer Aircraft
Clarify Franklin Resources Gannett
Cybercash John Hancock International Home Foods
Data Works Royal Bank of Canada Sara Lee
Documentum Volpe, Brown, Whelan & Company
Epoch Internet Weiss, Peck & Greer PUBLIC SECTOR
Excite@Home Wellington Management
Extreme Networks Brigham Young University
Icarian TELECOMMUNICATIONS/UTILITIES Center for Technology Access
Ikos Systems Lawrence Berkeley National Laboratories
Incyte Pharmaceuticals AirTouch Support Services Lawrence Livermore National Laboratories
Litton Data Systems Aspect Communications University of California
Macromedia BT North America
Mylex Baltimore Gas & Electric SERVICES/ENTERTAINMENT
NEC Systems Berk-Tek
Sterling Commerce Genesys Telecommunications Cendant Business Services
Sybase RELTEC Corporation Gelco Information Network
Wall Data TransCanada PipeLines Home Box Office
Ogilvy & Mather Worldwide
Parson Group
SFX Entertainment
</TABLE>
Customer case studies
BESTFOODS. International food giant, Bestfoods, with revenue of $8.4
billion, uses our applications to streamline its travel expense reporting
and automatically enforce corporate travel expense policies. In North
America, Bestfood's 3,000 regular travelers generate over 68,000 expense
reports each year. In 1998 Bestfoods began to evaluate several Internet-
based software applications to implement on its worldwide corporate
intranet, including expense report applications. After evaluating several
expense reporting applications, Bestfoods selected Extensity because of its
web-based solution and high ratings from its user panel. Bestfoods chose
Extensity Expense Reports in November 1998, re-engineered its expense
reporting procedures and began to deploy our application to its U.S. users
in May 1999.
By using Extensity Expense Reports, Bestfoods can now reimburse
employees within three days of travel and enforces Bestfood's travel and
expense policies in a less intrusive way. Bestfoods integrates Extensity
Expense Reports with American Express, allowing traveling employees to
automatically download their receipts from American Express on a daily
basis, fill out their reports and submit them without waiting for monthly
credit card statements to arrive by mail. Using Extensity business rules,
the application is set up to authorize expenses within certain parameters.
If the report falls within those guidelines it is automatically approved by
the system and managers only need to review expense reporting exceptions.
Because employees are reimbursed within two to three days, Bestfoods is
able to eliminate most travel advances and a significant amount of
accounting overhead. Bestfoods also uses the reporting capabilities to
minimize re-keying of data and auditing of expense reports, so it can spend
time analyzing travel and entertainment data and leverage that knowledge
into cost savings.
EXCITE@HOME. Excite@Home is a leading provider of broadband Internet
services over the cable television infrastructure. One of Excite@Home's key
operational goals is to implement best practices and eliminate paper-based
processes across its organization. In March 1998, Excite@Home selected
Extensity Expense Reports to manage travel, entertainment and other
corporate expenses. Prior to the merger with Excite, @Home had its employee
base on the Extensity applications. As the two companies continue to
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<PAGE> 48
integrate their systems, all Excite@Home employees will become users of the
Extensity application. Excite@Home currently has 500 employees on the
Extensity system. By using our application, Excite@Home has been able to
process more than twice the volume of expense reports in half the time
without increasing its accounting staff. Excite@Home is integrating its
accounting system with Extensity for seamless information flow and plans to
implement direct deposit capabilities to further remove paper from its
workforce processes. Due to our database approach, finance personnel can
query their centralized database using their standard tools and can gather
valuable information for consolidation and budgeting. This analysis has
proven to be extremely valuable in negotiations with airline and lodging
vendors.
TECHNOLOGY
Our applications are fully standards-based, designed for the Internet and
built upon an underlying architecture that is written entirely in Java. Our
applications run on standard Web browsers and servers and support leading
relational database management systems (RDBMS), including Oracle, Sybase and
Microsoft SQL Server. The multi-tier architecture connects browser-based
applications to application servers and the RDBMS through a corporate local area
network (LAN), wide area network (WAN), intranet or a secure Internet
connection. Our technology performs messaging between clients and the
application engine in real time over TCP/IP, and makes database connections via
standard Java database drivers. Our applications are inherently scalable, due to
our multi-tier architecture employing thin clients, multi-threaded application
servers and relational databases. In addition, our Java-based architecture
enables the Extensity Application Suite to operate across multiple platforms
within any organization, including Windows 95, 98 or NT, Macintosh, Solaris and
Palm Pilot operating systems.
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The Extensity Foundation
Building on a standards-based foundation, Extensity has designed a
component-based application infrastructure composed of readily-configurable
business rules, a workflow engine and advanced data management capabilities.
Each of these core elements plays a crucial role in deploying enterprise-wide
solutions that can model a company's unique policies and processes and manage
key business functions.
[EXTENSITY ARCHITECHTURE GRAPHIC]
BUSINESS RULES. Our business rules engine allows each Extensity
application to be configured so that companies can effectively monitor
their processes and policies. These business rules are also flexible and
can be edited and modified as a company's processes and policies evolve.
Employees are presented with appropriate warnings, explanations and message
prompts to guide data entry and encourage conformance with corporate
policies. The business rules dramatically reduce reworking of procedures,
track and resolve policy exceptions online and eliminate re-keying of data
into back-end systems. The business rules permit management by exception,
in which items requiring managerial attention are automatically highlighted
while managers need not review items that are clearly in compliance with
established business rules.
WORKFLOW ENGINE. Our workflow engine ensures that information flows
through the organization in a timely, secure and efficient manner. Robust
enterprise applications require database-driven workflow, rather than
e-mail-based messaging, to provide increased security and reliability, data
and transaction integrity, real-time availability, optimization for high
performance and usage reporting. Workflow processes can be configured to
reflect the unique process flow of documents and business processes in any
organization. Our applications also permit e-mail notification to users of
the status of a procedure or of events requiring attention, alteration and
action, such as notifying the creator of an expense report of its location
in the process cycle or notifying a manager of a document requiring
attention.
ADVANCED DATA MANAGEMENT. Data management ensures that all Extensity
applications can be customized and extended to add, delete or modify
buttons, type-in
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<PAGE> 50
fields or other controls on an application's user interface, in each case
as required by a customer's unique business objectives. New functionality
can also be assigned to existing controls, or new controls, with little
application modification and minimal programming. The Extensity Application
Suite can integrate with enterprise systems such as ERP systems and other
financial, human resources (for user information and organizational
structure) and project accounting systems and corporate credit card
systems. These interfaces allow for the automatic exchange of data between
the Extensity system and other enterprise systems and for the downloading
of data managed by these enterprise systems into Extensity. These
integration processes are scheduled according to the needs of our
customer's information services and finance departments.
STRATEGIC RELATIONSHIPS
To rapidly deliver a comprehensive, robust solution to our customers, we
have established strategic relationships with companies in three general
categories: e-business providers; content, commerce and service providers; and
marketing and distribution partners.
E-BUSINESS PROVIDERS. We have established relationships with key solutions
providers to deliver integrated workforce optimization solutions to our
customers. Cisco Systems has selected Extensity as one of four solutions
providers to support its workforce optimization effort. In this initiative,
Cisco has taken an active role in communicating to its customers the benefits of
Extensity Expense Reports. Cisco also supports Extensity through sales
assistance, customer referrals and co-marketing activities. In the procurement
card market, we work with American Express to integrate the Extensity
Application Suite with the American Express Procurement card. This relationship
ensures the quality of integration for our customers. We are also a strategic
partner with IBM, a leader in defining e-business in the marketplace. We have a
co-marketing agreement with IBM that will ensure compatibility of our
complementary solutions.
CONTENT, COMMERCE AND SERVICE PROVIDERS. We have formed strategic
relationships with several content, commerce and service providers to allow our
network of customer employees to conduct commerce efficiently over the Internet.
Commerce One -- We support Commerce One's open platform by bringing
employee buyers and suppliers of indirect goods and services together. Our
suite of products is integrated with MarketSite.net, Commerce One's online
marketplace. In addition, Commerce One has chosen us to be the preferred
provider of expense reporting applications to its customers and prospects.
Commerce One also refers its prospects to us for joint selling.
GetThere.com -- We partner with GetThere.com to deliver an online booking
solution as a key integrated component in our Extensity Travel Plans
application. As a leader in business-to-business online booking,
GetThere.com provides airline, hotel and car rental for our customers.
Ontheroad.com -- Ontheroad.com is a premier provider of travel information
for the business traveler. We have an exclusive relationship with
Ontheroad.com to integrate Ontheroad.com content into the Extensity
Application Suite and to distribute this content to Extensity customers.
Runzheimer International -- Extensity is the only integrated application
suite that provides access to Runzheimer benchmarking travel data. This
data is integrated with our application suite to provide cost comparison
detail for hotels, cars and meals both domestically and internationally.
Runzheimer and Extensity also have entered a marketing referral agreement.
MARKETING AND DISTRIBUTION PARTNERS. We have a worldwide distribution
arrangement in place with QSP. QSP is headquartered in the United Kingdom and
has satellite offices in
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<PAGE> 51
London, Raleigh, NC, and Sydney, Australia supporting its 200 worldwide
customers. QSP purchases Extensity's applications at a discount and resells them
together with implementation services to QSP's customers. Extensity has
marketing referral arrangements in place with Visa International, US Bank, Xtra
Online, Sabre BTS and Rosenbluth International. These marketing arrangements
include joint marketing and selling.
MARKETING AND SALES
We focus our marketing efforts on achieving brand recognition, market
awareness and lead generation. The market for our Extensity Application Suite
includes enterprises of all sizes in many industries. We typically market to the
senior financial officer in an organization, such as the Chief Financial Officer
or Vice President of Finance. We also conduct public relations campaigns to keep
the market aware of our product developments and major initiatives. Programs we
use to attract customers include advertising in business and financial
publications, trade shows, seminars, and direct mail. We also participate in
various co-marketing initiatives with strategic partners. We maintain close
relationships with industry analysts and frequently participate in industry
conferences and events. Our website serves as another sales tool for prospective
customers.
We sell our Extensity Application Suite primarily through our direct sales
organization. Our U.S. sales force is organized under three regional directors
and a Vice President of Sales. We have sales offices in Boston, Chicago, Dallas,
Los Angeles, Mahwah, NJ and San Francisco. Our U.S. sales organization included
17 direct sales representatives as of September 30, 1999. Our direct sales
representatives are supported by field-based sales engineers and sales
development staff. Our European sales organization includes a general manager,
two sales professionals and a marketing manager.
PRODUCT DEVELOPMENT
We have been developing and enhancing the Java-based architecture of our
applications for the Internet since 1996. We released our first Extensity
application, Extensity Expense Reports, in March 1998. Extensity Expense Reports
was one of the first workforce optimization applications to be architected
specifically for the Internet. We introduced Extensity Travel Plans in December
1998 and Extensity Timesheets and Extensity Purchase Reqs in July 1999. These
four applications, together with the Extensity System Administration Tool,
comprise our Extensity Application Suite, Version 4.0.
As of September 30, 1999, our engineering organization consisted of 47
employees and is grouped according to the following areas of focus: product
development, core technology, release engineering, mobile engineering,
architecture, tools development, quality assurance and technical documentation.
Each group within Extensity's engineering organization regularly shares
resources and collaborates with other groups on code development, quality
assurance and documentation. Our engineering organization includes a number of
key individuals that have developed Internet applications and services and have
extensive experience with Java-based application development. We believe that a
technically skilled and experienced engineering organization is a key factor in
the market acceptance of our applications and, accordingly, we plan to continue
to make significant investments in our engineering organization and efforts to
promote the success of our products. If we are unsuccessful in hiring and
training a sufficient number of personnel to staff our engineering organization,
our business could suffer.
To date, we have made significant investments in our technology
architecture and applications, and we believe they provide us with a significant
competitive advantage. Our research and development expenses totaled $5.0
million for the nine months ended September 30, 1999, $4.4 million in 1998, $1.7
million in 1997 and $519,000 in 1996. We
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intend to maintain our competitive advantage by continuing to focus on and
refine our development efforts. Our engineering organization employs a defined
product development methodology to each application, which includes technology
and architectural roadmaps, product planning, requirement specifications,
prototyping, design specifications, code review, identified program review
points and beta testing.
To successfully implement our business strategy, we have to provide
software applications and related services that meet the demands of our
customers and prospective customers. We expect that competitive factors will
create a continuing need for us to improve and add to our suite of software
solutions. We will have to, among other things, expend significant funds and
engineering and other resources to continue to improve our suite of
applications, and properly anticipate and respond to consumer preferences and
demands. As organizations' needs change with respect to their enterprise
applications, our existing suite of software applications may require
modifications or improvements. The addition of new products and services will
also require that we continue to improve the technology underlying our
applications. These requirements are significant, and we may fail to execute on
them quickly and efficiently. If we fail to expand the breadth of our
applications quickly in response to customer needs, or these offerings fail to
achieve market acceptance, our business will suffer significantly.
COMPETITION
The markets for Internet-based workforce optimization applications are
intensely competitive, and we expect the intensity of competition to increase in
the future. Increased competition may result in price reductions, reduced
margins and loss of market share, any one of which could seriously harm our
business. Competitors vary in size and in the scope and breadth of the products
and services offered. Companies offering one or more products directly
competitive with our products include Ariba, Captura Software, Concur
Technologies and IBM. We also expect to encounter competition in the near future
from major enterprise software vendors such as Oracle Corporation, PeopleSoft
Corporation and SAP Corporation, to the extent they enhance their existing
product offerings with competitive workforce optimization applications. As a
result of the large market opportunity, we also expect competition from other
established and emerging companies. For example, as the emergence of the ASP
market enables hosted solutions from our competitors to become broadly
available, our future success may also depend upon our ability to establish
successful relationships with leading ASPs.
We believe that the key competitive factors affecting our market include a
significant base of reference customers, breadth and depth of products and
product features, product quality and performance, core technology underlying
our applications, customer service and ability to rapidly implement our
solutions. We believe that our workforce optimization applications currently
compete favorably with respect to these factors. However, because the market for
our solutions is at an early stage of development and evolving rapidly, we
cannot assure you that we will be able to maintain our competitive position
against our current and potential competitors, particularly those with greater
financial, marketing, technical service and other resources.
Many of our current and potential 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 us. In addition, many of our competitors have well-established
relationships with our current and potential customers and have extensive
knowledge of our industry. Moreover, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase the ability of their products to address customer
needs. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. We also
expect that competition will increase as a result of industry consolidations. We
may fail to successfully compete against our current and future competitors.
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INTELLECTUAL PROPERTY RIGHTS
Our success depends in large part upon our proprietary technology. We rely
on a combination of copyright, trademark and trade secret protection,
confidentiality and nondisclosure agreements and licensing arrangements to
establish and protect our intellectual property rights. We license rather than
sell our solutions and require our customers to enter into license agreements,
which impose restrictions on their ability to utilize the software. In addition,
we seek to avoid disclosure of our trade secrets through a number of means,
including requiring those persons with access to our proprietary information to
execute nondisclosure 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 have no patents or current patent applications pending. Our future
patents, if any, may be successfully challenged or may not provide us with any
competitive advantages. We may not develop proprietary products or technologies
that are patentable.
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.
Our means of protecting our proprietary rights may not be adequate and our
competitors may independently develop similar technology, duplicate our products
or design around our proprietary intellectual property.
There has been a substantial amount of litigation in the software industry
and the Internet industry regarding intellectual property rights. It is possible
that in the future, third parties may claim that we or our current or potential
future products infringe upon their intellectual property. We expect that
software product developers and providers of Internet-based software
applications will increasingly be subject to infringement claims as the number
of products and competitors in our industry segment grows and the functionality
of products in different industry segments overlaps. Any claims, with or without
merit, could be time consuming, result in costly litigation, cause product
shipment delays or require us to enter into royalty or licensing agreements.
Royalty or licensing agreements, if required, may not be available on terms
acceptable to us or at all, which could seriously harm our business.
EMPLOYEES
As of September 30, 1999, we had a total of 145 employees, including 47 in
research and development, 52 in sales and marketing and business development, 30
in professional services and 16 in finance and administration. None of our
employees are subject to a collective bargaining agreement and we believe our
relations with our employees are good.
FACILITIES
Our primary administrative, sales, marketing, research and development
facility is located in Emeryville, California and consists of approximately
24,000 square feet of office space held under a lease that expires in June 2003.
As of September 30, 1999, we also leased sales offices in New Jersey,
Massachusetts and the United Kingdom. We believe our existing facilities meet
our current needs and that we will be able to obtain additional commercial space
as needed.
LEGAL PROCEEDINGS
Although we are not currently a party to any litigation, we may from time
to time become involved in litigation relating to claims arising from our
ordinary course of business.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEES
The names, ages and positions of our executive officers and other key
employees as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Executive Officers and Directors
Robert A. Spinner............... 42 President and Chief Executive Officer and Director
Sharam I. Sasson................ 44 Chairman of the Board of Directors and Founder
Kenneth R. Hahn................. 33 Vice President of Finance and Administration
Elizabeth A. Ireland............ 41 Vice President of Marketing
Allen F. Nordgren............... 54 Vice President of Professional Services
Eric C. Ruud.................... 40 Vice President of Sales
John R. Hummer.................. 51 Director
Mitchell E. Kertzman............ 50 Director
Ted E. Schlein.................. 35 Director
Other Key Employees
Brian H. Mort................... 41 Vice President and General Manager of European
Operations
Mark K. Oney.................... 41 Vice President of Engineering
David A. Yarnold................ 39 Vice President of Business Development
</TABLE>
Executive Officers
ROBERT A. SPINNER has served as Extensity's President, Chief Executive
Officer and as director since April 1999. Prior to joining Extensity, from
January 1995 to January 1999, Mr. Spinner served as Senior Vice President of
Worldwide Sales and International Operations at Clarify, Inc., a provider of
integrated sales and service solutions for the front office. From October 1988
to December 1994, Mr. Spinner served as Director of Western Regional Sales at
Sybase, Inc., a relational database management software company. Mr. Spinner has
also held technical positions at Applied Data Research, Inc. and Chevron
Corporation. Mr. Spinner received a B.A. in mathematics from Washington
University.
SHARAM I. SASSON is the founder and Chairman of the board of directors of
Extensity and has served as a director since our inception in 1995. Mr. Sasson
served as our President Chief Executive Officer of Extensity until March 1999.
Prior to founding Extensity, Mr. Sasson was an executive at Scopus Technology, a
provider of enterprise customer information management systems which he
co-founded in 1991. Mr. Sasson has also served as a research scientist at
Lockheed Missile and Space Company and as a developer of structural modeling
software at PMB/Bechtel Corporation. Mr. Sasson received a B.S. in civil
engineering from Queen Mary College, University of London, an M.S. in structural
engineering from City University in London, and an M.S. in engineering from the
University of California at Berkeley.
KENNETH R. HAHN has served as Extensity's Vice President of Finance and
Administration since January 1999 and previously served as Corporate Controller
from January 1998 to January 1999. From September 1995 to December 1997, Mr.
Hahn was employed as a management consultant with The Boston Consulting Group, a
strategy consulting firm. Mr. Hahn attended the Stanford Graduate School of
Business, where he earned an MBA and was named an Arjay Miller Scholar. Mr. Hahn
also held various positions at PriceWaterhouse LLP, most
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<PAGE> 55
recently as an Audit Manager. He received a B.A. in business administration from
California State University, Fullerton and is a Certified Public Accountant and
a Certified Management Accountant.
ELIZABETH A. IRELAND has served as Extensity's Vice President of Marketing
since January 1998. Prior to joining Extensity, Ms. Ireland was employed at
MapInfo Corporation, a software company, from 1989 to October 1997, most
recently as Vice President and General Manager of Internet Business. Additional
positions held by Ms. Ireland at MapInfo Corporation include Vice President of
Marketing and Business Development and Vice President of Information Products.
Ms. Ireland received a B.S. in business administration from the University of
South Carolina and is a Certified Public Accountant.
ALLEN F. NORDGREN has served as Extensity's Vice President of Professional
Services since November 1997. Prior to joining Extensity, Mr. Nordgren was
employed from June 1996 to November 1997 at Logica, Inc., a systems integrator,
as Vice President and General Manager of Western U.S. Operations. From October
1992 to May 1996, Mr. Nordgren was employed at Sybase, most recently as Practice
Director of Professional Services for the Northwest Region. Mr. Nordgren
attended Bernard Baruch University and served four years in the U.S. Military.
ERIC C. RUUD has served as Extensity's Vice President of Sales since June
1997. Prior to joining Extensity, from September 1995 to June 1997, Mr. Ruud
served as Sales Director for Documentum, a provider of document management
solutions. From September 1992 to June 1995, Mr. Ruud served as District Sales
Manager at Sybase. Mr. Ruud has also worked at System Industries and Xerox
Corporation. Mr. Ruud received a B.S. from the University of Utah.
Other Key Employees
BRIAN H. MORT has served as Extensity's Vice President and General Manager
of European Operations since July 1999. Prior to joining Extensity, Mr. Mort was
employed from June 1996 to June 1999 at SAP (UK) Ltd., a provider of ERP
applications, most recently as Global Access Director. From February 1994 to May
1996, Mr. Mort served as Global Account Sales Manager at Oracle Corporation, a
relational database and software applications provider. Mr. Mort has also held
senior sales positions at Dell Computer Corporation, Xerox Corporation and
Granada Plc. Mr. Mort received a B.A. in history and politics from London
University.
MARK K. ONEY has served as Extensity's Vice President of Engineering since
July 1999. Prior to joining Extensity, from May 1999 to June 1999, Mr. Oney
served as the Vice President of Engineering for Ringer Software, a consumer
information Internet company. From September 1998 through January 1999, Mr. Oney
was a co-founder of and served as Vice President of Software Engineering for
Crag Technologies, Inc., a developer and supplier of data storage solutions.
Crag Technologies was acquired by Western Digital Corporation in February 1999.
From July 1997 through May 1998, Mr. Oney was a co-founder of and served as Vice
President of Software Engineering for Ridge Technologies, a Windows NT storage
company which was acquired by Adaptec, Inc., in May 1998. Prior to founding
Ridge, from May 1988 through June 1997, Mr. Oney served in a variety of
engineering and management roles at Apple Computer, Inc., most recently as
Director of Software Development for the PowerBook line of business. Mr. Oney
received a B.S. in electrical engineering from Rochester Institute of
Technology.
DAVID A. YARNOLD has served as Extensity's Vice President of Business
Development since August 1999. Prior to joining Extensity, from January 1996 to
July 1999, Mr. Yarnold was employed at Clarify, Inc., most recently as Vice
President of Northern American Sales. From January 1993 to October 1995, Mr.
Yarnold served as Regional Vice President of Platinum
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<PAGE> 56
Software Corporation, a financial software provider. Mr. Yarnold received a B.S.
in accounting from San Francisco State University and is a Certified Public
Accountant.
Directors
JOHN R. HUMMER has served as director of Extensity since January 1996. Mr.
Hummer is a managing member of Hummer Winblad Venture Partners, a venture
capital firm, which he co-founded in 1989. Mr. Hummer played professional
basketball for the Buffalo Braves and Seattle Supersonics. Mr. Hummer holds a
B.A. in English from Princeton and an MBA from Stanford University.
MITCHELL E. KERTZMAN has served as a director of Extensity since August
1998. Mr. Kertzman has been President, Chief Executive Officer and a director of
Liberate Technologies, a developer and marketer of software products, since
November 1998. Prior to joining Liberate, Mr. Kertzman was a member of the board
of directors of Sybase, from March 1995 to November 1998, and served as chairman
of the board of directors from July 1997 to November 1998. Between February 1998
and August 1998, Mr. Kertzman served as Co-Chief Executive Officer of Sybase,
and from July 1996 until February 1997 he served as Chief Executive Officer.
From July 1996 until July 1997 he also served as President of Sybase. Between
February 1995 and July 1996, Mr. Kertzman served as an Executive Vice President
of Sybase. Prior to joining Sybase in March 1995 upon the acquisition by Sybase
of Powersoft Corporation, Mr. Kertzman served as Chief Executive Officer and
chairman of the board of directors of Powersoft, a provider of application
development tools which he founded. Mr. Kertzman is also a director of CNET,
Inc.
TED E. SCHLEIN has served as a director of Extensity since May 1997. Mr.
Schlein is a general partner at Kleiner Perkins Caufield & Byers, a venture
capital firm, which he joined in November 1996. Mr. Schlein also manages the
KPCB Java Fund, formed to invest in Java technology-based companies and related
Internet, intranet, networking and communications companies. From June 1986 to
October 1996, Mr. Schlein served in a variety of executive positions at Symantec
Corporation, a provider of Internet security technology and business management
technology solutions, most recently as Vice President, Networking and Client/
Server Solutions. Mr. Schlein holds a B.S. in economics from the University of
Pennsylvania.
BOARD OF DIRECTORS
Our board of directors is currently comprised of five directors. In October
1999, the board of directors designated a Compensation Committee and an Audit
Committee. Prior thereto, there were no such committees of the board of
directors, and decisions regarding the compensation of executive officers were
made by the board of directors as a whole. The Compensation Committee, which
consists of Messrs. Hummer, Kertzman and Schlein, makes recommendations to the
Board concerning the compensation of our officers and directors and the
administration of our 1996 Stock Option Plan and Employee Stock Purchase Plan
2000. The Audit Committee, which consists of Messrs. Hummer, Kertzman and
Schlein, reviews our financial controls, evaluates the scope of the annual
audit, reviews audit results, consults with management and our independent
auditors prior to the presentation of financial statements to stockholders and,
as appropriate, initiates inquiries into aspects of our internal accounting
controls and financial affairs.
DIRECTOR COMPENSATION
Directors currently do not receive any cash compensation from Extensity for
their services as members of the board of directors, although members are
reimbursed for expenses in
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<PAGE> 57
connection with attendance at board of directors and committee meetings.
Directors are eligible to participate in Extensity's stock plans. On August 20,
1998, Mr. Kertzman was granted an option to purchase 100,000 shares of common
stock at an exercise price of $0.33 per share, pursuant to the 1996 Stock Option
Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Messrs. Hummer, Kertzman
and Schlein. No member of the Compensation Committee and none of our executive
officers has a relationship that would constitute an interlocking relationship
with executive officers and directors of another entity.
EXECUTIVE COMPENSATION
The following table sets forth in summary form information concerning the
compensation paid by us during the fiscal years ended December 31, 1999, 1998
and 1997 to our Chief Executive Officer and each of our other most highly
compensated executive officers. These individuals are referred to as the named
executive officers in this prospectus. Compensation information for the named
executive officers for the fiscal year ending December 31, 1999 is based on
accrued compensation through November 15, 1999 and estimated projected
compensation for the balance of the year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
NAME AND -------------------- UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
------------------ ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Robert A. Spinner......................... 1999 $210,417 $ -- 1,266,070
President & Chief Executive Officer 1998 -- -- --
1997 -- -- --
Sharam I. Sasson.......................... 1999 142,365 -- --
Chairman of the Board of Directors 1998 120,000 -- --
1997 120,000 -- --
Elizabeth A. Ireland...................... 1999 150,833 45,000 110,000
Vice President of Marketing 1998 135,872 40,000 150,000
1997 -- -- --
Allen F. Nordgren......................... 1999 151,250 42,897 85,000
Vice President of Professional Services 1998 125,000 15,000 75,000
1997 12,820 -- 100,000
Eric C. Ruud.............................. 1999 125,000 217,196 50,000
Vice President of Sales 1998 125,000 107,675 50,000
1997 32,211 30,000 200,000
</TABLE>
Mr. Spinner joined Extensity as its President and Chief Executive Officer
in April 1999. Mr. Sasson served as President and Chief Executive Officer of
Extensity from November 1995 until March 1999. In March 1999, Mr. Sasson
resigned as President and Chief Executive Officer and was appointed Chairman of
the board of directors.
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<PAGE> 58
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth, as to the named executive officers,
information concerning stock options granted during the fiscal year ending
December 31, 1999.
The information regarding stock options granted to named executive officers
as a percentage of total options granted to employees in the fiscal year, as
disclosed in the table is based upon options to purchase an aggregate of
2,885,028 shares of common stock that were granted to all employees as a group,
including the named executive officers, through November 15, 1999. The stock
option information disclosed in this table is estimated for the fiscal year
ending December 31, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATE OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------------
GRANTED FISCAL YEAR SHARE DATE 5% 10%
---------- ------------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Spinner.... 1,188,764 41.2% $0.33 2/18/09 $ 246,711 $ 625,213
77,306 2.7 0.33 2/18/09 16,044 40,658
Sharam I. Sasson..... -- -- -- -- -- --
Elizabeth A.
Ireland............ 50,000 1.7 0.70 7/1/09 22,011 55,781
60,000 2.1 6.00 10/28/09 226,800 572,400
Allen F. Nordgren.... 85,000 2.9 6.00 10/28/09 321,300 810,900
Eric C. Ruud......... 50,000 1.7 6.00 10/28/09 189,000 477,000
</TABLE>
The 5% and 10% assumed annual rates of compounded stock appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent our estimate or projection of our future stock prices.
Except for options granted to Mr. Spinner, all options indicated in the
table above have a ten year term, vest as to 25% of the shares one year from the
vesting commencement date and vest at the rate of one forty-eighth ( 1/48) of
the shares at the end of each month thereafter, subject to continued service as
an employee or consultant. Our board of directors has permitted Robert Spinner,
Elizabeth Ireland, Allen Nordgren and Eric Ruud to exercise these prior to
vesting in exchange for shares of restricted common stock. We have a right to
repurchase these shares of restricted stock, which right lapses on the same
terms as the option vesting period discussed above.
In February 1999, Extensity granted to Mr. Spinner an option to purchase
1,188,764 shares of common stock, which vested to twelve and one-half percent
(12.5%) on September 1, 1999 and vest as to 1/48 of these shares on each month
thereafter, so that all of these shares are fully vested and exercisable on the
fourth anniversary of the vesting commencement date. Extensity also granted Mr.
Spinner at such time an option to purchase an additional 77,306 shares of common
stock. These shares vest in full on March 1, 2006, provided that if the board of
directors determines that Mr. Spinner has achieved performance milestones
specified for his first year as Chief Executive Officer of Extensity, then these
shares shall vest in accordance with the same schedule as Mr. Spinner's option
to purchase 1,188,764 shares of common stock. For additional details on Mr.
Spinner's employment agreement, see "Certain Transactions -- Officer
Transactions -- Officer Employment Arrangements."
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning option exercises and
unexercised options for the fiscal year ending December 31, 1999 with respect to
each of the named
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<PAGE> 59
executive officers. The stock option information disclosed in this table is
estimated for the fiscal year ending December 31, 1999.
The value realized represents the difference between the fair market value
of the common stock on the date of exercise and the exercise price of the
option.
The value of unexercised in-the-money options was calculated by determining
the difference between $6.00, the fair market value of the Common Stock as of
October 28, 1999 (the most recently granted options) and the exercise price of
the option exercised.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Spinner.... 900,433 $297,143 77,306 288,331 $438,325 $1,634,836
Sharam I. Sasson..... -- -- -- -- -- --
Elizabeth A.
Ireland............ 75,000 12,000 -- 85,000 -- 265,000
Allen F. Nordgren.... 75,000 24,750 -- 60,000 -- --
Eric C. Ruud......... 75,000 4,500 12,500 62,500 70,875 212,625
</TABLE>
COMPENSATION PLANS
1996 STOCK OPTION PLAN
Extensity's 1996 Stock Option Plan provides for the granting to employees
of incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the Code), and for the granting to employees,
directors and consultants of nonstatutory stock options and stock purchase
rights (SPRs). The 1996 Option Plan was approved by the board of directors in
February 1996 and by the stockholders in February 1996. Unless terminated
sooner, the 1996 Option Plan will terminate automatically in 2006. A total of
6,100,000 shares of our common stock is currently reserved for issuance pursuant
to the 1996 Option Plan. In October 1999, our board of directors approved an
amendment, subject to stockholder approval, to amend the 1996 Stock Option Plan,
to increase the maximum number of shares issuable under the plan to 7,000,000.
This amendment will be effective at the completion of this offering. The
following discussion reflects additional changes to the Plan made by such
amendment. In addition, the 1996 Option Plan provides for automatic annual
increases in the number of shares reserved for issuance under the plan, in an
amount each year equal to the lesser of (1) four percent (4%) of the outstanding
shares on such date, (2) 1,300,000 shares and (3) such lesser amount as may be
determined by the board.
The 1996 Option Plan may be administered by the board of directors or a
committee of the Board (as applicable, the Administrator), which shall, in the
case of options intended to qualify as "performance-based compensation" within
the meaning of Section 162(m) of the Code, consist of two or more "outside
directors" within the meaning of Section 162(m) of the Code. The Administrator
has the power to determine the terms of the options or SPRs granted, including
the exercise price, the number of shares subject to each option or SPR, the
exercisability thereof, and the form of consideration payable upon such
exercise. In addition, the Administrator has the authority to amend, suspend or
terminate the 1996 Option Plan, provided that no such action may affect any
share of common stock previously issued and sold or any option previously
granted under the 1996 Option Plan.
Options and SPRs granted under the 1996 Option Plan are not generally
transferable by the optionee, and each option and SPR is exercisable during the
lifetime of the optionee only by the optionee. Options granted under the 1996
Option Plan must generally be exercised within three months of the end of
optionee's status as an employee or consultant of Extensity, or
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<PAGE> 60
within twelve months after an optionee's termination by death or disability, but
in no event later than the expiration of the option's ten year term. In the case
of SPRs, unless the Administrator determines otherwise, the restricted stock
purchase agreement shall grant Extensity a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's employment with us
for any reason (including death or disability). The purchase price for shares
repurchased under the restricted stock purchase agreement shall be the original
price paid by the purchaser and may be paid by cancellation of any indebtedness
of the purchaser to us. The repurchase option shall lapse at a rate determined
by the Administrator. The exercise price of all incentive stock options granted
under the 1996 Option Plan must be at least equal to the fair market value of
the common stock on the date of grant. The exercise price of nonstatutory stock
options and SPRs granted under the 1996 Option Plan is determined by the
Administrator, but with respect to nonstatutory stock options intended to
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Code, the exercise price must at least be equal to the fair market value
of the common stock on the date of grant. With respect to any participant who
owns stock possessing more than 10% of the voting power of all classes of our
outstanding capital stock, the exercise price of any incentive stock option
granted must equal at least 110% of the fair market value on the grant date and
the term of such incentive stock option must not exceed five years. The term of
all other options granted under the 1996 Option Plan may not exceed ten years.
The 1996 Option Plan provides that in the event of a merger of Extensity
with or into another corporation, a sale of substantially all of our assets,
each option or right shall be assumed or an equivalent option or right
substituted by the successor corporation. If the outstanding options or rights
are not assumed or substituted, the Administrator shall provide for the Optionee
to have the right to exercise the option or SPR as to all of the optioned stock,
including shares as to which it would not otherwise be exercisable for a period
of at least fifteen (15) days from the date of such notice, and the option or
SPR will terminate upon the expiration of such period.
EMPLOYEE STOCK PURCHASE PLAN 2000
Extensity's Employee Stock Purchase Plan 2000 was adopted by the board of
directors and stockholders of Extensity in November 1999 and will become
effective upon the closing of this offering. A total of 500,000 shares of common
stock have been reserved for issuance under the Purchase Plan. The Purchase Plan
provides for automatic annual increases in the number of shares reserved for
issuance under the plan, in an amount each year equal to the lesser of (1) 1.5%
of the outstanding shares on such date, (2) 500,000 shares or (3) such lesser
amount as may be determined by the board.
The Purchase Plan, which is intended to qualify under Section 423 of the
Code, contains consecutive, overlapping, twenty-four month offering periods.
Each offering period generally includes four six-month purchase periods. The
offering periods generally start on the first trading day after April 15 and
October 15 of each year, except for the first such offering period. The first
offering period commences on the first trading day on or after the effective
date of this offering and ends on the last trading day on or before April 15,
2002. The first purchase period ends on the last trading day on or before
October 15, 2000.
Employees are eligible to participate in the Purchase Plan if they are
customarily employed by Extensity or any participating subsidiary for at least
20 hours per week and more than five months in any calendar year. However, any
employee who (1) immediately after grant owns stock possessing 5% or more of the
total combined voting power or value of all classes of our capital stock, or (2)
whose rights to purchase stock under all of our employee stock purchase plans
accrues at a rate which exceeds $25,000 worth of stock for each calendar year
may be not be granted an option to purchase stock under the Purchase Plan. The
Purchase Plan
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<PAGE> 61
permits participants to purchase common stock through payroll deductions of up
to 15% of the participant's "compensation." Compensation is defined as the
participant's total compensation including base straight time gross earnings,
bonuses and commissions, overtime, shift premium payments, incentive
compensation, incentive payments and other compensation. The maximum aggregate
number of shares that may be issued to employees during the first purchase
period is 1.5% of the then outstanding shares of capital stock; thereafter, the
maximum number of shares that may be issued to employees during a single
purchase period is 1%.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each purchase period. The price of stock
purchased under the Purchase Plan is generally 85% of the lower of the fair
market value of the common stock (1) at the beginning of the offering period or
(2) at the end of the purchase period. In the event the fair market value at the
end of a purchase period is less than the fair market value at the beginning of
the offering period, the participants will be withdrawn from the current
offering period following exercise and automatically re-enrolled in a new
offering period. The new offering period will use the lower fair market value as
of the first date of the new offering period to determine the purchase price for
future purchase periods. Participants may end their participation at any time
during an offering period, and they will be paid their payroll deductions to
date. Participation ends automatically upon termination of employment with us.
Rights granted under the Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the Purchase Plan. The Purchase Plan provides that, in
the event of a merger of Extensity with or into another corporation or a sale of
substantially all of our assets, each outstanding option may be assumed or
substituted for by the successor corporation. If the successor corporation
refuses to assume or substitute for the outstanding options, the offering period
then in progress will be shortened and a new exercise date will be set. The
Purchase Plan will terminate in 2009. The board of directors has the authority
to amend or terminate the Purchase Plan, except that no such action may
adversely affect any outstanding rights to purchase stock under the Purchase
Plan.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except for any liability arising with
respect to (1) any breach of their duty of loyalty to the corporation or its
stockholders, (2) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law or (3) any transaction from
which the director derived an improper personal benefit.
Our certificate of incorporation further provides that we are authorized to
indemnify our directors and executive officers and may indemnify our other
officers and employees and agents to the fullest extent permitted by Delaware
law. We believe that indemnification under our certificate of incorporation
covers negligence and gross negligence on the part of indemnified parties.
We have entered into agreements to indemnify certain of our directors and
officers, in addition to indemnification provided for in our certificate of
incorporation. These agreements, among other things, require us to indemnify
these directors and officers for certain expenses (including attorneys' fees),
judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by or in the right of Extensity,
arising out of that person's services as a director or officer of Extensity, any
subsidiary of Extensity or any other company or enterprise to which the person
provides services at the request of Extensity.
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<PAGE> 62
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of Extensity where indemnification would be
required or permitted. We are not aware of any pending or threatened litigation
or proceeding that might result in a claim for such indemnification. We believe
that these provisions and agreements are necessary to attract and retain
qualified directors and officers.
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<PAGE> 63
CERTAIN TRANSACTIONS
PREFERRED STOCK SALES
Series A Convertible Preferred Stock. In December 1995, we sold shares of
our Series A Preferred Stock convertible into an aggregate of 2,000,000 shares
of common stock at a price of $0.50 per share, to raise capital to finance our
operations. The share numbers and price per share set forth below reflect the
two-for-one stock split of our capital stock effected in April 1996. The holders
of our Series A Preferred Stock were allotted one seat on our board of
directors, currently filled by John Hummer, in connection with their investment.
This right expires upon closing of this offering.
Series B and Series C Convertible Preferred Stock. In September 1997, we
sold shares of our Series B Preferred Stock convertible into an aggregate of
3,750,000 shares of common stock at a price of $1.59 per share, to raise capital
to finance our operations. In September 1997 we also sold warrants to purchase
937,500 shares of our Series C Preferred Stock at an exercise price of $2.00 per
share to raise capital to finance our operations. The Series C warrants were
converted to Series C Preferred Stock at the time of our Series D financing and
are convertible into an aggregate of 937,500 shares of common stock. The holders
of our Series B Preferred Stock and Series C Preferred Stock, voting together,
were allotted one seat on our board of directors, currently filled by Ted
Schlein, in connection with their investment. This right expires upon closing of
this offering.
Series D Convertible Preferred Stock. In June 1998, we sold shares of our
Series D Preferred Stock convertible into an aggregate of 3,674,229 shares of
common stock at a price of $3.30 per share, to raise capital to finance our
operations. The holders of our Series D Preferred Stock were allotted one seat
on our board of directors, currently filled by Mitchell Kertzman, in connection
with their investment. This right expires upon closing of this offering.
Series E Convertible Preferred Stock. In July 1999, we sold shares of our
Series E Preferred Stock convertible into an aggregate of 3,732,820 shares of
common stock at a price of $6.00 per share, to raise capital to finance our
operations.
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<PAGE> 64
The following 5% stockholders purchased shares in the financings:
<TABLE>
<CAPTION>
NO. OF NO. OF NO. OF NO. OF NO. OF
SHARES OF SHARES OF SHARES OF SHARES OF SHARES OF
SERIES A SERIES B SERIES C SERIES D SERIES E TOTAL AGGREGATE
PURCHASER PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED SHARES CONSIDERATION
--------- --------- --------- --------- --------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Funds Affiliated with Hummer
Winblad Venture Partners
Hummer Winblad Venture
Partners II, L.P. ............ 1,728,000 600,000 150,000 257,575 -- 2,735,575 $3,537,998
Hummer Winblad Technology
Fund II, L.P. ............ 72,000 21,250 5,312 4,242 -- 102,804 $ 119,999
Hummer Winblad Technology
Fund IIA, L.P. ........... -- 3,750 938 4,242 -- 8,930 $ 19,999
Hummer Winblad Venture
Partners III, L.P. ....... -- -- -- 341,603 725,000 1,066,603 $5,477,290
Hummer Winblad Technology
Fund III, L.P. ........... -- -- -- 17,979 -- 17,979 $ 59,331
Funds Affiliated with Weiss
Peck & Greer
WPG Enterprise Fund III,
L.L.C. ................... -- 550,162 137,543 204,654 128,640 1,020,999 $2,345,198
Weiss Peck & Greer Venture
Associates IV, L.L.C. .... -- 596,438 149,107 234,006 147,090 1,126,641 $2,628,760
WP&G Venture Associates IV
Cayman, L.P. ............. -- 78,400 19,600 29,543 18,570 146,113 $ 336,912
WPG Information Sciences
Entrepreneur Fund,
L.P. ..................... -- 25,000 6,250 9,068 5,700 46,018 $ 64,124
Funds Affiliated with Kleiner
Perkins Caufield & Byers
KPCB Java Fund, L.P......... -- 1,203,125 300,782 196,969 183,333 1,884,209 $3,674,996
Kleiner Perkins Caufield &
Byers VIII, L.P. ......... -- 446,799 111,700 176,878 164,633 900,010 $2,327,745
KPCB Information Sciences
Zaibatsu Fund II, L.P..... -- 42,969 10,742 9,848 9,166 72,725 $ 156,244
Kleiner Perkins Caufield &
Byers VIII Founder's Fund,
L.P. ..................... -- 25,857 6,464 10,242 9,533 52,096 $ 90,997
Berkeley International Capital
Limited..................... -- -- -- -- 1,333,333 1,333,333 $7,999,998
Funds Affiliated with Lehman
Brothers Venture Capital
Partners
LBI Group, Inc.............. -- -- -- 863,207 -- 863,207 $2,848,583
Lehman Brothers MBG Venture
Capital Partners 1998(A)
L.P....................... -- -- -- 40,522 -- 40,522 $ 133,723
Lehman Brothers MBG Venture
Capital Partners 1998(B)
L.P....................... -- -- -- 748 -- 748 $ 2,468
Lehman Brothers MBG Venture
Capital Partners 1998(C)
L.P....................... -- -- -- 4,613 -- 4,613 $ 15,223
Lehman Brothers VC Partners
L.P....................... -- -- -- -- 166,667 166,667 $1,000,002
</TABLE>
In connection with the above transactions, we entered into agreements with
the investors providing for registration rights with respect to these shares.
The most recent such agreement is an Amended and Restated Investor Rights
Agreement dated July 27, 1999, which restates and incorporates the registration
rights of all investors. For more information regarding this agreement, see
"Description of Capital Stock -- Registration Rights."
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<PAGE> 65
OFFICER TRANSACTIONS
Officer Employment Arrangements
Under Robert Spinner's offer letter dated February 16, 1999, Mr. Spinner is
entitled to an initial annual base salary of $300,000 and up to $100,000 in
performance bonuses based upon satisfaction of agreed upon milestones. However,
Mr. Spinner elected to reduce his initial annual base salary to $275,000
effective June 16, 1999 and declined an initial $50,000 bonus to which he was
otherwise entitled payable in November 1999. Pursuant to the offer letter, Mr.
Spinner was granted (1) an option to purchase 1,188,764 shares of common stock,
subject to vesting over a four year period, and (2) a special option to purchase
an additional 77,306 shares of common stock vesting on March 1, 2006 or sooner
if certain milestones are achieved. Each option has an exercise price of $0.33
per share. In the event that Extensity involuntarily terminates Mr. Spinner's
employment within one year following a change of control of Extensity, then Mr.
Spinner is entitled to receive severance payment equal to six (6) months'
continuation of salary. In addition, in the event that Extensity terminates Mr.
Spinner's employment other than for cause or Mr. Spinner's employment is
constructively terminated, Mr. Spinner is entitled to accelerated vesting of one
half of the portion of the option to purchase 1,188,764 shares of common stock
that is otherwise unvested on the date of termination.
Officer Loan Transactions
On March 12, 1999, Extensity loaned to Mr. Spinner an aggregate of $100,000
in order for Mr. Spinner to early exercise 303,030 shares of common stock which
were granted to him under his offer letter. In connection with this loan, Mr.
Spinner executed a promissory note in favor of Extensity. The promissory note
bore interest at a rate of 4.77%, compounded semi-annually, was to mature on
February 28, 2004 and was secured by a pledge of the common stock purchased by
Mr. Spinner for cash, under the terms of a security agreement between Mr.
Spinner and Extensity. Mr. Spinner repaid this loan in full, including interest
of $3,081, on November 9, 1999. Mr. Spinner also early exercised at such time
454,576 shares for an aggregate of $150,000.08 in cash.
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<PAGE> 66
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of December 31, 1999 and as adjusted
to reflect the sale of common stock offered for (1) each person who we know to
beneficially own more than 5% of our common stock, (2) each of our directors,
(3) each of the named executive officers and (4) all directors and executive
officers as a group. Except as indicated in the table below or the footnotes
thereto and pursuant to applicable community property laws, the stockholders
named in the table have sole voting and investment power with respect to the
shares set forth opposite each stockholder's name.
<TABLE>
<CAPTION>
PERCENTAGE
OF SHARES
OUTSTANDING(2)
NUMBER OF SHARES --------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OWNED(1) OFFERING OFFERING
---------------- ---------------- -------- --------
<S> <C> <C> <C>
Berkeley International Capital Limited(3).......... 1,333,333 7.3%
c/o Minden House
6 Minden Place
St. Helier, Jersey, Channel Islands
Entities affiliated with Hummer Winblad Venture
Partners, and John R. Hummer(4).................. 3,931,091 21.6
2 South Park, 2nd Floor
San Francisco, CA 94107
Entities affiliated with Kleiner Perkins Caufield &
Byers, and Ted E. Schlein(5)..................... 2,909,040 16.0
2750 Sand Hill Road
Menlo Park, CA 94025
Entities affiliated with Lehman Brothers Venture
Capital Partners(6).............................. 1,075,757 5.9
555 California Street
San Francisco, CA 94104
Entities affiliated with Weiss Peck & Greer Venture
Associates(7).................................... 2,339,771 12.9
555 California Street, Suite 4760
San Francisco, CA 94104
Robert A. Spinner(8)............................... 890,433 4.8
Sharam I. Sasson(9)................................ 1,577,000 8.7
Elizabeth A. Ireland(10)........................... 158,333 *
Allen F. Nordgren(11).............................. 166,500 *
Mitchell E. Kertzman............................... 37,500 *
Eric C. Ruud(12)................................... 189,000 1.0
All executive officers and directors as a group (9
persons)(13)..................................... 9,948,897 53.5
</TABLE>
- -------------------------
* Less than 1% of the outstanding shares of common stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options or warrants held by that person
that are currently exercisable or exercisable within 60 days of December
31, 1999 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of each
other person.
(2) Assumes no exercise of the Underwriters' over-allotment option.
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<PAGE> 67
(3) Consists of 1,333,333 shares held by Berkeley International Capital
Limited.
(4) Consists of 2,735,575 shares held by Hummer Winblad Venture Partners II,
L.P., 102,804 shares held by Hummer Winblad Technology Fund II, L.P., 8,930
shares held by Hummer Winblad Technology Fund IIA, L.P., 1,066,603 shares
held by Hummer Winblad Venture Partners III, L.P. and 17,979 shares held by
Hummer Winblad Technology Fund III, L.P. John Hummer, a member of our board
of directors, is a Managing Member of Hummer Winblad Venture Partners. Mr.
Hummer disclaims beneficial ownership of the shares held by funds
affiliated with Hummer Winblad Venture Partners, except to the extent of
his pecuniary interest therein.
(5) Consists of 1,884,209 shares held by KPCB Java Fund, L.P., 900,010 shares
held by Kleiner Perkins Caufield & Byers VIII, L.P., 52,096 shares held by
KPCB VIII Founder's Fund, L.P. and 72,725 shares held by KPCB Information
Sciences Zaibatsu Fund II, L.P. Ted Schlein is a member of our board of
directors and a general partner of Kleiner Perkins Caufield & Byers. Mr.
Schlein disclaims beneficial ownership of the shares held by funds
affiliated with Kleiner Perkins Caufield & Byers, except to the extent of
his pecuniary interest therein.
(6) Consists of 863,207 shares held by LBI Group, Inc. 40,522 shares held by
Lehman Brothers MBG Venture Capital Partners 1998 (A) L.P., 748 shares held
by Lehman Brothers MBG Venture Capital Partners 1998 (B) L.P., 4,613 shares
held by Lehman Brothers MGB Venture Capital Partners 1998 (C) L.P., 166,667
shares held by Lehman Brothers VC Partners L.P.
(7) Consists of 1,020,999 shares held by WPG Enterprise Fund III, L.L.C.,
1,126,641 shares held by Weiss Peck & Greer Venture Associates IV, L.L.C.,
146,113 shares held by WP&G Venture Associates IV Cayman, L.P. and 46,018
shares held by WPG Information Sciences Entrepreneur Fund, L.P.
(8) Includes 727,576 shares held by the Spinner Family Trust U/D/T dated August
3, 1999. Also includes 10,000 shares held by the Jacqueline Nicole Spinner
Trust UTA dated August 3, 1999, 10,000 shares held by the Amanda Spinner
Trust UTA dated August 3, 1999 and 10,000 shares held by the Samantha
Sidney Spinner Trust UTA dated August 3, 1999, as to which shares Mr.
Spinner disclaims beneficial ownership. Includes 663,045 shares subject to
a right of repurchase in favor of the Company.
(9) Includes 1,075,000 shares held by the Sasson Family Trust U/D/T dated
December 28, 1994, 250,000 shares held by the Fariba J. Sasson Annuity
Trust I U/I dated October 19, 1999 and 250,000 shares held by the Sharam I.
Sasson Annuity Trust I U/I dated October 19, 1999. Also includes 10,000
shares held by the DAS Trust UTA dated September 24, 1998 and 10,000 shares
held by the EIS Trust UTA dated September 24, 1998, as to which shares Mr.
Sasson disclaims beneficial ownership.
(10) Includes 78,125 shares subject to a right of repurchase in favor of the
Company.
(11) Includes 104,167 shares subject to a right of repurchase in favor of the
Company.
(12) Includes 75,500 shares subject to a right of repurchase in favor of the
Company.
(13) Includes 920,837 shares subject to a right of repurchase in favor of the
Company.
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<PAGE> 68
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of Extensity as of September 30, 1999 consists
of 30,000,000 shares of Common Stock, $0.001 par value and 14,582,970 shares of
preferred stock, $0.01 par value. As of September 30, 1999, there were
outstanding 3,753,198 shares of common stock and 14,094,549 shares of Preferred
Stock. Such shares were held of record by a total of 166 stockholders.
Upon the closing of this offering:
- our certificate of incorporation will be amended and restated to provide
for total authorized capital consisting of 75,000,000 shares of common
stock and 5,000,000 shares of preferred stock; and
- all shares of preferred stock will convert into common stock, and a total
of shares of common stock and no shares of preferred stock will
be outstanding.
Common Stock
The holders of our common stock are entitled to receive dividends as may be
declared by the Company's board of directors and paid out of legally available
funds. Holders of shares of common stock are entitled to one vote per share upon
all matters upon which stockholders have the right to vote. Cumulative voting of
shares is not permitted. In the event of a voluntary or involuntary liquidation,
dissolution or winding up of the Company, the holders of our common stock are
entitled to receive and share ratably in all assets remaining available for
distribution to stockholders after payment of any preferential amounts to which
the holders of preferred stock may be entitled. The common stock has no
preemptive rights and is not redeemable, assessable or entitled to the benefits
of any sinking fund. Shares of our common stock held by all other persons are
not convertible. All outstanding shares of our common stock are, and the common
stock to be issued in this offering will be, validly issued, fully paid and
nonassessable.
Preferred Stock
As of the closing date of this offering, each outstanding share of
preferred stock will automatically convert into one share of common stock.
Pursuant to an amended and restated certificate of incorporation to be filed
upon the closing date, a total of 5,000,000 shares of Preferred Stock will be
authorized for issuance, none of which has been designated in any series. Our
board of directors is authorized, without further stockholder action, to
authorize and issue any of the 5,000,000 undesignated shares of preferred stock
in one or more series and to fix the voting rights, liquidation preferences,
dividend rights, repurchase rights, conversion rights, preemption rights,
redemption rights and terms, including sinking fund provisions and certain other
rights and preferences of such shares of the Preferred Stock. The issuance of
any class or series of preferred stock could adversely affect the rights of the
holders of common stock by restricting dividends on, diluting the power of,
impairing the liquidation rights of common stock, or delaying, deferring or
preventing a change in control of the Company. We have no present plans to issue
any preferred stock.
WARRANTS
In connection with certain credit arrangements, we issued to Comdisco
warrants to purchase a total of 160,303 shares of Series D Preferred Stock at an
exercise price, subject to certain adjustments, of $3.30 per share. Following
the closing of the offering, the warrants
63
<PAGE> 69
automatically will become exercisable for a similar number of shares of common
stock at the same exercise price per share. Comdisco may exercise such warrants
by means of (i) a cash payment in an amount equal to the exercise price or (ii)
in the event the common stock is publicly traded, a net issue exercise whereby
Comdisco would receive shares equal to the value of the warrant, as calculated
pursuant to the terms set forth therein. The warrants expire upon the earlier to
occur of (i) various dates ranging from March 25, 2008 to December 25, 2008,
(ii) five (5) years after the effective date of the our initial public offering,
or (iii) a change in control of the Company.
In connection with certain credit arrangements, the Company issued to
Silicon Valley Bank a warrant to purchase 23,585 shares of Series B Preferred
Stock at an exercise price, subject to certain adjustments, of $1.59 per share.
Following the closing of the Offering, the warrant automatically will become
exercisable for a similar number of shares of Common Stock at the same exercise
price per share. Silicon Valley Bank may exercise the warrant by means of (i) a
cash payment in an amount equal to the exercise price or (ii) in the event the
Common Stock is publicly traded, a net issue exercise whereby Silicon Valley
Bank would receive shares equal to the value of the warrant, as calculated
pursuant to the terms set forth therein. The warrant expires on January 28,
2002.
REGISTRATION RIGHTS
The holders of approximately 14,094,549 shares of outstanding common stock
held by investors who purchased shares of Series A, Series B, Series C, Series D
and Series E Preferred Stock and by certain current and former officers, and the
holders of warrants to purchase preferred stock convertible into 183,741 shares
of common stock will be entitled to certain rights with respect to the
registration of such shares of Common Stock under the Securities Act. Under the
terms of the Amended and Restated Investor Rights Agreement dated July 27, 1999,
if the Company proposes to register any of its common stock under the Securities
Act, the holders of the registrable securities are entitled to notice of the
registration and have the right to include their registrable securities in the
registration. However, the underwriters have certain rights to limit the number
of shares included in any registration. Beginning 180 days after the closing of
the offering, the holders of at least 40% of the registrable securities (other
than Comdisco or Silicon Valley Bank), have the right to require us on no more
than two occasions, to file a registration statement under the Securities Act in
order to register all or any part of their registrable securities, subject to
certain conditions and limitations. Comdisco and Silicon Valley Bank may include
their shares acquired pursuant to warrant agreements where we have has been
required to file a registration statement. We may in certain circumstances defer
such registrations, and the underwriters have the right (subject to certain
limitations) to limit, and in the case of our initial public offering, to
exclude entirely, the number of shares included in such registrations. Further,
the holders of registrable securities may require us to register all or any
portion of their registrable securities on Form S-3, when such form becomes
available to the Company, subject to certain conditions and limitations.
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<PAGE> 70
ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, AND
BYLAWS AND OF DELAWARE LAW
Certain provisions of our certificate of incorporation, bylaws and Delaware
law, described below, may have the effect of delaying, deferring or discouraging
another person from acquiring control of our company.
Certificate of Incorporation and Bylaws
Certain provisions of the Company's certificate of incorporation and Bylaws
are designed to enhance the likelihood of continuity and stability in the
Company's Board of Directors and in the policies formulated thereby.
Accordingly, such provisions may have the effect of preventing, discouraging or
delaying any potential acquisition proposals or changes in the control of the
Company and of preventing changes in the management of the Company.
Effect of Delaware Anti-Takeover Statute
We are subject to Section 203 of the Delaware General Corporation Law
"Section 203" which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any "business combination" with any "interested
stockholder" for a period of three years following the date that the stockholder
became an interested stockholder, unless:
- the transaction is approved by the board of directors prior to the date
the "interested stockholder" attained such status;
- upon the closing of the transaction that resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced; or
- on or subsequent to such date the "business combination" is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by at least two-thirds of the outstanding voting stock that
is not owned by the "interested stockholder."
Generally, a "business combination" includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the interested
stockholder. Generally, an "interested stockholder" is a person who, together
with affiliates and associates, owns or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Equiserve.
LISTING
We have applied to list our common stock on the Nasdaq National Market
under the trading symbol EXTN.
65
<PAGE> 71
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have shares of common stock
outstanding. Of these shares, the shares sold in this offering will be
freely tradable without restriction under the Securities Act, unless purchased
by our "affiliates", as that term is defined in Rule 144 under the Securities
Act. All stock outstanding prior to this offering is subject to 180-day lock-up
agreements with the underwriters, and may not be sold in the public market prior
to the expiration of the lock-up agreements (unless the lock-up agreements are
released earlier at the discretion of the underwriters). Upon the expiration of
the lock-up agreements, approximately 13,935,887 additional shares will be
available for sale in the public market, subject in some cases to compliance
with the volume and other limitations of Rule 144:
<TABLE>
<CAPTION>
DAYS AFTER DATE SHARES
OF THIS PROSPECTUS ELIGIBLE FOR SALE COMMENT
------------------ ----------------- -------
<S> <C> <C>
Upon effectiveness................... Freely tradable shares sold in this offering
181 days............................. 13,935,887 Lock-up released; shares saleable under Rule
144, 144(k) or 701
Various dates thereafter............. 3,748,820 Restricted securities held for one year or
less as of 180 days following effectiveness
</TABLE>
RULE 144
In general, under Rule 144 a person (or persons whose shares are
aggregated) who has beneficially owned shares for at least one year is entitled
to sell within any three-month period commencing 90 days after the date of this
prospectus a number of shares that does not exceed the greater of
- 1% of the then outstanding shares of our common stock (approximately
shares immediately after this offering) or
- the average weekly trading volume during the four calendar weeks
preceding such sale, subject to the filing of a Form 144 with respect to
the sale.
A person (or persons whose shares are aggregated) who is not deemed to have
been our affiliate at any time during the 90 days immediately preceding the sale
who has beneficially owned his or her shares for at least two years is entitled
to sell these shares pursuant to Rule 144(k) without regard to the limitations
described above. Affiliates must always sell pursuant to Rule 144, even after
the applicable holding periods have been satisfied.
We cannot estimate the number of shares that will be sold under Rule 144,
as this will depend on the market price for our common stock, the personal
circumstances of the sellers and other factors. Prior to this offering, there
has been no public market for our common stock, and there can be no assurance
that a significant public market for our common stock will develop or be
sustained after this offering. Any future sale of substantial amounts of our
common stock in the open market may adversely affect the market price of our
common stock.
LOCK-UP AGREEMENTS
We and our directors, executive officers, stockholders and holders of
options and warrants to purchase our capital stock have agreed pursuant to the
underwriting agreement and other agreements that we will not sell any of our
common stock without the prior consent of the underwriters until 180 days from
the date of this prospectus, except that we may, without such consent, grant
options and sell shares pursuant to our 1996 Stock Option Plan and our Employee
Stock Purchase Plan 2000.
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<PAGE> 72
STOCK OPTIONS
We intend to file a registration statement on Form S-8 under the Securities
Act to register shares of our common stock that are subject to outstanding
options or reserved for issuance under our 1996 Stock Option Plan and our
Employee Stock Purchase Plan 2000 within 180 days after the date of this
prospectus, thus permitting the resale of these shares by nonaffiliates in the
public market without restriction under the Securities Act.
RULE 701
Any of our employees or consultants who purchased his or her shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701, which permits nonaffiliates to sell their Rule
701 shares without having to comply with the public information, holding period,
volume limitation or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
prospectus. As of September 30, 1999, the holders of options exercisable into
approximately 2,096,344 shares of our common stock will be eligible to sell
their shares in reliance upon Rule 701 or pursuant to the Form S-8 upon the
expiration of the 180-day lockup period.
REGISTRATION RIGHTS
After this offering, the holders of 14,278,290 shares of our common stock
will be entitled to certain rights with respect to registration of such shares
under the Securities Act. Registration of these shares under the Securities Act
would result in these shares becoming freely tradable without restriction under
the Securities Act (except for shares purchased by our affiliates. See
"Description of Capital Stock -- Registration Rights."
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<PAGE> 73
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank Securities
Inc., Bear, Stearns & Co. Inc. and Hambrecht & Quist LLC, have severally agreed
to purchase from Extensity the following respective number of shares of common
stock at a public offering price less the underwriting discounts and commissions
set forth on the cover page of this prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Deutsche Bank Securities Inc................................
Bear, Stearns & Co. Inc.....................................
Hambrecht & Quist LLC.......................................
---------
Total.....................................................
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all
shares of the common stock offered hereby, other than those covered by the
over-allotment option described below, if any of these shares are purchased.
The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover of this prospectus and to
dealers at a price that represents a concession not in excess of $ per share
under the public offering price. The underwriters may allow, and these dealers
may re-allow, a concession of not more than $ per share to other dealers.
After the initial public offering, representatives of the underwriters may
change the offering price and other selling terms.
We have granted to the underwriters an option, exercisable not later than
30 days after the date of this prospectus, to purchase up to
additional shares of common stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus. The underwriters may exercise this option only to cover over-
allotments made in connection with the sale of the common stock offered hereby.
To the extent that the underwriters exercise this option, each of the
underwriters will become obligated, subject to conditions, to purchase
approximately the same percentage of additional shares of common stock as the
number of shares of common stock to be purchased by it in the above table bears
to the total number of shares of common stock offered hereby. We will be
obligated, pursuant to the option, to sell these additional shares of common
stock to the underwriters to the extent the option is exercised. If any
additional shares of common stock are purchased, the underwriters will offer the
additional shares on the same terms as those on which the shares are
being offered.
The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is currently expected to be approximately 7% of the
initial public offering price. We have agreed to pay the underwriters the
following fees, assuming either no exercise or full exercise by the underwriters
of the underwriters' over-allotment option:
<TABLE>
<CAPTION>
TOTAL FEES
----------------------------------------------
WITHOUT EXERCISE OF WITH FULL EXERCISE OF
FEE PER SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
------------- --------------------- ---------------------
<S> <C> <C> <C>
Fees paid by Extensity............ $ $ $
</TABLE>
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $ .
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<PAGE> 74
We have agreed to indemnify the underwriters against some specified types
of liabilities, including liabilities under the Securities Act, and to
contribute to payments the underwriters may be required to make in respect of
any of these liabilities.
Each of our officers and directors, stockholders and holders of options and
warrants to purchase our stock, has agreed not to offer, sell, contract to sell
or otherwise dispose of, or enter into any transaction that is designed to, or
could be expected to, result in the disposition of any shares of our common
stock or other securities convertible into or exchangeable or exercisable for
shares of our common stock or derivatives of our common stock for a period of
180 days after the effective date of the registration statement of which this
prospectus is a part without the prior written consent of Deutsche Bank
Securities Inc. This consent may be given at any time without public notice. We
have entered into a similar agreement with the representatives of the
underwriters.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with this offering, thus creating a
short position in our common stock for their own account. A short position
results when an underwriter sells more shares of common stock than that
underwriter is committed to purchase. Additionally, to cover these
over-allotments or to stabilize the market price of our common stock, the
underwriters may bid for, and purchase, shares of our common stock in the open
market. Finally, the representatives, on behalf of the underwriters, may also
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market or otherwise.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to shares for our vendors, employees, family
members of employees, customers and other third parties. The number of shares of
our common stock available for sale to the general public will be reduced to the
extent these reserved shares are purchased. Any reserved shares that are not
purchased by these persons will be offered by the underwriters to the general
public on the same basis as the other shares in this offering.
In July 1999, we sold shares of our Series E Preferred Stock in a private
placement at a price of $6.00 per share. Each of the shares of Series E
Preferred Stock is convertible at the option of the holder into one share of our
common stock. In this private placement, BT Investment Partners, Inc., an
affiliate of Deutsche Bank Securities Inc., purchased 166,666 shares of Series E
Preferred Stock for an aggregate purchase price of $999,996. BT Investment
Partners, Inc. purchased the Series E Preferred Stock on the same terms as the
other investors in the private placement. Upon conversion of these shares into
common stock, based upon an assumed public offering price of $ , the value
of these shares is $ . The difference between the amount that BT Investment
Partners, Inc. originally paid for the Series E preferred stock and the value of
the Series E Preferred Stock based upon the assumed initial public offering
price equals $ . The National Association of Securities Dealers, Inc. may
deem this $ to be additional underwriting compensation received in
connection with this offering. If this is deemed to be underwriting
compensation, these shares of Series E Preferred Stock, and the common stock
issued upon conversion thereof, could not be sold, transferred, assigned,
pledged or hypothecated by any person for a period of one year after the
effective date of this
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<PAGE> 75
offering, except to officers or partners of the underwriters and members of the
selling group and their officers or partners.
PRICING OF THIS OFFERING
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock has
been determined by negotiation among us and the representatives of the
underwriters. Among the primary factors considered in determining the public
offering price were:
- prevailing market conditions;
- our results of operations in recent periods;
- the present stage of our development;
- the market capitalization and stage of development of other companies
that we and the representatives of the underwriters believe to be
comparable to our business; and
- estimates of our business potential.
The estimated initial public offering price range set forth on the cover of
this preliminary prospectus is subject to change as a result of market
conditions and other factors.
LEGAL MATTERS
The validity of the issuance of shares of Common Stock offered hereby will
be passed upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Certain legal matters in connection with
this offering will be passed upon for the Underwriters by Morrison & Foerster
LLP, Irvine, California. WS Investments, an investment partnership composed of
some current and former members of and persons associated with Wilson Sonsini
Goodrich & Rosati, a Professional Corporation, as well as an individual attorney
at this firm, beneficially own a total of 47,603 shares of our common stock.
EXPERTS
The consolidated financial statements of Extensity, Inc. as of December 31,
1997, 1998 and September 30, 1999 and for each of the three years in the period
ended December 31, 1998, and the nine month periods ended September 30, 1998 and
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.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock.
This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedule filed as part of the
registration statement. For further information with respect to us and our
common stock, we refer you to the registration statement and the exhibits and
schedule filed as a part of the registration statement. Statements contained in
this prospectus concerning the contents of any contract or any other document
are not necessarily complete. If a contract or document has been filed as an
exhibit to the registration statement, we refer you
70
<PAGE> 76
to the copy of the contract or document that has been filed. Each statement in
this prospectus relating to a contract or document filed as an exhibit is
qualified in all respects by the filed exhibit. The registration statement,
including exhibits and schedule, may be inspected without charge at the
principal office of the Securities and Exchange Commission in Washington, D.C.,
and copies of all or any part of it may be obtained from that office after
payment of fees prescribed by the Securities and Exchange Commission. The
Securities and Exchange Commission maintains a website that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Securities and Exchange Commission at
http://www.sec.gov.
Upon completion of this offering, Extensity will become subject to the
information and periodic reporting requirements of the Securities Exchange Act
and, in accordance therewith, will file periodic reports, proxy statements and
other information with the SEC. These periodic reports, proxy statements and
other information will be available for inspection and copying at the SEC's
public reference rooms and the website of the SEC referred to above.
We intend to provide our stockholders with annual reports containing
financial statements audited by an independent public accounting firm and to
make available to our stockholders quarterly reports containing unaudited
financial data for the first three quarters of each year.
71
<PAGE> 77
EXTENSITY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Stockholders' Deficit............ F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 78
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Extensity, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' deficit and of
cash flows present fairly, in all material respects, the financial position of
Extensity, Inc. as of December 31, 1997, 1998 and September 30, 1999, and the
results of its operations and its cash flows for the three years in the period
ended December 31, 1998 and for the nine month periods ended September 30, 1998
and 1999, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits 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.
/s/ PricewaterhouseCoopers LLP
November 5, 1999
San Jose, California
F-2
<PAGE> 79
EXTENSITY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
AS OF DECEMBER 31, AS OF EQUITY AS OF
------------------- SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1999 1999
------- -------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 2,560 $ 5,239 $ 15,308
Short term investments.............................. -- 5,644 6,974
Restricted short term investment.................... 33 82 76
Trade accounts receivable, net of allowance for
doubtful accounts of $0, $0 and $200 in 1997,
1998, and 1999, respectively...................... -- 1,178 2,931
Prepaids and other assets........................... 99 119 566
------- -------- --------
Total current assets............................ 2,692 12,262 25,855
Property and equipment, net........................... 892 1,476 2,021
Other assets.......................................... -- 73 77
------- -------- --------
Total assets.................................... $ 3,584 $ 13,811 $ 27,953
======= ======== ========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT):
Current liabilities:
Accounts payable.................................... $ 280 $ 349 $ 1,128
Accrued liabilities................................. 51 678 1,250
Deferred revenue.................................... 300 2,513 5,564
Capital lease obligations, current portion.......... -- 287 445
Notes payable, current portion...................... -- 1,116 1,191
------- -------- --------
Total current liabilities....................... 631 4,943 9,578
------- -------- --------
Capital lease obligations, noncurrent portion......... -- 746 807
Notes payable, noncurrent portion..................... -- 1,725 885
Deferred rent......................................... 10 140 179
------- -------- --------
Total liabilities............................... 641 7,554 11,449
Commitments (Note 5)
Mandatorily redeemable convertible preferred stock:
14,582,970 shares authorized; 5,750,000,
10,361,729 and 14,094,549 shares outstanding
actual (aggregate liquidation preference
$43,359,898) and none outstanding pro forma
(unaudited)....................................... 6,983 21,269 43,648
------- -------- --------
Stockholders' equity (deficit):
Common stock, $0.001 par value,
30,000,000 shares authorized actual; 1,936,542,
2,013,904 and 3,753,198 shares issued and
outstanding actual; 17,847,747 shares issued and
outstanding pro forma (unaudited)................. 2 2 4 18
Additional paid-in capital.......................... 17 30 6,710 50,344
Notes receivable from stockholders.................. -- -- (230) (230)
Deferred stock compensation......................... -- -- (3,607) (3,607)
Accumulated deficit................................. (4,059) (15,044) (30,021) (30,021)
------- -------- -------- --------
Total stockholders' equity (deficit)............ (4,040) (15,012) (27,144) 16,504
------- -------- -------- ========
Total liabilities, mandatorily redeemable
convertible preferred stock and stockholders'
equity (deficit)............................. $ 3,584 $ 13,811 $ 27,953
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 80
EXTENSITY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- -------------------
1996 1997 1998 1998 1999
------ ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
REVENUES
Licenses.................................. $ -- $ -- $ 718 $ 542 $ 2,476
Services and maintenance................ 409 183 1,575
------ ------- -------- ------- --------
Total revenues........................ -- -- 1,127 725 4,051
------ ------- -------- ------- --------
COST OF REVENUES:
Licenses................................ 90 37 145
Services and maintenance................ 1,554 989 3,074
------ ------- -------- ------- --------
Total cost of revenues................ -- -- 1,644 1,026 3,219
------ ------- -------- ------- --------
Gross profit (loss)....................... -- -- (517) (301) 832
OPERATING EXPENSES:
Sales and marketing..................... 102 1,082 4,703 3,266 6,406
Research and development................ 519 1,713 4,401 2,865 4,986
General and administrative.............. 233 540 1,392 898 1,956
Amortization of non-cash stock based
compensation.......................... -- -- -- -- 2,479
------ ------- -------- ------- --------
Total operating expenses.............. 854 3,335 10,496 7,029 15,827
------ ------- -------- ------- --------
Loss from operations.................. (854) (3,335) (11,013) (7,330) (14,995)
Interest income........................... 24 107 332 188 407
Interest expense.......................... -- -- (299) (181) (388)
Other expense............................. -- -- (5) (5) --
------ ------- -------- ------- --------
Net loss............................ $ (830) $(3,228) $(10,985) $(7,328) $(14,976)
====== ======= ======== ======= ========
Net loss per share:
Basic and diluted....................... $(3.79) $ (4.35) $ (8.28) $ (5.85) $ (5.58)
====== ======= ======== ======= ========
Weighted average shares................. 219 742 1,326 1,252 2,683
Pro forma net loss per share (unaudited):
Basic and diluted $ (1.12) $ (1.08)
======== ========
Weighted average shares 9,766 13,822
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 81
EXTENSITY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(in thousands, except share data)
<TABLE>
<CAPTION>
NOTES
COMMON STOCK ADDITIONAL RECEIVABLE DEFERRED TOTAL
------------------ PAID-IN FROM STOCK ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION DEFICIT DEFICIT
--------- ------ ---------- ------------ ------------ ------------ -------------
(IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995... 1,750,000 $ 1 $ -- $ -- $ -- $ (1) $ --
Net loss....................... -- -- -- -- -- (830) (830)
--------- ------ ---------- --------- ----------- ------------ ------------
Balance at December 31, 1996... 1,750,000 1 -- -- -- (831) (830)
Exercise of stock options...... 186,542 1 17 -- -- -- 18
Net loss....................... -- -- -- -- -- (3,228) (3,228)
--------- ------ ---------- --------- ----------- ------------ ------------
Balance at December 31, 1997... 1,936,542 2 17 -- -- (4,059) (4,040)
Common stock issued for
services rendered............. 31,953 -- 7 -- -- -- 7
Exercise of stock options...... 45,409 -- 6 -- -- -- 6
Net loss....................... -- -- -- -- -- (10,985) (10,985)
--------- ------ ---------- --------- ----------- ------------ ------------
Balance at December 31, 1998... 2,013,904 2 30 -- -- (15,044) (15,012)
Exercise of stock options...... 1,739,294 2 594 (230) -- -- 366
Deferred stock compensation.... -- -- 6,086 -- (6,086) -- --
Amortization of deferred stock
compensation.................. -- -- -- -- 2,479 -- 2,479
Net loss....................... -- -- -- -- -- (14,976) (14,976)
--------- ------ ---------- --------- ----------- ------------ ------------
Balance at September 30, 1999.. 3,753,198 $ 4 $ 6,710 $ (230) $ (3,607) $ (30,021) $ (27,144)
========= ====== ========== ========= =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 82
EXTENSITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ------------------
1996 1997 1998 1998 1999
------ ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Cash from operating activities:
Net loss.................................................... $ (830) $(3,228) $(10,985) $(7,328) $(14,976)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization........................... 36 153 528 359 634
Amortization of deferred stock compensation............. -- -- -- -- 2,479
Common stock issued for services rendered............... -- 24 7 7 --
Amortization of debt discount and lease line issuance
cost.................................................. -- -- 58 39 66
Changes in operating assets and liabilities:
Increase in accounts receivable....................... -- -- (1,178) (1,213) (1,753)
Increase in prepaids and other assets................. (6) (94) (55) (10) (451)
Increase (decrease) in accounts payable............... (7) 270 69 34 779
Increase in accrued liabilities....................... 12 38 628 210 572
Increase in deferred revenue.......................... -- 300 2,213 1,403 3,051
Increase (decrease) in deferred rent.................. 16 (6) 130 95 39
------ ------- -------- ------- --------
Net cash used in operating activities............... (779) (2,543) (8,585) (6,404) (9,560)
------ ------- -------- ------- --------
Cash from investing activities:
Capital expenditures...................................... (185) (894) (429) (245) (874)
Purchase of short term investments........................ -- -- (5,644) (1,505) (1,330)
(Increase) decrease in restricted short term
investments............................................. (10) (23) (49) (43) 6
------ ------- -------- ------- --------
Net cash used in investing activities............... (195) (917) (6,122) (1,793) (2,198)
------ ------- -------- ------- --------
Cash from financing activities:
Proceeds from loan........................................ -- 250 3,500 2,500 --
Payments on loan.......................................... -- (250) (446) (78) (832)
Payments on capital lease obligations..................... -- -- (186) (185) (326)
Proceeds from sale-lease back............................. -- -- 535 535 240
Net proceeds from issuance of preferred stock............. -- 5,933 13,978 13,868 22,379
Proceeds from issuance of preferred stock warrants........ -- 37 -- -- --
Proceeds from issuance of common stock.................... -- 19 5 5 366
------ ------- -------- ------- --------
Net cash provided by financing activities........... -- 5,989 17,386 16,645 21,827
------ ------- -------- ------- --------
Increase in cash............................................ (974) 2,529 2,679 8,448 10,069
Cash and cash equivalents, beginning of period.............. 1,005 31 2,560 2,560 5,239
Cash and cash equivalents, end of period.................... $ 31 $ 2,560 $ 5,239 $11,008 $ 15,308
====== ======= ======== ======= ========
Supplemental cash flow information:
Interest paid............................................. $ 5 $ 5 $ 241 $ 142 $ 322
====== ======= ======== ======= ========
Income taxes paid......................................... $ 1 $ 1 $ 1 $ 1 $ 1
====== ======= ======== ======= ========
Noncash investing and financing activities:
Purchase of equipment under capital leases................ $ -- $ -- $ 1,218 $ -- $ --
====== ======= ======== ======= ========
Notes receivable from stockholders........................ $ -- $ -- $ -- $ -- $ 230
====== ======= ======== ======= ========
Convertible preferred stock warrants issued............... $ -- $ 24 $ 309 $ 309 $ --
====== ======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 83
EXTENSITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Extensity, Inc. (the Company) is a leading provider of Internet-based
workforce optimization software applications designed to improve the
productivity of employees across the enterprise and to enhance enterprise
operating efficiency. The Company was incorporated as Celerity, Inc. in Delaware
in November 1995, effective April 12, 1996, changed its name from Celerity, Inc.
to At Large Software, Inc. and changed its name from At Large Software, Inc. to
Extensity, Inc., effective August 19, 1997.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Extensity Europe Limited, which commenced
operations in September 1999. All significant intercompany balances and
transactions have been eliminated in consolidation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all investments with an original maturity of three
months or less to be cash equivalents. The Company periodically maintains cash
balances at banks in excess of the Federal Deposit Insurance Corporation
insurance limit of $100,000.
SHORT TERM INVESTMENTS
The Company accounts for its investments in quality corporate debt
securities under the provisions of Statement of Financial Accounting Standards
No. 115 (SFAS 115), Accounting for Certain Investments in Debt and Equity
Securities. The Company has classified all marketable debt securities as
held-to-maturity and has accounted for these investments at amortized cost. As
of December 31, 1998, the Company's carrying value of its short term investments
approximated their amortized cost basis.
RESTRICTED SHORT TERM INVESTMENT
The restricted short term investment consists of several one year
certificates of deposit required as collateral for the Company's letters of
credit (Note 5).
CONCENTRATION OF CREDIT RISK AND CERTAIN RISKS
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents, short term
investments and accounts receivable. The Company's accounts receivable are
derived from revenue earned from customers located primarily in the United
States. The Company performs credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers. The Company
F-7
<PAGE> 84
EXTENSITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
maintains an allowance for doubtful accounts receivable based upon the expected
collectibility of accounts receivable.
At December 31, 1998, two customers accounted for 60% of total accounts
receivable. At September 30, 1999, no customer accounted for more than 10% of
total accounts receivable.
Three customers accounted for 53% of total revenue during fiscal 1998. Four
customers accounted for 72% of total revenues during the nine month period ended
September 30, 1998. Three customers accounted for 48% of total revenues during
the nine month period ended September 30, 1999.
All of the Companies' revenues were derived from U.S. customers.
The market in which the Company competes is characterized by changing
customer needs, frequent new software product introductions and rapidly evolving
industry standards. Significant technological change could adversely affect the
Company's operating results.
SOFTWARE DEVELOPMENT COSTS
The Company capitalizes internally generated software development costs
under the provision of Statement of Financial Accounting Standards No. 86 (SFAS
86), Accounting for Costs of Computer Software to be Sold, Leased or Otherwise
Marketed. Capitalization of computer software development costs begins upon the
establishment of technological feasibility, which the Company has defined as
completion of a working model. Internally generated capitalizable software
development costs have not been material for years ended December 31, 1998 and
1997. The Company has not capitalized any software development costs to date,
and has charged software development costs as incurred to research and
development expense in the accompanying consolidated statements of operations.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
are calculated using the straight-line method over estimated useful lives of
three years, or over the lease term if it is shorter for leasehold improvements.
When assets are sold or retired, the cost and related accumulated
depreciation and amortization are removed from the accounts and any resulting
gain or loss is included in operations. Maintenance and repairs are charged to
operations as incurred.
INCOME TAXES
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes(SFAS No. 109). Under
SFAS No. 109, deferred income tax liabilities and assets are determined based on
the difference between the financial reporting amounts and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates in effect for the years in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized. Income tax expense is the tax payable for the period and the
change during the period in deferred tax assets and liabilities.
F-8
<PAGE> 85
EXTENSITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
REVENUE RECOGNITION
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-2, Software Revenue Recognition (SOP 97-2).The
Company adopted SOP 97-2 beginning in fiscal 1998. SOP 97-2 has been modified by
SOP 98-4 and SOP 98-9 as it relates to certain transactions. These standards
generally require revenues earned on software arrangements involving multiple
elements such as software products, upgrades, enhancements, postcontract
customer support, installation and training to be allocated to each element
based on the relative fair values of the elements. The fair value of an element
must be based on evidence that is specific to the vendor. Evidence of the fair
value of each element is based on the price charged when the element is sold
separately or, if the element is not being sold separately, the price for each
element established by management having relevant authority.
The Company's software products prior to the release in July 1999 of
Version 4.0 typically required significant customization, installation and other
services. Additionally, it was difficult to generate dependable estimates of the
costs necessary to complete product implementations. Therefore, the Company
accounted for its software licenses and implementation revenues using the
completed contract method as required under the provisions of SOP 97-2. Amounts
billed for maintenance are deferred and recognized ratably over the service
period related to the billing.
Following the release of Version 4.0 in July 1999, the Company commenced
recognizing revenues from both licenses and services ratably over the
maintenance period, which is typically one year. SOP 97-2 requires revenue to be
recognized ratably over the maintenance period in circumstances where vendor
specific objective evidence of the fair values of the respective elements of the
contract do not exist and the only remaining undelivered element of such
contract are the maintenance services.
STOCK-BASED COMPENSATION
The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB No. 25) and complies with the
disclosure provisions of Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation(SFAS No. 123). Under APB No. 25,
compensation expense is based on the difference, if any, between the fair value
of the Company's stock and the exercise price of the option on the measurement
date, which is typically the date of grant (see Note 8).
The Company accounts for options granted to non-employees under SFAS No.
123. Under SFAS No. 123, options are recorded at their fair value on the
measurement date, which is typically the date of grant.
HISTORICAL AND PRO FORMA NET LOSS PER SHARE
Historical basic and diluted net loss per share are computed using the
weighted average number of common shares outstanding. Options, warrants and
preferred stock were not included in the computation of diluted net loss per
share because the effect would be antidilutive.
F-9
<PAGE> 86
EXTENSITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Pro forma net loss per share has been computed assuming the conversion of
all outstanding shares of convertible preferred stock into shares of common
stock.
The following table sets forth the computation of historical and pro forma
basic and diluted net loss per share for the periods indicated (in thousands,
except per share data):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
HISTORICAL:
Numerator:
Net loss...................................... $ (830) $(3,228) $(10,985) $(7,328) $(14,976)
Denominator:
Weighted average shares....................... 1,750 1,835 1,982 1,963 2,956
Weighted average unvested common shares....... (1,531) (1,093) (656) (711) (273)
------- ------- -------- ------- --------
Total weighted average shares.......... 219 742 1,326 1,252 2,683
------- ------- -------- ------- --------
Net loss per share:
Basic and diluted............................. $ (3.79) $ (4.35) $ (8.28) $ (5.85) $ (5.58)
PRO FORMA:
Numerator:
Net loss...................................... $(10,985) $(14,976)
======== ========
Denominator:
Weighted average common shares, basic and
diluted..................................... 1,326 2,683
Conversion of convertible preferred stock..... 8,440 11,139
-------- --------
Total weighted average shares.......... 9,766 13,822
======== ========
Pro forma net loss per share:
Basic and diluted............................. $ (1.12) $ (1.08)
======== ========
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1997 1998 1999
------ ------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Computer hardware and software.......................... $ 876 $ 585 $ 985
Furniture and fixtures.................................. 178 133 504
Leasehold improvements.................................. 25 -- 56
Office equipment........................................ -- 44 90
Assets under capital leases............................. -- 1,429 1,734
------ ------ -------
1,079 2,191 3,369
Less accumulated depreciation and amortization.......... (187) (715) (1,348)
------ ------ -------
Total property and equipment, net..................... $ 892 $1,476 $ 2,021
====== ====== =======
</TABLE>
Accumulated amortization relating to assets under capital leases amounted
to $0, $466,000 and $693,000 as of December 31, 1997 and 1998 and September 30,
1999, respectively.
F-10
<PAGE> 87
EXTENSITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
The provision for income taxes for the years ended December 31, 1997 and
1998 and the nine month periods ended September 30, 1998 and 1999 relates to
minimum state income tax. The difference between the amount of income tax
benefit recorded of zero and the amount of income tax benefit calculated using
the federal statutory rate of 34% is primarily due to net operating losses being
fully offset by a valuation allowance. Significant components of the Company's
deferred tax balances are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1997 1998 1999
------- ------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards..................... $ 1,594 $ 5,325 $ 10,240
Research and development credit carryforwards...... 105 365 625
Other.............................................. 26 75 100
------- ------- --------
Total deferred tax asserts.................... 1,725 5,765 10,965
Valuation allowance................................ (1,725) (5,765) (10,965)
------- ------- --------
Net deferred tax assets....................... $ -- $ -- $ --
======= ======= ========
</TABLE>
Due to the uncertainty of realization, a valuation allowance has been
provided to offset net deferred tax assets at December 31, 1997 and 1998 and
September 30, 1999. The increase in the valuation allowance was $1,366,000,
$4,040,000 and $5,200,000 during the years ended December 31, 1997 and 1998, and
the nine month period ended September 30, 1999, respectively.
As of September 30, 1999, the Company had net operating loss carryforwards
of approximately $26.3 million and $20.9 million for federal and state income
tax purposes, respectively. Such carryforwards expire through 2018 and 2003 for
federal and state income tax purposes, respectively. At September 30, 1999, the
Company also had research and experimentation tax credit carryforwards of
$380,000 and $245,000 for federal and state purposes, respectively, and expire
in varying amounts through 2013.
Under the Tax Reform Act of 1986, the amounts of and benefits from net
operating loss carryforwards may be impaired of limited in certain circumstances
including as a result of a cumulative ownership change of more than 50%, as
defined, over a three-year period. The issuance of the Company's convertible
preferred securities may have resulted in a limitation on utilization of such
net operating loss carryforwards.
5. COMMITMENTS
During 1998, the Company entered into various lease agreements for computer
and office equipment. The Company leases office space under a noncancelable
operating lease expiring in June 2003. Total rent expense for 1998 and 1997
aggregated $383,000 and $88,000,
F-11
<PAGE> 88
EXTENSITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
respectively. Minimum future rental payments under capital and operating leases
at September 30, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDING DECEMBER 31, CAPITAL OPERATING
------------------------------- ------- ---------
<S> <C> <C>
1999........................................................ $ 128 $ 136
2000........................................................ 529 556
2001........................................................ 529 586
2002........................................................ 285 608
2003........................................................ 85 306
Thereafter.................................................. -- --
------ ------
Total minimum lease payments................................ 1,556 $2,192
======
Less amount representing interest and discount.............. 304
------
Present value of minimum lease payments..................... 1,252
Less current portion of capital lease obligations........... 445
------
Long term portion........................................... $ 807
======
</TABLE>
In connection with certain capital lease transactions, the Company granted
to the lessor warrants to purchase 22,425 shares of Series D preferred stock at
an exercise price of $3.30 per share. Such warrants were valued at approximately
$44,000 using the Black-Scholes valuation model and recorded as a long-term
asset, which is being amortized over the capital lease term of 4 years. Such
amortization amounted to $5,000 and $14,000 during the year ended December 31,
1998 and the nine-month period ended September 30, 1999.
The Company has established a $45,000 letter of credit with a bank for the
benefit of the Company's office space lessor. The letter of credit accrues
interest at the bank's prime rate and is collateralized by a $33,000 certificate
of deposit. As of September 30, 1999, no amounts were outstanding under the
letter of credit.
6. DEBT
In March 1998, the Company entered into a loan and security agreement with
a lender for $3,500,000. Borrowings under this loan accrue interest at an
average rate of 11.4% per annum and mature through March 25, 2001. The agreement
provides the lender with the right to exercise warrants to purchase 137,878
shares of Series D preferred stock at an exercise price of $3.30 per share. The
Company recorded the loan at a discount of approximately $265,000, which was
allocated to the warrants. The debt discount was calculated in accordance with
the provisions of APB No. 14, Accounting for Convertible Debt and Debt Issued
with Stock Purchase Warrant. The fair value of the warrants was estimated on the
date of grant using the Black-Scholes model with expected volatility of 40%,
risk-free interest of 6% and expected life of 10 years. Amortization of the debt
discount was recorded as interest expense and amounted to $58,000 and $66,000
during the year ended December 31, 1998 and the nine-month period ended
September 30, 1999, respectively.
F-12
<PAGE> 89
EXTENSITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Scheduled repayments of the loan subsequent to September 30, 1999 are as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1999..................................................... $ 285
2000..................................................... 1,225
2001..................................................... 712
-------
Total.................................................... 2,222
Less current portion..................................... (1,191)
-------
Long-term portion........................................ $ 1,031
=======
</TABLE>
The non-current portion of the Notes payable of $885,000 as of September
30, 1999 is net of the remaining debt discount of $146,000.
7. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
Mandatorily Redeemable Convertible Preferred consists of the following (in
thousands, except share data):
<TABLE>
<CAPTION>
OUTSTANDING
SHARES AMOUNT
----------- -----------
<S> <C> <C>
Issuance of Series A preferred stock........................ 2,000,000 $ 988
---------- -----------
Balance at December 31, 1996................................ 2,000,000 $ 988
Issuance of Series B preferred stock...................... 3,750,000 5,933
Issuance of Series B preferred stock warrants............. -- 62
---------- -----------
Balance at December 31, 1997................................ 5,750,000 $ 6,983
Issuance of Series C preferred stock...................... 937,500 1,872
Issuance of Series D preferred stock...................... 3,674,229 12,105
Issuance of Series D preferred stock warrants............. -- 309
---------- -----------
Balance at December 31, 1998................................ 10,361,729 $ 21,269
Issuance of Series E preferred stock...................... 3,732,820 22,379
---------- -----------
Balance at September 30, 1999............................... 14,094,549 $ 43,648
========== ===========
</TABLE>
In July 1999, the Company's Board of Directors approved an amendment to the
Company's Articles of Incorporation to increase the number of its authorized
shares of common stock and preferred stock to 30,000,000 and 14,582,970,
respectively.
Each share of Series A, B, C, D and E preferred stock is convertible into
common stock at the option of the stockholder on a one-for-one basis, subject to
certain adjustments. Each share of Series A, B, C, D and E preferred stock will
automatically convert to common stock upon the earlier of the closing date of an
underwritten public offering of the Company's common stock with an offering
price of not less than $8.00 per share and aggregate proceeds in excess of
$15,000,000 or the date of mutual consent of the holders of 60% of the then
outstanding preferred stock voting as a class.
Holders of preferred stock are entitled to one vote for each share of
common stock into which such shares may be converted. Each share of Series A, B,
C, D and E preferred stock entitles the stockholder to receive annual
noncumulative dividends of $0.045, $0.144, $0.18, $0.30 and $0.54 respectively,
in preference to holders of shares of common stock, if and when declared by the
Board of Directors. No dividends have been declared to date.
F-13
<PAGE> 90
EXTENSITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In the event of any liquidation, dissolution or winding up of the Company,
holders of Series A, B, C, D and E preferred stock are entitled to receive
$0.50, $1.60, $2.00, $3.30 and $6.00 per share, respectively, and all declared
but unpaid dividends prior and in preference to any distribution to holders of
common stock. After payment has been made to the holders of preferred stock, any
remaining assets will be distributed ratably among the holders of preferred and
common stock in proportion to the number of shares of common stock held by each,
assuming conversion of all Series A, B, C, D and E preferred stock until certain
limits are reached. If the Company's assets are insufficient to provide for the
full preference amount for the preferred stock outstanding, then such assets
will be distributed ratably among the holders of the preferred stock in
proportion to the amount of such stock owned by each stockholder.
At any time after May 31, 2004, the holders of at least 75% of the then
outstanding shares of Series A, B, C, D and E preferred stock may require the
Company to redeem all or any part of the then outstanding shares of Series A, B,
C, D and E preferred stock at a price equal to $0.50, $1.60, $2.00, $3.30 and
$6.00 per share, respectively, plus all declared but unpaid dividends on such
shares.
PREFERRED STOCK WARRANTS ISSUED IN CONNECTION WITH FINANCINGS
On January 29, 1997, the Company entered into a loan and security agreement
with a bank. During fiscal 1997, $250,000 was drawn on the loan and was repaid
in the same year. This loan expired on June 15, 1997. In conjunction with this
loan agreement, the Company issued to the lender a warrant to purchase 23,585
shares of Series B preferred stock at an exercise price per share of $1.59. The
Company recorded the loan at a discount of $24,000 which discount was allocated
to the warrant and amortized as interest expense during 1997. The warrant
expires on January 28, 2002 and was not exercised as of September 30, 1999.
During 1998, the Company entered into financing agreements with a financial
institution (see Note 6). In conjunction with these transactions, the Company
issued to the financial institution warrants to purchase shares of Series D
preferred stock at an exercise price of $3.30 per share. These warrants expire
through December 2008 and none were exercised as of September 30, 1999.
8. STOCK OPTIONS
In 1996, the Company adopted the 1996 Stock Option Plan (the Plan) under
which eligible employees, directors, and consultants can receive options to
purchase shares of the Company's common stock at a price generally not less than
100% of the fair value of the common stock on the date of the grant for
incentive stock options and nonstatutory stock options. The Plan, as amended
through September 30, 1999, allows for the issuance of a maximum of 6,100,000
shares of the Company's common stock. This number of shares of common stock has
been reserved for issuance under the Plan. The options granted under the Plan
vest according to varying schedules determined by the Plan Administrator,
currently the Board of Directors. Options generally vest over four years and
expire ten years from the date of grant.
F-14
<PAGE> 91
EXTENSITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the activity under the Plan since inception is set forth
below:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES -------------------------------------------
AVAILABLE NUMBER OF PRICE AGGREGATE
FOR GRANT SHARES PER SHARE PRICE
---------- ---------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1996...... 630,500 619,500 $0.10 $ 62
---------- ---------- ------------- ------
Additional shares reserved........ 250,000 -- -- --
Options granted................... (908,992) 908,992 $0.10 - $0.16 140
Options exercised................. -- (209,784) $0.10 - $0.16 (21)
Options forfeited................. 319,458 (319,458) $0.10 - $0.16 (32)
---------- ---------- ------------- ------
Balance at December 31, 1997...... 290,966 999,250 $0.10 - $0.16 149
Additional shares reserved........ 2,100,000 -- -- --
Options granted................... (1,066,500) 1,066,500 $0.16 - $0.33 280
Options exercised................. -- (45,409) $0.10 - $0.16 (5)
Options forfeited................. 115,874 (115,874) $0.10 - $0.16 (18)
---------- ---------- ------------- ------
Balance at December 31, 1998...... 1,440,340 1,904,467 $0.16 - $0.33 406
Additional shares reserved........ 2,500,000 -- --
Options granted................... (2,783,217) 2,783,217 $0.33 - $3.25 1,901
Options exercised................. -- (1,739,294) $0.05 - $0.33 (596)
Options forfeited................. 265,697 (265,697) $0.16 - $0.33 (54)
---------- ---------- ------------- ------
Outstanding at September 30,
1999............................ 1,422,820 2,682,693 $0.10 - $3.25 $1,657
========== ========== ============= ======
</TABLE>
The following table summarizes information with respect to stock options
outstanding at September 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
--------------- ----------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.10 - $0.33 1,371,243 8.4 $0.26 405,469 $0.19
$0.55 - $0.70 696,500 9.6 $0.63 --
$1.00 - $1.50 560,950 9.7 $1.37 --
$3.25 54,000 9.8 $3.25 --
--------- --------
2,682,693 8.9 $0.62 405,469
</TABLE>
The Plan allows certain option holders to exercise their options prior to
vesting. However, such exercises are subject to repurchase by the Company if not
vested. The Company's repurchase right lapses over a four year period. As of
September 30, 1999, 887,243 shares of common stock acquired by option holders
are subject to repurchase by the Company.
The Company accounts for employee and board of director stock options in
accordance with the provisions of APB No. 25 and complies with the disclosure
provisions of SFAS No. 123.
Under APB No. 25, compensation expense is recognized based on the amount by
which the fair value of the underlying common stock exceeds the exercise price
of the stock options at the measurement date, which in the case of employee
stock options is typically the date of
F-15
<PAGE> 92
EXTENSITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
grant. For financial reporting purposes, the Company has determined that the
deemed fair market value on the date of grant of certain employee stock options
was in excess of the exercise price of the options. This amount is recorded as
deferred compensation and is classified as a reduction of stockholders' equity
and is amortized as a charge to operations over the vesting period of the
applicable options. The vesting period is generally four years. The fair value
per share used to calculate deferred compensation was derived by reference to
the preferred stock values and the Company's initial public offering price
range. Consequently, the Company recorded deferred stock compensation of $0 and
$6,086,195 during the year ended December 31, 1998 and the nine months ended
September 30, 1999, respectively. Amortization recognized for the year ended
December 31, 1998 and the nine months ended September 30, 1999 totaled $0 and
$2,478,809, respectively.
The weighted average fair values of the options granted in fiscal 1996,
1997, 1998 and the nine month periods ended September 30, 1998 and 1999 were
$0.03, $0.06, $0.81, $0.50 and $2.87, respectively.
Had compensation cost for option grants to employees been determined
consistent with SFAS No. 123, the Company's net loss would have been as follows
(in thousands, except per share data):
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------- -------------------
1996 1997 1998 1998 1999
------ ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Pro forma net loss.................. $ 839 $3,248 $11,023 $7,356 $15,754
Pro forma net loss per share, basic
and diluted......................... $(3.84) $(4.38) $ (8.31) $(5.88) $ (5.87)
</TABLE>
The above pro forma disclosures are not necessarily representative of the
effects on reported income or loss for future years as additional grants are
made each year and options vest over several years.
The fair value of each option grant was estimated on the date of grant
using the minimum value options pricing model with the following weighted
average assumptions by period:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------- --------------------
1996 1997 1998 1998 1999
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Risk-free interest rate......... 5.9% 5.7% 5.5% 5.5% 5.6%
Expected life (in years)........ 4 4 4 4 4
Dividends....................... -- -- -- -- --
</TABLE>
Because the Company does not have actively traded equity securities,
volatility is not considered in determining the value of options granted to
employees.
9. 401(k) PLAN
In January 1998, the Company adopted a 401(k) plan for employees. All
employees who meet certain service requirements are eligible to participate.
Matching contributions are at the discretion of the Company. The Company made no
matching or discretionary contributions during 1998 and the nine month period
ended September 30, 1999.
F-16
<PAGE> 93
EXTENSITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. SUBSEQUENT EVENTS
In October 1999, the Company's Board of Directors authorized the Company to
file a registration statement with the Securities and Exchange Commission for
the purpose of an initial public offering of the Company's common stock. Upon
the completion of this offering, the Company's preferred stock will be converted
into shares of common stock, and all outstanding shares of preferred stock will
be cancelled and retired. The pro forma effect of the conversion has been
presented as a separate column in the Company's balance sheet, assuming the
conversion had occurred as of September 30, 1999.
The Board of Directors also authorized, subject to stockholders' approval,
(i) establishment of the Employee Stock Purchase Plan 2000 (ESPP) with 500,000
shares reserved for issuance and (ii) the amendment of the Company's 1996 Stock
Option Plan to provide for, among other things, an increase to 7,000,000 of the
number of shares of common stock reserved for issuance thereunder, and an annual
replenishment of the shares of common stock authorized for issuance thereunder
equal to the lesser of (a) 1,300,000 shares, (b) 4% of the outstanding shares on
such date or (c) a lesser amount to be determined by the Board. The ESPP and the
amendment to the Company's 1996 Stock Option Plan will become effective upon the
closing of the initial public offering.
F-17
<PAGE> 94
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF
COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE
OF OUR COMMON STOCK.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 4
Special Note Regarding Forward-
Looking Statements and Industry
Data................................ 17
Use of Proceeds....................... 18
Dividend Policy....................... 18
Capitalization........................ 19
Dilution.............................. 20
Selected Consolidated Financial
Data................................ 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 33
Management............................ 49
Certain Transactions.................. 58
Principal Stockholders................ 61
Description of Capital Stock.......... 63
Shares Eligible for Future Sale....... 66
Underwriting.......................... 68
Legal Matters......................... 70
Experts............................... 70
Where You Can Find Additional
Information......................... 70
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT BUY, SELL OR TRADE IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. DEALERS ARE ALSO
OBLIGATED TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ---------------------------------------------------------
[LOGO]
SHARES
COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
BEAR, STEARNS & CO. INC.
HAMBRECHT & QUIST
PROSPECTUS
, 1999
<PAGE> 95
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of Common Stock being registered. All amounts are estimates except
the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
Registration Fee............................................ $ 15,985
NASD Fee.................................................... *
Nasdaq National Market Listing Fee.......................... *
Printing and Engraving...................................... 225,000
Legal Fees and Expenses..................................... 325,000
Accounting Fees and Expenses................................ 300,000
Blue Sky Fees and Expenses.................................. 10,000
Transfer Agent Fees......................................... 20,000
Miscellaneous............................................... *
----------
Total..................................................... $1,000,000
==========
</TABLE>
- -------------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's certificate of incorporation includes a provision that eliminates
the personal liability of its directors for monetary damages for breach or
alleged breach of their duty of care to the Company or its stockholders. In
addition, as permitted by Section 145 of the Delaware General Corporation Law,
the certificate of incorporation of the Registrant provides, inter alia, that
each person who is made a party or is threatened to be made a party to or
otherwise involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she is or was a director or officer of the Company or, while a
director or officer of the Company, is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a director
or officer or in any other capacity while serving as a director or officer, is
authorized to be indemnified and held harmless by the Company to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended, against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such indemnitee in
connection therewith and such indemnification shall continue as to an
indemnitee's heirs, executors and administrators; provided, however, that,
except with respect to the proceedings brought by an indemnitee to enforce
rights to indemnification (subject to certain restrictions and as more fully
described in the Registrant's certificate of incorporation), the Company shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Company. The right to
indemnification conferred in the Registrant's certificate of incorporation
includes the right to be paid by the Company the expenses incurred in connection
with any such proceeding in advance of its final
II-1
<PAGE> 96
disposition; provided, however, that, if and to the extent that the Delaware
General Corporation Law requires, such an advancement of expenses incurred by an
indemnitee in his or her capacity in which service was or is rendered by such
indemnitee, including, without limitation, service with respect to an employee
benefit plan, shall be made only upon delivery to the Company of an undertaking
by or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal that such indemnitee is not entitled to be indemnified
for such expenses under the Company's certificate of incorporation or otherwise.
The Registrant's policy is to enter into indemnification agreements with
each of its directors and executive officers that provide the maximum indemnity
allowed to directors and executive officers by Section 145 of the Delaware
General Corporation Law and the Bylaws, as well as certain additional procedural
protections. The indemnity agreements provide that directors and executive
officers will be indemnified to the fullest possible extent not prohibited by
law against all expenses (including attorney's fees) and settlement amounts paid
or incurred by them in any action or proceeding, including any derivative action
by or in the right of the Registrant, on account of their services as directors
or executive officers of the Registrant or as directors or officers of any other
company or enterprise when they are serving in such capacities at the request of
the Registrant. Pursuant to the indemnity agreements, the Company will not be
obligated to indemnify or advance expenses to an indemnified party with respect
to proceedings or claims initiated by the indemnified party and not by way of
defense, except with respect to proceedings specifically authorized by the Board
of Directors or brought to enforce a right to indemnification under such
indemnity agreement, the Company's certificate of incorporation, Bylaws or any
statute or law, or as otherwise required under Section 145 of the Delaware
General Corporation Law. Also under the indemnity agreements, the Company is not
obligated to indemnify the indemnified party for (i) any expenses incurred by
the indemnified party with respect to any proceeding instituted by the
indemnified party to enforce or interpret the agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
indemnified party in such proceeding was not made in good faith or was
frivolous, (ii) acts, omissions or transactions on the part of the indemnified
party from which such party may not be relieved of liability under applicable
law or (iii) expenses and the payment of profits arising from the purchase and
sale by the indemnified party of securities in violation of Section 16(b) of the
Exchange Act, or any similar or successor statute.
The indemnification provisions in the certificate of incorporation and the
indemnification agreements entered into between the Registrant and its directors
and executive officers, may be sufficiently broad to permit indemnification of
the Registrant's officers and directors for liabilities arising under the 1933
Act.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ------- --------
<C> <S>
1.1 Form of Underwriting Agreement
3.2 Amended and Restated Certificate of Incorporation, as
amended
10.1 Form of Indemnification Agreement entered into by the
Registrant with each of its directors and executive officers
</TABLE>
II-2
<PAGE> 97
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following sets forth information regarding all securities sold by us
since January 1997:
1. In January 1997, we issued and sold a warrant to purchase 23,585 shares
of Series B Preferred Stock at an exercise price of $1.59 per share to
Silicon Valley Bank. The foregoing purchase and sale was exempt from
registration under the Securities Act pursuant to Section 4(2) thereof
on the basis that the transaction did not involve a public offering.
2. In May 1997, we issued and sold an aggregate of 3,750,000 shares of
Series B Preferred Stock to a total of nine investors for $1.59 per
share, or an aggregate of $5,962,500. In May 1997 we also issued and
sold warrants to purchase up to 937,500 shares of Series C Preferred
Stock at an exercise price of $2.00 per share to the same nine
investors, all of whom exercised their warrants in June 1998.
3. From August 1997 through December 1997 we issued and sold an aggregate
of 27,758 shares of common stock at a purchase price of $0.16 per share
to five consultants. The foregoing purchases and sales were exempt from
registration under the Securities Act pursuant to Section 4(2) thereof
on the basis that the transaction did not involve a public offering.
4. In March 1998, we issued and sold an aggregate of 2,500 shares of
common stock at a purchase price of $0.16 per share to a consultant.
The foregoing purchases and sales were exempt from registration under
the Securities Act pursuant to Section 4(2) thereof on the basis that
the transaction did not involve a public offering.
5. On June 2, 1998, we issued and sold an aggregate of 1,445 shares of
common stock at a purchase price of $0.16 per share to a consultant.
The foregoing purchase and sale was exempt from registration under the
Securities Act pursuant to Section 4(2) thereof on the basis that the
transaction did not involve a public offering.
6. On June 26, 1998 and September 30, 1998, we issued and sold an
aggregate of 3,674,229 shares of Series D Preferred Stock to a total of
14 investors for $3.30 per share, or an aggregate of $12,124,957.
7. In June 1998 and December 1998, we issued and sold warrants to purchase
160,304 shares of Series D Preferred Stock to Comdisco, Inc. at an
exercise price of $3.30 per share for an aggregate purchase price of
$529,003. The foregoing purchases and sales were exempt from
registration under the Securities Act pursuant to Section 4(2) thereof
on the basis that the transaction did not involve a public offering.
8. On July 6, 1998, we issued and sold an aggregate of 10,000 shares of
common stock at a purchase price of $0.33 per share to two consultants.
The foregoing purchases and sales were exempt from registration under
the Securities Act pursuant to Section 4(2) thereof on the basis that
the transaction did not involve a public offering.
9. In June 1999, we issued and sold an aggregate of 4,000 shares of common
stock at a purchase price of $0.70 per share to two investors for an
aggregate purchase price of $2,800. The foregoing purchases and sales
were exempt from registration under the Securities Act pursuant to
Section 4(2) thereof on the basis that the transaction did not involve
a public offering.
10. In August 1999, we issued and sold an aggregate of 25,000 shares of
common stock to three investors for an aggregate purchase price of
$37,500. The foregoing purchases
II-3
<PAGE> 98
and sales were exempt from registration under the Securities Act
pursuant to Section 4(2) thereof on the basis that the transaction did
not involve a public offering.
11. On July 27, 1999 and August 20, 1999, we issued and sold an aggregate
of 3,732,820 shares of Series E Preferred Stock to a total of 47
investors for $6.00 per share, or an aggregate of $22,396,920. The
foregoing purchases and sales were exempt from registration under the
Securities Act pursuant to Section 4(2) thereof on the basis that the
transaction did not involve a public offering.
12. Since January 1997, we have granted stock options under our 1996 Stock
Option Plan, covering an aggregate of 4,876,389 shares of common stock
(net of expirations and cancellations) at exercise prices ranging from
$0.10 to $6.00.
13. Since January 1997, options to purchase an aggregate of 2,050,265
shares of common stock under our 1996 Stock Option Plan were exercised
with a weighted average exercise price of approximately $0.62 per
share.
Except as indicated above, none of the foregoing transactions involved any
underwriters, underwriting discounts or commissions, or any public offering, and
we believe that each transaction was exempt from the registration requirements
of the Securities Act by virtue of Section 4(2) thereof, Regulation D
promulgated thereunder or Rule 701 pursuant to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The
recipients in such transactions represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof, and appropriate legends were affixed to the share
certificates and instruments issued in such transactions. All recipients had
adequate access to information about the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT DESCRIPTION
------- -------------------
<S> <C>
1.1* Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Registrant
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant
3.3 Bylaws of the Registrant
4.1 Form of Registrant's Common Stock Certificate
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, P.C. regarding
legality of the securities being issued
10.1 Form of Indemnification Agreement entered into by and
between the Registrant and each of its directors and
executive officers
10.2 Warrant dated January 28, 1997 issued to Silicon Valley Bank
10.3 Warrant dated June 29, 1998 issued to Comdisco, Inc.
10.4 Warrant dated June 29, 1998 issued to Comdisco, Inc.
10.5 Warrant dated June 29, 1998 issued to Comdisco, Inc.
10.6 Warrant dated December 1, 1998 issued to Comdisco, Inc.
10.7 Warrant dated December 11, 1998 issued to Comdisco, Inc.
10.8 Lease agreement dated by and between the Registrant and
Spieker Properties, Inc.
</TABLE>
II-4
<PAGE> 99
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT DESCRIPTION
------- -------------------
<S> <C>
10.9 Offer Letter dated February 16, 1999 by and between the
Registrant and Robert Spinner
10.10 1996 Stock Option Plan
10.11 Employee Stock Purchase Plan 2000 and related agreements
23.1* Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included
in Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
24.1 Power of Attorney (See page II-5)
27 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts and Reserves.
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.
ITEM 17. UNDERTAKINGS
The undersigned hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referenced in Item 14 of this Registration
Statement or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question 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 Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the 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 Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-5
<PAGE> 100
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement on Form S-1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Emeryville, State of
California, on the 11(th) day of November, 1999.
EXTENSITY, INC.
By: /s/ ROBERT A. SPINNER
-------------------------------------
Robert A. Spinner,
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears constitutes and appoints, jointly and severally, Robert A. Spinner,
Sharam I. Sasson and Kenneth R. Hahn, as his true and lawful attorney-in-fact
and agent, each with full power of substitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents or any of them, or his or their substitute or substitutes, may
lawfully do or cause to be done or by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ ROBERT A. SPINNER President and Chief Executive November 11, 1999
- ---------------------------------- Officer and Director (Principal
Robert A. Spinner Executive Officer)
/s/ KENNETH R. HAHN Vice President of Finance and November 11, 1999
- ---------------------------------- Administration, (Principal
Kenneth R. Hahn Financial and Accounting Officer)
/s/ SHARAM I. SASSON Chairman of the Board of Directors November 11, 1999
- ---------------------------------- and Founder
Sharam I. Sasson
/s/ JOHN R. HUMMER Director November 11, 1999
- ----------------------------------
John R. Hummer
/s/ MITCHELL E. KERTZMAN Director November 11, 1999
- ----------------------------------
Mitchell E. Kertzman
/s/ TED E. SCHLEIN Director November 11, 1999
- ----------------------------------
Ted E. Schlein
</TABLE>
II-6
<PAGE> 101
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT DESCRIPTION
- ------- -------------------
<S> <C>
1.1* Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Registrant
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant
3.2 Bylaws of the Registrant
4.1 Form of Registrant's Common Stock Certificate
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, P.C. regarding
legality of the securities being issued
10.1 Form of Indemnification Agreement entered into by and
between the Registrant and each of its directors and
executive officers
10.2 Warrant dated January 28, 1997 issued to Silicon Valley Bank
10.3 Warrant dated June 29, 1998 issued to Comdisco, Inc.
10.4 Warrant dated June 29, 1998 issued to Comdisco, Inc.
10.5 Warrant dated June 29, 1998 issued to Comdisco, Inc.
10.6 Warrant dated December 1, 1998 issued to Comdisco, Inc.
10.7 Warrant dated December 11, 1998 issued to Comdisco, Inc.
10.8 Lease agreement dated by and between the Registrant and
Spieker Properties, Inc.
10.9 Offer Letter dated February 16, 1999 by and between the
Registrant and Robert Spinner
10.10 1996 Stock Option Plan
10.11 Employee Stock Purchase Plan 2000 and related agreements
23.1* Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included
in Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers Independent Accountants
24.1 Power of Attorney (See page II-5)
27 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF EXTENSITY, INC.,
a Delaware Corporation
(Originally incorporated on November 13, 1995 as Celerity, Inc.)
ARTICLE I
The name of this Corporation is Extensity, Inc.
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is the Corporation Trust
Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
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 Forty
Four Million Five Hundred Eighty-Two Thousand Nine Hundred Seventy (44,582,970)
shares. Thirty Million (30,000,000) shares shall be Common Stock, par value
$0.001 per share, and Fourteen Million Five Hundred Eighty-Two Thousand Nine
Hundred Seventy (14,582,970) shares shall be Preferred Stock, par value $0.01
per share. Of the authorized shares of Preferred Stock a total of Two Million
(2,000,000) shares shall be designated Series A Preferred Stock ("SERIES A
PREFERRED"), a total of Three Million, Seven Hundred Seventy-Three Thousand,
Four Hundred Thirty-Seven (3,773,437) shares shall be designated Series B
Preferred Stock ("SERIES B PREFERRED"), a total of Nine Hundred Seventy-Five
Thousand (975,000) shares shall be designated Series C Preferred Stock ("SERIES
C PREFERRED"), a total of Three Million Eight Hundred Thirty-Four Thousand, Five
Hundred Thirty-Three (3,834,533) shares shall be designated Series D Preferred
Stock ("SERIES D PREFERRED"), and a total of Four Million (4,000,000) shares
shall be designated Series E Preferred Stock ("SERIES E PREFERRED").
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
preferences, privileges and restrictions granted to and imposed on the Series A
Preferred, Series B Preferred,
<PAGE> 2
Series C Preferred, Series D Preferred and Series E Preferred are as set forth
below in this Article IV(B).
1. Dividend Provisions. The holders of shares of Preferred Stock
shall be entitled to receive dividends, when and if declared by the Board of
Directors, out of any assets legally available therefor, prior and in preference
to any declaration or payment of any dividend (payable other than in Common
Stock) on the Common Stock of this Corporation, at the rate of (i) four and
one-half cents ($0.045) per share per annum for each share of Series A Preferred
held by them (as adjusted for any stock dividends, combinations or splits with
respect to such shares), (ii) fourteen and four-tenths cents ($0.144) per share
per annum for each share of Series B Preferred held by them (as adjusted for any
stock dividends, combinations or splits with respect to such shares), (iii)
eighteen cents ($0.18) per share per annum for each share of Series C Preferred
held by them (as adjusted for any stock dividends, combinations or splits with
respect to such shares), (iv) thirty cents ($0.30) per share per annum for each
share of Series D Preferred held by them (as adjusted for any stock dividends,
combinations or splits with respect to such shares), and (v) fifty-four cents
($0.54) per share per annum for each share of Series E Preferred held by them
(as adjusted for any stock dividends, combinations or splits with respect to
such shares). If any dividends are paid on shares of any Series of Preferred
Stock, dividends shall be paid on shares of all Series of Preferred Stock on a
pro rata basis based on the foregoing dividend rates. After such dividends are
declared and paid upon the shares of Preferred Stock, dividends may be declared
and paid on the Common Stock if at the same time equivalent dividends are
declared and paid to holders of Preferred Stock (as determined on an as
converted basis for the Preferred Stock). Such dividends shall not be
cumulative.
2. Liquidation Preference.
a. Primary Distribution. In the event of any
liquidation, dissolution or winding up of this Corporation, either voluntary or
involuntary, the holders of Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets and funds of this
Corporation to the holders of Common Stock by reason of their ownership thereof,
(i) the amount of fifty cents ($0.50) (the "ORIGINAL SERIES A ISSUE PRICE") for
each outstanding share of Series A Preferred then held of record by such holder,
(ii) the amount of one dollar and sixty cents ($1.60) (the "ORIGINAL SERIES B
ISSUE PRICE") for each outstanding share of Series B Preferred then held of
record by such holder, (iii) the amount of two dollars ($2.00) (the "ORIGINAL
SERIES C ISSUE PRICE") for each outstanding share of Series C Preferred then
held of record by such holder, (iv) the amount of three dollars and thirty cents
($3.30) (the "ORIGINAL SERIES D ISSUE PRICE") for each outstanding share of
Series D Preferred then held of record by such holder, and (v) the amount of six
dollars ($6.00) (the "ORIGINAL SERIES E ISSUE PRICE") for each outstanding share
of Series E Preferred then held of record by such holder, plus in each case an
amount equal to declared but unpaid dividends on such respective shares. If upon
the occurrence of such event, the assets and funds of the Corporation legally
available for distribution to the holders of Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed among the holders of
Preferred Stock in a manner such that the amount distributed to each holder of
Preferred Stock shall equal the amount obtained by multiplying the entire assets
and funds of the Corporation legally available for distribution hereunder by a
fraction, the numerator of which shall be the sum obtained by adding
-2-
<PAGE> 3
(a) the product obtained by multiplying the number of shares of Series A
Preferred then held by the holder by the liquidation preference amount per share
of the Series A Preferred plus (b) the product obtained by multiplying the
number of shares of Series B Preferred then held by the holder by the
liquidation preference amount per share of the Series B Preferred plus (c) the
product obtained by multiplying the number of shares of Series C Preferred then
held by the holder by the liquidation preference amount per share of the Series
C Preferred plus (d) the product obtained by multiplying the number of shares of
Series D Preferred then held by the holder by the liquidation preference amount
per share of the Series D Preferred plus (e) the product obtained by multiplying
the number of shares of Series E Preferred then held by the holder by the
liquidation preference amount per share of the Series E Preferred, and the
denominator of which shall be the sum obtained by adding (v) the product
obtained by multiplying the total then outstanding number of shares of Series A
Preferred by the liquidation preference amount per share of the Series A
Preferred plus (w) the product obtained by multiplying the total then
outstanding number of shares of Series B Preferred by the liquidation preference
amount per share of the Series B Preferred plus (x) the product obtained by
multiplying the total then outstanding number of shares of Series C Preferred by
the liquidation preference amount per share of the Series C Preferred plus (y)
the product obtained by multiplying the total then outstanding number of shares
of Series D Preferred by the liquidation preference amount per share of the
Series D Preferred plus (z) the product obtained by multiplying the total then
outstanding number of shares of Series E Preferred by the liquidation preference
amount per share of the Series E Preferred.
b. Secondary Distribution. Upon the completion of the
distribution required by subparagraph (a) of this Section 2, any remaining
assets of the Corporation legally available for distribution to stockholders
shall be distributed among the holders of Preferred Stock and Common Stock pro
rata in proportion to the number of shares of Common Stock held by each
(assuming conversion of all such Preferred Stock) until (i) with respect to the
holders of Series A Preferred, such holders shall have received an aggregate of
two dollars ($2.00) per share of Series A Preferred held by them (including
amounts paid pursuant to subparagraph (a) of this Section 2) (as adjusted for
any stock dividends, combinations or splits with respect to such shares), (ii)
with respect to the holders of Series B Preferred, such holders shall have
received an aggregate of six dollars and forty cents ($6.40) per share of Series
B Preferred held by them (including amounts paid pursuant to subparagraph (a) of
this Section 2) (as adjusted for any stock dividends, combinations or splits
with respect to such shares), (iii) with respect to the holders of Series C
Preferred, such holders shall have received an aggregate of eight dollars
($8.00) per share of Series C Preferred held by them (including amounts paid
pursuant to subparagraph (a) of this Section 2) (as adjusted for any stock
dividends, combinations or splits with respect to such shares), (iv) with
respect to the holders of Series D Preferred, such holders shall have received
an aggregate of nine dollars ($9.00) per share of Series D Preferred held by
them (including amounts paid pursuant to subparagraph (a) of this Section 2) (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) and (v) with respect to the holders of Series E Preferred, such holders
shall have received an aggregate of nine dollars ($9.00) per share of Series E
Preferred held by them (including amounts paid pursuant to subparagraph (a) of
this Section 2) (as adjusted for any stock dividends, combinations or splits
with respect to such shares). Thereafter, any remaining assets and funds legally
available for distribution to stockholders shall be distributed solely to the
holder of Common Stock pro rata in proportion to the number of shares of Common
Stock held by each.
-3-
<PAGE> 4
c. Definition of Liquidity Event; Notice.
(i) For purposes of this Section 2, a
liquidation, dissolution or winding up of this Corporation shall be deemed to be
occasioned by, and to include, (A) the acquisition of the Corporation by another
entity by means of any transaction or Series of related transactions (including,
without limitation, any reorganization, merger or consolidation); or (B) 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) (each such
acquisition or sale, a "LIQUIDITY EVENT"); unless in each case, 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 fifty percent (50%) of the voting power of the
surviving or acquiring entity.
(ii) In any Liquidity Event, if the
consideration received by the Corporation is other than cash, its value shall be
the fair market value thereof, as determined by the Board of Directors of this
Corporation. Notwithstanding the foregoing, the fair market value of any
securities received as consideration shall be determined as follows:
(1) Securities not subject to investment
letter or other similar restrictions on free marketability shall be valued as
follows: (1) if traded on a securities exchange or through the Nasdaq National
Market, the value shall be deemed to be the average of the closing prices of the
securities on such exchange over the thirty (30) day period ending three (3)
days prior to the closing; (2) if actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty (30) day period ending three (3) days prior to
the closing; and (3) if there is no active public market, the value shall be the
fair market value thereof, as determined in good faith by the Board of Directors
of the Corporation.
(2) Securities subject to investment letter
or other restrictions on free marketability (other than restrictions arising
solely by virtue of a stockholder's status as an affiliate or former affiliate)
shall be valued in such a manner as to make an appropriate discount from the
market value determined as above in (A) (1), (2) or (3) to reflect the
approximate fair market value thereof, as determined in good faith by the Board
of Directors of the Corporation.
(iii) The Corporation shall give each holder of
record of Preferred Stock written notice of any such impending Liquidity Event
not later than fifteen (15) days prior to the stockholder meeting called to
approve such Liquidity Event, or thirty (30) days prior to the closing of such
transaction, whichever notice date 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, the provisions of this Section 2, and the nature and the amounts of
the consideration anticipated to be distributed to holders of each outstanding
Series and class of capital stock of the Corporation pursuant to this Section 2,
and the Corporation shall thereafter give such holders prompt notice of any
material changes. The transaction shall in no event take place earlier than
thirty (30) 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
-4-
<PAGE> 5
changes provided for herein; provided, however, that such periods may be
shortened (but shortened to no less than two (2) days after the Corporation has
given notice provided for herein) upon the written consent of the holders of
Preferred Stock that are entitled to such notice rights or similar notice rights
and that represent at least sixty percent (60%) of the voting power of all then
outstanding shares of such Preferred Stock (on an as-converted into Common Stock
basis).
(iv) In the event the requirements of this
subsection 2(c) are not complied with, this Corporation shall forthwith either:
(1) cause such closing to be postponed until
such time as the requirements of this Section 2 have been complied with; or
(2) cancel such transaction, in which event
the rights, preferences and privileges of the holders of 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 subsection
2(c)(iv) hereof.
3. Redemption of Preferred Stock.
a. Right to Redemption. Upon the written request of the
holders of at least seventy-five percent (75%) of the then outstanding shares of
Preferred Stock (on an as-converted into Common Stock basis) at any time after
May 31, 2004 (the "MANDATORY REDEMPTION NOTICE"), the Corporation shall, subject
to Section 3(c) below, redeem all of the Preferred Stock outstanding as of the
date of the redemption notice (the "REDEMPTION NOTICE DATE"). The Preferred
Stock shall be redeemed by the Corporation in full on a date (the "MANDATORY
REDEMPTION DATE") within sixty (60) days following the Redemption Notice Date at
the Mandatory Redemption Price (as defined in Section 3(b) below).
b. Redemption Price. The Series A Mandatory Redemption
Price for each share of Series A Preferred (the "SERIES A MANDATORY REDEMPTION
PRICE") shall be an amount in cash equal to the sum of fifty cents ($0.50) plus
all declared and unpaid dividends thereon to and including the date fixed for
redemption. The redemption price for each share of Series B Preferred (the
"SERIES B MANDATORY REDEMPTION PRICE") shall be an amount in cash equal to the
sum of one dollar and sixty cents ($1.60) plus all declared and unpaid dividends
thereon to and including the date fixed for redemption. The redemption price for
each share of Series C Preferred (the "SERIES C MANDATORY REDEMPTION PRICE")
shall be an amount in cash equal to the sum of two dollars ($2.00) plus all
declared and unpaid dividends thereon to and including the date fixed for
redemption. The redemption price for each share of Series D Preferred (the
"SERIES D MANDATORY REDEMPTION PRICE") shall be an amount in cash equal to the
sum of three dollars and thirty cents ($3.30) plus all declared and unpaid
dividends thereon to and including the date fixed for redemption. The redemption
price for each share of Series E Preferred (the "SERIES E MANDATORY REDEMPTION
PRICE") shall be an amount in cash equal to the sum of six dollars ($6.00) plus
all declared and unpaid dividends thereon to and including the date fixed for
redemption. (The Series A Mandatory Redemption Price, the Series B Mandatory
Redemption Price, the Series C Mandatory Redemption Price, the Series D
Mandatory Redemption Price and the Series E Mandatory Redemption Price are
individually or collectively referred to herein as the "MANDATORY REDEMPTION
PRICE").
-5-
<PAGE> 6
c. Pro Rata Redemption. In the event the Corporation is
lawfully permitted to redeem only a part of the outstanding shares of Preferred
Stock to be redeemed on the Mandatory Redemption Date, the Corporation shall
redeem the maximum possible number of such shares ratably, so that (i) the
Corporation shall redeem an equal proportion of the total number of shares of
Series A Preferred then outstanding, Series B Preferred then outstanding, Series
C Preferred then outstanding, and Series D Preferred then outstanding and Series
E Preferred then outstanding, and (ii) as among the holders of any individual
Series of Preferred Stock, the Corporation shall redeem from each holder of
shares of such Series that number of shares equal to the product obtained by
multiplying the total number of shares of such Series of Preferred Stock to be
redeemed by the Corporation by a fraction, the numerator of which is the number
of shares of such Series of Preferred Stock then held by such holder and the
denominator of which is the total number of shares of such Series of Preferred
Stock then outstanding. The shares of Preferred Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided herein. At
any time thereafter when additional funds of the Corporation are legally
available for the redemption of such shares of Preferred Stock, such funds will
immediately be used to redeem the balance of the shares which the Corporation
has become obliged to redeem on any Mandatory Redemption Date but which it has
not redeemed.
d. Redemption Notice. The Mandatory Redemption Notice
shall state:
(i) Whether all or less than all of the
outstanding shares of Preferred Stock are proposed to be redeemed and the total
number of shares of each Series of Preferred Stock proposed to be redeemed;
(ii) The number of shares of each Series of
Preferred Stock held by each holder that the Corporation shall redeem;
(iii) The proposed Mandatory Redemption Date and
the applicable Mandatory Redemption Price; and
(iv) The date upon which the holder's conversion
rights as to such shares terminate.
No later than fifteen (15) days before the Mandatory Redemption Date,
the Company shall provide to the holders of outstanding shares of Preferred
Stock written notice of the intended redemption (the "REPLY Notice").
e. Mechanics of Redemption. (i) On or before the
Mandatory Redemption Date, each holder of Preferred Stock to be redeemed, unless
such holder has exercised his right to convert the shares as provided in Section
4 hereof, shall surrender the certificate or certificates representing such
shares to the Corporation, in the manner and at the place designated in the
Reply Notice, and thereupon the applicable Mandatory Redemption Price for such
shares shall be payable on the Mandatory Redemption Date to the order of the
person whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be canceled and retired. In the
event that
-6-
<PAGE> 7
less than all of the shares represented by such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(ii) If the Mandatory Redemption Notice and the
Reply Notice shall have been duly given, and if on the Mandatory Redemption Date
the applicable Mandatory Redemption Price is either paid or made available for
payment through the deposit arrangements specified in Section 3(e)(iii) below,
then notwithstanding that the certificates evidencing any of the shares of
Preferred Stock so called for redemption shall not have been surrendered, any
dividends with respect to such shares, and only those shares, to be redeemed on
such Mandatory Redemption Date shall cease to accrue after the Mandatory
Redemption Date, such shares shall cease to be outstanding and all rights with
respect to such shares shall forthwith after the Mandatory Redemption Date
terminate, except only the right of the holders to receive the Mandatory
Redemption Price without interest upon surrender of their certificate or
certificates therefor.
(iii) On or prior to each Mandatory Redemption
Date, the Corporation may deposit with any bank or trust company having a
capital and surplus of at least twenty million dollars ($20,000,000), as a trust
fund, a sum equal to the aggregate Mandatory Redemption Price of all shares of
Preferred Stock called for redemption on such Mandatory Redemption Date and not
yet redeemed, with irrevocable instructions and authority to the bank or trust
company to pay, on or after such Mandatory Redemption Date, the applicable
Mandatory Redemption Price to the respective holders upon the surrender of their
share certificates. From and after the applicable Mandatory Redemption Date,
such shares of Preferred Stock so called for payment shall be deemed to be no
longer outstanding, and the holders thereof shall cease to be stockholders with
respect to such shares and shall have no rights as stockholders with respect
thereto, except for the right to receive from the bank or trust company payment
of the applicable Mandatory Redemption Price of the shares, without interest,
upon surrender of their certificates therefor. Such instructions shall also
provide that any funds so deposited and unclaimed at the end of one year from
the applicable Mandatory Redemption Date shall be released or repaid to the
Corporation, after which the holders of shares called for redemption shall be
entitled to receive payment of the applicable Mandatory Redemption Price only
from the Corporation. Shares of Preferred Stock which are unredeemed following
each Mandatory Redemption Date, if any, shall remain outstanding and shall be
entitled to all rights applicable thereto.
4. Conversion. The holders of Preferred Stock shall have
conversion rights as follows (the "CONVERSION RIGHTS"):
a. Right to Convert. Each share of Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after the date
of issuance of such share at the office of this Corporation or any transfer
agent for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined (i) in the case of the Series A Preferred, by
dividing the Original Series A Issue Price by the Series A Conversion Price,
determined as hereinafter provided, in effect on the date the certificate is
surrendered for conversion, (ii) in the case of the Series B Preferred, by
dividing the Original Series B Issue Price by the Series B Conversion Price,
determined as hereinafter provided, in effect on the date the certificate is
surrendered for conversion, (iii) in the case of the Series C Preferred, by
dividing the Original Series C Issue Price by the Series C Conversion Price,
determined as hereinafter provided, in effect on the date the
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certificate is surrendered for conversion, (iv) in the case of the Series D
Preferred, by dividing the Original Series D Issue Price by the Series D
Conversion Price, determined as hereinafter provided, in effect on the date the
certificate is surrendered for conversion, and (v) in the case of the Series E
Preferred, by dividing the Original Series E Issue Price by the Series E
Conversion Price, determined as hereinafter provided, in effect on the date the
certificate is surrendered for conversion. The initial Series A Conversion Price
per share for shares of Series A Preferred shall be the Original Series A Issue
Price, the initial Series B Conversion Price per share for shares of Series B
Preferred shall be the Original Series B Issue Price, the initial Series C
Conversion Price per share for shares of Series C Preferred shall be the
Original Series C Issue Price, the initial Series D Conversion Price per share
for shares of Series D Preferred shall be the Original Series D Issue Price, and
the initial Series E Conversion Price per share for shares of Series E Preferred
shall be the Original Series E Issue Price; provided, however, that each such
Conversion Price shall be subject to adjustment as set forth in this Section 4.
(The Series A Conversion Price, the Series B Conversion Price, the Series C
Conversion Price, the Series D Conversion Price and the Series E Conversion
Price are individually or collectively referred to herein as the "CONVERSION
PRICE").
b. Automatic Conversion. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock at the Conversion
Price at the time in effect for such share of Preferred Stock immediately upon
the earlier of (i) the Corporation's sale of its Common Stock in an underwritten
public offering on Form S-1 or SB-2 (or successor forms) under the Securities
Act of 1933, as amended (the "ACT"), the public offering price of which was not
less than eight dollars ($8.00) per share (adjusted to reflect subsequent stock
dividends, stock splits, combinations or recapitalizations) and having gross
proceeds to the Corporation in excess of fifteen million dollars ($15,000,000)
or (ii) the date specified by written consent or agreement of the holders of at
least sixty percent (60%) of the then outstanding shares of Preferred Stock (on
an as-converted into Common Stock basis).
c. Mechanics of Conversion. Before any holder of
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, the holder shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this Corporation or of any transfer agent for the
Preferred Stock, and shall give written notice to this Corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. This Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred Stock,
or to the nominee or nominees of such holder, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an underwritten offering
of securities registered pursuant to the Act, the conversion, unless otherwise
designated by the holder, will be conditioned upon the closing with the
underwriters of the sale of securities pursuant to such offering, in which event
the person(s) entitled to receive Common Stock upon conversion of Preferred
Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities.
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<PAGE> 9
d. Conversion Price Adjustments of Preferred Stock for
Certain Splits and Combinations. The Conversion Price of each Series of
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) In the event the Corporation should at any
time or from time to time after the effective date of this Amended and Restated
Certificate of Incorporation (the "AMENDMENT DATE") fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or for the determination of the outstanding shares of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of Common
Stock without payment of any consideration by such holder for the additional
shares of Common Stock, then, as of such record date (or the date of such
dividend, distribution, split or subdivision if no record date is fixed), the
Conversion Price of each Series of the Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of such Series shall be increased in proportion to such increase of
the aggregate of shares of Common Stock outstanding unless a proportionate
split, subdivision, dividend or other distribution is concurrently made with
respect to all outstanding shares of Preferred Stock.
(ii) If the number of shares of Common Stock
outstanding at any time after the Amendment Date is decreased by a combination
of the outstanding shares of Common Stock or reverse stock split, then,
following the record date of such combination or reverse stock split, the
Conversion Price for each Series of Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of such Series shall be decreased in proportion to such decrease in
outstanding shares unless a proportionate combination or reverse stock split is
concurrently made with respect to all outstanding shares of Preferred Stock.
e. Other Distributions. In the event this Corporation
shall after the Amendment Date declare a distribution payable in securities of
other persons, evidences of indebtedness issued by this corporation or other
persons, assets (excluding cash dividends) or options or rights not referred to
in Section 4(d)(i), then, in each such case for the purpose of this Section
4(e), 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
of 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.
f. Recapitalizations. If at any time or from time to
time after the Amendment Date 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 Section 4 or Section 2), provision
shall be made so that each holder of Preferred Stock shall thereafter be
entitled to receive upon conversion of the shares of Preferred Stock held by
such holder the number of shares of stock or other securities or property of the
Corporation or otherwise, to which a holder of the number of shares of Common
Stock into which the shares of Preferred Stock held by such holder are
convertible immediately prior to such recapitalization would have been entitled
upon such recapitalization. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section 4 with respect to the
rights of the holders of Preferred Stock after the recapitalization to the end
that the provisions of this Section 4 (including adjustment of the
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<PAGE> 10
Conversion Price then in effect and the number of shares issuable upon
conversion of Preferred Stock) shall be applicable after that event as nearly
equivalently as may be practicable.
g. Adjustments to Conversion Price for Dilutive Issues.
(i) Special Definitions. For purposes of this
Section 4(g), the following definitions shall apply:
(1) 'Options' shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities (defined below).
(2) 'Series E Original Issue Date' shall
mean the date on which the first share of Series E Preferred Stock was issued.
(3) 'Convertible Securities' shall mean any
evidences of indebtedness, Preferred Stock (other than Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred) or other securities convertible into or exchangeable for Common
Stock.
(4) 'Additional Shares of Common' shall mean
all shares of Common Stock issued (or, pursuant to Section 4(g)(iii), deemed to
be issued) by the Corporation after the Series E Original Issue Date, other than
shares of Common Stock issued, issuable or, pursuant to Section 4(g)(iii)
herein, deemed to be issued:
(A) upon conversion of shares of Preferred
Stock;
(B) to officers, directors or employees
of, or consultants to, the Corporation pursuant to a stock grant, option plan or
purchase plan or other stock incentive program or arrangement approved by the
Board of Directors for employees, officers, directors or consultants of the
Corporation;
(C) as a dividend or distribution on
Preferred Stock;
(D) in connection with any transaction for
which adjustment is made pursuant to Section 4(d), Section 4(e) or Section 4(f)
hereof;
(E) upon grant or exercise of warrants to
purchase Common Stock, or upon conversion of shares of Preferred Stock issued
upon exercise of warrants to purchase Preferred Stock, that may be hereinafter
issued in connection with bona fide, arm's-length debt financings or equipment
lease financing transactions approved by the Board of Directors (including a
majority of the directors elected by the holders of Preferred Stock pursuant to
Section 5(b) below);
(F) any shares of Common Stock issued or
issuable, if the holders of sixty percent (60%) of each Series of Preferred
Stock which otherwise would have
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<PAGE> 11
been adjusted and then outstanding agree in writing that such shares shall not
constitute Additional Shares of Common Stock; or
(G) in connection with an acquisition by\
the Corporation approved by the Board of Directors (including a majority of the
directors elected by the holders of Preferred Stock pursuant to Section 5(b)
below).
(ii) No Adjustment of Conversion Price. No
adjustment in the applicable Conversion Price shall be made in respect of the
issuance of Additional Shares of Common unless the consideration per share
(determined pursuant to Section 4(g)(v) hereof) for an Additional Share of
Common issued or deemed to be issued by the Corporation is less than the
applicable Conversion Price in effect on the date of, and immediately prior to,
such issue.
(iii) Options and Convertible Securities. In the
event that the Corporation at any time or from time to time after the Series E
Original Issue Date shall issue any Options or Convertible Securities or shall
fix a record date for the determination of holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the maximum
number of shares of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and Options therefor, the conversion or
exchange of such Convertible Securities, shall be deemed to be Additional Shares
of Common issued as of the time of such issuance of the Options or Convertible
Securities, as applicable, or, in case such a record date shall have been fixed,
as of the close of business on such record date; provided, however, that
Additional Shares of Common shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 4(g)(v) hereof) of such
Additional Shares of Common would be less than the applicable Conversion Price
in effect on the date of and immediately prior to such issue, or such record
date, as the case may be, and provided further that in any such case in which
Additional Shares of Common are deemed to be issued:
(1) no further adjustment in the applicable
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities, in each case, pursuant to
their respective terms;
(2) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, or decrease in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the applicable Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;
(3) upon the expiration of any such Options
or any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the applicable Conversion Price computed upon the
original issue thereof (or upon the occurrence of a
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<PAGE> 12
record date with respect thereto), and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if:
(A) in the case of Convertible Securities
or Options for Common Stock, the only Additional Shares of Common issued were
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually received by
the Corporation upon such conversion or exchange, and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
deemed to have been then issued was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration deemed to have been received by the Corporation upon the issue
of the Convertible Securities with respect to which such Options were actually
exercised;
(4) no readjustment pursuant to clauses (2)
or (3) above shall have the effect of increasing the applicable Conversion Price
to an amount which exceeds the lower of (i) the applicable Conversion Price on
the original adjustment date, or (ii) the applicable Conversion Price that would
have resulted from other issuances of Additional Shares of Common between the
Series E Original Issue Date and such readjustment date.
(iv) Adjustment of Conversion Price Upon
Issuance of Additional Shares of Common. In the event that this Corporation
shall issue Additional Shares of Common (including Additional Shares of Common
deemed to be issued pursuant to Section 4(g)(iii)) without consideration or for
a consideration per share less than the applicable Conversion Price in effect on
the date of and immediately prior to such issue, then and in such event such
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Conversion Price
theretofore in effect by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock which the aggregate consideration received by
the Corporation for the total number of Additional Shares of Common so issued
would purchase at such Conversion Price in effect immediately prior to such
issue, and the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common so issued; provided however, that, for the purposes
of this Section 4(g)(iv), all shares of Common Stock issuable upon exercise,
conversion or exchange of outstanding Options or Convertible Securities, as the
case may be, shall be deemed to be outstanding, and immediately after any
Additional Shares of Common are deemed issued pursuant to Section 4(g)(iii),
such Additional Shares of Common shall be deemed to be outstanding.
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<PAGE> 13
(v) Determination of Consideration. For purposes
of this Section 4(g), the consideration received by the Corporation for the
issue of any Additional Shares of Common shall be computed as follows:
(1) Cash and Property. Such consideration
shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property
other than cash, be computed at the fair market value thereof at the time of
such issue, as determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of
Common are issued together with other shares or securities or other assets of
the Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The
consideration per share received by the Corporation for Additional Shares of
Common deemed to have been issued pursuant to Section 4(g)(iii)(1), relating to
Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common
Stock issuable upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, as determined in Section 4(g)(iii) hereof.
h. No Impairment. This Corporation will not, by
amendment of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of Preferred Stock against impairment.
i. No Fractional Shares and Certificate as to
Adjustment.
(i) No fractional shares shall be issued upon
the conversion of any share or shares of Preferred Stock, and the number of
shares of Common Stock to be issued shall be
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<PAGE> 14
rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of any Series of Preferred Stock pursuant
to this Section 4, this Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of 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. This Corporation shall, upon the
reasonable 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 (A)
such adjustment and readjustment, (B) the Conversion Price for each Series of
Preferred Stock at the time in effect, and (C) 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 a share of such Series of Preferred Stock.
j. Notices of Record Date. In the event of any taking by
this Corporation of a record date for determining the holders of any class of
securities who are entitled to receive (A) any dividend (other than a cash
dividend) or other distribution, (B) any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or (C) any other right, this Corporation shall mail to each holder of
Preferred Stock, at least ten (10) days prior to the record date specified
therein, a notice specifying the record date to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right.
k. Reservation of Stock Issuable Upon Conversion. This
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the then outstanding 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 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 Preferred Stock, in
addition to such other remedies as shall be available to the holder of such
Preferred Stock, this Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of common stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to obtain the
requisite Board of Directors and stockholder approval of any necessary amendment
to its certificate of incorporation.
l. Notices. Any notice required by the provisions of
this Section 4 to be given to the holders of shares of Preferred Stock shall be
deemed given five (5) days after deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his address appearing on the
books of this Corporation.
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<PAGE> 15
5. Voting Rights.
a. General Voting Rights. Each holder of shares of
Preferred Stock shall be entitled to notice of any stockholder meeting in
accordance with the bylaws of the Corporation, shall be entitled to a number of
votes equal to a number of shares of Common Stock into which the shares of
Preferred Stock held by such holder could be converted, shall have voting rights
and powers equal to the voting rights and powers of the holders of Common Stock
and shall vote together as a single class with holders of Common Stock and all
Series of Preferred Stock on all matters except as expressly required by law.
Fractional votes shall not be permitted and any fractional voting rights
resulting from the right of any holder of Preferred Stock to vote on an
as-converted basis (after aggregating the shares into which all shares of
Preferred Stock held by such holder could be converted) shall be rounded to the
nearest whole number (with one-half being rounded upward). The holders of
Preferred Stock shall have no separate class or Series vote on any matter except
as required by Section 6 hereof or except as expressly required by law.
b. Election of Directors. Notwithstanding the provisions
of subsection 5(a) above, for so long as at least an aggregate of 500,000 shares
of Series A Preferred remain outstanding (subject to appropriate adjustments for
stock splits, dividends, combinations, recapitalizations and the like), the
holders of Series A Preferred, voting as a separate class, shall be entitled to
elect one (1) director of the Corporation (the "SERIES A DIRECTOR"); for so long
as at least an aggregate of 500,000 shares of Series B Preferred and Series C
Preferred remain outstanding (subject to appropriate adjustments for stock
splits, dividends, combinations, recapitalizations and the like), the holders of
Series B Preferred and Series C Preferred, voting together as a separate class,
shall be entitled to elect one (1) director of the Corporation the ("SERIES B/C
DIRECTOR"); for so long as at least an aggregate of 500,000 shares of Series D
Preferred remain outstanding (subject to appropriate adjustments for stock
splits, dividends, combinations, recapitalizations and the like), the holders of
Series D Preferred, voting as a separate class, shall be entitled to elect one
(1) director of the Corporation (the "SERIES D DIRECTOR"); the holders of Common
Stock, voting as a separate class, shall be entitled to elect one (1) director
of the Corporation (the "COMMON DIRECTOR"); and the remaining directors of the
Corporation shall be elected by the holders of Common Stock and Preferred Stock
voting together on an as converted basis. At any meeting held for the purpose of
electing or nominating directors, the presence in person or by proxy of the
holders of a majority of the Series A Preferred then outstanding shall
constitute a quorum of the Series A Preferred for the election or nomination of
the Series A Director, the presence in person or by proxy of the holder of a
majority of the Series B Preferred and a majority of the Series C Preferred then
outstanding shall constitute a quorum of the Series B Preferred and Series C
Preferred, as a class, for the election or nomination of the Series B/C
Director, the presence in person or by proxy of the holders of a majority of the
Series D Preferred then outstanding shall constitute a quorum of the Series D
Preferred for the election or nomination of the Series D Director, and the
presence in person or by proxy of the holders of a majority of the Common Stock
then outstanding shall constitute a quorum of the Common Stock for the election
or nomination of the Common Director. A vacancy in the directorship elected
solely by the holders of Series A Preferred shall be filled only by vote of the
holders of Series A Preferred; a vacancy in any directorship elected solely by
the holders of Series B Preferred and Series C Preferred, as a class, shall be
filled only by vote of the holders of Series B Preferred and Series C Preferred,
voting together as a class; a vacancy in the directorship elected solely by the
holders of Series D Preferred shall be filled only by vote of the holders of
Series D
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<PAGE> 16
Preferred; and a vacancy in any directorship elected solely by the holders of
Common Stock shall be filled only by the vote of the holders of Common Stock.
6. Protective Provisions.
a. Series A Preferred. So long as any shares of Series A
Preferred are outstanding, this Corporation shall not, without first obtaining
the affirmative vote or written consent of the holders of not less than sixty
percent (60%) of the then outstanding shares of Series A Preferred voting
together as a class, (i) amend or repeal any provision of, or add any provision
to, this Corporation's Amended and Restated Certificate of Incorporation or
Bylaws if such action would adversely alter or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit of, the
Series A Preferred and (ii) authorize or issue shares of any Series or class of
capital stock or any other security convertible into or exchangeable for shares
of any Series or class of capital stock which is senior to the Series A
Preferred with respect to dividend rights, rights upon any liquidation, wind up
or dissolution, or redemption rights, it being understood that the authorization
or issuance of any security, as provided above, shall not be deemed to be senior
to the Series A Preferred if (A) the differences in dividend rights, rights upon
any liquidation, wind up or dissolution or redemption rights with respect to
such Series only reflect a different original issue price with respect to such
series, or (B) if the holders of Preferred Stock approve the authorization or
issuance of shares of any Series or class of capital stock or any other security
convertible into or exchangeable for shares of any Series or class of capital
stock (in accordance with the provisions of Article IV(B)(6)(d)(iv) below) which
is senior to each Series of Preferred Stock on a pari passu basis.
b. Series B Preferred and Series C Preferred. So long as
any shares of Series B Preferred or Series C Preferred are outstanding, this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than sixty percent (60%) of the then
outstanding shares of Series B Preferred and Series C Preferred, voting together
as a class, (i) amend or repeal any provision of, or add any provision to, this
Corporation's Amended and Restated Certificate of Incorporation or Bylaws if
such action would adversely alter or change the preferences, rights, privileges
or powers of, or the restrictions provided for the benefit of, the Series B
Preferred or the Series C Preferred and (ii) authorize or issue shares of any
Series or class of capital stock or any other security convertible into or
exchangeable for shares of any Series or class of capital stock which is senior
to the Series B Preferred or Series C Preferred with respect to dividend rights,
rights upon any liquidation, wind up or dissolution, or redemption rights, it
being understood that the authorization or issuance of any security, as provided
above, shall not be deemed to be senior to the Series B Preferred or Series C
Preferred if (A) the differences in dividend rights, liquidation rights, rights
upon wind up or dissolution or redemption rights with respect to such Series
only reflect a different original issue price with respect to such series, or
(B) if the holders of Preferred Stock approve the authorization or issuance of
shares of any Series or class of capital stock or any other security convertible
into or exchangeable for shares of any Series or class of capital stock (in
accordance with the provisions of Article IV(B)(6)(d)(iv) below) which is senior
to each Series of Preferred Stock on a pari passu basis.
c. Series D Preferred. So long as any shares of Series D
Preferred are outstanding, this Corporation shall not, without first obtaining
the affirmative vote or written consent
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<PAGE> 17
of the holders of not less than sixty percent (60%) of the then outstanding
shares of Series D Preferred, voting together as a class, (i) amend or repeal
any provision of, or add any provision to, this Corporation's Amended and
Restated Certificate of Incorporation or Bylaws if such action would adversely
alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, the Series D Preferred and (ii)
authorize or issue shares of any Series or class of capital stock or any other
security convertible into or exchangeable for shares of any Series or class of
capital stock which is senior to the Series D Preferred with respect to dividend
rights, rights upon any liquidation, wind up or dissolution, or redemption
rights, it being understood that the authorization or issuance of any security,
as provided above, shall not be deemed to be senior to the Series D Preferred if
(A) the differences in dividend rights, liquidation rights, rights upon wind up
or dissolution or redemption rights with respect to such Series only reflect a
different original issue price with respect to such series, or (B) if the
holders of Preferred Stock approve the authorization or issuance of shares of
any Series or class of capital stock or any other security convertible into or
exchangeable for shares of any Series or class of capital stock (in accordance
with the provisions of Article IV(B)(6)(d)(iv) below) which is senior to each
Series of Preferred Stock on a pari passu basis.
d. Series E Preferred. So long as any shares of Series E
Preferred are outstanding, this Corporation shall not, without first obtaining
the affirmative vote or written consent of the holders of more than fifty
percent (50%) of the then outstanding shares of Series E Preferred, voting
together as a class, (i) amend or repeal any provision of, or add any provision
to, this Corporation's Amended and Restated Certificate of Incorporation or
Bylaws if such action would adversely alter or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit of, the
Series E Preferred and (ii) authorize or issue shares of any Series or class of
capital stock or any other security convertible into or exchangeable for shares
of any Series or class of capital stock which is senior to the Series E
Preferred with respect to dividend rights, rights upon any liquidation, wind up
or dissolution, or redemption rights, it being understood that the authorization
or issuance of any security, as provided above, shall not be deemed to be senior
to the Series E Preferred if (A) the differences in dividend rights, liquidation
rights, rights upon wind up or dissolution or redemption rights with respect to
such Series only reflect a different original issue price with respect to such
series, or (B) if the holders of Preferred Stock approve the authorization or
issuance of shares of any Series or class of capital stock or any other security
convertible into or exchangeable for shares of any Series or class of capital
stock (in accordance with the provisions of Article IV(B)(6)(d)(iv) below) which
is senior to each Series of Preferred Stock on a pari passu basis.
e. Preferred Stock. So long as any shares of Preferred
Stock are outstanding, this Corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of not less than sixty
percent (60%) of the then outstanding shares of Preferred Stock, voting together
as a single class on an as-converted into Common Stock basis:
(i) authorize a liquidation, dissolution,
winding up, recapitalization or reorganization of the Corporation, or a sale,
transfer or encumbrance of all or substantially all of the assets of the
Corporation or a merger or consolidation of the Corporation if, as a result of
such merger or consolidation, the stockholders of the Corporation shall own (by
virtue of
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<PAGE> 18
shares held in the Corporation) less than fifty percent (50%) of the voting
securities of the surviving corporation; or
(ii) authorize any cash dividend, repurchases or
redemptions, except for (i) repurchases at cost of shares of Common Stock
originally issued to employees, officers, directors and consultants pursuant to
the terms of the stock restriction agreements under which the shares were
originally issued and (ii) redemption of Preferred Stock as authorized by this
Certificate of Incorporation;
(iii) authorize or issue shares of any Series or
class of capital stock or any other security convertible into or exchangeable
for shares of any Series or class of capital stock which is senior to or on
parity with the Series A Preferred, Series B Preferred, Series C Preferred or
the Series D Preferred with respect to dividend rights, rights upon any
liquidation, wind up or dissolution, redemption rights, or any rights contained
in this Section 6(e);
(iv) amend this Corporation's Amended and
Restated Certificate of Incorporation.
7. Status of Converted Preferred. In the event any shares of
Preferred Stock shall be converted pursuant to Section 4, the shares so
converted shall be canceled and shall not thereafter be issuable by the
Corporation. The Amended and Restated Certificate of Incorporation of this
Corporation shall be appropriately amended to effect the corresponding reduction
in the Corporation's authorized capital stock.
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 Section 2 of Article IV(B) hereof.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock shall
have the right to one (1) vote, shall be entitled to notice of any stockholder
meeting in accordance with the Bylaws of this Corporation, and shall be entitled
to vote upon such matters and in such manner as is otherwise provided herein or
as may be provided by law.
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<PAGE> 19
ARTICLE V
Except as otherwise provided in this Amended and Restated Certificate of
Incorporation, in furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend and rescind any or all of the Bylaws of the Corporation.
ARTICLE VI
The number of directors of the Corporation shall be fixed from time to
time by, or in the manner provided in, the Bylaws or amendment thereof duly
adopted by the Board of Directors or by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
ARTICLE VIII
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 IX
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
or without 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.
To the extent that the laws of the State of California would purport to
govern the ability of the Corporation under Delaware law to limit the personal
liability of its directors for breach of fiduciary duty, and to the extent that
a court should uphold the application of California law in lieu of Delaware law
to the issue of director liability, then for purposes of California law the
personal liability of a director to the Corporation or its stockholders for
monetary damages shall be limited to the fullest extent permitted by California
law.
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<PAGE> 20
Any repeal or modification of the foregoing provisions of this Article
IX, by amendment of this Article IX or by operation of law, 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 X
To the fullest extent permitted by applicable law, the Corporation is
authorized to provide indemnification of (and advancement of expenses to)
directors, officers, employees and other agents of the Corporation (and any
other persons to which Delaware law permits the Corporation to provide
indemnification), through Bylaw provisions, agreements with any such director,
officer, employee or other agent or other person, 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 nonstatutory), with respect to actions for breach of duty to a
corporation, its stockholders, and others.
To the extent that the laws of the State of California would purport to
govern the ability of the Corporation under Delaware law to provide
indemnification of (and advancement of expenses to) certain persons and to the
extent that a court should uphold the application of California law in lieu of
Delaware law to the issue of indemnification of (and advancement of expenses to)
directors, officers, employees and other agents of the Corporation (and any
other persons to which California law permits the Corporation to provide
indemnification) then for the purposes of California law, the Corporation is
authorized to provide indemnification of (and advancement of expenses to) any
such director, officer, employee or other agent or other person, through Bylaw
provisions, agreements with any such director, officer, employee or other agent
or other person, vote of stockholders or disinterested directors, or otherwise,
to the fullest extent permitted by California law.
Any repeal or modification of any of the foregoing provisions of this
Article X, by amendment of this Article X or by operation of law, shall not
adversely affect any right or protection of a director, officer, employee or
other 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.
ARTICLE XI
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.
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<PAGE> 21
ARTICLE XII
The Corporation shall have perpetual existence.
* * *
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by the Corporation's Board of Directors and Stockholders in
accordance with the applicable provisions of Section 228, Section 242 and
Section 245 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this certificate on
July 27, 1999.
EXTENSITY, INC.
By: /s/ ROBERT SPINNER
---------------------------------
Robert Spinner, President and
Chief Executive Officer
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<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF EXTENSITY, INC.,
a Delaware Corporation
(Originally incorporated on November 13, 1995 as Celerity, Inc.)
ARTICLE I
The name of this Corporation is Extensity, Inc.
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is the Corporation Trust
Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
This Corporation is authorized to issue two classes of shares to be
designated, respectively, Common Stock and Preferred Stock. Each share of Common
Stock shall have a par value of $0.001 and each share of Preferred Stock shall
have a par value of $0.01. The total number of shares of Common Stock this
Corporation shall have authority to issue is 75,000,000, and the total number of
shares of Preferred Stock this Corporation shall have authority to issue is
5,000,000.
The Preferred Stock initially shall be undesignated as to series. Any
Preferred Stock not previously designated as to series may be issued from time
to time in one or more series pursuant to a resolution or resolutions providing
for such issue duly adopted by the Board of Directors (authority to do so being
hereby expressly vested in the Board), and such resolution or resolutions shall
also set forth the voting powers, full or limited or none, of each such series
of Preferred Stock and shall fix the designations, preferences and relative,
participating, optional or other special rights of each such series of Preferred
Stock and the qualifications, limitations or restrictions of such powers,
designations, preferences or rights. The Board of Directors is also authorized
to fix the number of shares of each such series of Preferred Stock. The Board of
Directors is authorized to alter the powers, designation, preferences, rights,
qualifications, limitations and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and, within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series of Preferred
Stock, to increase or decrease (but not below the number of shares
<PAGE> 2
of any such series then outstanding) the number of shares of any such series
subsequent to the issue of shares of that series.
Each share of Preferred Stock issued by the Corporation, if reacquired
by the Corporation (whether by redemption, repurchase, conversion to Common
Stock or other means), shall upon such reacquisition resume the status of
authorized and unissued shares of Preferred Stock, undesignated as to series and
available for designation and issuance by the Corporation in accordance with the
immediately preceding paragraph.
The Corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit conversion, if applicable, of the
Preferred Stock.
ARTICLE V
Except as otherwise provided in this Amended and Restated Certificate of
Incorporation, in furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend and rescind any or all of the Bylaws of the Corporation.
ARTICLE VI
The number of directors of the Corporation shall be fixed from time to
time by, or in the manner provided in, the Bylaws or amendment thereof duly
adopted by the Board of Directors or by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
ARTICLE VIII
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.
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<PAGE> 3
ARTICLE IX
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
or without 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.
To the extent that the laws of the State of California would purport to
govern the ability of the Corporation under Delaware law to limit the personal
liability of its directors for breach of fiduciary duty, and to the extent that
a court should uphold the application of California law in lieu of Delaware law
to the issue of director liability, then for purposes of California law the
personal liability of a director to the Corporation or its stockholders for
monetary damages shall be limited to the fullest extent permitted by California
law.
Any repeal or modification of the foregoing provisions of this Article
IX, by amendment of this Article IX or by operation of law, 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 X
To the fullest extent permitted by applicable law, the Corporation is
authorized to provide indemnification of (and advancement of expenses to)
directors, officers, employees and other agents of the Corporation (and any
other persons to which Delaware law permits the Corporation to provide
indemnification), through Bylaw provisions, agreements with any such director,
officer, employee or other agent or other person, 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 nonstatutory), with respect to actions for breach of duty to a
corporation, its stockholders, and others.
To the extent that the laws of the State of California would purport to
govern the ability of the Corporation under Delaware law to provide
indemnification of (and advancement of expenses to) certain persons and to the
extent that a court should uphold the application of California law in lieu of
Delaware law to the issue of indemnification of (and advancement of expenses to)
directors, officers, employees and other agents of the Corporation (and any
other persons to which California law permits the Corporation to provide
indemnification) then for the purposes of California law, the Corporation is
authorized to provide indemnification of (and advancement of expenses to) any
such director, officer, employee or other agent or other person, through Bylaw
provisions, agreements with any such director, officer, employee or other agent
or other person, vote of stockholders or disinterested directors, or otherwise,
to the fullest extent permitted by California law.
Any repeal or modification of any of the foregoing provisions of this
Article X, by amendment of this Article X or by operation of law, shall not
adversely affect any right or protection
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<PAGE> 4
of a director, officer, employee or other 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.
ARTICLE XI
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 XII
Section 1. Stockholders of the Corporation may not take action by
written consent in lieu of a meeting but must take any actions at a duly called
annual or special meeting.
Section 2. Unless otherwise required by law, special meetings of the
stockholders of the Corporation, for any purpose or purposes, may be called only
by either the Board of Directors of the Corporation or duly authorized
Committee of the Board of Directors.
ARTICLE XIII
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 XIV
The Corporation shall have perpetual existence.
* * *
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by the Corporation's Board of Directors and Stockholders in
accordance with the applicable provisions of Section 228, Section 242 and
Section 245 of the General Corporation Law of the State of Delaware.
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<PAGE> 5
IN WITNESS WHEREOF, the undersigned has executed this certificate on
November __, 1999.
EXTENSITY, INC.
By: ____________________________________
Robert Spinner, President and Chief
Executive Officer
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<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
EXTENSITY, INC.
(a Delaware corporation)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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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........................................................................ 3
2.8 VOTING........................................................................................... 3
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT................................................ 4
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.......................................... 4
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS...................................... 5
2.12 PROXIES.......................................................................................... 5
2.13 INSPECTORS OF ELECTION........................................................................... 5
2.14 ADVANCE NOTICE OF STOCKHOLDER BUSINESS........................................................... 6
2.15 ADVANCE NOTICE OF DIRECTOR NOMINATIONS........................................................... 7
ARTICLE III DIRECTORS.............................................................................................. 8
3.1 POWERS........................................................................................... 8
3.2 NUMBER AND TERM OF OFFICE........................................................................ 8
3.3 RESIGNATION AND VACANCIES........................................................................ 8
3.4 REMOVAL.......................................................................................... 9
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE......................................................... 9
3.6 REGULAR MEETINGS................................................................................. 9
3.7 SPECIAL MEETINGS; NOTICE......................................................................... 9
3.8 QUORUM........................................................................................... 10
3.9 WAIVER OF NOTICE................................................................................. 10
3.10 ADJOURNMENT...................................................................................... 10
3.11 NOTICE OF ADJOURNMENT............................................................................ 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................................................ 10
3.13 FEES AND COMPENSATION OF DIRECTORS............................................................... 10
3.14 APPROVAL OF LOANS TO OFFICERS.................................................................... 11
3.15 INTERESTED DIRECTORS............................................................................. 11
ARTICLE IV COMMITTEES.............................................................................................. 11
4.1 COMMITTEES OF DIRECTORS.......................................................................... 11
ARTICLE V OFFICERS................................................................................................. 12
5.1 OFFICERS......................................................................................... 12
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
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<S> <C>
5.2 ELECTION OF OFFICERS............................................................................. 13
5.3 SUBORDINATE OFFICERS............................................................................. 13
5.4 REMOVAL AND RESIGNATION OF OFFICERS.............................................................. 13
5.5 VACANCIES IN OFFICES............................................................................. 13
5.6 CHAIRMAN OF THE BOARD............................................................................ 13
5.7 CHIEF EXECUTIVE OFFICER.......................................................................... 13
5.8 PRESIDENT........................................................................................ 14
5.9 VICE PRESIDENTS.................................................................................. 14
5.10 SECRETARY........................................................................................ 14
5.11 CHIEF FINANCIAL OFFICER.......................................................................... 14
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS..................................... 15
6.1 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR IN THE
RIGHT OF THE CORPORATION......................................................................... 15
6.2 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF THE
CORPORATION...................................................................................... 15
6.3 AUTHORIZATION OF INDEMNIFICATION................................................................. 16
6.4 GOOD FAITH DEFINED............................................................................... 16
6.5 INDEMNIFICATION BY A COURT....................................................................... 16
6.6 EXPENSES PAYABLE IN ADVANCE...................................................................... 17
6.7 NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.................................... 17
6.8 INSURANCE........................................................................................ 17
6.9 CERTAIN DEFINITIONS.............................................................................. 17
6.10 SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.......................................... 18
6.11 LIMITATION ON INDEMNIFICATION.................................................................... 18
6.12 INDEMNIFICATION OF EMPLOYEES AND AGENTS.......................................................... 18
ARTICLE VII RECORDS AND REPORTS.................................................................................... 18
7.1 MAINTENANCE AND INSPECTION OF RECORDS............................................................ 18
7.2 INSPECTION BY DIRECTORS.......................................................................... 19
7.3 ANNUAL STATEMENT TO STOCKHOLDERS................................................................. 19
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS................................................... 19
ARTICLE VIII GENERAL MATTERS....................................................................................... 19
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING............................................ 19
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS........................................................ 20
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED............................................... 20
8.4 STOCK CERTIFICATES; PARTLY PAID SHARES........................................................... 20
8.5 SPECIAL DESIGNATION ON CERTIFICATES.............................................................. 20
8.6 LOST CERTIFICATES................................................................................ 21
8.7 CONSTRUCTION; DEFINITIONS........................................................................ 21
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE IX AMENDMENTS.............................................................................................. 21
</TABLE>
iii
<PAGE> 5
BYLAWS
OF
EXTENSITY, INC.
(a Delaware corporation)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the Certificate
of Incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside the
State of Delaware designated from time to time 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 each year on a date and
at a time designated from time to time by the board of directors. 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 for any
purposes may be called at any time by the Board of Directors, or by a committee
of the Board of Directors which has been duly designated by the Board of
Directors and whose powers and authority, as expressly provided in a resolution
of the Board of Directors, include the power to call such meetings, but such
special meetings may not be called by any other person or persons.
<PAGE> 6
No business may be transacted at such special meeting otherwise than specified
in the notice of such special meeting delivered to stockholders (or any
supplement thereto).
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings of stockholders shall be sent or otherwise given
in accordance with Section 2.5 of these bylaws not less than ten (10) nor more
than sixty (60) days before the date of the meeting. The notice shall specify
the place, date, and hour of the meeting and (i) in the case of a special
meeting, the general nature of the business to be transacted (no business other
than that specified in the notice (or in any supplement thereto) may be
transacted) or (ii) in the case of the annual meeting, those matters which the
board of directors, at the time of giving the notice, intends to present for
action by the stockholders (but any proper matter may be presented at the
meeting for such action). The notice of any meeting at which directors are to be
elected shall include the name of any nominee or nominees who, at the time of
the notice, the board intends to present for election.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given by
first-class mail or by facsimile, telegraphic or other written communication or
in such other manner as permitted by law. Notices shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
If any notice addressed to a stockholder at the address of that
stockholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the stockholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
stockholder on written demand of the stockholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice (or
supplement thereto) of any stockholders' meeting, executed by the secretary,
assistant secretary or any transfer agent of the corporation giving the notice,
shall be prima facie evidence of the giving of such notice (or supplement
thereto).
2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of stockholders. The stockholders present at a duly
called or held meeting at which a quorum is present may continue to do business
for which such
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<PAGE> 7
meeting is called until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy. In the absence
of a quorum, no other business may be transacted at that meeting except as has
been transacted while a quorum was present, if any, as provided in Section 2.6
of these bylaws.
When any meeting of stockholders, either annual or special, is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and place are announced at the meeting at which the adjournment is
taken. However, if a new record date for the adjourned meeting is fixed or if
the adjournment is for more than thirty (30) days from the date set for the
original meeting, then notice of the adjourned meeting shall be given. Notice of
any such adjourned meeting shall be given to each stockholder of record entitled
to vote at the adjourned meeting in accordance with the provisions of Sections
2.4 and 2.5 of these bylaws. At any adjourned meeting the corporation may
transact any business which might have been transacted at the original meeting.
2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the Certificate of Incorporation,
each outstanding share, regardless of class, shall be entitled to one vote on
each matter submitted to a vote of the stockholders.
If a quorum is present, the affirmative vote of the majority of the shares
represented and voting at a duly held meeting (which shares voting affirmatively
also constitute at least a majority of the required quorum) shall be the act of
the stockholders, unless the vote of a greater number or a vote by classes is
required by law, by the Certificate of Incorporation or by these bylaws. The
board of directors, in its discretion, or the officer of the corporation
presiding at a meeting of stockholders, in such officer's discretion, may
require that any votes cast at such meeting shall be cast by written ballot.
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<PAGE> 8
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of stockholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though they
had been taken at a meeting duly held after regular call and notice, if a quorum
be present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of stockholders. All such waivers, consents,
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the Certificate of Incorporation, any action
which may be taken at any annual or special meeting of stockholders may be taken
without a meeting and without prior notice, if a consent in writing, setting
forth the action so taken, is signed by the holders of outstanding shares having
not less than the minimum number of votes that would be necessary to authorize
or take that action at a meeting at which all shares entitled to vote on that
action were present and voted and shall be delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Every
written consent shall bear the date of signature of each stockholder who signs
the consent and no written consent shall be effective to take the corporate
action referred to therein unless, within sixty days of the earliest dated
consent delivered in the manner required by this Section 2.10 to the
corporation, written consents signed by a sufficient number of holders to take
action are delivered to the corporation by delivery to its registered office in
the state of Delaware, its principal place of business, or an officer or agent
of the corporation having custody of the book in which proceedings of meetings
of stockholders are recorded.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of 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.
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2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only stockholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date.
If the board of directors does not so fix a record date:
(a) the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the business day next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the business day next preceding the day
on which the meeting is held; and
(b) the record date for determining stockholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given as required by Section 2.10, or (ii) when prior action by the
board has been taken, shall be at the close of business on the day on which the
board adopts the resolution relating to that action.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
providing, however, that the board of directors may fix a new record date for
the adjourned meeting. The record date for any other purpose shall be as
provided in Article VIII of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
2.13 INSPECTORS OF ELECTION
The board of directors of the corporation may adopt by resolution such
rules and regulations for the conduct of the meeting of the stockholders as it
shall deem appropriate. Except to the extent inconsistent with such rules and
regulations as adopted by the board of directors, the chairman of any meeting of
the stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the board of directors or
prescribed by the chairman of the meeting, and such acts may include, without
limitation, the following: (i) the establishment of an agenda or order of
business for the meeting; (ii) the determination of when the polls shall open
and close
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for any given matter to be voted on at the meeting; (iii) rules and procedures
for maintaining order at the meeting and the safety of those present; (iv)
limitations on attendance at or participation in the meeting to stockholders of
record of the corporation, their duly authorized and constituted proxies or such
other persons as the chairman of the meeting shall determine; (v) restrictions
on entry to the meeting after the time fixed for the commencement thereof; (vi)
limitations on the time allotted to questions or comments by participants; (vii)
determination of the number of shares outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, and
the authenticity, validity, and effect of proxies; (viii) counting and
tabulation of all votes or consents; (ix) hearing and determining all challenges
and questions in any way arising in connection with the right to vote; (x) any
other acts that may be proper to conduct the election or vote with fairness to
all stockholders and (xi) the appointment of an inspector or inspectors of
election to act at the meeting or its adjournment in respect of one or more of
the foregoing matters. The board of directors or chairman may hear and determine
all challenges and questions in any way arising in connection with the right to
vote.
2.14 ADVANCE NOTICE OF STOCKHOLDER BUSINESS
To be properly brought before an annual meeting, any business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the board of directors, (b) otherwise properly brought before
the meeting by or at the direction of the board of directors, or (c) otherwise
properly brought before the meeting by a stockholder (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 2.14
and on the record date for the determination of stockholders entitled to vote at
such annual meeting and (ii) who complies with the notice procedures set forth
in this Section 2.14. For such nominations or other business to be considered
properly brought before the meeting by a stockholder such stockholder must, in
addition to any other applicable requirements, have given timely notice and in
proper form of such stockholder's intent to bring such business before such
meeting. To be timely, such stockholder's notice must be delivered to or mailed
and received by the Secretary of the corporation at the principal executive
offices of the corporation not less than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting; provided, however,
that in the event the annual meeting is called for a date that is not within
thirty (30) days before or after such anniversary date, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth (10th) day following the day on which such notice of the
date of the meeting was mailed or such public disclosure made, whichever occurs
first. To be in proper form, a stockholder's notice to the Secretary shall set
forth:
(a) the name and record address of the stockholder who intends to
propose the business and the class or series and number of shares of capital
stock of the corporation which are owned beneficially or of record by such
stockholder;
(b) a representation that the stockholder is a holder of record of
stock of the corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting introduce the business specified in the
notice;
(c) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting; and ;
(d) any material interest of the shareholder in such business.
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section; provided, however, that, once
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business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 2.14 shall be deemed to preclude
discussion by any stockholder of any such business. The chairman of the meeting
may refuse to acknowledge the proposal of any business not made in compliance
with the foregoing procedure.
2.15 ADVANCE NOTICE OF DIRECTOR NOMINATIONS
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors of the corporation, except as may be
otherwise provided in the Certificate of Incorporation with respect to the right
of holders of preferred stock of the corporation to nominate and elect a
specified number of directors in certain circumstances. To be properly brought
before an annual meeting, meeting of stockholders, or any special meeting of
stockholders called for the purpose of electing directors, nominations for the
election of director must be (a) specified in the notice of meeting (or any
supplement thereto), (b) made by or at the direction of the board of directors
(or any duly authorized committee thereof) or (c) made by any stockholder of the
corporation (i) who is a stockholder of record on the date of the giving of the
notice provided for in this Section 2.15 and on the record date for the
determination of stockholders entitled to vote at such meeting and (ii) who
complies with the notice procedures set forth in this Section 2.15.
In addition to any other applicable requirements, for a nomination to be
made by a stockholder, such stockholder must have given timely notice thereof in
proper written form to the Secretary of the corporation. To be timely, a
stockholder's notice to the Secretary must be delivered to or mailed and
received at the principal executive offices of the corporation (a) in the case
of an annual meeting, not less than ninety (90) days prior to the anniversary
date of the immediately preceding annual meeting of stockholders; provided,
however, that in the event that the annual meeting is called for a date that is
not within thirty (30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth (10th) day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure of the date
of the annual meeting was made, whichever first occurs; and (b) in the case of a
special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the tenth (10th) day following the day
on which notice of the date of the special meeting was mailed or public
disclosure of the date of the special meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth:
(a) as to each person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or employment of the person, (iii)
the class or series and number of shares of capital stock of the corporation
which are owned beneficially or of record by the person and (iv) any other
information relating to the person that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and
(b) as to the stockholder giving the notice (i) the name and record
address of such stockholder, (ii) the class or series and number of shares of
capital stock of the corporation which are owned beneficially or of record by
such stockholder, (iii) a description of all arrangements or understandings
between such stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s) are to be
made by such stockholder, (iv) a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the persons named in its
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notice and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee to being named as a nominee and to serve as a director if
elected.
No person shall be eligible for election as a director of the corporation
unless nominated in accordance with the procedures set forth in this Section
2.15. If the Chairman of the meeting determines that a nomination was not made
in accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the nomination was defective and such defective nomination shall be
disregarded.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
to any limitations in the Restated 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 AND TERM OF OFFICE
The authorized number of directors shall be established from time to time
by resolution of the board of directors or by amendment of this Section 3.2,
duly adopted by the board of directors or by the stockholders. Directors need
not be stockholders.
3.3 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the board of directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, the board of directors
(including such director whose resignation is to be effective at a later time)
may elect a successor to take office when the resignation becomes effective.
Unless otherwise required by law or the Certificate of Incorporation,
vacancies arising through death, resignation, removal, an increase in the number
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of directors or otherwise may be filled only by a majority of the directors then
in office, though less than a quorum, or by a sole remaining director. Any
director elected in accordance with the preceding sentence shall hold office for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified, or until such director's
earlier death, resignation or removal. No decrease in the number of directors
constituting the board of directors shall shorten the term of any incumbent
director.
3.4 REMOVAL
Any director may be removed from office at any time only with cause by the
affirmative vote of the holders of at least a majority of the then outstanding
shares of the capital stock of the corporation entitled to vote at an election
of directors.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place within
or outside the State of Delaware that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the corporation. Special
meetings of the board may be held at any place within or outside the State of
Delaware that has been designated in the notice of the meeting or, if not stated
in the notice or if there is no notice, at the principal executive office of the
corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice if
the times of such meetings are fixed by the board of directors.
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, 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,
facsimile 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 facsimile, it shall be delivered
personally or by telephone or by facsimile machine at least forty-eight (48)
hours before the time of the holding of the meeting or on such shorter notice as
the person or persons calling such meeting may deem necessary or appropriate in
the circumstances. Any oral notice given personally or by telephone may be
communicated either to the director
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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.
3.8 QUORUM
Except as otherwise required by law, a majority of the authorized number
of directors shall constitute a quorum for the transaction of business, except
to adjourn as provided in Section 3.11 of these bylaws. Every act or decision
done or made by a majority of the directors present at a duly held meeting at
which a quorum is present shall be regarded as the act of the board of
directors, subject to the provisions of the Certificate of Incorporation and
applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors may
be taken without a meeting, provided that all the members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This
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Section 3.13 shall not be construed to preclude any director from serving the
corporation in any other capacity as an officer, agent, employee or otherwise
and receiving compensation for those services.
3.14 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 contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 INTERESTED DIRECTORS
No contract or transaction between the corporation and one or more of its
directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the board of
directors or committee thereof which authorizes the contract or transaction, or
solely because the director or officer's vote is counted for such purpose if (i)
the material facts as to the director or officer's relationship or interest and
as to the contract or transaction are disclosed or are known to the board of
directors or the committee, and the board of directors or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to the director or
officer's relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified by the board of directors,
a committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the board of
directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may designate one (1) or more committees, each
consisting of one (1) or more directors, to serve at the pleasure of the board.
The board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee. In
the absence or disqualification of a member of a committee, and in the absence
of a designation by the board of directors of an alternate member to replace the
absent or disqualified member, 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 absent or disqualified
member. Any committee, to the extent permitted by law and
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provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it;
provided, however, that 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 any of the preferences or rights
of such shares relating to dividends, redemption, dissolution, any distribution
of assets of the corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the same
or any other class or classes of stock of the corporation), (ii) adopt an
agreement of merger or consolidation under Sections 251 or 252 of the General
Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease
or exchange of all or substantially all of the corporation's property and
assets, (iv) recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or (v) amend the bylaws of the corporation; and,
unless the board resolution establishing the committee, the bylaws or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law of Delaware. Each committee shall keep regular
minutes and report to the board of directors when required
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; 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 president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of the
board of directors, a chairman of the board, a chief executive officer, a
treasurer, one or more vice presidents, one or more assistant secretaries, one
or more assistant treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these bylaws. Any number of
offices may be held by the same person.
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5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws,
shall be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in 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 the
board of directors at any regular or special meeting of the board or, except in
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.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no chief
executive officer, then the chairman of the board shall also be the chief
executive officer of the corporation and shall have the powers and duties
prescribed in Section 5.7 of these bylaws.
5.7 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 there be such an officer, the
chief executive officer shall be subject to the control of the board of
directors and have general supervision, direction and control of the business.
He or she shall preside at all meetings of the stockholders and, in the absence
or non-existence of the chairman of the board, at all meetings of the board of
directors. He or she shall have the general powers and duties of management
usually vested in the office of the chief executive officer of a corporation,
and shall have such other powers and perform such other duties as from time to
time may be prescribed by the board of directors or these bylaws.
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5.8 PRESIDENT
In the absence or disability of the chief executive officer, and if there
is no chairman of the board, the president shall perform all the duties of the
chief executive officer and when so acting shall have the power of, and be
subject to all the restrictions upon, the chief executive officer. The president
shall have such other powers and perform such other duties as from time to time
may be prescribed for the president by the board of directors, these bylaws, the
chief executive officer or the chairman of the board.
5.9 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.
5.10 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and shareholders. The minutes shall show the time and place of each
meeting, whether regular or special (and, if special, how authorized and the
notice given), the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at shareholders' 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 shareholders
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 shareholders and of the board of directors required to be given by law or by
these bylaws. He 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.
5.11 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 money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated in accordance with procedures established by the board of directors.
He shall disburse the funds of the corporation as may be ordered by the board of
directors, shall render to the president and directors, whenever they request
it, an account of all of his transactions as
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chief financial officer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE
BY OR IN THE RIGHT OF THE CORPORATION
Subject to Section 6.3 of this Article VI, the corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that such person is or was a
director or officer of the corporation, or is or was a director or officer of
the corporation serving at the request of the corporation as a director or
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person'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 the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's con-duct was unlawful.
6.2 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE
RIGHT OF THE CORPORATION
Subject to Section 6.3 of this Article VI, the corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director or officer of the corporation, or is or was a
director or officer of the corporation serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
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6.3 AUTHORIZATION OF INDEMNIFICATION
Any indemnification under this Article VI (unless ordered by a court)
shall be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in Section 6.1 or Section 6.2 of this Article VI, as the case may be. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) by a committee of such directors designated by a
majority vote of such directors, even though less than a quorum, or (iii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion or (iv) by the stockholders (but only if a
majority of the directors who are not parties to such action, suit or
proceeding, if they constitute a quorum of the board of directors, presents the
issue of entitlement to indemnification to the shareholders for their
determination). Such determination shall be made, with respect to former
directors and officers, by any person or persons having the authority to act on
the matter on behalf of the corporation. To the extent, however, that a present
or former director or officer of the corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith, without the necessity of
authorization in the specific case.
6.4 GOOD FAITH DEFINED
For purposes of any determination under Section 6.3 of this Article VI, a
person shall be deemed to have acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, or, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe such person's conduct was unlawful, if such
person's action is based on the records or books of account of the corporation
or another enterprise, or on information supplied to such person by the officers
of the corporation or another enterprise in the course of their duties, or on
the advice of legal counsel for the corporation or another enterprise or on
information or records given or reports made to the corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the corporation or another
enterprise. The term "another enterprise" as used in this Section 6.4 shall mean
any other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise of which such person is or was serving at the request
of the corporation as a director, officer, employee or agent. The provisions of
this Section 6.4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Section 6.1 or 6.2 of this Article VI, as the
case may be.
6.5 INDEMNIFICATION BY A COURT
Notwithstanding any contrary determination in the specific case under
Section 6.3 of this Article VI, and not withstanding the absence of any
determination thereunder, any director or officer may apply to the Court of
Chancery in the State of Delaware for indemnification to the extent otherwise
permissible under Sections 6.1 and 6.2 of this Article VI. The basis of such
indemnification by a court shall be a determination by such court that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standards of conduct set forth in
Section 6.1 or 6.2 of this Article VI, as the case may be. Neither a contrary
determination in the specific case under Section 6.3 of this Article VI nor the
absence of any determination thereunder shall be a defense to such application
or create a presumption that the director or officer seeking indemnification has
not met any applicable standard of conduct. Notice of any
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application for indemnification pursuant to this Section 5 shall be given to the
corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
6.6 EXPENSES PAYABLE IN ADVANCE
Expenses incurred by a director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation as authorized in
this Article VI.
6.7 NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by or granted
pursuant to this Article VI shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under the Restated Certificate of Incorporation, any Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, it being the policy of the corporation that indemnification of the
persons specified in Sections 6.1 and 6.2 of this Article VI shall be made to
the fullest extent permitted by law. The provisions of this Article VI shall not
be deemed to preclude the indemnification of any person who is not specified in
Section 6.1 or 6.2 of this Article VI but whom the corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
6.8 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director or officer of the corporation, or is or was a
director or officer of the corporation serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
corporation would have the power or the obligation to indemnify such person
against such liability under the provisions of this Article VI.
6.9 CERTAIN DEFINITIONS
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors or officers, so that any person who is or
was a director or officer of such constituent corporation, or is or was a
director or officer of such constituent corporation serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, shall stand in the same position under the provisions of this
Article VI with respect to the resulting or surviving corporation as such person
would have with respect to such constituent corporation if its separate
existence had continued. For purposes of this Article VI, references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation "
shall include any service as a
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director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the corporation"
as referred to in this Article VI.
6.10 SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
6.11 LIMITATION ON INDEMNIFICATION
Notwithstanding anything contained in this Article VI to the contrary,
except for proceedings to enforce rights to indemnification (which shall be
governed by Section 6.5 hereof), the corporation shall not be obligated to
indemnify any director or officer in connection with a proceeding (or part
thereof) initiated by such person unless such proceeding (or part thereof) was
authorized or consented to by the board of directors of the corporation.
6.12 INDEMNIFICATION OF EMPLOYEES AND AGENTS
The corporation may, to the extent authorized from time to time by the
board of directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the corporation similar to those conferred
in this Article VI to directors and officers of the corporation.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records.
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.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the
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meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
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.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the chief executive officer, the president or
any other person authorized by the board of directors or the chief executive
officer or 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 herein granted may be exercised either by such person directly or by
any other person authorized to do so by proxy or power of attorney duly executed
by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any other lawful
action (other than action by stockholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided by law.
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<PAGE> 24
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws, may
authorize 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
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed in the name of the corporation by(a) the chairman or vice-chairman of the
board of directors, or the chief executive officer, president or vice-president,
and by (b) the chief financial officer, treasurer, secretary or an assistant
secretary of the 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.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
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rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
ARTICLE IX
AMENDMENTS
These bylaws of the corporation may be altered, amended or repealed, in
whole or in part, or new bylaws may be adopted by the stockholders entitled to
vote or by the board of directors. All such amendments must be approved by
either the holders of a majority of the outstanding capital stock entitled to
vote thereon or by a majority of the board of directors then in office. The fact
that such power has been so conferred upon the board of directors shall not
divest the stockholders of the power, nor limit their power to adopt, alter,
amend or repeal bylaws.
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EXHIBIT 4.1
INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE
NUMBER C-<<M_1>> EXTENSITY, INC. **<<M_2>>** SHARES
A DELAWARE CORPORATION
THIS CERTIFIES THAT <<M_3>> is the record holder of **<<M_4>>
(<<M_2>>)** shares OF COMMON STOCK of EXTENSITY, INC. (the "Corporation")
transferable only on the share register of the Corporation by the holder, in
person or by duly authorized attorney, upon surrender of this Certificate
properly endorsed or assigned.
A statement of all of the rights, preferences, privileges and
restrictions granted to or imposed upon the respective classes or series of
shares of stock of the Corporation and upon the holders thereof as established
by the Amended and Restated Certificate of Incorporation or by any certificate
of determination of preferences, and the number of shares constituting each
class and designations thereof, may be obtained by any stockholder, upon request
and without charge, upon written request to the Secretary of the Corporation at
the Corporation's principal office.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
Corporation this <<M_5>>.
___________________________________ ___________________________________
Secretary President
<PAGE> 2
FOR VALUE RECEIVED I DO HEREBY SELL, ASSIGN, AND TRANSFER UNTO _________________
______________________ SHARES REPRESENTED BY THE WITHIN CERTIFICATE AND DO
HEREBY IRREVOCABLY CONSTITUTE AND APPOINT ___________________________________ AS
ATTORNEY, TO TRANSFER THE SAID SHARES ON THE SHARE REGISTER OF THE WITHIN NAMED
CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED ________________, 19 ____
___________________________________ ___________________________________
(WITNESS) (STOCKHOLDER)
___________________________________
(STOCKHOLDER)
NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THIS CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERNATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR THE ISSUER OF THE SHARES (THE "ISSUER") HAS RECEIVED AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR IT'S ASSIGNEE(S)
AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER
OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON
TRANSFEREES OF THE SHARES REPRESENTED HEREBY.
<PAGE> 1
EXHIBIT 10.1
EXTENSITY, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is entered into as of the
___ day of ______, 19__ by and between Extensity, Inc. a Delaware corporation
(the "COMPANY") and _____ ("INDEMNITEE").
RECITALS
A. The Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for its directors, officers, employees, agents and
fiduciaries, the significant increases in the cost of such insurance and the
general reductions in the coverage of such insurance.
B. The Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited.
C. Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other directors,
officers, employees, agents and fiduciaries of the Company may not be willing to
continue to serve in such capacities without additional protection.
D. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and, in part, in
order to induce Indemnitee to continue to provide services to the Company,
wishes to provide for the indemnification and advancing of expenses to
Indemnitee to the maximum extent permitted by law.
E. In view of the considerations set forth above, the Company desires
that Indemnitee be indemnified by the Company as set forth herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Indemnification of Expenses. The Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any threatened, pending or
completed action, suit, proceeding or alternative dispute resolution mechanism,
or any hearing, inquiry or investigation that Indemnitee in good faith believes
might lead to the institution of any such action, suit, proceeding or
alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other (hereinafter a "CLAIM") by reason of (or
arising in part out of) any event or occurrence related to the fact that
Indemnitee is or was a director, officer,
<PAGE> 2
employee, agent or fiduciary of the Company, or any subsidiary of the Company,
or is or was serving at the request of the Company as a director, officer,
employee, agent or fiduciary of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action or inaction on the part of
Indemnitee while serving in such capacity (hereinafter an "INDEMNIFIABLE EVENT")
against any and all expenses (including attorneys' fees and all other costs,
expenses and obligations incurred in connection with investigating, defending,
being a witness in or participating in (including on appeal), or preparing to
defend, be a witness in or participate in, any such action, suit, proceeding,
alternative dispute resolution mechanism, hearing, inquiry or investigation),
judgments, fines, penalties and amounts paid in settlement (if such settlement
is approved in advance by the Company, which approval shall not be unreasonably
withheld) of such Claim and any federal, state, local or foreign taxes imposed
on Indemnitee as a result of the actual or deemed receipt of any payments under
this Agreement (collectively, hereinafter "EXPENSES"), including all interest,
assessments and other charges paid or payable in connection with or in respect
of such Expenses. Such payment of Expenses shall be made by the Company as soon
as practicable but in any event no later than five days after written demand by
Indemnitee therefor is presented to the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i) the
obligations of the Company under Section 1(a) shall be subject to the condition
that the Reviewing Party (as described in Section 10(e) hereof) shall not have
determined (in a written opinion, in any case in which the Independent Legal
Counsel referred to in Section 1(c) hereof is involved) that Indemnitee would
not be permitted to be indemnified under applicable law, and (ii) the obligation
of the Company to make an advance payment of Expenses to Indemnitee pursuant to
Section 2(a) (an "EXPENSE ADVANCE") shall be subject to the condition that, if,
when and to the extent that the Reviewing Party determines that Indemnitee would
not be permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid; provided, however, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitees' obligation to reimburse the Company for any
Expense Advance shall be unsecured and no interest shall be charged thereon. If
there has not been a Change in Control (as defined in Section 10(c) hereof), the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel referred to in Section 1(c) hereof. If there has been
no determination by the Reviewing Party or if the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in whole
or in part under applicable law, Indemnitee shall have the right to commence
litigation seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, including the legal
or factual bases therefor, and the Company
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<PAGE> 3
hereby consents to service of process and to appear in any such proceeding. Any
determination by the Reviewing Party otherwise shall be conclusive and binding
on the Company and Indemnitee.
(c) Change in Control. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then, with respect to all matters
thereafter arising concerning the rights of Indemnitees to payments of Expenses
and Expense Advances under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel (as defined in Section 10(d) hereof) shall be selected
by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would be permitted to be indemnified under applicable law and the
Company agrees to abide by such opinion. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above and to fully
indemnify such counsel against any and all expenses (including attorneys' fees),
claims, liabilities and damages arising out of or relating to this Agreement or
its engagement pursuant hereto.
(d) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 9 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
action, suit, proceeding, inquiry or investigation referred to in Section (1)(a)
hereof or in the defense of any claim, issue or matter therein, Indemnitee shall
be indemnified against all Expenses incurred by Indemnitee in connection
therewith.
2. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all
Expenses incurred by Indemnitee. The advances to be made hereunder shall be paid
by the Company to Indemnitee as soon as practicable but in any event no later
than five days after written demand by Indemnitee therefor to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitees' 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 at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitees'
power.
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<PAGE> 4
(c) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law. In addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
applicable law, shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief. In connection with any determination by the Reviewing
Party or otherwise as to whether Indemnitee is entitled to be indemnified
hereunder, the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 2(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim 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 Indemnitee, all amounts payable as a result of such action, suit,
proceeding, inquiry or investigation in accordance with the terms of such
policies.
(e) Selection of Counsel. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim, the Company shall be
entitled to assume the defense of such Claim with counsel approved by
Indemnitee, which approval shall not be unreasonably withheld, 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 Claim; provided that, (i) Indemnitee shall have the right to
employ Indemnitees' counsel in any such Claim at Indemnitee 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 is a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, or (C) the Company shall not continue to retain such counsel to
defend such Claim, then the fees and expenses of Indemnitee counsel shall be at
the expense of the Company. The Company shall have the right to conduct such
defense as it sees fit in its sole discretion, including the right to settle any
claim against Indemnitee without the consent of the Indemnitee.
3. Additional Indemnification Rights; Nonexclusivity.
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<PAGE> 5
(a) Scope. The Company hereby agrees to indemnify 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,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. 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, employee, agent or fiduciary, such change, 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 except as set forth in Section 8(a) hereof.
(b) Nonexclusivity. The indemnification provided by this
Agreement shall be in addition to any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorpo ration, its Bylaws, any agreement,
any vote of stockholders or disinterested directors, the General Corporation Law
of the State of Delaware, or otherwise. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action Indemnitee took or did
not take while serving in an indemnified capacity even though Indemnitee may
have ceased to serve in such capacity.
4. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Certificate of Incorporation, Bylaw or otherwise)
of the amounts otherwise indemnifiable hereunder.
5. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee are entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission 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. Liability Insurance. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies 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 offi-
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<PAGE> 6
cers, if Indemnitee is not a director of the Company but is an officer; or of
the Company's key employees, agents or fiduciaries, if Indemnitee is not an
officer or director but is a key employee, agent or fiduciary.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for
Indemnitee's acts, omissions or transactions from which Indemnitee or the
Indemnitee may not be relieved of liability under applicable law;
(b) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company's
Certificate of Incorporation or Bylaws now or hereafter in effect relating to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise required under Section 145 of the Delaware General Corporation Law,
regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be;
(c) 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; or
(d) Claims Under Section 16(b). To indemnify Indemnitee for
expenses and 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.
9. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
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 consti-
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<PAGE> 7
tuent) absorbed in a consolidation or merger which, if its separate existence
had continued, would have had power and authority to indemnify its directors,
officers, employees, agents or fiduciaries, so that if Indemnitee is or was a
director, officer, employee, agent or fiduciary of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, 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, agent or fiduciary of the
Company which imposes duties on, or involves services by, such director,
officer, employee, agent or fiduciary with respect to an employee benefit plan,
its participants or its 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.
(c) For purposes of this Agreement a "Change in Control" shall
be deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or a corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company, (A) who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 10% or more of the
combined voting power of the Company's then outstanding Voting Securities,
increases his beneficial ownership of such securities by 5% or more over the
percentage so owned by such person, or (B) becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of
the Company representing more than 20% of the total voting power represented by
the Company's then outstanding Voting Securities, (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by the
Board of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
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<PAGE> 8
for the sale or disposition by the Company of (in one transaction or a series of
transactions) all or substantially all of the Company's assets.
(d) For purposes of this Agreement, "Independent Legal
Counsel" shall mean an attorney or firm of attorneys, selected in accordance
with the provisions of Section 1(c) hereof, who shall not have otherwise
performed services for the Company or Indemnitee within the last three years
(other than with respect to matters concerning the rights of Indemnitee under
this Agreement, or of other indemnitees under similar indemnity agreements).
(e) For purposes of this Agreement, a "Reviewing Party" shall
mean any appropriate person or body consisting of a member or members of the
Company's Board of Directors or any other person or body appointed by the Board
of Directors who is not a party to the particular Claim for which Indemnitee are
seeking indemnification, or Independent Legal Counsel.
(f) For purposes of this Agreement, "Voting Securities" shall
mean any securities of the Company that vote generally in the election of
directors.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, spouses, heirs,
and personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all, or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. This Agreement shall
continue in effect with respect to Claims relating to Indemnifiable Events
regardless of whether Indemnitee continues to serve as a director, officer,
employee, agent or fiduciary of the Company or of any other enterprise at the
Company's request.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless, as a part of such action, a
court of competent jurisdiction over such action determines that each of the
material assertions made by Indemnitee as a basis for such action was not made
in good faith or was frivolous. In the event of an action instituted by or in
the name of the Company under this Agreement to enforce or interpret any of the
terms of this Agreement, Indemnitee shall be entitled to be paid all
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<PAGE> 9
Expenses incurred by Indemnitee in defense of such action (including costs and
expenses incurred with respect to Indemnitee counterclaims and cross-claims made
in such action), and shall be entitled to the advancement of Expenses with
respect to such action, unless, as a part of such action, a court having
jurisdiction over such action determines that each of Indemnitee material
defenses to such action was made in bad faith or was frivolous.
14. Notice. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given (a) five (5) days after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first class mail,
postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day
after the business day of deposit with Federal Express or similar overnight
courier, freight prepaid, or (d) one day after the business day of delivery by
facsimile transmission, if delivered by facsimile transmission, with copy by
first class mail, postage prepaid, and shall be addressed if to Indemnitee, at
the Indemnitee address as set forth beneath Indemnitee signatures to this
Agreement and if to the Company at the address of its principal corporate
offices (attention: Secretary) or at such other address as such party may
designate by ten days' advance written notice to the other party hereto.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of the State of
Delaware, as applied to contracts between Delaware residents, entered into and
to be performed entirely within the State of Delaware, without regard to the
conflict of laws principles thereof.
18. 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
effectively to bring suit to enforce such rights.
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<PAGE> 10
19. Amendment and Termination. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
Extensity, Inc.
a Delaware corporation
By:_____________________________________
Title:__________________________________
Address: 2200 Powell Street, Suite 400
Emeryville, CA 94608
AGREED TO AND ACCEPTED BY:
___________________________________
Name: _____________________________
Address:___________________________
___________________________
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<PAGE> 1
EXHIBIT 10.2
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: At Large Software, Inc., A Delaware corporation
Number of Shares: See below.
Class of Stock: Series B Preferred, subject to below.
Initial Exercise Price: See below.
Issue Date: January 28, 1997
Expiration Date: January 28, 2002
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 herein
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth of this Warrant. The Warrant Price
shall be equal to the price per share at which the Company after the date hereof
first sells its shares of capital stock in an offering in which the Company
receives not less than One Million Dollars ($1,000,000); provided that if such
sale is not completed by May 28, 1997, the Warrant Price shall be Fifty Cents
($.50) and the class of stock shall be Series A Preferred. The number of Shares
subject to this Warrant shall be the quotient derived by dividing (x) the sum of
(a) Twenty Five Thousand Dollars ($25,000), plus (b) five percent (5%) of the
highest amount of aggregate Advances (as defined in the Loan and Security
Agreement of even date herewith by and between the Company the Holder (the "Loan
Agreement")) outstanding at any time during the term of such Loan Agreement by
(y) the Warrant Price.
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
<PAGE> 2
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 Alternative Stock Appreciation Right. At Holder's option, the Company
shall pay Holder the fair market value of the Shares issuable upon conversion of
this Warrant pursuant to Section 1.2 in cash in lieu of such Shares.
1.4 Fair Market Value. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its 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 shall 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.
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<PAGE> 3
ARTICLE 2
ADJUSTMENTS TO THE SHARES
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. Such an
event shall include any automatic conversion of the outstanding or issuable
securities of the Company of the same class or series as the Shares to common
stock pursuant to the terms of the Company's Articles of Incorporation upon the
closing of a registered public offering of the Company's common stock. The
Company or its successor shall promptly issue to Holder a new Warrant for such
new securities or other property. The new Warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise
of the new Warrant. The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number
of Shares issuable upon exercise of this Warrant or, if the Shares are Preferred
Stock, the number of shares of common stock issuable upon conversion of the
Shares, shall be subject to adjustment, from time to time in the manner set
forth on Exhibit A in the event of Diluting Issuances (as defined on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its Certificate
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
other than in the ordinary course of its
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<PAGE> 4
business affecting the Shares or its common stock other than as described above
that adversely affects Holder's rights under this Warrant, the Warrant Price
shall be adjusted downward and the number of Shares issuable upon exercise of
this Warrant shall be adjusted upward in such a manner that the aggregate
Warrant Price of this Warrant is unchanged.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3
REPRESENTATIONS AND COVENANTS OF THE COMPANY
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page
of this Warrant is not greater than (i) the price per share at which the Shares
were last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
(b) 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.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock or
redemption of any of the Shares; (d) to merge or consolidate with or into any
other corporation, or sell, lease, license, or convey all or substantially all
of its assets, or to liquidate, dissolve or wind up; or (e) offer holders of
registration rights the opportunity to participate in an underwritten public
offering of the company's securities for cash, then, in connection with each
such event, the Company shall give Holder (1) at least
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<PAGE> 5
10 days prior written notice of the date on which a record will be taken for
such dividend, distribution, or subscription rights (and specifying the date on
which the holders of common stock will be entitled thereto) or for determining
rights to vote, if any, in respect of the matters referred to in (c) and (d)
above; (2) in the case of the matters referred to in (c) and (d) above at least
20 days prior written notice of the date when the same will take place (and
specifying the date on which the holders of common stock will be entitled to
exchange their common stock for securities or other property deliverable upon
the occurrence of such event); and (3) in the case of the matter referred to in
(e) above, the same notice as is given to the holders of such registration
rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4
MISCELLANEOUS.
4.1 Term; Notice of Expiration. This Warrant is exercisable, in whole or
in part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 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
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<PAGE> 6
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 4.2, Holder
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). The
Company shall have the right to refuse to transfer any portion of this Warrant
to any person who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys Fees. In the event of any dispute between the parties
concerning the terms and 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.
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<PAGE> 7
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"
AT LARGE SOFTWARE, INC.
By:___________________________________
Name:_________________________________
(Print)
Title: Chairman of the Board,
President, or Vice President
By:___________________________________
Name:_________________________________
(Print)
Title: Chief Financial Officer,
Secretary Assistant
Treasurer, or Assistant
Secretary
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<PAGE> 8
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _________ shares of the
Series ________ Preferred Stock of At Large 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> 9
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: January 28, 1997
Class of Security Issuable: See warrant.
Exercise Price per Share: See warrant.
Number of Shares Issuable: See warrant.
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> 10
EXHIBIT A
Anti-Dilution Provisions
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
(the "Provisions") of the Company's Certificate of Incorporation which apply to
Diluting Issuances.
The Company agrees that the Provisions, as in effect on the Issue Date,
shall be deemed to remain in full force and effect during the term of the
Warrant notwithstanding any subsequent amendment, waiver or termination thereof
by the Company's shareholders.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
<PAGE> 11
EXHIBIT B
Registration Rights
The Shares (if common stock), or the common stock issuable upon conversion
of the Shares, shall be deemed "registrable securities" or otherwise entitled to
"piggy back" registration rights in accordance with the terms of the following
agreement (the "Agreement") between the Company and its investor(s):
Investor Rights Agreement dated as of December 1, 1995 by and
between Celerity, Inc., predecessor-in-interest to the Company, and
the Investors, as defined therein.
The Company agrees that no amendments will be made to the Agreement which
would have an adverse impact on Holder's registration rights thereunder without
the consent of Holder. By acceptance of the Warrant to which this Exhibit B is
attached, Holder shall be deemed to be a party to the Agreement.
<PAGE> 1
EXHIBIT 10.3
EXTENSITY, INC.
SERIES D PREFERRED STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES WHICH MAY BE PURCHASED UPON THE EXERCISE OF THIS
WARRANT HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER, PLEDGE OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS UNLESS SOLD
PURSUANT TO RULE 144 OF THE ACT.
Effective Date: June 29, 1998
NO. 1998D-1 Void after March 25, 2008
THIS CERTIFIES THAT, for value received, Comdisco, Inc. (the "HOLDER")
is entitled to subscribe for and purchase shares of fully paid and nonassessable
Series D Preferred Stock, par value $0.01 per share, (the "DESIGNATED PREFERRED
STOCK") of Extensity, Inc., a Delaware corporation (the "COMPANY").
1. Purchase Right. This Warrant represents the right of the Holder to
subscribe for and purchase up to an aggregate of 8,290 shares of fully paid and
nonassessable Designated Preferred Stock at an exercise price of $3.30 per share
(as adjusted pursuant to Section 4 hereof) (the "EXERCISE PRICE").
2. Method of Exercise; Payment.
(a) Cash Exercise. The purchase rights represented by this Warrant
may be exercised by the Holder, in whole or in part, by the surrender of this
Warrant (with the notice of exercise form attached hereto as EXHIBIT A duly
executed) at the principal office of the Company, and by the payment to the
Company, by certified, cashier's or other check, of an amount equal to the
aggregate Exercise Price for the number of shares of Designated Preferred Stock
being purchased.
(b) Net Issue Exercise. The Exercise Price may be paid at the
Holder's election either (i) by cash or check, or (ii) by surrender of this
Warrant at the principal office of the Company together with notice of such
election in which event the Company shall issue to the Holder a number of shares
of Designated Preferred Stock computed using the following formula:
<PAGE> 2
X = Y(A-B)
------
A
Where X = the number of shares of Designated Preferred Stock to be
issued to the Holder
Y = the number of shares of Designated Preferred Stock
purchasable under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the Warrant
being canceled (at the date of such calculation)
A = the fair market value of one share of the Company's
Designated Preferred Stock (at the date of such
calculation)
B = the Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of the Company's
Designated Preferred Stock shall mean such fair market value as is reasonably
determined as follows:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
SEC, then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to the
offering and (y) the number of shares of Common Stock into which each share of
Designated Preferred Stock is convertible at the time of such exercise;
(ii) If this Warrant is exercised after, and not in connection
with the Company's initial public offering, and;
(a) if traded on a securities exchange, the fair market
value shall be deemed to be the product of (x) the average of the closing prices
over a twenty-one (21) day period ending three days before the day the current
fair market value of the securities is being determined and (y) the number of
shares of Common Stock into which each share of Designated Preferred Stock is
convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the fair market
value shall be deemed to be the product of (x) the average of the closing bid
and asked prices quoted on the NASDAQ system (or similar system) over the
twenty-one (21) day period ending three days before the day the current fair
market value of the securities is being determined and (y) the number of shares
of Common Stock into which each share of Designated Preferred Stock is
convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the current fair market value of the Company's Common Stock shall be the
product of (x) the highest price per share, as determined in good faith by its
Board of Directors and (y) the number of shares of Common Stock into which each
share of Designated Preferred Stock is convertible at the time of such exercise,
unless the Company shall become
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<PAGE> 3
subject to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the fair market value of
Designated Preferred Stock shall be deemed to be the value received by the
holders of the Company's Designated Preferred Stock on a common equivalent basis
pursuant to such merger or acquisition.
(c) Stock Certificates. In the event of any exercise of the rights
represented by this Warrant, certificates for the Designated Preferred Stock so
purchased shall be delivered to the Holder within a reasonable time, and in no
event later than thirty (30) days thereafter, and, unless this Warrant has been
fully exercised or has expired, a new Warrant representing the shares with
respect to which this Warrant shall not have been exercised shall also be issued
to the Holder within such time.
3. Stock Fully Paid; Reservation of Shares. All of the Designated
Preferred Stock issuable upon the exercise of the rights represented by this
Warrant will, upon issuance and receipt of the Exercise Price therefor, be fully
paid and nonassessable, and free from all taxes, liens and charges with respect
to the issue thereof. During the period within which the rights represented by
this Warrant may be exercised, the Company shall at all times have authorized
and reserved for issuance a sufficient number of shares of its Designated
Preferred Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Exercise Price and Number of Shares.
(a) Subject to the provisions of Section 12 hereof, in the event
that the Company shall at any time subdivide the outstanding shares of
Designated Preferred Stock or shall issue a stock dividend on its outstanding
shares of Designated Preferred Stock, then the number of shares of Designated
Preferred Stock issuable upon exercise of this Warrant immediately prior to such
subdivision or to the issuance of such stock dividend shall be proportionately
increased, and the Exercise Price shall be proportionately decreased, and in the
event that the Company shall at any time combine the outstanding shares of
Designated Preferred Stock the number of shares of Designated Preferred Stock
issuable upon exercise of this Warrant immediately prior to such combination
shall be proportionately decreased, and the Exercise Price shall be
proportionately increased, effective at the close of business on the date of
such subdivision, stock dividend or combination, as the case may be.
(b) In the case of any reclassification, recapitalization or change
of the Designated Preferred Stock (other than any action for which adjustment is
made pursuant to Section 4(a) hereof and other than a change as contemplated by
Section 12(b) hereof), the Company shall execute a new warrant providing that
the Holder of this Warrant shall have the right to exercise such new warrant and
to procure upon such exercise and payment of the same aggregate Exercise Price,
in lieu of the shares of Designated Preferred Stock theretofore issuable upon
exercise of this Warrant, the kind and amount of shares, other securities, money
or property receivable upon such reclassification, recapitalization or change of
the Designated Preferred Stock.
(c) In the case of any merger or any capital reorganization of the
shares of the Company's stock (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), or a merger or
consolidation of the Company with or into another corporation
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<PAGE> 4
whether or not the Company is the surviving corporation other than as set forth
in section 13(c) hereof (hereinafter referred to as a "Merger Event"), then, as
a part of such Merger Event, lawful provision shall be made so that the Holder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of Designated Preferred Stock or other securities of the
successor corporation resulting from such Merger Event, equivalent in value to
that which would have been issuable if Holder had exercised this Warrant
immediately prior to the Merger Event. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant with respect to the rights
and interest of the Holder after the Merger Event to the end that the provisions
of this Warrant (including adjustments of the Exercise Price and number of
shares of Designated Preferred Stock purchasable) shall be applicable to the
greatest extent possible.
5. Notice of Adjustments. Whenever the number of shares of Designated
Preferred Stock purchasable hereunder or the Exercise Price thereof shall be
adjusted pursuant to Section 4 hereof, the Company shall provide notice to the
Holder setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the number of shares of Designated Preferred Stock which may be
purchased and the Exercise Price therefor after giving effect to such
adjustment.
6. Fractional Shares. This Warrant may not be exercised for fractional
shares, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
7. Representations and Warranties by the Company. The Company
represents, covenants and warrants to the Holder as follows:
(a) The Company represents that all corporate actions on the part of
the Company, its officers, directors and shareholders necessary for the sale and
issuance of shares of Designated Preferred Stock pursuant hereto and the
performance of the Company's obligations hereunder were taken prior to and are
effective as of the effective date of this Warrant.
(b) If the Company proposes at any time to enter into a transaction
described in Section 12(b) or Section 12(c) hereof, the Company shall give
Holder at least fifteen (15) days written notice prior to the consummation of
such transaction.
(c) Reservation of Designated Preferred Stock. The Designated
Preferred Stock issuable upon exercise of the Holder's rights will be duly and
validly reserved and, when issued in accordance with the provisions of this
Warrant, will be validly issued, fully paid and non-assessable, and will be free
of any taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Designated Preferred Stock issuable pursuant to this Warrant
may be subject to restrictions on transfer under state and/or Federal securities
laws. The Company has made available to the Holder true, correct and complete
copies of its Amended and Restated Certificate of Incorporation ("CHARTER") and
Bylaws, as amended. The issuance of certificates for shares
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<PAGE> 5
of Designated Preferred Stock upon exercise of the Warrant shall be made without
charge to the Holder for any issuance tax in respect thereof, or other cost
incurred by the Company in connection with such exercise and the related
issuance of shares of Designated Preferred Stock. The Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
and the issuance and delivery of any certificate in a name other than that of
the Holder.
(d) Due Authority. The execution and delivery by the Company of this
Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Holder of the right to acquire the shares of
Designated Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and this Warrant is not inconsistent with the
Company's Charter or Bylaws, does not contravene any law or governmental rule,
regulation or order applicable to it, does not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and this
Warrant constitutes a legal, valid and binding agreement of the Company,
enforceable in accordance with its respective terms.
(e) Consents and Approvals. No material consent or approval of,
giving notice to, registration with, or taking of any other action in respect of
any state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant, except for the filing of notices pursuant to
Regulation D under the Act and any filing required by applicable state
securities laws, which filings will be effective by the time required thereby.
(f) Issued Securities. All issued and outstanding shares of Common
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) As of June 29, 1998, the authorized capital of the Company
consists of (A) 20,000,000 shares of Common Stock, of which 2,272,814 shares are
issued and outstanding, and (B) 10,756,250 shares of Preferred Stock, of which
2,000,000 shares are designated Series A Preferred Stock ("SERIES A PREFERRED")
all of which is issued and outstanding, 3,781,250 shares are designated Series B
Preferred Stock ("SERIES B PREFERRED"), 3,750,000 shares of which are issued and
outstanding and 23,437 shares of which are reserved for issuance upon exercise
of outstanding warrants, 975,000 shares are designated Series C Preferred Stock
("SERIES C PREFERRED"), 937,500 shares of which are issued and outstanding and
4,000,000 shares are designated Designated Preferred Stock up to 3,675,170
shares of which may be sold pursuant to that certain Stock Purchase Agreement
dated as of June 26, 1998 by and among the Company and the investors listed on
Exhibit A attached thereto and up to 153,031 shares of which are reserved for
issuance upon exercise of outstanding warrants or for future warrant grants with
respect to agreements entered into with the Holder. Each share of Series A
Preferred, Series B Preferred, Series C Preferred and Designated Preferred Stock
outstanding is currently convertible into one share of Common Stock.
(ii) The Company has reserved 2,000,000 shares of Common Stock
for issuance under its 1996 Stock Option Plan, under which 491,111 shares are
issued and outstanding and options for an aggregate of 1,150,750 shares are
outstanding as of June 29, 1998. Except as set forth
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<PAGE> 6
herein there are no other options, warrants, conversion privileges or other
rights presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities of the
Company
(iii) Except as set forth in the Amended and Restated Investor
Rights Agreement dated June 26, 1998 ("INVESTOR RIGHTS AGREEMENT"), no
shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
(g) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customarily
insured against in Company's line of business as otherwise may be required
pursuant to the terms of any other contract or agreement, subject to customary
deductibles.
(h) Other Commitments to Register Securities. Except as set forth in
the Investor Rights Agreement, the Company is not, pursuant to the terms of any
other agreement currently in existence, under any obligation to register under
the Act any of its presently outstanding securities or any of its securities,
which may hereafter be issued.
(i) Exempt Transaction. Subject to the accuracy of the Holder's
representation in Section 10 hereof and provided that (a) such representations
are correct at the time this Warrant is exercised, (b) this Warrant is not
transferred and (c) the laws with respect to the subject matter herein are not
amended, the Company covenants that the issuance of the Designated Preferred
Stock upon exercise of this Warrant will constitute a transaction exempt from
(i) the registration requirements of Section 5 of the Act, in reliance upon
Section 4(2) thereof, and (ii) the qualification requirements of the applicable
state securities laws.
(j) Compliance with Rule 144. At the written request of the Holder,
who proposes to sell Designated Preferred Stock issuable upon the exercise of
the Warrant in compliance with Rule 144 within thirty days after receipt of such
request, a written statement confirming the Company's compliance with the filing
requirements of the Securities and Exchange Commission as set forth in such
Rule, as such Rule may be amended from time to time.
8. Representations and Warranties by the Holder. The Holder represents
and warrants to the Company as follows:
(a) This Warrant and the shares of Designated Preferred Stock
issuable upon exercise hereof are being acquired for the Holder's own account,
for investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Act. Upon
exercise of this Warrant, the Holder shall, if so requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the securities
issuable upon exercise of this Warrant are being acquired for investment and not
with a view toward distribution or resale.
(b) The Holder understands that the Warrant and the shares of
Designated Preferred Stock issuable on exercise hereof have not been registered
under the Act by reason of their issuance in
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<PAGE> 7
a transaction exempt from the registration and prospectus delivery requirements
of the Act pursuant to Section 4(2) thereof, and that they must be held by the
Holder indefinitely, and that the Holder must therefore bear the economic risk
of such investment indefinitely, unless a subsequent disposition thereof is
registered under the Act or is exempted from such registration. The Holder
further understands that the shares of Designated Preferred Stock issuable on
exercise hereof have not been qualified under the blue sky laws of any
jurisdiction by reason of their issuance in a transaction exempt from the
qualification requirements of such blue sky laws, which exemption depends upon,
among other things, the bona fide nature of the Holder's investment intent
expressed above.
(c) The Holder has such knowledge and experience in financial and
business matters that the Holder is capable of evaluating the merits and risks
of the purchase of this Warrant and the shares of Designated Preferred Stock
purchasable pursuant to the terms of this Warrant and of protecting the Holder's
interests in connection therewith. The Holder is aware of the Company's business
affairs and financial condition, and believes it has sufficient information
about the Company to reach an informed and knowledgeable decision to acquire the
Securities.
(d) The Holder is able to bear the economic risk of the purchase of
the Designated Preferred Stock issuable on exercise of this Warrant.
9. Restrictive Legend.
The Designated Preferred Stock issuable on exercise of this Warrant
shall (unless registered under the Act) be stamped or imprinted with a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE CORPORATION RECEIVES AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE AGREEMENTS COVERING
THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD
OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF THE CORPORATION'S AMENDED AND RESTATED INVESTOR
RIGHTS AGREEMENT, DATED JUNE 26, 1998. A COPY OF SUCH AGREEMENT MAY
BE OBTAINED WITHOUT
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<PAGE> 8
CHARGE UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL
PLACE OF BUSINESS."
10. Restrictions Upon Transfer and Removal of Legend.
(a) The Company need not register a transfer of this Warrant or
shares of Designated Preferred Stock issued on exercise of this Warrant bearing
the restrictive legend set forth in Section 9 hereof, unless the conditions
specified in such legend are satisfied and, at the discretion of the Company,
the Company has received such representations from the transferee as the Company
deems necessary to ensure compliance with applicable securities laws. The
Company may also instruct its transfer agent not to register the transfer of the
Shares unless one of the conditions specified in the legend referred to in
Section 9 hereof is satisfied.
(b) Notwithstanding the provisions of paragraph (a) above, no
opinion of counsel or "no-action" letter shall be necessary for a transfer
without consideration by any holder (i) to an affiliate of the holder, (ii) if
such holder is a partnership, to a partner or retired partner of such
partnership who retires after the date hereof or to the estate of any such
partner or retired partner, (iii) if such holder is a corporation, to a
shareholder of such corporation, or to any other corporation under common
control, direct or indirect, with such holder, or (iv) by gift, will or
intestate succession of any individual holder to his spouse or siblings, or to
the lineal descendants or ancestors of such holder or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if such transferee were the original holder hereunder.
11. Rights of Shareholders. No holder of this Warrant shall be entitled,
as a Warrant holder, to vote or receive dividends or be deemed the holder of the
shares of Designated Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise hereof for any purpose, nor
shall anything contained herein be construed to confer upon the holder of this
Warrant, as such, any of the rights of a shareholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
12. Expiration of Warrant. This Warrant shall expire and shall no longer
be exercisable upon the first to occur of:
(a) 5:00 p.m., California local time, on March 25, 2008;
(b) Five (5) years after the effective date of the Company's initial
public offering; or
(c) The merger or consolidation of the Company with or into, or
other corporate reorganization of the Company with, or the sale of all or
substantially all of the assets of the Company to, any third party other than
any such transaction following which the shareholders of the Company
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<PAGE> 9
prior to the transaction own, by virtue of their holdings of securities of the
Company prior to the transaction, a majority of the equity securities of the
corporation surviving to the business and assets of the Company.
13. Requests for Registration. Holder and Company agree that all shares
of Designated Preferred Stock subject to the Warrant shall have the same
registration rights and be subject to the same terms and conditions with respect
to the registration and sale of such stock as possessed by the other Holders of
Designated Preferred Stock.
14. Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given upon receipt or, if earlier, (a) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid, (b) upon delivery, if delivered
by hand, (c) one (1) business day after the business day of deposit with Federal
Express or similar overnight courier, freight prepaid or (d) one (1) business
day after the business day of facsimile transmission, if delivered by facsimile
transmission with copy by first class mail, postage prepaid, and shall be
addressed (i) if to the Holder, at the Holder's address as set forth beneath the
Holder's signature to this Warrant, and (ii) if to the Company, at the address
of its principal corporate offices (attention: Company Secretary), or at such
other address as the Company shall have furnished to the other parties hereto in
writing.
15. Governing Law. This Warrant and all actions arising out of or in
connection with this Agreement shall be governed by and construed in accordance
with the laws of the State of California, without regard to the conflicts of law
provisions of the State of California; provided, however, that to the extent the
value of the Warrants is considered in evaluating compliance with usury laws
pursuant certain loan agreement entered into between the Company and the Holder,
the laws of the State of Illinois shall govern.
16. Entire Agreement. This Warrant contains the entire agreement among
the Company and the Holder with regard to the subject matter hereof.
17. Successors and Assigns. The terms and provisions of this Warrant
shall be binding upon the Company and the Holder and their respective
successors, assigns, heirs and legal representatives.
18. Titles and Subtitles. The titles and subtitles used in this Warrant
are for convenience only and are not to be considered in construing or
interpreting this Warrant.
19. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
20. Amendments and Waivers. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder.
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<PAGE> 10
21. Severability. If one or more provisions of this Warrant are held to
be unenforceable under applicable law, such provision shall be excluded from
this Warrant and the balance of the Warrant shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
22. Effective Date: The provisions of this Warrant shall be construed
and shall be given effect in all respects as if it had been executed and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company.
23. Counterparts. This Warrant 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.
24. Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit or equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Holder will not have an adequate remedy at law and where damages
will not be readily ascertainable.
25. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Holder against impairment.
26. Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
shall survive the execution and delivery of this Warrant.
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<PAGE> 11
ANTIDILUTION PROVISION
Antidilution Provision. Except with respect to those antidilution
provisions contained herein, the Designated Preferred Stock issuable upon
execution of this Warrant shall be granted the same antidilution protection as
the other holders of Designated Preferred Stock. The Company shall promptly
provide the Holder with any restatement, amendment, modification or waiver of
the Charter that materially affects the rights, preferences and privileges of
the Designated Preferred Stock. The Company shall provide Holder with prior
written notice of any issuance of its stock or other equity security that will
implicate such antidilution provisions to occur after the Effective Date of this
Warrant, which notice shall include (a) the price at which stock or security is
to be sold, (b) the number of shares to be issued, and (c) such other
information as necessary for Holder to determine if a dilutive event has
occurred.
Issued this 29th day of June, 1998.
EXTENSITY, INC.
------------------------------------
Sharam Sasson, President
ACCEPTED:
- -----------------------------------
By:
--------------------------------
Title:
-----------------------------
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<PAGE> 12
EXHIBIT A
NOTICE OF EXERCISE
TO: EXTENSITY, INC.
5801 Christie Avenue, Suite 590
Emeryville, California 94608
Attention: President
1. The undersigned hereby elects to purchase __________ shares of
Designated Preferred Stock of EXTENSITY, INC. (the "COMPANY") pursuant to the
terms of the attached Warrant.
2. Method of Exercise (Please initial the applicable blank):
___ The undersigned elects to exercise the attached Warrant by
means of a cash payment, and tenders herewith payment in
full for the purchase price of the shares being purchased,
together with all applicable transfer taxes, if any.
___ The undersigned elects to exercise the attached Warrant by
means of the net exercise provisions of Section 2(b) of
the Warrant.
3. Please issue a certificate or certificates representing said shares
of Designated Preferred Stock in the name of the undersigned or in such other
name as is specified below:
---------------------------------------
(Name)
---------------------------------------
---------------------------------------
(Address)
4. The undersigned hereby represents and warrants as follows:
(a) The shares of Designated Preferred Stock being acquired hereby
(the "SECURITIES") are being acquired for the account of the undersigned for
investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares, except pursuant to a registration or
exemption.
(b) All representations and warranties of the undersigned set forth
in Section 8 of the attached Warrant are true and correct as of the date hereof.
<PAGE> 13
(c) The undersigned is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities. The
undersigned is purchasing the Securities for the undersigned's own account for
investment purposes only and not with a view to, or for the resale in connection
with, any "distribution" thereof for purposes of the Securities Act of 1933, as
amended (the "ACT").
(d) The undersigned understands that the Securities have not been
registered under the Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of its
investment intent as expressed herein. In this connection, the undersigned
understands that, in the view of the Securities and Exchange Commission (the
"SEC"), the statutory basis for such exemption may be unavailable if its
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under tax statutes,
for a deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one year or any other fixed period in the
future.
(e) The undersigned further understands that the Securities must be
held indefinitely unless subsequently registered under the Act or unless an
exemption from registration is otherwise available. Moreover, the undersigned
understands that the Company is under no obligation to register the Securities.
In addition, the undersigned understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel for the Company.
(f) The undersigned is familiar with the provisions of Rule 144,
promulgated under the Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. The Securities may be resold in certain limited circumstances
subject to the provisions of Rule 144, which requires among other things, except
as otherwise provided by section (k) of such Rule 144: (1) the availability of
certain public information about the Company, (2) the resale occurring not less
than one (1) year after the party has purchased, and made full payment for,
within the meaning of Rule 144, the securities to be sold; and, (3) in the case
of an affiliate, or of a non-affiliate who has held the securities less than two
(2) years, the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the amount of securities
being sold during any three (3) month period not exceeding the specified
limitations stated therein, if applicable.
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<PAGE> 14
(g) The undersigned further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
---------------------------------------
By:
------------------------------------
Title:
---------------------------------
Date:
----------------------------------
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<PAGE> 15
EXHIBIT B
FORM OF TRANSFER
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________________________ the right represented by
the attached Warrant to purchase ____________ shares of the Designated Preferred
Stock of EXTENSITY, INC. to which the attached Warrant relates, and appoints
______________ Attorney to transfer such right on the books of EXTENSITY, INC.
with full power of substitution in the premises.
Dated: ____________________
----------------------------------------------
(Signature must conform in all respects to the
name of the Holder as specified on the face of
the Warrant)
----------------------------------------------
----------------------------------------------
(Address)
Signed in the presence of:
- --------------------------------
<PAGE> 1
EXHIBIT 10.4
EXTENSITY, INC.
SERIES D PREFERRED STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES WHICH MAY BE PURCHASED UPON THE EXERCISE OF THIS
WARRANT HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER, PLEDGE OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS UNLESS SOLD
PURSUANT TO RULE 144 OF THE ACT.
Effective Date: June 29, 1998
NO. 1998D-2 Void after March 25, 2008
THIS CERTIFIES THAT, for value received, Comdisco, Inc. (the "HOLDER")
is entitled to subscribe for and purchase shares of fully paid and nonassessable
Series D Preferred Stock, par value $0.01 per share, (the "DESIGNATED PREFERRED
STOCK") of Extensity, Inc., a Delaware corporation (the "COMPANY").
1. Purchase Right. This Warrant represents the right of the Holder to
subscribe for and purchase up to an aggregate of 6,862 shares of fully paid and
nonassessable Designated Preferred Stock at an exercise price of $3.30 per share
(as adjusted pursuant to Section 4 hereof) (the "EXERCISE PRICE") .
2. Method of Exercise; Payment.
(a) Cash Exercise. The purchase rights represented by this
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (with the notice of exercise form attached hereto as EXHIBIT A duly
executed) at the principal office of the Company, and by the payment to the
Company, by certified, cashier's or other check, of an amount equal to the
aggregate Exercise Price for the number of shares of Designated Preferred Stock
being purchased.
(b) Net Issue Exercise. The Exercise Price may be paid at the
Holder's election either (i) by cash or check, or (ii) by surrender of this
Warrant at the principal office of the Company together with notice of such
election in which event the Company shall issue to the Holder a number of shares
of Designated Preferred Stock computed using the following formula:
<PAGE> 2
X = Y(A-B)
------
A
Where X = the number of shares of Designated Preferred Stock to be
issued to the Holder
Y = the number of shares of Designated Preferred Stock
purchasable under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the Warrant
being canceled (at the date of such calculation)
A = the fair market value of one share of the Company's
Designated Preferred Stock (at the date of such
calculation)
B = the Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of the Company's
Designated Preferred Stock shall mean such fair market value as is reasonably
determined as follows:
(i) if the exercise is in connection with an initial
public offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
SEC, then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to the
offering and (y) the number of shares of Common Stock into which each share of
Designated Preferred Stock is convertible at the time of such exercise;
(ii) If this Warrant is exercised after, and not in
connection with the Company's initial public offering, and;
(a) if traded on a securities exchange, the fair
market value shall be deemed to be the product of (x) the average of the closing
prices over a twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined and (y) the
number of shares of Common Stock into which each share of Designated Preferred
Stock is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the fair
market value shall be deemed to be the product of (x) the average of the closing
bid and asked prices quoted on the NASDAQ system (or similar system) over the
twenty-one (21) day period ending three days before the day the current fair
market value of the securities is being determined and (y) the number of shares
of Common Stock into which each share of Designated Preferred Stock is
convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the current fair market value of the Company's Common Stock shall be the
product of (x) the highest price per share, as determined in good
<PAGE> 3
faith by its Board of Directors and (y) the number of shares of Common Stock
into which each share of Designated Preferred Stock is convertible at the time
of such exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Designated Preferred
Stock shall be deemed to be the value received by the holders of the Company's
Designated Preferred Stock on a common equivalent basis pursuant to such merger
or acquisition.
(c) Stock Certificates. In the event of any exercise of the
rights represented by this Warrant, certificates for the Designated Preferred
Stock so purchased shall be delivered to the Holder within a reasonable time,
and in no event later than thirty (30) days thereafter, and, unless this Warrant
has been fully exercised or has expired, a new Warrant representing the shares
with respect to which this Warrant shall not have been exercised shall also be
issued to the Holder within such time.
3. Stock Fully Paid; Reservation of Shares. All of the Designated
Preferred Stock issuable upon the exercise of the rights represented by this
Warrant will, upon issuance and receipt of the Exercise Price therefor, be fully
paid and nonassessable, and free from all taxes, liens and charges with respect
to the issue thereof. During the period within which the rights represented by
this Warrant may be exercised, the Company shall at all times have authorized
and reserved for issuance a sufficient number of shares of its Designated
Preferred Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Exercise Price and Number of Shares.
(a) Subject to the provisions of Section 12 hereof, in the event
that the Company shall at any time subdivide the outstanding shares of
Designated Preferred Stock or shall issue a stock dividend on its outstanding
shares of Designated Preferred Stock, then the number of shares of Designated
Preferred Stock issuable upon exercise of this Warrant immediately prior to such
subdivision or to the issuance of such stock dividend shall be proportionately
increased, and the Exercise Price shall be proportionately decreased, and in the
event that the Company shall at any time combine the outstanding shares of
Designated Preferred Stock the number of shares of Designated Preferred Stock
issuable upon exercise of this Warrant immediately prior to such combination
shall be proportionately decreased, and the Exercise Price shall be
proportionately increased, effective at the close of business on the date of
such subdivision, stock dividend or combination, as the case may be.
(b) In the case of any reclassification, recapitalization or
change of the Designated Preferred Stock (other than any action for which
adjustment is made pursuant to Section 4(a) hereof and other than a change as
contemplated by Section 12(b) hereof), the Company shall execute a new warrant
providing that the Holder of this Warrant shall have the right to exercise such
new warrant and to procure upon such exercise and payment of the same aggregate
Exercise Price, in lieu of the shares of Designated Preferred Stock theretofore
issuable upon exercise of this Warrant, the kind and amount of shares, other
securities, money or property receivable upon such reclassification,
recapitalization or change of the Designated Preferred Stock.
-3-
<PAGE> 4
(c) In the case of any merger or any capital reorganization of
the shares of the Company's stock (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), or a merger or
consolidation of the Company with or into another corporation whether or not the
Company is the surviving corporation other than as set forth in section 13(c)
hereof (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Holder shall thereafter
be entitled to receive, upon exercise of the Warrant, the number of shares of
Designated Preferred Stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Holder had exercised this Warrant immediately prior to the
Merger Event. In any such case, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interest of the
Holder after the Merger Event to the end that the provisions of this Warrant
(including adjustments of the Exercise Price and number of shares of Designated
Preferred Stock purchasable) shall be applicable to the greatest extent
possible.
5. Notice of Adjustments. Whenever the number of shares of Designated
Preferred Stock purchasable hereunder or the Exercise Price thereof shall be
adjusted pursuant to Section 4 hereof, the Company shall provide notice to the
Holder setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the number of shares of Designated Preferred Stock which may be
purchased and the Exercise Price therefor after giving effect to such
adjustment.
6. Fractional Shares. This Warrant may not be exercised for fractional
shares, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
7. Representations and Warranties by the Company. The Company
represents, covenants and warrants to the Holder as follows:
(a) The Company represents that all corporate actions on the part
of the Company, its officers, directors and shareholders necessary for the sale
and issuance of shares of Designated Preferred Stock pursuant hereto and the
performance of the Company's obligations hereunder were taken prior to and are
effective as of the effective date of this Warrant.
(b) If the Company proposes at any time to enter into a
transaction described in Section 12(b) or Section 12(c) hereof, the Company
shall give Holder at least fifteen (15) days written notice prior to the
consummation of such transaction.
(c) Reservation of Designated Preferred Stock. The Designated
Preferred Stock issuable upon exercise of the Holder's rights will be duly and
validly reserved and, when issued in accordance with the provisions of this
Warrant, will be validly issued, fully paid and non-assessable, and will be free
of any taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Designated Preferred Stock issuable pursuant to this Warrant
may be subject to restrictions on transfer under state and/or Federal securities
laws. The Company has made available to the Holder true,
-4-
<PAGE> 5
correct and complete copies of its Amended and Restated Certificate of
Incorporation ("CHARTER") and Bylaws, as amended. The issuance of certificates
for shares of Designated Preferred Stock upon exercise of the Warrant shall be
made without charge to the Holder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Designated Preferred Stock. The Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved and the issuance and delivery of any certificate in a name other than
that of the Holder.
(d) Due Authority. The execution and delivery by the Company of
this Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Holder of the right to acquire the shares of
Designated Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and this Warrant is not inconsistent with the
Company's Charter or Bylaws, does not contravene any law or governmental rule,
regulation or order applicable to it, does not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and this
Warrant constitutes a legal, valid and binding agreement of the Company,
enforceable in accordance with its respective terms.
(e) Consents and Approvals. No material consent or approval of,
giving notice to, registration with, or taking of any other action in respect of
any state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant, except for the filing of notices pursuant to
Regulation D under the Act and any filing required by applicable state
securities laws, which filings will be effective by the time required thereby.
(f) Issued Securities. All issued and outstanding shares of
Common Stock, Preferred Stock or any other securities of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) As of June 29, 1998, the authorized capital of the
Company consists of (A) 20,000,000 shares of Common Stock, of which 2,272,814
shares are issued and outstanding, and (B) 10,756,250 shares of Preferred Stock,
of which 2,000,000 shares are designated Series A Preferred Stock ("SERIES A
PREFERRED") all of which is issued and outstanding, 3,781,250 shares are
designated Series B Preferred Stock ("SERIES B PREFERRED"), 3,750,000 shares of
which are issued and outstanding and 23,437 shares of which are reserved for
issuance upon exercise of outstanding warrants, 975,000 shares are designated
Series C Preferred Stock ("SERIES C Preferred"), 937,500 shares of which are
issued and outstanding and 4,000,000 shares are designated Designated Preferred
Stock up to 3,675,170 shares of which may be sold pursuant to that certain Stock
Purchase Agreement dated as of June 26, 1998 by and among the Company and the
investors listed on Exhibit A attached thereto and up to 153,031 shares of which
are reserved for issuance upon exercise of outstanding warrants or for future
warrant grants with respect to agreements entered into with the Holder. Each
share of Series A
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<PAGE> 6
Preferred, Series B Preferred, Series C Preferred and Designated Preferred Stock
outstanding is currently convertible into one share of Common Stock.
(ii) The Company has reserved 2,000,000 shares of Common
Stock for issuance under its 1996 Stock Option Plan, under which 491,111 shares
are issued and outstanding and options for an aggregate of 1,150,750 shares are
outstanding as of June 29, 1998. Except as set forth herein there are no other
options, warrants, conversion privileges or other rights presently outstanding
to purchase or otherwise acquire any authorized but unissued shares of the
Company's capital stock or other securities of the Company
(iii) Except as set forth in the Amended and Restated
Investor Rights Agreement dated June 26, 1998 ("INVESTOR RIGHTS AGREEMENT"), no
shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
(g) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customarily
insured against in Company's line of business as otherwise may be required
pursuant to the terms of any other contract or agreement, subject to customary
deductibles.
(h) Other Commitments to Register Securities. Except as set forth
in the Investor Rights Agreement, the Company is not, pursuant to the terms of
any other agreement currently in existence, under any obligation to register
under the Act any of its presently outstanding securities or any of its
securities, which may hereafter be issued.
(i) Exempt Transaction. Subject to the accuracy of the Holder's
representation in Section 10 hereof and provided that (a) such representations
are correct at the time this Warrant is exercised, (b) this Warrant is not
transferred and (c) the laws with respect to the subject matter herein are not
amended, the Company covenants that the issuance of the Designated Preferred
Stock upon exercise of this Warrant will constitute a transaction exempt from
(i) the registration requirements of Section 5 of the Act, in reliance upon
Section 4(2) thereof, and (ii) the qualification requirements of the applicable
state securities laws.
(j) Compliance with Rule 144. At the written request of the
Holder, who proposes to sell Designated Preferred Stock issuable upon the
exercise of the Warrant in compliance with Rule 144 within thirty days after
receipt of such request, a written statement confirming the Company's compliance
with the filing requirements of the Securities and Exchange Commission as set
forth in such Rule, as such Rule may be amended from time to time.
8. Representations and Warranties by the Holder. The Holder represents
and warrants to the Company as follows:
(a) This Warrant and the shares of Designated Preferred Stock
issuable upon exercise hereof are being acquired for the Holder's own account,
for investment and not with a view to, or for
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<PAGE> 7
resale in connection with, any distribution or public offering thereof within
the meaning of the Act. Upon exercise of this Warrant, the Holder shall, if so
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the securities issuable upon exercise of this Warrant are being
acquired for investment and not with a view toward distribution or resale.
(b) The Holder understands that the Warrant and the shares of
Designated Preferred Stock issuable on exercise hereof have not been registered
under the Act by reason of their issuance in a transaction exempt from the
registration and prospectus delivery requirements of the Act pursuant to Section
4(2) thereof, and that they must be held by the Holder indefinitely, and that
the Holder must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Act or is exempted from such registration. The Holder further understands that
the shares of Designated Preferred Stock issuable on exercise hereof have not
been qualified under the blue sky laws of any jurisdiction by reason of their
issuance in a transaction exempt from the qualification requirements of such
blue sky laws, which exemption depends upon, among other things, the bona fide
nature of the Holder's investment intent expressed above.
(c) The Holder has such knowledge and experience in financial and
business matters that the Holder is capable of evaluating the merits and risks
of the purchase of this Warrant and the shares of Designated Preferred Stock
purchasable pursuant to the terms of this Warrant and of protecting the Holder's
interests in connection therewith. The Holder is aware of the Company's business
affairs and financial condition, and believes it has sufficient information
about the Company to reach an informed and knowledgeable decision to acquire the
Securities.
(d) The Holder is able to bear the economic risk of the purchase
of the Designated Preferred Stock issuable on exercise of this Warrant.
9. Restrictive Legend.
The Designated Preferred Stock issuable on exercise of this
Warrant shall (unless registered under the Act) be stamped or imprinted with a
legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
CORPORATION RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
COPIES OF THE AGREEMENTS COVERING THE PURCHASE OF THESE SHARES
AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE
TO THE SECRETARY OF
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<PAGE> 8
THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF THE CORPORATION'S AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT, DATED JUNE 26, 1998. A COPY OF SUCH
AGREEMENT MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO
THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS."
10. Restrictions Upon Transfer and Removal of Legend.
(a) The Company need not register a transfer of this Warrant or
shares of Designated Preferred Stock issued on exercise of this Warrant bearing
the restrictive legend set forth in Section 9 hereof, unless the conditions
specified in such legend are satisfied and, at the discretion of the Company,
the Company has received such representations from the transferee as the Company
deems necessary to ensure compliance with applicable securities laws. The
Company may also instruct its transfer agent not to register the transfer of the
Shares unless one of the conditions specified in the legend referred to in
Section 9 hereof is satisfied.
(b) Notwithstanding the provisions of paragraph (a) above, no
opinion of counsel or "no-action" letter shall be necessary for a transfer
without consideration by any holder (i) to an affiliate of the holder, (ii) if
such holder is a partnership, to a partner or retired partner of such
partnership who retires after the date hereof or to the estate of any such
partner or retired partner, (iii) if such holder is a corporation, to a
shareholder of such corporation, or to any other corporation under common
control, direct or indirect, with such holder, or (iv) by gift, will or
intestate succession of any individual holder to his spouse or siblings, or to
the lineal descendants or ancestors of such holder or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if such transferee were the original holder hereunder.
11. Rights of Shareholders. No holder of this Warrant shall be entitled,
as a Warrant holder, to vote or receive dividends or be deemed the holder of the
shares of Designated Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise hereof for any purpose, nor
shall anything contained herein be construed to confer upon the holder of this
Warrant, as such, any of the rights of a shareholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
12. Expiration of Warrant. This Warrant shall expire and shall no longer
be exercisable upon the first to occur of:
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<PAGE> 9
(a) 5:00 p.m., California local time, on March 25, 2008;
(b) Five (5) years after the effective date of the Company's
initial public offering; or
(c) The merger or consolidation of the Company with or into, or
other corporate reorganization of the Company with, or the sale of all or
substantially all of the assets of the Company to, any third party other than
any such transaction following which the shareholders of the Company prior to
the transaction own, by virtue of their holdings of securities of the Company
prior to the transaction, a majority of the equity securities of the corporation
surviving to the business and assets of the Company.
13. Requests for Registration. Holder and Company agree that all shares
of Designated Preferred Stock subject to the Warrant shall have the same
registration rights and be subject to the same terms and conditions with respect
to the registration and sale of such stock as possessed by the other Holders of
Designated Preferred Stock.
14. Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given upon receipt or, if earlier, (a) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid, (b) upon delivery, if delivered
by hand, (c) one (1) business day after the business day of deposit with Federal
Express or similar overnight courier, freight prepaid or (d) one (1) business
day after the business day of facsimile transmission, if delivered by facsimile
transmission with copy by first class mail, postage prepaid, and shall be
addressed (i) if to the Holder, at the Holder's address as set forth beneath the
Holder's signature to this Warrant, and (ii) if to the Company, at the address
of its principal corporate offices (attention: Company Secretary), or at such
other address as the Company shall have furnished to the other parties hereto in
writing.
15. Governing Law. This Warrant and all actions arising out of or in
connection with this Agreement shall be governed by and construed in accordance
with the laws of the State of California, without regard to the conflicts of law
provisions of the State of California; provided, however, that to the extent the
value of the Warrants is considered in evaluating compliance with usury laws
pursuant certain loan agreement entered into between the Company and the Holder,
the laws of the State of Illinois shall govern.
16. Entire Agreement. This Warrant contains the entire agreement among
the Company and the Holder with regard to the subject matter hereof.
17. Successors and Assigns. The terms and provisions of this Warrant
shall be binding upon the Company and the Holder and their respective
successors, assigns, heirs and legal representatives.
18. Titles and Subtitles. The titles and subtitles used in this Warrant
are for convenience only and are not to be considered in construing or
interpreting this Warrant.
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<PAGE> 10
19. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
20. Amendments and Waivers. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder.
21. Severability. If one or more provisions of this Warrant are held to
be unenforceable under applicable law, such provision shall be excluded from
this Warrant and the balance of the Warrant shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
22. Effective Date: The provisions of this Warrant shall be construed
and shall be given effect in all respects as if it had been executed and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company.
23. Counterparts. This Warrant 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.
24. Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit or equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Holder will not have an adequate remedy at law and where damages
will not be readily ascertainable.
25. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Holder against impairment.
26. Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
shall survive the execution and delivery of this Warrant.
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<PAGE> 11
ANTIDILUTION PROVISION
Antidilution Provision. Except with respect to those antidilution
provisions contained herein, the Designated Preferred Stock issuable upon
execution of this Warrant shall be granted the same antidilution protection as
the other holders of Designated Preferred Stock. The Company shall promptly
provide the Holder with any restatement, amendment, modification or waiver of
the Charter that materially affects the rights, preferences and privileges of
the Designated Preferred Stock. The Company shall provide Holder with prior
written notice of any issuance of its stock or other equity security that will
implicate such antidilution provisions to occur after the Effective Date of this
Warrant, which notice shall include (a) the price at which stock or security is
to be sold, (b) the number of shares to be issued, and (c) such other
information as necessary for Holder to determine if a dilutive event has
occurred.
Issued this 29th day of June, 1998.
EXTENSITY, INC.
___________________________________
Sharam Sasson, President
ACCEPTED:
By:________________________________
Title:_____________________________
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<PAGE> 12
EXHIBIT A
NOTICE OF EXERCISE
TO: EXTENSITY, INC.
5801 Christie Avenue, Suite 590
Emeryville, California 94608
Attention: President
1. The undersigned hereby elects to purchase __________ shares of
Designated Preferred Stock of EXTENSITY, INC. (the "COMPANY") pursuant to the
terms of the attached Warrant.
2. Method of Exercise (Please initial the applicable blank):
___ The undersigned elects to exercise the attached Warrant by
means of a cash payment, and tenders herewith payment in
full for the purchase price of the shares being purchased,
together with all applicable transfer taxes, if any.
___ The undersigned elects to exercise the attached Warrant by
means of the net exercise provisions of Section 2(b) of
the Warrant.
3. Please issue a certificate or certificates representing said shares
of Designated Preferred Stock in the name of the undersigned or in such other
name as is specified below:
_______________________________________
(Name)
_______________________________________
_______________________________________
(Address)
4. The undersigned hereby represents and warrants as follows:
(a) The shares of Designated Preferred Stock being acquired
hereby (the "SECURITIES") are being acquired for the account of the undersigned
for investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares, except pursuant to a registration or
exemption.
<PAGE> 13
(b) All representations and warranties of the undersigned set
forth in Section 8 of the attached Warrant are true and correct as of the date
hereof.
(c) The undersigned is aware of the Company's business affairs
and financial condition, and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
Securities. The undersigned is purchasing the Securities for the undersigned's
own account for investment purposes only and not with a view to, or for the
resale in connection with, any "distribution" thereof for purposes of the
Securities Act of 1933, as amended (the "ACT").
(d) The undersigned understands that the Securities have not been
registered under the Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of its
investment intent as expressed herein. In this connection, the undersigned
understands that, in the view of the Securities and Exchange Commission (the
"SEC"), the statutory basis for such exemption may be unavailable if its
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under tax statutes,
for a deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one year or any other fixed period in the
future.
(e) The undersigned further understands that the Securities must
be held indefinitely unless subsequently registered under the Act or unless an
exemption from registration is otherwise available. Moreover, the undersigned
understands that the Company is under no obligation to register the Securities.
In addition, the undersigned understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel for the Company.
(f) The undersigned is familiar with the provisions of Rule 144,
promulgated under the Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. The Securities may be resold in certain limited circumstances
subject to the provisions of Rule 144, which requires among other things, except
as otherwise provided by section (k) of such Rule 144: (1) the availability of
certain public information about the Company, (2) the resale occurring not less
than one (1) year after the party has purchased, and made full payment for,
within the meaning of Rule 144, the securities to be sold; and, (3) in the case
of an affiliate, or of a non-affiliate who has held the securities less than two
(2) years, the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the amount of securities
being sold during any three (3) month period not exceeding the specified
limitations stated therein, if applicable.
<PAGE> 14
(g) The undersigned further understands that in the event all of
the applicable requirements of Rule 144 are not satisfied, registration under
the Act, compliance with Regulation A, or some other registration exemption will
be required; and that, notwithstanding the fact that Rule 144 is not exclusive,
the Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
___________________________________
By:________________________________
Title:_____________________________
Date:______________________________
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<PAGE> 15
EXHIBIT B
FORM OF TRANSFER
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________________________ the right represented by
the attached Warrant to purchase ____________ shares of the Designated Preferred
Stock of EXTENSITY, INC. to which the attached Warrant relates, and appoints
______________ Attorney to transfer such right on the books of EXTENSITY, INC.
with full power of substitution in the premises.
Dated: ____________________
________________________________________
(Signature must conform in all respects
to the name of the Holder as specified
on the face of the Warrant)
________________________________________
________________________________________
(Address)
Signed in the presence of:
___________________________________
<PAGE> 1
EXHIBIT 10.5
EXTENSITY, INC.
SERIES D PREFERRED STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES WHICH MAY BE PURCHASED UPON THE EXERCISE OF THIS
WARRANT HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER, PLEDGE OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS UNLESS SOLD
PURSUANT TO RULE 144 OF THE ACT.
Effective Date: June 29, 1998
NO. 1998D-1 Void after March 25, 2008
THIS CERTIFIES THAT, for value received, Comdisco, Inc. (the "HOLDER")
is entitled to subscribe for and purchase shares of fully paid and nonassessable
Series D Preferred Stock, par value $0.01 per share, (the "DESIGNATED PREFERRED
STOCK") of Extensity, Inc., a Delaware corporation (the "COMPANY").
1. Purchase Right. This Warrant represents the right of the Holder to
subscribe for and purchase up to an aggregate of 8,290 shares of fully paid and
nonassessable Designated Preferred Stock at an exercise price of $3.30 per share
(as adjusted pursuant to Section 4 hereof) (the "EXERCISE PRICE") .
2. Method of Exercise; Payment.
(a) Cash Exercise. The purchase rights represented by this
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (with the notice of exercise form attached hereto as EXHIBIT A duly
executed) at the principal office of the Company, and by the payment to the
Company, by certified, cashier's or other check, of an amount equal to the
aggregate Exercise Price for the number of shares of Designated Preferred Stock
being purchased.
(b) Net Issue Exercise. The Exercise Price may be paid at the
Holder's election either (i) by cash or check, or (ii) by surrender of this
Warrant at the principal office of the Company together with notice of such
election in which event the Company shall issue to the Holder a number of shares
of Designated Preferred Stock computed using the following formula:
<PAGE> 2
X = Y(A-B)
-----
A
Where X = the number of shares of Designated Preferred Stock to be
issued to the Holder
Y = the number of shares of Designated Preferred Stock
purchasable under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the Warrant
being canceled (at the date of such calculation)
A = the fair market value of one share of the Company's
Designated Preferred Stock (at the date of such
calculation)
B = the Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of the Company's
Designated Preferred Stock shall mean such fair market value as is reasonably
determined as follows:
(i) if the exercise is in connection with an initial
public offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
SEC, then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to the
offering and (y) the number of shares of Common Stock into which each share of
Designated Preferred Stock is convertible at the time of such exercise;
(ii) If this Warrant is exercised after, and not in
connection with the Company's initial public offering, and;
(a) if traded on a securities exchange, the fair
market value shall be deemed to be the product of (x) the average of the closing
prices over a twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined and (y) the
number of shares of Common Stock into which each share of Designated Preferred
Stock is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the
fair market value shall be deemed to be the product of (x) the average of the
closing bid and asked prices quoted on the NASDAQ system (or similar system)
over the twenty-one (21) day period ending three days before the day the current
fair market value of the securities is being determined and (y) the number of
shares of Common Stock into which each share of Designated Preferred Stock is
convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on
any securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the current fair market value of the Company's Common Stock shall be the
product of (x) the highest price per share, as determined in good faith by its
Board of Directors and (y) the number of shares of Common Stock into which each
share of Designated Preferred Stock is convertible at the time of such exercise,
unless the Company shall become
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<PAGE> 3
subject to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the fair market value of
Designated Preferred Stock shall be deemed to be the value received by the
holders of the Company's Designated Preferred Stock on a common equivalent basis
pursuant to such merger or acquisition.
(c) Stock Certificates. In the event of any exercise of the
rights represented by this Warrant, certificates for the Designated Preferred
Stock so purchased shall be delivered to the Holder within a reasonable time,
and in no event later than thirty (30) days thereafter, and, unless this Warrant
has been fully exercised or has expired, a new Warrant representing the shares
with respect to which this Warrant shall not have been exercised shall also be
issued to the Holder within such time.
3. Stock Fully Paid; Reservation of Shares. All of the Designated
Preferred Stock issuable upon the exercise of the rights represented by this
Warrant will, upon issuance and receipt of the Exercise Price therefor, be fully
paid and nonassessable, and free from all taxes, liens and charges with respect
to the issue thereof. During the period within which the rights represented by
this Warrant may be exercised, the Company shall at all times have authorized
and reserved for issuance a sufficient number of shares of its Designated
Preferred Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Exercise Price and Number of Shares.
(a) Subject to the provisions of Section 12 hereof, in the event
that the Company shall at any time subdivide the outstanding shares of
Designated Preferred Stock or shall issue a stock dividend on its outstanding
shares of Designated Preferred Stock, then the number of shares of Designated
Preferred Stock issuable upon exercise of this Warrant immediately prior to such
subdivision or to the issuance of such stock dividend shall be proportionately
increased, and the Exercise Price shall be proportionately decreased, and in the
event that the Company shall at any time combine the outstanding shares of
Designated Preferred Stock the number of shares of Designated Preferred Stock
issuable upon exercise of this Warrant immediately prior to such combination
shall be proportionately decreased, and the Exercise Price shall be
proportionately increased, effective at the close of business on the date of
such subdivision, stock dividend or combination, as the case may be.
(b) In the case of any reclassification, recapitalization or
change of the Designated Preferred Stock (other than any action for which
adjustment is made pursuant to Section 4(a) hereof and other than a change as
contemplated by Section 12(b) hereof), the Company shall execute a new warrant
providing that the Holder of this Warrant shall have the right to exercise such
new warrant and to procure upon such exercise and payment of the same aggregate
Exercise Price, in lieu of the shares of Designated Preferred Stock theretofore
issuable upon exercise of this Warrant, the kind and amount of shares, other
securities, money or property receivable upon such reclassification,
recapitalization or change of the Designated Preferred Stock.
(c) In the case of any merger or any capital reorganization of
the shares of the Company's stock (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), or a merger or
consolidation of the Company with or into another corporation
-3-
<PAGE> 4
whether or not the Company is the surviving corporation other than as set forth
in section 13(c) hereof (hereinafter referred to as a "Merger Event"), then, as
a part of such Merger Event, lawful provision shall be made so that the Holder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of Designated Preferred Stock or other securities of the
successor corporation resulting from such Merger Event, equivalent in value to
that which would have been issuable if Holder had exercised this Warrant
immediately prior to the Merger Event. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant with respect to the rights
and interest of the Holder after the Merger Event to the end that the provisions
of this Warrant (including adjustments of the Exercise Price and number of
shares of Designated Preferred Stock purchasable) shall be applicable to the
greatest extent possible.
5. Notice of Adjustments. Whenever the number of shares of Designated
Preferred Stock purchasable hereunder or the Exercise Price thereof shall be
adjusted pursuant to Section 4 hereof, the Company shall provide notice to the
Holder setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the number of shares of Designated Preferred Stock which may be
purchased and the Exercise Price therefor after giving effect to such
adjustment.
6. Fractional Shares. This Warrant may not be exercised for fractional
shares, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
7. Representations and Warranties by the Company. The Company
represents, covenants and warrants to the Holder as follows:
(a) The Company represents that all corporate actions on the
part of the Company, its officers, directors and shareholders necessary for the
sale and issuance of shares of Designated Preferred Stock pursuant hereto and
the performance of the Company's obligations hereunder were taken prior to and
are effective as of the effective date of this Warrant.
(b) If the Company proposes at any time to enter into a
transaction described in Section 12(b) or Section 12(c) hereof, the Company
shall give Holder at least fifteen (15) days written notice prior to the
consummation of such transaction.
(c) Reservation of Designated Preferred Stock. The Designated
Preferred Stock issuable upon exercise of the Holder's rights will be duly and
validly reserved and, when issued in accordance with the provisions of this
Warrant, will be validly issued, fully paid and non-assessable, and will be free
of any taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Designated Preferred Stock issuable pursuant to this Warrant
may be subject to restrictions on transfer under state and/or Federal securities
laws. The Company has made available to the Holder true, correct and complete
copies of its Amended and Restated Certificate of Incorporation ("CHARTER") and
Bylaws, as amended. The issuance of certificates for shares of Designated
Preferred Stock upon exercise of the Warrant shall be made without charge to the
Holder for any issuance tax in respect thereof, or other cost incurred by the
Company in connection with such exercise and the related issuance of shares
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<PAGE> 5
of Designated Preferred Stock. The Company shall not be required to pay any tax
which may be payable in respect of any transfer involved and the issuance and
delivery of any certificate in a name other than that of the Holder.
(d) Due Authority. The execution and delivery by the Company of
this Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Holder of the right to acquire the shares of
Designated Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and this Warrant is not inconsistent with the
Company's Charter or Bylaws, does not contravene any law or governmental rule,
regulation or order applicable to it, does not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and this
Warrant constitutes a legal, valid and binding agreement of the Company,
enforceable in accordance with its respective terms.
(e) Consents and Approvals. No material consent or approval of,
giving notice to, registration with, or taking of any other action in respect of
any state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant, except for the filing of notices pursuant to
Regulation D under the Act and any filing required by applicable state
securities laws, which filings will be effective by the time required thereby.
(f) Issued Securities. All issued and outstanding shares of
Common Stock, Preferred Stock or any other securities of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) As of June 29, 1998, the authorized capital of the
Company consists of (A) 20,000,000 shares of Common Stock, of which 2,272,814
shares are issued and outstanding, and (B) 10,756,250 shares of Preferred Stock,
of which 2,000,000 shares are designated Series A Preferred Stock ("SERIES A
PREFERRED") all of which is issued and outstanding, 3,781,250 shares are
designated Series B Preferred Stock ("SERIES B PREFERRED"), 3,750,000 shares of
which are issued and outstanding and 23,437 shares of which are reserved for
issuance upon exercise of outstanding warrants, 975,000 shares are designated
Series C Preferred Stock ("SERIES C PREFERRED"), 937,500 shares of which are
issued and outstanding and 4,000,000 shares are designated Designated Preferred
Stock up to 3,675,170 shares of which may be sold pursuant to that certain Stock
Purchase Agreement dated as of June 26, 1998 by and among the Company and the
investors listed on Exhibit A attached thereto and up to 153,031 shares of which
are reserved for issuance upon exercise of outstanding warrants or for future
warrant grants with respect to agreements entered into with the Holder. Each
share of Series A Preferred, Series B Preferred, Series C Preferred and
Designated Preferred Stock outstanding is currently convertible into one share
of Common Stock.
(ii) The Company has reserved 2,000,000 shares of Common
Stock for issuance under its 1996 Stock Option Plan, under which 491,111 shares
are issued and outstanding and options for an aggregate of 1,150,750 shares are
outstanding as of June 29, 1998. Except as set forth
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<PAGE> 6
herein there are no other options, warrants, conversion privileges or other
rights presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities of the
Company.
(iii) Except as set forth in the Amended and Restated
Investor Rights Agreement dated June 26, 1998 ("INVESTOR RIGHTS AGREEMENT"), no
shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
(g) Insurance. The Company has in full force and effect
insurance policies, with extended coverage, insuring the Company and its
property and business against such losses and risks, and in such amounts, as are
customarily insured against in Company's line of business as otherwise may be
required pursuant to the terms of any other contract or agreement, subject to
customary deductibles.
(h) Other Commitments to Register Securities. Except as set
forth in the Investor Rights Agreement, the Company is not, pursuant to the
terms of any other agreement currently in existence, under any obligation to
register under the Act any of its presently outstanding securities or any of its
securities, which may hereafter be issued.
(i) Exempt Transaction. Subject to the accuracy of the Holder's
representation in Section 10 hereof and provided that (a) such representations
are correct at the time this Warrant is exercised, (b) this Warrant is not
transferred and (c) the laws with respect to the subject matter herein are not
amended, the Company covenants that the issuance of the Designated Preferred
Stock upon exercise of this Warrant will constitute a transaction exempt from
(i) the registration requirements of Section 5 of the Act, in reliance upon
Section 4(2) thereof, and (ii) the qualification requirements of the applicable
state securities laws.
(j) Compliance with Rule 144. At the written request of the
Holder, who proposes to sell Designated Preferred Stock issuable upon the
exercise of the Warrant in compliance with Rule 144 within thirty days after
receipt of such request, a written statement confirming the Company's compliance
with the filing requirements of the Securities and Exchange Commission as set
forth in such Rule, as such Rule may be amended from time to time.
8. Representations and Warranties by the Holder. The Holder represents
and warrants to the Company as follows:
(a) This Warrant and the shares of Designated Preferred Stock
issuable upon exercise hereof are being acquired for the Holder's own account,
for investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Act. Upon
exercise of this Warrant, the Holder shall, if so requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the securities
issuable upon exercise of this Warrant are being acquired for investment and not
with a view toward distribution or resale.
(b) The Holder understands that the Warrant and the shares of
Designated Preferred Stock issuable on exercise hereof have not been registered
under the Act by reason of their issuance in
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<PAGE> 7
a transaction exempt from the registration and prospectus delivery requirements
of the Act pursuant to Section 4(2) thereof, and that they must be held by the
Holder indefinitely, and that the Holder must therefore bear the economic risk
of such investment indefinitely, unless a subsequent disposition thereof is
registered under the Act or is exempted from such registration. The Holder
further understands that the shares of Designated Preferred Stock issuable on
exercise hereof have not been qualified under the blue sky laws of any
jurisdiction by reason of their issuance in a transaction exempt from the
qualification requirements of such blue sky laws, which exemption depends upon,
among other things, the bona fide nature of the Holder's investment intent
expressed above.
(c) The Holder has such knowledge and experience in financial
and business matters that the Holder is capable of evaluating the merits and
risks of the purchase of this Warrant and the shares of Designated Preferred
Stock purchasable pursuant to the terms of this Warrant and of protecting the
Holder's interests in connection therewith. The Holder is aware of the Company's
business affairs and financial condition, and believes it has sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Securities.
(d) The Holder is able to bear the economic risk of the purchase
of the Designated Preferred Stock issuable on exercise of this Warrant.
9. Restrictive Legend.
The Designated Preferred Stock issuable on exercise of this
Warrant shall (unless registered under the Act) be stamped or imprinted with a
legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
CORPORATION RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
COPIES OF THE AGREEMENTS COVERING THE PURCHASE OF THESE SHARES
AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE
TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE CORPORATION."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS AND CONDITIONS OF THE CORPORATION'S AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT, DATED JUNE 26,
1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED WITHOUT
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<PAGE> 8
CHARGE UPON WRITTEN REQUEST TO THE CORPORATION AT ITS
PRINCIPAL PLACE OF BUSINESS."
10. Restrictions Upon Transfer and Removal of Legend.
(a) The Company need not register a transfer of this Warrant or
shares of Designated Preferred Stock issued on exercise of this Warrant bearing
the restrictive legend set forth in Section 9 hereof, unless the conditions
specified in such legend are satisfied and, at the discretion of the Company,
the Company has received such representations from the transferee as the Company
deems necessary to ensure compliance with applicable securities laws. The
Company may also instruct its transfer agent not to register the transfer of the
Shares unless one of the conditions specified in the legend referred to in
Section 9 hereof is satisfied.
(b) Notwithstanding the provisions of paragraph (a) above, no
opinion of counsel or "no-action" letter shall be necessary for a transfer
without consideration by any holder (i) to an affiliate of the holder, (ii) if
such holder is a partnership, to a partner or retired partner of such
partnership who retires after the date hereof or to the estate of any such
partner or retired partner, (iii) if such holder is a corporation, to a
shareholder of such corporation, or to any other corporation under common
control, direct or indirect, with such holder, or (iv) by gift, will or
intestate succession of any individual holder to his spouse or siblings, or to
the lineal descendants or ancestors of such holder or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if such transferee were the original holder hereunder.
11. Rights of Shareholders. No holder of this Warrant shall be entitled,
as a Warrant holder, to vote or receive dividends or be deemed the holder of the
shares of Designated Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise hereof for any purpose, nor
shall anything contained herein be construed to confer upon the holder of this
Warrant, as such, any of the rights of a shareholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
12. Expiration of Warrant. This Warrant shall expire and shall no longer
be exercisable upon the first to occur of:
(a) 5:00 p.m., California local time, on March 25, 2008;
(b) Five (5) years after the effective date of the Company's
initial public offering; or
(c) The merger or consolidation of the Company with or into, or
other corporate reorganization of the Company with, or the sale of all or
substantially all of the assets of the Company to, any third party other than
any such transaction following which the shareholders of the Company
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<PAGE> 9
prior to the transaction own, by virtue of their holdings of securities of the
Company prior to the transaction, a majority of the equity securities of the
corporation surviving to the business and assets of the Company.
13. Requests for Registration. Holder and Company agree that all shares
of Designated Preferred Stock subject to the Warrant shall have the same
registration rights and be subject to the same terms and conditions with respect
to the registration and sale of such stock as possessed by the other Holders of
Designated Preferred Stock.
14. Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given upon receipt or, if earlier, (a) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid, (b) upon delivery, if delivered
by hand, (c) one (1) business day after the business day of deposit with Federal
Express or similar overnight courier, freight prepaid or (d) one (1) business
day after the business day of facsimile transmission, if delivered by facsimile
transmission with copy by first class mail, postage prepaid, and shall be
addressed (i) if to the Holder, at the Holder's address as set forth beneath the
Holder's signature to this Warrant, and (ii) if to the Company, at the address
of its principal corporate offices (attention: Company Secretary), or at such
other address as the Company shall have furnished to the other parties hereto in
writing.
15. Governing Law. This Warrant and all actions arising out of or in
connection with this Agreement shall be governed by and construed in accordance
with the laws of the State of California, without regard to the conflicts of law
provisions of the State of California; provided, however, that to the extent the
value of the Warrants is considered in evaluating compliance with usury laws
pursuant certain loan agreement entered into between the Company and the Holder,
the laws of the State of Illinois shall govern.
16. Entire Agreement. This Warrant contains the entire agreement among
the Company and the Holder with regard to the subject matter hereof.
17. Successors and Assigns. The terms and provisions of this Warrant
shall be binding upon the Company and the Holder and their respective
successors, assigns, heirs and legal representatives.
18. Titles and Subtitles. The titles and subtitles used in this Warrant
are for convenience only and are not to be considered in construing or
interpreting this Warrant.
19. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
20. Amendments and Waivers. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder.
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<PAGE> 10
21. Severability. If one or more provisions of this Warrant are held to
be unenforceable under applicable law, such provision shall be excluded from
this Warrant and the balance of the Warrant shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
22. Effective Date: The provisions of this Warrant shall be construed
and shall be given effect in all respects as if it had been executed and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company.
23. Counterparts. This Warrant 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.
24. Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit or equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Holder will not have an adequate remedy at law and where damages
will not be readily ascertainable.
25. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Holder against impairment.
26. Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
shall survive the execution and delivery of this Warrant.
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<PAGE> 11
ANTIDILUTION PROVISION
Antidilution Provision. Except with respect to those antidilution
provisions contained herein, the Designated Preferred Stock issuable upon
execution of this Warrant shall be granted the same antidilution protection as
the other holders of Designated Preferred Stock. The Company shall promptly
provide the Holder with any restatement, amendment, modification or waiver of
the Charter that materially affects the rights, preferences and privileges of
the Designated Preferred Stock. The Company shall provide Holder with prior
written notice of any issuance of its stock or other equity security that will
implicate such antidilution provisions to occur after the Effective Date of this
Warrant, which notice shall include (a) the price at which stock or security is
to be sold, (b) the number of shares to be issued, and (c) such other
information as necessary for Holder to determine if a dilutive event has
occurred.
Issued this 29th day of June, 1998.
EXTENSITY, INC.
/s/ SHARAM SASSON
------------------------------------
Sharam Sasson, President
ACCEPTED:
/s/ JAMES P. LABE
- -------------------------------------------
By: JAMES P. LABE
----------------------------------------
Title: PRESIDENT COMDISCO VENTURES DIVISION
-------------------------------------
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<PAGE> 12
EXHIBIT A
NOTICE OF EXERCISE
TO: EXTENSITY, INC.
5801 Christie Avenue, Suite 590
Emeryville, California 94608
Attention: President
1. The undersigned hereby elects to purchase __________ shares of
Designated Preferred Stock of EXTENSITY, INC. (the "COMPANY") pursuant to the
terms of the attached Warrant.
2. Method of Exercise (Please initial the applicable blank):
___ The undersigned elects to exercise the attached Warrant by
means of a cash payment, and tenders herewith payment in
full for the purchase price of the shares being purchased,
together with all applicable transfer taxes, if any.
___ The undersigned elects to exercise the attached Warrant by
means of the net exercise provisions of Section 2(b) of
the Warrant.
3. Please issue a certificate or certificates representing said shares
of Designated Preferred Stock in the name of the undersigned or in such other
name as is specified below:
_______________________________________
(Name)
_______________________________________
_______________________________________
(Address)
4. The undersigned hereby represents and warrants as follows:
(a) The shares of Designated Preferred Stock being acquired
hereby (the "SECURITIES") are being acquired for the account of the undersigned
for investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares, except pursuant to a registration or
exemption.
(b) All representations and warranties of the undersigned set
forth in Section 8 of the attached Warrant are true and correct as of the date
hereof.
<PAGE> 13
(c) The undersigned is aware of the Company's business affairs
and financial condition, and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
Securities. The undersigned is purchasing the Securities for the undersigned's
own account for investment purposes only and not with a view to, or for the
resale in connection with, any "distribution" thereof for purposes of the
Securities Act of 1933, as amended (the "ACT").
(d) The undersigned understands that the Securities have not
been registered under the Act in reliance upon a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of its
investment intent as expressed herein. In this connection, the undersigned
understands that, in the view of the Securities and Exchange Commission (the
"SEC"), the statutory basis for such exemption may be unavailable if its
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under tax statutes,
for a deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one year or any other fixed period in the
future.
(e) The undersigned further understands that the Securities must
be held indefinitely unless subsequently registered under the Act or unless an
exemption from registration is otherwise avail able. Moreover, the undersigned
understands that the Company is under no obligation to register the Securities.
In addition, the undersigned understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel for the Company.
(f) The undersigned is familiar with the provisions of Rule 144,
promulgated under the Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. The Securities may be resold in certain limited circumstances
subject to the provisions of Rule 144, which requires among other things, except
as otherwise provided by section (k) of such Rule 144: (1) the availability of
certain public information about the Company, (2) the resale occurring not less
than one (1) year after the party has purchased, and made full payment for,
within the meaning of Rule 144, the securities to be sold; and, (3) in the case
of an affiliate, or of a non-affiliate who has held the securities less than two
(2) years, the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the amount of securities
being sold during any three (3) month period not exceeding the specified
limitations stated therein, if applicable.
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<PAGE> 14
(g) The undersigned further understands that in the event all of
the applicable requirements of Rule 144 are not satisfied, registration under
the Act, compliance with Regulation A, or some other registration exemption will
be required; and that, notwithstanding the fact that Rule 144 is not exclusive,
the Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
By:_________________________________
Title:______________________________
Date:_______________________________
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<PAGE> 15
EXHIBIT B
FORM OF TRANSFER
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________________________ the right represented by
the attached Warrant to purchase ____________ shares of the Designated Preferred
Stock of EXTENSITY, INC. to which the attached Warrant relates, and appoints
______________ Attorney to transfer such right on the books of EXTENSITY, INC.
with full power of substitution in the premises.
Dated: ____________________
____________________________________
(Signature must conform in all
respects to the name of the Holder
as specified on the face of the
Warrant)
____________________________________
____________________________________
(Address)
Signed in the presence of:
____________________________________
<PAGE> 1
EXHIBIT 10.6
EXTENSITY, INC.
SERIES D PREFERRED STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES WHICH MAY BE PURCHASED UPON THE EXERCISE OF THIS
WARRANT HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER, PLEDGE OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS UNLESS SOLD
PURSUANT TO RULE 144 OF THE ACT.
Effective Date: December 1, 1998
NO. 1998D-4 Void after December 25, 2008
THIS CERTIFIES THAT, for value received, Comdisco, Inc. (the "HOLDER")
is entitled to subscribe for and purchase shares of fully paid and nonassessable
Series D Preferred Stock, par value $0.01 per share, (the "DESIGNATED PREFERRED
STOCK") of Extensity, Inc., a Delaware corporation (the "COMPANY").
1. Purchase Right. This Warrant represents the right of the Holder to
subscribe for and purchase up to an aggregate of 21,212 shares of fully paid and
nonassessable Designated Preferred Stock at an exercise price of $3.30 per share
(as adjusted pursuant to Section 4 hereof) (the "EXERCISE PRICE") .
2. Method of Exercise; Payment.
(a) Cash Exercise. The purchase rights represented by this
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (with the notice of exercise form attached hereto as EXHIBIT A duly
executed) at the principal office of the Company, and by the payment to the
Company, by certified, cashier's or other check, of an amount equal to the
aggregate Exercise Price for the number of shares of Designated Preferred Stock
being purchased.
(b) Net Issue Exercise. The Exercise Price may be paid at the
Holder's election either (i) by cash or check, or (ii) by surrender of this
Warrant at the principal office of the Company together with notice of such
election in which event the Company shall issue to the Holder a number of shares
of Designated Preferred Stock computed using the following formula:
<PAGE> 2
X = Y(A-B)
------
A
Where X = the number of shares of Designated Preferred Stock to
be issued to the Holder
Y = the number of shares of Designated Preferred Stock
purchasable under the Warrant or, if only a portion
of the Warrant is being exercised, the portion of the
Warrant being canceled (at the date of such
calculation)
A = the fair market value of one share of the Company's
Designated Preferred Stock (at the date of such
calculation)
B = the Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of the Company's
Designated Preferred Stock shall mean such fair market value as is reasonably
determined as follows:
(i) if the exercise is in connection with an initial
public offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
SEC, then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to the
offering and (y) the number of shares of Common Stock into which each share of
Designated Preferred Stock is convertible at the time of such exercise;
(ii) If this Warrant is exercised after, and not in
connection with the Company's initial public offering, and;
(a) if traded on a securities exchange, the
fair market value shall be deemed to be the product of (x) the average of the
closing prices over a twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being determined and (y)
the number of shares of Common Stock into which each share of Designated
Preferred Stock is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the
fair market value shall be deemed to be the product of (x) the average of the
closing bid and asked prices quoted on the NASDAQ system (or similar system)
over the twenty-one (21) day period ending three days before the day the current
fair market value of the securities is being determined and (y) the number of
shares of Common Stock into which each share of Designated Preferred Stock is
convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed
on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the current fair market value of the Company's Common
Stock shall be the product of (x) the highest price per share, as determined in
good faith by its Board of Directors and (y) the number of shares of Common
Stock into which each share of Designated Preferred Stock is convertible at the
time of such exercise, unless the Company shall become
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<PAGE> 3
subject to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the fair market value of
Designated Preferred Stock shall be deemed to be the value received by the
holders of the Company's Designated Preferred Stock on a common equivalent basis
pursuant to such merger or acquisition.
(c) Stock Certificates. In the event of any exercise of the
rights represented by this Warrant, certificates for the Designated Preferred
Stock so purchased shall be delivered to the Holder within a reasonable time,
and in no event later than thirty (30) days thereafter, and, unless this Warrant
has been fully exercised or has expired, a new Warrant representing the shares
with respect to which this Warrant shall not have been exercised shall also be
issued to the Holder within such time.
3. Stock Fully Paid; Reservation of Shares. All of the Designated
Preferred Stock issuable upon the exercise of the rights represented by this
Warrant will, upon issuance and receipt of the Exercise Price therefor, be fully
paid and nonassessable, and free from all taxes, liens and charges with respect
to the issue thereof. During the period within which the rights represented by
this Warrant may be exercised, the Company shall at all times have authorized
and reserved for issuance a sufficient number of shares of its Designated
Preferred Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Exercise Price and Number of Shares.
(a) Subject to the provisions of Section 12 hereof, in the
event that the Company shall at any time subdivide the outstanding shares of
Designated Preferred Stock or shall issue a stock dividend on its outstanding
shares of Designated Preferred Stock, then the number of shares of Designated
Preferred Stock issuable upon exercise of this Warrant immediately prior to such
subdivision or to the issuance of such stock dividend shall be proportionately
increased, and the Exercise Price shall be proportionately decreased, and in the
event that the Company shall at any time combine the outstanding shares of
Designated Preferred Stock the number of shares of Designated Preferred Stock
issuable upon exercise of this Warrant immediately prior to such combination
shall be proportionately decreased, and the Exercise Price shall be
proportionately increased, effective at the close of business on the date of
such subdivision, stock dividend or combination, as the case may be.
(b) In the case of any reclassification, recapitalization or
change of the Designated Preferred Stock (other than any action for which
adjustment is made pursuant to Section 4(a) hereof and other than a change as
contemplated by Section 12(b) hereof), the Company shall execute a new warrant
providing that the Holder of this Warrant shall have the right to exercise such
new warrant and to procure upon such exercise and payment of the same aggregate
Exercise Price, in lieu of the shares of Designated Preferred Stock theretofore
issuable upon exercise of this Warrant, the kind and amount of shares, other
securities, money or property receivable upon such reclassification,
recapitalization or change of the Designated Preferred Stock.
(c) In the case of any merger or any capital reorganization of
the shares of the Company's stock (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), or a merger or
consolidation of the Company with or into another corporation
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<PAGE> 4
whether or not the Company is the surviving corporation other than as set forth
in section 13(c) hereof (hereinafter referred to as a "Merger Event"), then, as
a part of such Merger Event, lawful provision shall be made so that the Holder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of Designated Preferred Stock or other securities of the
successor corporation resulting from such Merger Event, equivalent in value to
that which would have been issuable if Holder had exercised this Warrant
immediately prior to the Merger Event. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant with respect to the rights
and interest of the Holder after the Merger Event to the end that the provisions
of this Warrant (including adjustments of the Exercise Price and number of
shares of Designated Preferred Stock purchasable) shall be applicable to the
greatest extent possible.
5. Notice of Adjustments. Whenever the number of shares of Designated
Preferred Stock purchasable hereunder or the Exercise Price thereof shall be
adjusted pursuant to Section 4 hereof, the Company shall provide notice to the
Holder setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the number of shares of Designated Preferred Stock which may be
purchased and the Exercise Price therefor after giving effect to such
adjustment.
6. Fractional Shares. This Warrant may not be exercised for fractional
shares, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
7. Representations and Warranties by the Company. The Company
represents, covenants and warrants to the Holder as follows:
(a) The Company represents that all corporate actions on the
part of the Company, its officers, directors and shareholders necessary for the
sale and issuance of shares of Designated Preferred Stock pursuant hereto and
the performance of the Company's obligations hereunder were taken prior to and
are effective as of the effective date of this Warrant.
(b) If the Company proposes at any time to enter into a
transaction described in Section 12(b) or Section 12(c) hereof, the Company
shall give Holder at least fifteen (15) days written notice prior to the
consummation of such transaction.
(c) Reservation of Designated Preferred Stock. The Designated
Preferred Stock issuable upon exercise of the Holder's rights will be duly and
validly reserved and, when issued in accordance with the provisions of this
Warrant, will be validly issued, fully paid and non-assessable, and will be free
of any taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Designated Preferred Stock issuable pursuant to this Warrant
may be subject to restrictions on transfer under state and/or Federal securities
laws. The Company has made available to the Holder true, correct and complete
copies of its Amended and Restated Certificate of Incorporation ("CHARTER") and
Bylaws, as amended. The issuance of certificates for shares of Designated
Preferred Stock upon exercise of the Warrant shall be made without charge to the
Holder for any issuance tax in respect thereof, or other cost incurred by the
Company in connection with such exercise and the related issuance of shares
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<PAGE> 5
of Designated Preferred Stock. The Company shall not be required to pay any tax
which may be payable in respect of any transfer involved and the issuance and
delivery of any certificate in a name other than that of the Holder.
(d) Due Authority. The execution and delivery by the Company
of this Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Holder of the right to acquire the shares of
Designated Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and this Warrant is not inconsistent with the
Company's Charter or Bylaws, does not contravene any law or governmental rule,
regulation or order applicable to it, does not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and this
Warrant constitutes a legal, valid and binding agreement of the Company,
enforceable in accordance with its respective terms.
(e) Consents and Approvals. No material consent or approval
of, giving notice to, registration with, or taking of any other action in
respect of any state, Federal or other governmental authority or agency is
required with respect to the execution, delivery and performance by the Company
of its obligations under this Warrant, except for the filing of notices pursuant
to Regulation D under the Act and any filing required by applicable state
securities laws, which filings will be effective by the time required thereby.
(f) Issued Securities. All issued and outstanding shares of
Common Stock, Preferred Stock or any other securities of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) As of September 30, 1998, the authorized capital
of the Company consisted of (A) 20,000,000 shares of Common Stock, of which
2,298,564 shares are issued and outstanding, and (B) 10,756,250 shares of
Preferred Stock, of which 2,000,000 shares are designated Series A Preferred
Stock ("SERIES A PREFERRED"), all of which is issued and outstanding, 3,781,250
shares are designated Series B Preferred Stock ("SERIES B PREFERRED"), 3,750,000
shares of which are issued and outstanding and 23,437 shares of which are
reserved for issuance upon exercise of outstanding warrants, 975,000 shares are
designated Series C Preferred Stock ("SERIES C PREFERRED"), 937,500 shares of
which are issued and outstanding and 4,000,000 shares are designated Designated
Preferred Stock, up to 3,674,229 shares of which are issued and outstanding and
up to 153,031 shares of which are reserved for issuance upon exercise of
outstanding warrants or for future warrant grants with respect to agreements
entered into with the Holder. Each share of Series A Preferred, Series B
Preferred, Series C Preferred and Designated Preferred Stock outstanding is
currently convertible into one share of Common Stock.
(ii) The Company has reserved 2,000,000 shares of
Common Stock for issuance under its 1996 Stock Option Plan, under which 506,861
shares are issued and outstanding and options for an aggregate of 1,432,375
shares are outstanding as of September, 1998. Except as set forth herein there
are no other options, warrants, conversion privileges or other rights presently
outstanding
-5-
<PAGE> 6
to purchase or otherwise acquire any authorized but unissued shares of the
Company's capital stock or other securities of the Company
(iii) Except as set forth in the Amended and Restated
Investor Rights Agreement dated June 26, 1998 ("INVESTOR RIGHTS AGREEMENT"), no
shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
(g) Insurance. The Company has in full force and effect
insurance policies, with extended coverage, insuring the Company and its
property and business against such losses and risks, and in such amounts, as are
customarily insured against in Company's line of business as otherwise may be
required pursuant to the terms of any other contract or agreement, subject to
customary deductibles.
(h) Other Commitments to Register Securities. Except as set
forth in the Investor Rights Agreement, the Company is not, pursuant to the
terms of any other agreement currently in existence, under any obligation to
register under the Act any of its presently outstanding securities or any of its
securities, which may hereafter be issued.
(i) Exempt Transaction. Subject to the accuracy of the
Holder's representation in Section 10 hereof and provided that (a) such
representations are correct at the time this Warrant is exercised, (b) this
Warrant is not transferred and (c) the laws with respect to the subject matter
herein are not amended, the Company covenants that the issuance of the
Designated Preferred Stock upon exercise of this Warrant will constitute a
transaction exempt from (i) the registration requirements of Section 5 of the
Act, in reliance upon Section 4(2) thereof, and (ii) the qualification
requirements of the applicable state securities laws.
(j) Compliance with Rule 144. At the written request of the
Holder, who proposes to sell Designated Preferred Stock issuable upon the
exercise of the Warrant in compliance with Rule 144 within thirty days after
receipt of such request, a written statement confirming the Company's compliance
with the filing requirements of the Securities and Exchange Commission as set
forth in such Rule, as such Rule may be amended from time to time.
8. Representations and Warranties by the Holder. The Holder represents
and warrants to the Company as follows:
(a) This Warrant and the shares of Designated Preferred Stock
issuable upon exercise hereof are being acquired for the Holder's own account,
for investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Act. Upon
exercise of this Warrant, the Holder shall, if so requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the securities
issuable upon exercise of this Warrant are being acquired for investment and not
with a view toward distribution or resale.
(b) The Holder understands that the Warrant and the shares of
Designated Preferred Stock issuable on exercise hereof have not been registered
under the Act by reason of their issuance in a transaction exempt from the
registration and prospectus delivery requirements of the Act pursuant to
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<PAGE> 7
Section 4(2) thereof, and that they must be held by the Holder indefinitely, and
that the Holder must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Act or is exempted from such registration. The Holder further understands that
the shares of Designated Preferred Stock issuable on exercise hereof have not
been qualified under the blue sky laws of any jurisdiction by reason of their
issuance in a transaction exempt from the qualification requirements of such
blue sky laws, which exemption depends upon, among other things, the bona fide
nature of the Holder's investment intent expressed above.
(c) The Holder has such knowledge and experience in financial
and business matters that the Holder is capable of evaluating the merits and
risks of the purchase of this Warrant and the shares of Designated Preferred
Stock purchasable pursuant to the terms of this Warrant and of protecting the
Holder's interests in connection therewith. The Holder is aware of the Company's
business affairs and financial condition, and believes it has sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Securities.
(d) The Holder is able to bear the economic risk of the
purchase of the Designated Preferred Stock issuable on exercise of this Warrant.
9. Restrictive Legend.
The Designated Preferred Stock issuable on exercise of this
Warrant shall (unless registered under the Act) be stamped or imprinted with a
legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE CORPORATION RECEIVES AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE AGREEMENTS
COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF THE CORPORATION'S AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT, DATED JUNE 26, 1998. A COPY OF SUCH
AGREEMENT MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO
THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS."
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<PAGE> 8
10. Restrictions Upon Transfer and Removal of Legend.
(a) The Company need not register a transfer of this Warrant or
shares of Designated Preferred Stock issued on exercise of this Warrant bearing
the restrictive legend set forth in Section 9 hereof, unless the conditions
specified in such legend are satisfied and, at the discretion of the Company,
the Company has received such representations from the transferee as the Company
deems necessary to ensure compliance with applicable securities laws. The
Company may also instruct its transfer agent not to register the transfer of the
Shares unless one of the conditions specified in the legend referred to in
Section 9 hereof is satisfied.
(b) Notwithstanding the provisions of paragraph (a) above, no
opinion of counsel or "no-action" letter shall be necessary for a transfer
without consideration by any holder (i) to an affiliate of the holder, (ii) if
such holder is a partnership, to a partner or retired partner of such
partnership who retires after the date hereof or to the estate of any such
partner or retired partner, (iii) if such holder is a corporation, to a
shareholder of such corporation, or to any other corporation under common
control, direct or indirect, with such holder, or (iv) by gift, will or
intestate succession of any individual holder to his spouse or siblings, or to
the lineal descendants or ancestors of such holder or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if such transferee were the original holder hereunder.
11. Rights of Shareholders. No holder of this Warrant shall be entitled,
as a Warrant holder, to vote or receive dividends or be deemed the holder of the
shares of Designated Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise hereof for any purpose, nor
shall anything contained herein be construed to confer upon the holder of this
Warrant, as such, any of the rights of a shareholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
12. Expiration of Warrant. This Warrant shall expire and shall no longer
be exercisable upon the first to occur of:
(a) 5:00 p.m., California local time, on December 25, 2008;
(b) Five (5) years after the effective date of the Company's
initial public offering; or
(c) The merger or consolidation of the Company with or into, or
other corporate reorganization of the Company with, or the sale of all or
substantially all of the assets of the Company to, any third party other than
any such transaction following which the shareholders of the Company prior to
the transaction own, by virtue of their holdings of securities of the Company
prior to the transaction, a majority of the equity securities of the corporation
surviving to the business and assets of the Company.
-8-
<PAGE> 9
13. Requests for Registration. Holder and Company agree that all shares
of Designated Preferred Stock subject to the Warrant shall have the same
registration rights and be subject to the same terms and conditions with respect
to the registration and sale of such stock as possessed by the other Holders of
Designated Preferred Stock.
14. Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given upon receipt or, if earlier, (a) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid, (b) upon delivery, if delivered
by hand, (c) one (1) business day after the business day of deposit with Federal
Express or similar overnight courier, freight prepaid or (d) one (1) business
day after the business day of facsimile transmission, if delivered by facsimile
transmission with copy by first class mail, postage prepaid, and shall be
addressed (i) if to the Holder, at the Holder's address as set forth beneath the
Holder's signature to this Warrant, and (ii) if to the Company, at the address
of its principal corporate offices (attention: Company Secretary), or at such
other address as the Company shall have furnished to the other parties hereto in
writing.
15. Governing Law. This Warrant and all actions arising out of or in
connection with this Agreement shall be governed by and construed in accordance
with the laws of the State of California, without regard to the conflicts of law
provisions of the State of California; provided, however, that to the extent the
value of the Warrants is considered in evaluating compliance with usury laws
pursuant certain loan agreement entered into between the Company and the Holder,
the laws of the State of Illinois shall govern.
16. Entire Agreement. This Warrant contains the entire agreement among
the Company and the Holder with regard to the subject matter hereof.
17. Successors and Assigns. The terms and provisions of this Warrant
shall be binding upon the Company and the Holder and their respective
successors, assigns, heirs and legal representatives.
18. Titles and Subtitles. The titles and subtitles used in this Warrant
are for convenience only and are not to be considered in construing or
interpreting this Warrant.
19. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
20. Amendments and Waivers. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder.
21. Severability. If one or more provisions of this Warrant are held to
be unenforceable under applicable law, such provision shall be excluded from
this Warrant and the balance of the Warrant shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
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<PAGE> 10
22. Effective Date: The provisions of this Warrant shall be construed and
shall be given effect in all respects as if it had been executed and delivered
by the Company on the date hereof. This Warrant shall be binding upon any
successors or assigns of the Company.
23. Counterparts. This Warrant 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.
24. Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit or equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Holder will not have an adequate remedy at law and where damages
will not be readily ascertainable.
25. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Holder against impairment.
26. Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
shall survive the execution and delivery of this Warrant.
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<PAGE> 11
ANTIDILUTION PROVISION
Antidilution Provision. Except with respect to those antidilution
provisions contained herein, the Designated Preferred Stock issuable upon
execution of this Warrant shall be granted the same antidilution protection as
the other holders of Designated Preferred Stock. The Company shall promptly
provide the Holder with any restatement, amendment, modification or waiver of
the Charter that materially affects the rights, preferences and privileges of
the Designated Preferred Stock. The Company shall provide Holder with prior
written notice of any issuance of its stock or other equity security that will
implicate such antidilution provisions to occur after the Effective Date of this
Warrant, which notice shall include (a) the price at which stock or security is
to be sold, (b) the number of shares to be issued, and (c) such other
information as necessary for Holder to determine if a dilutive event has
occurred.
Issued this 1st day of December, 1998.
EXTENSITY, INC.
________________________________________
Sharam Sasson, President
ACCEPTED:
________________________________________
By:_____________________________________
Title:__________________________________
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<PAGE> 12
EXHIBIT A
NOTICE OF EXERCISE
TO: EXTENSITY, INC.
5801 Christie Avenue, Suite 590
Emeryville, California 94608
Attention: President
1. The undersigned hereby elects to purchase __________ shares of
Designated Preferred Stock of EXTENSITY, INC. (the "COMPANY") pursuant to the
terms of the attached Warrant.
2. Method of Exercise (Please initial the applicable blank):
___ The undersigned elects to exercise the attached Warrant by
means of a cash payment, and tenders herewith payment in
full for the purchase price of the shares being purchased,
together with all applicable transfer taxes, if any.
___ The undersigned elects to exercise the attached Warrant by
means of the net exercise provisions of Section 2(b) of the
Warrant.
3. Please issue a certificate or certificates representing said shares of
Designated Preferred Stock in the name of the undersigned or in such other name
as is specified below:
________________________________________
(Name)
________________________________________
________________________________________
(Address)
4. The undersigned hereby represents and warrants as follows:
(a) The shares of Designated Preferred Stock being acquired hereby
(the "SECURITIES") are being acquired for the account of the undersigned for
investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares, except pursuant to a registration or
exemption.
(b) All representations and warranties of the undersigned set forth
in Section 8 of the attached Warrant are true and correct as of the date hereof.
<PAGE> 13
(c) The undersigned is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities. The
undersigned is purchasing the Securities for the undersigned's own account for
investment purposes only and not with a view to, or for the resale in connection
with, any "distribution" thereof for purposes of the Securities Act of 1933, as
amended (the "ACT").
(d) The undersigned understands that the Securities have not been
registered under the Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of its
investment intent as expressed herein. In this connection, the undersigned
understands that, in the view of the Securities and Exchange Commission (the
"SEC"), the statutory basis for such exemption may be unavailable if its
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under tax statutes,
for a deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one year or any other fixed period in the
future.
(e) The undersigned further understands that the Securities must be
held indefinitely unless subsequently registered under the Act or unless an
exemption from registration is otherwise avail able. Moreover, the undersigned
understands that the Company is under no obligation to register the Securities.
In addition, the undersigned understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel for the Company.
(f) The undersigned is familiar with the provisions of Rule 144,
promulgated under the Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. The Securities may be resold in certain limited circumstances
subject to the provisions of Rule 144, which requires among other things, except
as otherwise provided by section (k) of such Rule 144: (1) the availability of
certain public information about the Company, (2) the resale occurring not less
than one (1) year after the party has purchased, and made full payment for,
within the meaning of Rule 144, the securities to be sold; and, (3) in the case
of an affiliate, or of a non-affiliate who has held the securities less than two
(2) years, the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the amount of securities
being sold during any three (3) month period not exceeding the specified
limitations stated therein, if applicable.
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<PAGE> 14
(g) The undersigned further understands that in the event all of
the applicable requirements of Rule 144 are not satisfied, registration under
the Act, compliance with Regulation A, or some other registration exemption will
be required; and that, notwithstanding the fact that Rule 144 is not exclusive,
the Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
________________________________________
By: _________________________________
Title: _________________________________
Date: ______________________
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<PAGE> 15
EXHIBIT B
FORM OF TRANSFER
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________________________ the right represented by
the attached Warrant to purchase ____________ shares of the Designated Preferred
Stock of EXTENSITY, INC. to which the attached Warrant relates, and appoints
______________ Attorney to transfer such right on the books of EXTENSITY, INC.
with full power of substitution in the premises.
Dated: ____________________
________________________________________
(Signature must conform in all respects
to the name of the Holder as specified
on the face of the Warrant)
________________________________________
(Address)
Signed in the presence of:
_________________________________
<PAGE> 1
EXHIBIT 10.7
EXTENSITY, INC.
SERIES D PREFERRED STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES WHICH MAY BE PURCHASED UPON THE EXERCISE OF THIS
WARRANT HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER, PLEDGE OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS UNLESS SOLD
PURSUANT TO RULE 144 OF THE ACT.
Effective Date: December 11, 1998
NO. 1998D-5 Void after December 11, 2008
THIS CERTIFIES THAT, for value received, Comdisco, Inc. (the "HOLDER")
is entitled to subscribe for and purchase shares of fully paid and nonassessable
Series D Preferred Stock, par value $0.01 per share, (the "DESIGNATED PREFERRED
STOCK") of Extensity, Inc., a Delaware corporation (the "COMPANY").
1. Purchase Right. This Warrant represents the right of the Holder to
subscribe for and purchase up to an aggregate of 7,273 shares of fully paid and
nonassessable Designated Preferred Stock at an exercise price of $3.30 per share
(as adjusted pursuant to Section 4 hereof) (the "EXERCISE PRICE") .
2. Method of Exercise; Payment.
(a) Cash Exercise. The purchase rights represented by this
Warrant may be exercised by the Holder, in whole or in part, by the surrender of
this Warrant (with the notice of exercise form attached hereto as EXHIBIT A duly
executed) at the principal office of the Company, and by the payment to the
Company, by certified, cashier's or other check, of an amount equal to the
aggregate Exercise Price for the number of shares of Designated Preferred Stock
being purchased.
(b) Net Issue Exercise. The Exercise Price may be paid at the
Holder's election either (i) by cash or check, or (ii) by surrender of this
Warrant at the principal office of the Company together with notice of such
election in which event the Company shall issue to the Holder a number of shares
of Designated Preferred Stock computed using the following formula:
<PAGE> 2
X = Y(A-B)
------
A
Where X = the number of shares of Designated Preferred Stock to
be issued to the Holder
Y = the number of shares of Designated Preferred Stock
purchasable under the Warrant or, if only a portion
of the Warrant is being exercised, the portion of the
Warrant being canceled (at the date of such
calculation)
A = the fair market value of one share of the Company's
Designated Preferred Stock (at the date of such
calculation)
B = the Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, fair market value of the Company's
Designated Preferred Stock shall mean such fair market value as is reasonably
determined as follows:
(i) if the exercise is in connection with an initial
public offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
SEC, then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to the
offering and (y) the number of shares of Common Stock into which each share of
Designated Preferred Stock is convertible at the time of such exercise;
(ii) If this Warrant is exercised after, and not in
connection with the Company's initial public offering, and;
(a) if traded on a securities exchange, the
fair market value shall be deemed to be the product of (x) the average of the
closing prices over a twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being determined and (y)
the number of shares of Common Stock into which each share of Designated
Preferred Stock is convertible at the time of such exercise; or
(b) if actively traded over-the-counter, the
fair market value shall be deemed to be the product of (x) the average of the
closing bid and asked prices quoted on the NASDAQ system (or similar system)
over the twenty-one (21) day period ending three days before the day the current
fair market value of the securities is being determined and (y) the number of
shares of Common Stock into which each share of Designated Preferred Stock is
convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed
on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the current fair market value of the Company's Common
Stock shall be the product of (x) the highest price per share, as determined in
good faith by its Board of Directors and (y) the number of shares of Common
Stock into which each share of Designated Preferred Stock is convertible at the
time of such exercise, unless the Company shall become
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subject to a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the fair market value of
Designated Preferred Stock shall be deemed to be the value received by the
holders of the Company's Designated Preferred Stock on a common equivalent basis
pursuant to such merger or acquisition.
(c) Stock Certificates. In the event of any exercise of the
rights represented by this Warrant, certificates for the Designated Preferred
Stock so purchased shall be delivered to the Holder within a reasonable time,
and in no event later than thirty (30) days thereafter, and, unless this Warrant
has been fully exercised or has expired, a new Warrant representing the shares
with respect to which this Warrant shall not have been exercised shall also be
issued to the Holder within such time.
3. Stock Fully Paid; Reservation of Shares. All of the Designated
Preferred Stock issuable upon the exercise of the rights represented by this
Warrant will, upon issuance and receipt of the Exercise Price therefor, be fully
paid and nonassessable, and free from all taxes, liens and charges with respect
to the issue thereof. During the period within which the rights represented by
this Warrant may be exercised, the Company shall at all times have authorized
and reserved for issuance a sufficient number of shares of its Designated
Preferred Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Exercise Price and Number of Shares.
(a) Subject to the provisions of Section 12 hereof, in the
event that the Company shall at any time subdivide the outstanding shares of
Designated Preferred Stock or shall issue a stock dividend on its outstanding
shares of Designated Preferred Stock, then the number of shares of Designated
Preferred Stock issuable upon exercise of this Warrant immediately prior to such
subdivision or to the issuance of such stock dividend shall be proportionately
increased, and the Exercise Price shall be proportionately decreased, and in the
event that the Company shall at any time combine the outstanding shares of
Designated Preferred Stock the number of shares of Designated Preferred Stock
issuable upon exercise of this Warrant immediately prior to such combination
shall be proportionately decreased, and the Exercise Price shall be
proportionately increased, effective at the close of business on the date of
such subdivision, stock dividend or combination, as the case may be.
(b) In the case of any reclassification, recapitalization or
change of the Designated Preferred Stock (other than any action for which
adjustment is made pursuant to Section 4(a) hereof and other than a change as
contemplated by Section 12(b) hereof), the Company shall execute a new warrant
providing that the Holder of this Warrant shall have the right to exercise such
new warrant and to procure upon such exercise and payment of the same aggregate
Exercise Price, in lieu of the shares of Designated Preferred Stock theretofore
issuable upon exercise of this Warrant, the kind and amount of shares, other
securities, money or property receivable upon such reclassification,
recapitalization or change of the Designated Preferred Stock.
(c) In the case of any merger or any capital reorganization of
the shares of the Company's stock (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), or a merger or
consolidation of the Company with or into another corporation
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<PAGE> 4
whether or not the Company is the surviving corporation other than as set forth
in section 13(c) hereof (hereinafter referred to as a "Merger Event"), then, as
a part of such Merger Event, lawful provision shall be made so that the Holder
shall thereafter be entitled to receive, upon exercise of the Warrant, the
number of shares of Designated Preferred Stock or other securities of the
successor corporation resulting from such Merger Event, equivalent in value to
that which would have been issuable if Holder had exercised this Warrant
immediately prior to the Merger Event. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant with respect to the rights
and interest of the Holder after the Merger Event to the end that the provisions
of this Warrant (including adjustments of the Exercise Price and number of
shares of Designated Preferred Stock purchasable) shall be applicable to the
greatest extent possible.
5. Notice of Adjustments. Whenever the number of shares of Designated
Preferred Stock purchasable hereunder or the Exercise Price thereof shall be
adjusted pursuant to Section 4 hereof, the Company shall provide notice to the
Holder setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the number of shares of Designated Preferred Stock which may be
purchased and the Exercise Price therefor after giving effect to such
adjustment.
6. Fractional Shares. This Warrant may not be exercised for fractional
shares, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
7. Representations and Warranties by the Company. The Company
represents, covenants and warrants to the Holder as follows:
(a) Corporate Approval. The Company represents that all
corporate actions on the part of the Company, its officers, directors and
shareholders necessary for the sale and issuance of shares of Designated
Preferred Stock pursuant hereto and the performance of the Company's obligations
hereunder were taken prior to and are effective as of the effective date of this
Warrant.
(b) Notice of Certain Transactions. If the Company proposes at
any time to enter into a transaction described in Section 12(b) or Section 12(c)
hereof, the Company shall give Holder at least fifteen (15) days written notice
prior to the consummation of such transaction.
(c) Reservation of Designated Preferred Stock. The Designated
Preferred Stock issuable upon exercise of the Holder's rights have been duly and
validly reserved and, when issued in accordance with the provisions of this
Warrant, will be validly issued, fully paid and non-assessable, and will be free
of any taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Designated Preferred Stock issuable pursuant to this Warrant
may be subject to restrictions on transfer under state and/or Federal securities
laws. The Company has made available to the Holder true, correct and complete
copies of its Amended and Restated Certificate of Incorporation ("CHARTER") and
Bylaws, as amended. The issuance of certificates for shares of Designated
Preferred Stock upon exercise of the Warrant shall be made without charge to the
Holder for any issuance tax in respect thereof, or other cost incurred by the
Company in connection with such exercise and the related issuance of shares
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<PAGE> 5
of Designated Preferred Stock. The Company shall not be required to pay any tax
which may be payable in respect of any transfer involved and the issuance and
delivery of any certificate in a name other than that of the Holder.
(d) Due Authority. The execution and delivery by the Company
of this Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Holder of the right to acquire the shares of
Designated Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and this Warrant is not inconsistent with the
Company's Charter or Bylaws, does not contravene any law or governmental rule,
regulation or order applicable to it, does not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and this
Warrant constitutes a legal, valid and binding agreement of the Company,
enforceable in accordance with its respective terms.
(e) Consents and Approvals. No material consent or approval
of, giving notice to, registration with, or taking of any other action in
respect of any state, Federal or other governmental authority or agency is
required with respect to the execution, delivery and performance by the Company
of its obligations under this Warrant, except for the filing of notices pursuant
to Regulation D under the Act and any filing required by applicable state
securities laws, which filings will be effective by the time required thereby.
(f) Issued Securities. All issued and outstanding shares of
Common Stock, Preferred Stock or any other securities of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) As of September 30, 1998, the authorized capital
of the Company consisted of (A) 20,000,000 shares of Common Stock, of which
2,298,564 shares are issued and outstanding, and (B) 10,756,250 shares of
Preferred Stock, of which 2,000,000 shares are designated Series A Preferred
Stock ("SERIES A PREFERRED"), all of which is issued and outstanding, 3,781,250
shares are designated Series B Preferred Stock ("SERIES B PREFERRED"), 3,750,000
shares of which are issued and outstanding and 23,437 shares of which are
reserved for issuance upon exercise of outstanding warrants, 975,000 shares are
designated Series C Preferred Stock ("SERIES C PREFERRED"), 937,500 shares of
which are issued and outstanding and 4,000,000 shares are designated Designated
Preferred Stock, up to 3,674,229 shares of which are issued and outstanding and
up to 153,031 shares of which are reserved for issuance upon exercise of
outstanding warrants or for future warrant grants with respect to agreements
entered into with the Holder. Each share of Series A Preferred, Series B
Preferred, Series C Preferred and Designated Preferred Stock outstanding is
currently convertible into one share of Common Stock.
(ii) The Company has reserved 2,000,000 shares of
Common Stock for issuance under its 1996 Stock Option Plan, under which 506,861
shares are issued and outstanding and options for an aggregate of 1,432,375
shares are outstanding as of September, 1998. Except as set forth herein there
are no other options, warrants, conversion privileges or other rights presently
outstanding
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<PAGE> 6
to purchase or otherwise acquire any authorized but unissued shares of the
Company's capital stock or other securities of the Company
(iii) Except as set forth in the Amended and Restated
Investor Rights Agreement dated June 26, 1998 ("INVESTOR RIGHTS AGREEMENT"), no
shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
(g) Insurance. The Company has in full force and effect
insurance policies, with extended coverage, insuring the Company and its
property and business against such losses and risks, and in such amounts, as are
customarily insured against in Company's line of business as otherwise may be
required pursuant to the terms of any other contract or agreement, subject to
customary deductibles.
(h) Other Commitments to Register Securities. Except as set
forth in the Investor Rights Agreement, the Company is not, pursuant to the
terms of any other agreement currently in existence, under any obligation to
register under the Act any of its presently outstanding securities or any of its
securities, which may hereafter be issued.
(i) Exempt Transaction. Subject to the accuracy of the
Holder's representation in Section 8 hereof and provided that (a) such
representations are correct at the time this Warrant is exercised, (b) this
Warrant is not transferred and (c) the laws with respect to the subject matter
herein are not amended, the Company covenants that the issuance of the
Designated Preferred Stock upon exercise of this Warrant will constitute a
transaction exempt from (i) the registration requirements of Section 5 of the
Act, in reliance upon Section 4(2) thereof, and (ii) the qualification
requirements of the applicable state securities laws.
(j) Compliance with Rule 144. At the written request of the
Holder, who proposes to sell Designated Preferred Stock issuable upon the
exercise of the Warrant in compliance with Rule 144 within thirty days after
receipt of such request, a written statement confirming the Company's compliance
with the filing requirements of the Securities and Exchange Commission as set
forth in such Rule, as such Rule may be amended from time to time.
8. Representations and Warranties by the Holder. The Holder represents
and warrants to the Company as follows:
(a) This Warrant and the shares of Designated Preferred Stock
issuable upon exercise hereof are being acquired for the Holder's own account,
for investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Act. Upon
exercise of this Warrant, the Holder shall, if so requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the securities
issuable upon exercise of this Warrant are being acquired for investment and not
with a view toward distribution or resale.
(b) The Holder understands that the Warrant and the shares of
Designated Preferred Stock issuable on exercise hereof have not been registered
under the Act by reason of their issuance in a transaction exempt from the
registration and prospectus delivery requirements of the Act pursuant to
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<PAGE> 7
Section 4(2) thereof, and that they must be held by the Holder indefinitely, and
that the Holder must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Act or is exempted from such registration. The Holder further understands that
the shares of Designated Preferred Stock issuable on exercise hereof have not
been qualified under the blue sky laws of any jurisdiction by reason of their
issuance in a transaction exempt from the qualification requirements of such
blue sky laws, which exemption depends upon, among other things, the bona fide
nature of the Holder's investment intent expressed above.
(c) The Holder has such knowledge and experience in financial
and business matters that the Holder is capable of evaluating the merits and
risks of the purchase of this Warrant and the shares of Designated Preferred
Stock purchasable pursuant to the terms of this Warrant and of protecting the
Holder's interests in connection therewith. The Holder is aware of the Company's
business affairs and financial condition, and believes it has sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Securities.
(d) The Holder is able to bear the economic risk of the
purchase of the Designated Preferred Stock issuable on exercise of this Warrant.
9. Restrictive Legend.
The Designated Preferred Stock issuable on exercise of this
Warrant shall (unless registered under the Act) be stamped or imprinted with a
legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE CORPORATION RECEIVES AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF
THE AGREEMENTS COVERING THE PURCHASE OF THESE SHARES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION."
The Designated Preferred Stock issuable on exercise of this Warrant shall
also be stamped or imprinted with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS AND CONDITIONS OF THE CORPORATION'S AMENDED
AND RESTATED INVESTOR RIGHTS AGREEMENT, DATED JUNE 26,
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<PAGE> 8
1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED WITHOUT
CHARGE UPON WRITTEN REQUEST TO THE CORPORATION AT ITS
PRINCIPAL PLACE OF BUSINESS."
10. Restrictions Upon Transfer and Removal of Legend.
(a) The Company need not register a transfer of this Warrant or
shares of Designated Preferred Stock issued on exercise of this Warrant bearing
the restrictive legend set forth in Section 9 hereof, unless the conditions
specified in such legend are satisfied and, at the discretion of the Company,
the Company has received such representations from the transferee as the Company
deems necessary to ensure compliance with applicable securities laws. The
Company may also instruct its transfer agent not to register the transfer of the
Shares unless one of the conditions specified in the legend referred to in
Section 9 hereof is satisfied.
(b) Notwithstanding the provisions of paragraph (a) above, no
opinion of counsel or "no-action" letter shall be necessary for a transfer
without consideration by any holder (i) to an affiliate of the holder, (ii) if
such holder is a partnership, to a partner or retired partner of such
partnership who retires after the date hereof or to the estate of any such
partner or retired partner, (iii) if such holder is a corporation, to a
shareholder of such corporation, or to any other corporation under common
control, direct or indirect, with such holder, or (iv) by gift, will or
intestate succession of any individual holder to his spouse or siblings, or to
the lineal descendants or ancestors of such holder or his spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if such transferee were the original holder hereunder.
11. Rights of Shareholders. No holder of this Warrant shall be entitled,
as a Warrant holder, to vote or receive dividends or be deemed the holder of the
shares of Designated Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise hereof for any purpose, nor
shall anything contained herein be construed to confer upon the holder of this
Warrant, as such, any of the rights of a shareholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
12. Expiration of Warrant. This Warrant shall expire and shall no longer
be exercisable upon the first to occur of:
(a) 5:00 p.m., California local time, on December 11, 2008;
(b) Five (5) years after the effective date of the Company's
initial public offering; or
(c) The merger or consolidation of the Company with or into, or
other corporate reorganization of the Company with, or the sale of all or
substantially all of the assets of the Company
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<PAGE> 9
to, any third party other than any such transaction following which the
shareholders of the Company prior to the transaction own, by virtue of their
holdings of securities of the Company prior to the transaction, a majority of
the equity securities of the corporation surviving to the business and assets of
the Company.
13. Requests for Registration. Holder and Company agree that all shares
of Designated Preferred Stock subject to the Warrant shall have the same
registration rights and be subject to the same terms and conditions with respect
to the registration and sale of such stock as possessed by the other Holders of
Designated Preferred Stock.
14. Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given upon receipt or, if earlier, (a) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid, (b) upon delivery, if delivered
by hand, (c) one (1) business day after the business day of deposit with Federal
Express or similar overnight courier, freight prepaid or (d) one (1) business
day after the business day of facsimile transmission, if delivered by facsimile
transmission with copy by first class mail, postage prepaid, and shall be
addressed (i) if to the Holder, at the Holder's address as set forth beneath the
Holder's signature to this Warrant, and (ii) if to the Company, at the address
of its principal corporate offices (attention: Company Secretary), or at such
other address as the Company shall have furnished to the other parties hereto in
writing.
15. Governing Law. This Warrant and all actions arising out of or in
connection with this Agreement shall be governed by and construed in accordance
with the laws of the State of California, without regard to the conflicts of law
provisions of the State of California; provided, however, that to the extent the
value of the Warrants is considered in evaluating compliance with usury laws
pursuant certain loan agreement entered into between the Company and the Holder,
the laws of the State of Illinois shall govern.
16. Entire Agreement. This Warrant contains the entire agreement among
the Company and the Holder with regard to the subject matter hereof.
17. Successors and Assigns. The terms and provisions of this Warrant
shall be binding upon the Company and the Holder and their respective
successors, assigns, heirs and legal representatives.
18. Titles and Subtitles. The titles and subtitles used in this Warrant
are for convenience only and are not to be considered in construing or
interpreting this Warrant.
19. Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements in addition to
any other relief to which such party may be entitled.
20. Amendments and Waivers. Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder.
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21. Severability. If one or more provisions of this Warrant are held to
be unenforceable under applicable law, such provision shall be excluded from
this Warrant and the balance of the Warrant shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
22. Effective Date: The provisions of this Warrant shall be construed and
shall be given effect in all respects as if it had been executed and delivered
by the Company on the date hereof. This Warrant shall be binding upon any
successors or assigns of the Company.
23. Counterparts. This Warrant 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.
24. Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit or equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Holder will not have an adequate remedy at law and where damages
will not be readily ascertainable.
25. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Holder against impairment.
26. Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
shall survive the execution and delivery of this Warrant.
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ANTIDILUTION PROVISION
Antidilution Provision. Except with respect to those antidilution
provisions contained herein, the Designated Preferred Stock issuable upon
execution of this Warrant shall be granted the same antidilution protection as
the other holders of Designated Preferred Stock. The Company shall promptly
provide the Holder with any restatement, amendment, modification or waiver of
the Charter that materially affects the rights, preferences and privileges of
the Designated Preferred Stock. The Company shall provide Holder with prior
written notice of any issuance of its stock or other equity security that will
implicate such antidilution provisions to occur after the Effective Date of this
Warrant, which notice shall include (a) the price at which stock or security is
to be sold, (b) the number of shares to be issued, and (c) such other
information as necessary for Holder to determine if a dilutive event has
occurred.
Issued this 11th day of December, 1998.
EXTENSITY, INC.
___________________________________
Sharam Sasson, President
ACCEPTED:
___________________________________
By:________________________________
Title:_____________________________
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EXHIBIT A
NOTICE OF EXERCISE
TO: EXTENSITY, INC.
2200 Powell Street, Suite 400
Emeryville, California 94608
Attention: President
1. The undersigned hereby elects to purchase __________ shares of
Designated Preferred Stock of EXTENSITY, INC. (the "COMPANY") pursuant to the
terms of the attached Warrant.
2. Method of Exercise (Please initial the applicable blank):
___ The undersigned elects to exercise the attached Warrant by
means of a cash payment, and tenders herewith payment in
full for the purchase price of the shares being purchased,
together with all applicable transfer taxes, if any.
___ The undersigned elects to exercise the attached Warrant by
means of the net exercise provisions of Section 2(b) of the
Warrant.
3. Please issue a certificate or certificates representing said shares of
Designated Preferred Stock in the name of the undersigned or in such other name
as is specified below:
___________________________________
(Name)
___________________________________
___________________________________
(Address)
4. The undersigned hereby represents and warrants as follows:
(a) The shares of Designated Preferred Stock being acquired hereby
(the "SECURITIES") are being acquired for the account of the undersigned for
investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares, except pursuant to a registration or
exemption.
(b) All representations and warranties of the undersigned set forth
in Section 8 of the attached Warrant are true and correct as of the date hereof.
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<PAGE> 13
(c) The undersigned is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities. The
undersigned is purchasing the Securities for the undersigned's own account for
investment purposes only and not with a view to, or for the resale in connection
with, any "distribution" thereof for purposes of the Securities Act of 1933, as
amended (the "ACT").
(d) The undersigned understands that the Securities have not been
registered under the Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of its
investment intent as expressed herein. In this connection, the undersigned
understands that, in the view of the Securities and Exchange Commission (the
"SEC"), the statutory basis for such exemption may be unavailable if its
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under tax statutes,
for a deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one year or any other fixed period in the
future.
(e) The undersigned further understands that the Securities must be
held indefinitely unless subsequently registered under the Act or unless an
exemption from registration is otherwise avail able. Moreover, the undersigned
understands that the Company is under no obligation to register the Securities.
In addition, the undersigned understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel for the Company.
(f) The undersigned is familiar with the provisions of Rule 144,
promulgated under the Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. The Securities may be resold in certain limited circumstances
subject to the provisions of Rule 144, which requires among other things, except
as otherwise provided by section (k) of such Rule 144: (1) the availability of
certain public information about the Company, (2) the resale occurring not less
than one (1) year after the party has purchased, and made full payment for,
within the meaning of Rule 144, the securities to be sold; and, (3) in the case
of an affiliate, or of a non-affiliate who has held the securities less than two
(2) years, the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the amount of securities
being sold during any three (3) month period not exceeding the specified
limitations stated therein, if applicable.
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(g) The undersigned further understands that in the event all of
the applicable requirements of Rule 144 are not satisfied, registration under
the Act, compliance with Regulation A, or some other registration exemption will
be required; and that, notwithstanding the fact that Rule 144 is not exclusive,
the Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
___________________________________
By:________________________________
Title:_____________________________
Date:______________________________
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EXHIBIT B
FORM OF TRANSFER
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________________________ the right represented by
the attached Warrant to purchase ____________ shares of the Designated Preferred
Stock of EXTENSITY, INC. to which the attached Warrant relates, and appoints
______________ Attorney to transfer such right on the books of EXTENSITY, INC.
with full power of substitution in the premises.
Dated: ____________________
________________________________________
(Signature must conform in all respects
to the name of the Holder as specified
on the face of the Warrant)
________________________________________
________________________________________
(Address)
Signed in the presence of:
___________________________________
<PAGE> 1
EXHIBIT 10.8
WATERGATE OFFICE LEASE
1. PARTIES; BASIC LEASE PROVISIONS; DEFINED TERMS
1.1 Parties. This Watergate Office Lease ("Lease") is entered into
in the City of Emeryville, County of Alameda, State of California, between
Spieker Properties, L.P., a California limited partnership ("Landlord"), and
Extensity, Inc., a Delaware corporation ("Tenant").
1.2 Basic Lease Provisions. The following Basic Lease Provisions
constitute an integral part of this Lease, and each reference in this Lease to
the Basic Lease Provisions shall mean the provisions set forth in this Paragraph
1.2. Section references in this Paragraph 1.2 are to the section in which the
particular Basic Lease Provision is first discussed. In the event of any
conflict between the Basic Lease Provisions and the remainder of the Lease, the
latter shall control.
Lease Date: ________________________
Address of Landlord: 2200 Powell Street
Suite 325
Emeryville, CA 94608
Address of Tenant: 2200 Powell Street
Suite 455
Emeryville, CA 94608
Section 2: Premises: Suite 455
Building: Tower II
2200 Powell Street
Emeryville, CA 94608
Premises Rentable Area: 3,403 square feet
Premises Useable Area: 2,934 square feet
Building Rentable Area: 215,550 square feet
Tenant Parking: 6 permits
Parking Charge: $44.00 per permit
Section 3: Term: 17 months
Commencement Date: January 15, 1998
Expiration Date: June 15, 1999
Section 4: Base Rent: Stepped as follows:
1/15/98-1/30/98 $4,338.91 per month
2/01/98-2/01/99 $7,656.75 per month
2/01/99-5/31/99 $7,963.02 per month
6/01/99-6/15/99 $3,981.45 per month
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Security Deposit: $7,963.02
Base Year: 1998
Tenant's Share: 1.58 percent
1.3 Defined Terms. Words and phrases which are capitalized in this
Lease (other than words which are capitalized solely to denote the beginning of
sentences) are defined terms. The definitions of such words and phrases are set
forth in Section 17 of this Lease.
2. PREMISES; COMMON AREAS; TENANT PARKING
2.1 Demise of Premises. On and subject to the terms, covenants and
conditions set forth in this Lease, Landlord demises the Premises to Tenant and
Tenant rents and hires the Premises from Landlord. The usable and rentable area
of the Premises, and the rentable area of the Building, for all purposes under
this Lease, are stipulated to be as specified in the Basic Lease Provisions.
Landlord shall not be liable to Tenant, nor shall Tenant have any claim against
Landlord or defense to the enforcement of this Lease, if it is determined that
the actual rentable or usable area of the Premises or the rentable area of the
Building differs from that specified in the Basic Lease Provisions.
2.2 Condition of Premises. Except as otherwise expressly provided in
a Scope of Work executed by Landlord and Tenant concurrently with their
execution of this Lease. Tenant shall accept the Premises in an "as is"
condition on the date the Term commences and Landlord shall have no obligation
to improve, alter, remodel or otherwise modify the Premises prior to Tenant's
occupancy. Landlord shall construct or install in the Premises only the
improvements specified in the Scope of Work. The Scope of Work, if any, will be
attached as Exhibit B to this Lease, and Landlord shall use reasonable diligence
to cause the Substantial Completion of Landlord's Work pursuant to the Scope of
Work in a timely manner.
2.3 Common Areas. During the Term, Tenant shall have the
nonexclusive right to use of the Common Areas for their intended and usual
purpose. However, the manner in which the Common Areas are maintained shall be
at the sole reasonable discretion of Landlord and use thereof shall be subject
to the Rules and Regulations. Landlord reserves the right to make alterations,
additions or deletions to, or to change the location of elements of the Common
Areas, Building or Office Complex, and to use the roof, exterior walls and the
area above and beneath the Premises, together with the right to install, use,
maintain and replace equipment, machinery, pipes, conduits and wiring through
the Premises, which serve other parts of the Building or Office Complex, in a
manner and in locations which do not unreasonably interfere with Tenant's use of
or access to the Premises.
2.4 Tenant Parking. Tenant shall have the right to obtain the number
of parking permits designated as Tenant Parking in the Basic Lease Provisions,
and each such permit shall authorize Tenant or its employees to park one
passenger automobile in the Parking Facilities. Issuance of such parking permits
shall be subject to Tenant's payment of the Parking Charge for each permit
specified in the Basic Lease Provisions, which Parking Charge shall be payable
on the first day of each calendar month during the Term and may be increased by
Landlord at any time, and from time to time during the Term upon not less than
thirty (30) days prior written notice to Tenant. Tenant and
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its employees shall at all times observe such terms and conditions and charges
as may be established by Landlord from time to time concerning the operation and
use of the Parking Facilities. Tenant's employees shall not be entitled to park
in areas located in the Parking Facilities designated by Landlord for reserved
parking or for use by visitors to the Office Complex.
3. TERM
3.1 Period. The Term shall be for the period specified in the Basic
Lease Provisions. The Term shall commence on the Commencement Date and shall end
on the Expiration Date, as such dates are determined under Paragraph 3.2 below,
unless sooner terminated pursuant to any provision of this Lease.
3.2 Term Commencement. The anticipated Commencement Date and the
corresponding Expiration Date are specified in the Basic Lease Provisions.
However, the actual Commencement Date shall be the earlier of (a) the date
Tenant first occupies any part of the Premises, or (b) the date of Substantial
Completion of the Landlord's Work or (c) the date established by Landlord in the
event of a delay by Tenant, as provided in Paragraph 3.3(ii) below; and the
Expiration Date shall be adjusted so that the period between the actual
Commencement Date and the Expiration Date is equal to the Term specified in the
Basic Lease Provisions. If the actual Commencement Date and the Expiration Date
differ from those inserted in the Base Lease Provisions as of the Lease Date,
then promptly after the Commencement Date Landlord and Tenant shall execute a
written acknowledgment of the Commencement Date and the Expiration Date, and
attach it as Exhibit C to this Lease.
3.3 Delayed Occupancy.
(i) Landlord shall use reasonable diligence to
substantially complete any Landlord's Work on or before the Commencement Date
specified in the Basic Lease Provisions. However, this Lease shall not be void
or voidable, nor shall Landlord or its agents or contractors have any liability
to Tenant, by reason of Landlord's failure to substantially complete Landlord's
Work by the Commencement Date specified in the Basic Lease Provisions, or by
reason of Landlord's failure to deliver possession of the Premises due to any
other cause beyond Landlord's reasonable control, and postponement of Tenant's
rental obligation prior to delivery of possession of the Premises shall be
Tenant's exclusive remedy and in sole satisfaction of all claims Tenant might
otherwise have been reason of Landlord's failure to deliver the Premises by the
Commencement Date specified in the Basic Lease Provisions.
(ii) Time is of the essence in connection with the
delivery to Landlord of each and every drawing, plan, specification, schedule or
other item required to be given by Tenant to Landlord or to be approved by
Tenant pursuant to the schedule in and provisions of the scope of Work.
Accordingly, notwithstanding any contrary provision of this Lease, if Landlord
is delayed in the Substantial Completion of Landlord's Work as a result of (a)
Tenant's failure to approve plans, specifications, changes, cost estimates and
other items within the time limits specified therefor in the Work Letter, or (b)
any change by Tenant in said plans, specifications, or other items after the
expiration of such time limits, or (c) any default by Tenant relating to its
obligations hereunder or under the Scope of Work, then, in any or all such
instances and without limitation as to
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any other right or remedy available to Landlord. Landlord may under clause (c)
of Paragraph 3.2 determine in its sole reasonable discretion that the actual
Commencement Date is the date that Substantial Completion of Landlord's Work
would have occurred but for such delay.
3.4 Holding Over. Tenant shall not be entitled to remain in
possession of the Premises after the Expiration Date or after earlier
termination of this Lease, except with Landlord's prior written consent. Any
such continuance of possession with Landlord's consent shall constitute a
month-to-month tenancy on all of the terms and conditions of this Lease, except
that the Base Rent shall be 150% of the Base Rent in effect as of the Expiration
Date or the earlier termination date. Any such continuance in possession without
Landlord's consent (or after such consent has been withdrawn upon thirty (30)
days' notice to Tenant) shall constitute an unlawful detention of the Premises;
and Tenant shall indemnify, defend and hold Landlord harmless from all claims,
losses or liability resulting from Landlord's inability to timely deliver
possession of the Premises to any succeeding tenant.
4. BASE RENT; SECURITY DEPOSIT; OPERATING COSTS; TAXES
4.1 Base Rent. Tenant shall pay to Landlord as monthly Base Rent for
the Premises, in advance, without deduction, setoff, prior notice or demand, the
sum specified in the Basic Lease Provisions. The first month's Base Rent shall
be paid upon Tenant's execution of this Lease, and the Base Rent for each
calendar month thereafter during the Term shall be paid on the first day of each
such calendar month. If the Commencement Date occurs on a day other than the
first day of a calendar month, the Base Rent payable for the first calendar
month of the Term shall be prorated on the basis which the number of days of the
Term in the first month bears to the total number of days in such month and, in
such case, Tenant shall pay such prorated Base Rent to Landlord on the
Commencement Date, and the first month's Base Rent paid upon execution of this
Lease shall be credited against the Base Rent for the second calendar month. If
the Term ends on a day other than the last day of a calendar month, the Base
Rent payable for the last calendar month of the Term shall be prorated on the
basis which the number of days of the Term in the last calendar month bears to
the total number of days in such month.
4.2 Security Deposit.
(i) Upon Tenant's execution of this Lease, Tenant
shall deposit with Landlord the sum specified as the Security Deposit in the
Basic Lease Provisions, which shall be held by Landlord as security for the
faithful performance by Tenant of all of the terms, covenants, and conditions of
this Lease, it being expressly understood and agreed that the Security Deposit
is not an advance deposit for rent or a measure of Landlord's damages in case of
Tenant's default. If at any time Tenant's Base Rent is increased, the Security
Deposit shall also be increased by the same percentage as the increase in Base
Rent and Tenant shall, within ten (10) days after receipt of notice of such
increase in Base Rent, deposit cash with Landlord in an amount sufficient to
effect such adjustment.
(ii) The Security Deposit may be retained, used or
applied by Landlord to remedy any default by Tenant, to repair damage caused by
Tenant to any part of the
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Premises of the Building, and to clean the Premises upon expiration or earlier
termination of this Lease, as well as to reimburse Landlord for any amount which
Landlord may spend by reason of Tenant's default or to compensate Landlord for
any other loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of the Security Deposit is so used or applied. Tenant
shall, within ten (10) days after written demand therefor, deposit cash with
Landlord in an amount sufficient to restore the Security Deposit to the full
amount required hereunder, and Tenant's failure to do so shall be a material
breach of this Lease. Landlord shall not be required to keep the Security
Deposit separate from its general funds, and Tenant shall not be entitled to
interest on, or any other compensation for, Landlord's retention of the Security
Deposit. Tenant may not elect to apply any portion of the Security Deposit
toward payment of Base Rent or any other amounts payable by Tenant under this
Lease, although Landlord may elect to do so in the event Tenant is in default or
is insolvent. If Tenant shall fully and faithfully perform every provision of
this Lease to be performed by it, the Security Deposit or any balance thereof
shall be returned to Tenant at Tenant's last known address (or, at Landlord's
option, to the last assignee of Tenant's interest hereunder) within thirty (30)
days after the Term has ended and Tenant has vacated the Premises.
4.3 Operating Costs. Tenant shall pay to Landlord Tenant's Share of
the Increased Operating Costs as follows:
(i) Landlord shall submit to Tenant, before January
1 of each Subsequent Year, or as soon thereafter as Landlord has sufficient
data, a reasonably detailed statement showing the estimated Increased Operating
Costs for such Subsequent Year, which determination shall be made by Landlord
based upon experience with actual costs and projections. At the first monthly
Base Rent Payment date following the submittal of such statement and at each
succeeding monthly rent payment date thereafter during the Subsequent Year,
Tenant shall pay to Landlord an amount equal to one-twelfth (1/12th) of the
Increased Operating Costs. If Landlord does not submit said statement to Tenant
prior to January 1 of any Subsequent Year, Tenant shall continue to pay Tenant's
Share of the Increased Operating Costs at the then existing rate until such
statement is submitted and, thereafter, at the monthly Base Rent payment date
next following the submittal of such statement Tenant shall pay Tenant's Share
of the Increased Operating Costs based on the rate set forth in such statement
plus, if the new rate is greater than the old rate, the difference accrued from
January 1 of such Subsequent Year. Landlord may revise such estimated Increased
Operating Costs at the end of any calendar quarter.
(ii) On or before March 31 of the second and each
succeeding Subsequent Year or as soon thereafter as Landlord has sufficient
data, Landlord shall submit to Tenant a reasonably detailed statement showing
the actual Building Operating Costs paid or incurred by Landlord during the
previous calendar year. If Tenant's Share of the actual Increased Operating
Costs is less than the amount of Tenant's Share of the estimated Increased
Operating Costs for the previous Subsequent Year theretofore paid by Tenant,
Landlord shall credit such difference against the next Increased Operating Costs
payments coming due. If Tenant's Share of the actual Increased Operating Costs
is more than the amount of Tenant's Share of the estimated Increased Operating
Costs for such previous Subsequent Year theretofore paid by Tenant, Tenant shall
pay to Landlord
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the full amount of such difference at the monthly Base Rent payment date next
following the submittal of such statement to Tenants.
(iii) If the Expiration Date or the date of earlier
termination of this Lease is other than December 31, the Operating Costs for
both the Base Year and the last Subsequent Year shall be prorated based on what
the number of days in the Term in the last Subsequent Year bears to 365; and any
amounts owed or to be credited pursuant to Paragraph 4.3.2 shall be paid at the
time in the last Subsequent Year, or in the calendar year immediately following
the last Subsequent Year, that such amount is calculated pursuant to Paragraph
4.3(ii).
4.4 Taxes Payable By Tenant. Tenant shall pay before delinquency any
and all taxes levied or assessed and which become payable by Tenant or directly
or indirectly by Landlord during the term (excluding, however, state and federal
personal or corporate income taxes measured by the income of Landlord from all
sources, capital stock taxes, and estate and inheritance taxes), whether or not
now customary or within the contemplation of the parties hereto, which are based
upon, measured by or otherwise calculated with respect to: (a) the gross or net
rental income of Landlord under this Lease, including, without limitation, any
gross receipts tax levied by any taxing authority, or any other gross income tax
or excise tax levied by any taxing authority with respect to the receipt of the
rental payable hereunder; (b) the value of Tenant's equipment, furniture,
fixtures or other personal property located in the Premises: (c) the possession,
lease, operation, management, maintenance, alteration, repair, use or occupancy
by Tenant of the Premises or any portion thereof; (d) the value of any leasehold
improvements, alterations or additions made in or to the Premises, regardless of
whether title to such improvements, alterations or additions shall be in Tenant
or Landlord; (e) this transaction or any document to which Tenant is a party
creating or transferring an interest or an estate in the Premises.
4.5 Late Charges and Interest. All amounts payable under this Lease
shall be paid in lawful money of the United States of America. Any amount of
Base Rent, Tenant's Share of Increased Operating Costs, Parking Charges or any
other amount payable under this Lease which is not paid within ten (10) days
after it is due shall be subject to a late charge of 5% of the amount unpaid.
Any amount due to Landlord that is not paid when due shall bear interest at the
Overdue Rate, except that no interest shall accrue for the month in which a late
charge is assessed. Tenant's failure to perform any monetary obligations under
this Lease shall have the same consequences as Tenant's failure to pay Base
Rent.
5. USES
5.1 Authorized. Tenant shall use the Premises solely for general
office purposes and for no other purpose. Tenant shall not use or permit or
suffer the Premises or any part thereof to be used for any purpose other than
the purpose expressly authorized herein.
5.2 Suitability. Tenant acknowledges that neither Landlord nor any
agent of Landlord has made any representation or warranty with respect to the
Premises, the Building or the Office Complex, or with respect to the suitability
of same for the conduct of Tenant's business, except as
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expressly provided in this Lease. Tenant's acceptance of possession of the
Premises shall conclusively establish that the foregoing were at such time in
satisfactory condition.
5.3 Insurance. Tenant shall not do or suffer anything to be done in
or about the Premises, nor shall Tenant bring or allow anything to be brought
into the Premises, which will in any way increase the rate of any fire insurance
or other insurance upon the Building or its contents, cause a cancellation of
said insurance or otherwise affect said insurance in any manner.
5.4 Laws. Tenant shall not do or suffer anything to be done in or
about the Premises which will in any way conflict with any law, statute,
ordinance or other governmental rule, regulation or requirement now in force or
which may be subsequently enacted or promulgated. Tenant shall, at its sole cost
and expense, promptly comply with each and all of said governmental measures and
also with the requirements of any board of fire underwriters or other similar
body now or hereafter constituted to deal with the condition, use or occupancy
of the Premises, excluding structural changes not related to or affected by
Tenant's alterations, additions or improvements. Without limiting the generality
of the foregoing, Tenant will maintain throughout the Term a copy of the most
current list of chemicals known to the State of California to cause cancer or
reproductive toxicity, as published by the State Health and Welfare Agency in
accordance with the Safe Drinking Water and Toxic Enforcement Act of 1986
("Proposition 65"). Tenant will monitor the chemicals Tenant maintains on the
Premises and will comply with both the warning requirements and the discharge
prohibitions of Proposition 65 for all chemicals on the Premises that appear on
such list. The judgment of any court of competent jurisdiction or the admission
of Tenant in any judicial action, regardless of whether Landlord is a party
thereto, that Tenant has violated any of said governmental measures or
requirements shall be conclusive of that fact as between Landlord and Tenant.
5.5 Nuisance. Tenant shall not place or permit to be placed on any
floor a load exceeding the floor load which such floor was designed to carry.
Tenant also shall not do or suffer anything to be done in or about the Premises
which will in any way obstruct or interfere with the rights of other tenants or
occupants of the Building or injure or annoy said tenants or occupants, nor
shall Tenant use or suffer the Premises to be used for any unlawful purposes. In
no event shall Tenant cause or permit any nuisance in or about the Premises, and
no loudspeakers or similar devices shall be used without the prior written
approval of Landlord, which approval may be withheld in Landlord's sole
discretion. Tenant shall not commit or suffer to be committed any waste in or
upon the Premises. The provisions of this paragraph are for the benefit of
Landlord only and shall not be construed to be for the benefit of any tenant or
occupant of the Building.
5.6 Rules and Regulations. Tenant shall comply with the Rules and
Regulations for the Building, together with all modifications and additions
thereto adopted by Landlord from time to time. If there is any conflict between
the Rules and Regulations and the provisions of this Lease, the provisions of
this Lease shall prevail. Landlord shall not be responsible to Tenant for the
nonperformance of any of the Rules and Regulations by any other tenants or
occupants of the Building.
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6. SERVICES AND UTILITIES
6.1 Basic Services by Landlord. Provided Tenant is not in default
under this Lease, and subject to the provisions elsewhere in this Lease and to
the Rules and Regulations of the Building, Landlord shall furnish the Premises
with: (a) water, sewage and electricity suitable in Landlord's judgment for the
intended use of the Premises and for the operation of a reasonable number, based
on customary use for general office purposes, of desktop office machines and
ordinary copying machines; (b) heat and air conditioning between 8:00 a.m. and
5:00 p.m. on days other than Saturdays, Sundays and generally recognized
holidays, in an amount reasonably required in Landlord's judgment for the
comfortable occupation of the Premises; (c) elevator service, which shall mean
service by non-attended automatic elevators or elevators with attendants, either
or both, at the option of Landlord; and (d) daily janitorial service (five
nights per week) similar to that which is provided in comparable office
buildings in the Oakland/Emeryville area. Landlord shall maintain the Common
Areas in a clean and orderly manner and in a good state of repair.
6.2 Additional Heating and Air Conditioning. Landlord shall use
reasonable efforts to provide additional or after-hours heating or air
conditioning at Tenant's request, provided Tenant pays to Landlord the cost of
such services as determined solely by Landlord based upon Landlord's reasonable
estimates of the costs of such additional services, plus a reasonable charge
(not to exceed 10% of the cost of such services) for Landlord's overhead
expense. Tenant shall keep all draperies closed when necessary because of the
sun's position and at all times cooperate fully with Landlord and abide by all
the regulations and requirements which Landlord may prescribe from time to time
for the proper functioning and protection of the heating, ventilating and air
conditioning systems. Whenever heat-generating machines or equipment or lighting
used in the Premises by Tenant affect the temperature otherwise maintained by
the air conditioning system, Landlord shall have the right to install any
machinery and equipment Landlord deems necessary to restore the temperature
balance in any affected part of the Building, including but not limited to
modifications to the Building's air conditioning system or installation of
supplementary air conditioning units. Tenant shall pay the cost thereof,
including installation and any additional costs of operation and maintenance
occasioned thereby, to Landlord upon demand.
6.3 Special Apparatus. Tenant shall not, except with Landlord's
prior written consent, which consent may be withheld in Landlord's sole
discretion, either: (a) use any apparatus or device in the Premises which will
increase the amount of cooling, ventilation, electricity or water supplied to
the Premises beyond that usually supplied for general office use; or (b) connect
with electric current or water pipes any device or apparatus for the purpose of
using electrical current or water, except as such connections now exist or as
may be provided for the Scope of Work. If Landlord consents to the use and/or
connection of any apparatus or device described in clauses (a) and (b) above,
Landlord may install meters and similar monitoring devices to measure the amount
of utilities consumed by such apparatus or devices and Tenant shall pay for the
cost of all work and materials required for the installation, maintenance and
use of such meters and monitoring devices. If Landlord elects not to install a
special meter or monitoring device, Landlord shall determine the amount of
additional utilities and resources consumed by such apparatus or device based
upon Landlord's reasonable estimates and best judgment, and such determination,
made in good faith by
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Landlord, shall be conclusive on Tenant. Tenant shall pay to Landlord promptly
upon demand the cost of any excess use of utilities and resources based on the
rates charged by the local public utility company or other supplier furnishing
same, plus any additional expense incurred by Landlord in keeping account of the
foregoing and administering same.
6.4 Interruption In Service. Landlord shall use reasonable efforts
to remedy any interruption in the furnishing of services and utilities. However,
Landlord shall not be in default under this Lease or liable for any damages
directly or indirectly arising from, nor shall the rent be abated by reason of,
any failure to provide or any reduction in any of the above services or
utilities if such failure or reduction is caused by the making of repairs or
improvements to the Premises or the Building, the installation of equipment,
acts of God or the elements, labor disturbances of any character, or any other
events or conditions whatsoever beyond the reasonable control of Landlord, or
rationing or restrictions on the use of said services and utilities due to
energy shortages or other causes, whether or not any of the above result from
acts or omissions of Landlord. Furthermore, Landlord shall be entitled to
cooperate voluntarily in a reasonable manner with the efforts of national, state
or local governmental bodies or utilities suppliers in reducing energy or other
resources consumption. The failure of Landlord to provide the utilities and
services specified in this Section 6 shall not constitute a constructive or
other eviction of Tenant.
6.5 Tenant's Other Utilities. Tenant shall pay prior to delinquency
for all telephone and all other materials and services not expressly required to
be provided by Landlord, which may be furnished to or used in, on or about the
Premises during the Term.
7. TENANT'S ALTERATIONS: PROTECTION AGAINST LIENS
7.1 Landlord's Consent Required. Tenant shall not make or permit to
be made any alterations, additions or improvements to the Premises or any part
thereof, without first obtaining Landlord's written consent. When applying for
such consent, Tenant shall, if required by Landlord, furnish complete plans and
specifications for such alterations, additions or improvements. All alterations,
additions or improvements to the Premises shall be performed by contractors
selected and supervised by Landlord for Tenant's account and at Tenant's sole
cost and expense. Within ten (10) days after receipt of a written statement from
Landlord, Tenant shall reimburse Landlord for all costs arising in connection
with Landlord's review of plans and specifications and supervision of
contractors. Landlord shall have the right to require that any contractor
performing alterations, improvements or additions to the Premises shall, prior
to commencement of any work, provide Landlord with a performance bond and labor
and materials payment bond in the amount of the contract price for the work,
naming Landlord and Tenant (and any other persons designated by Landlord as
co-obligees). All alterations, additions, fixtures and improvements, including
without limitation all improvements made pursuant to a Scope of Work, whether
temporary or permanent in character, made in or upon the Premises either by
Landlord or Tenant, shall at once belong to Landlord and become part of the
Premises and shall remain on the Premises without compensation of any kind to
Tenant, unless Landlord requires their removal under Paragraph 7.2 below. Tenant
shall carry insurance as required by Section 10 covering any improvements,
alterations or additions to the Premises made or paid for by Tenant, it being
understood and agreed that none of such
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alterations, additions or improvements shall be insured by Landlord nor shall
Landlord be required under any provision of this Lease to repair, reconstruct or
reinstall any such alterations, additions or improvements. Movable furniture
equipment which are removable without material damage to the Building or the
Premises shall remain the property of Tenant.
7.2 Removal of Tenant's Alterations. Notwithstanding any contrary
provision in this Lease, Tenant shall, upon Landlord's written request made
prior to or within thirty (30) days following the Expiration Date or the earlier
termination of this Lease, promptly remove any alterations, additions, fixtures
or improvements designated by Landlord to be removed and repair any damage to
the Premises resulting from such removal. Landlord may, in connection with any
such removal which might in Landlord's judgment involve damage to the Premises,
require that such removal be performed by a bonded contractor or other person
for whom a bond satisfactory to Landlord has been furnished covering the cost of
repairing the anticipated damage.
7.3 Protection Against Liens. Tenant shall keep the Premises, the
Building and the Common Areas free from any liens arising out of work performed,
materials furnished, or obligations incurred by Tenant and shall indemnify, hold
harmless and defend Landlord from any liens and encumbrances arising out of any
work performed or materials furnished by or at the direction of Tenant. In the
event that Tenant shall not, within twenty (20) days following imposition of any
such lien, cause such lien to be released of record by payment or posting of a
proper bond, Landlord shall have, in addition to all other remedies provided in
this Lease and by law, the right, but no obligation, to cause the same to be
released by such means as Landlord shall deem proper, including payment of the
claim giving rise to such lien. All such sums paid by Landlord and all expenses
incurred by it in connection therewith, including attorneys' fees and costs,
shall be payable by Tenant upon demand with interest at the Overdue Rate from
the date such sums are paid or expenses incurred by Landlord. Landlord shall
have the right at all times to post and keep posted on the Premises any notices
permitted or required by law, or which Landlord shall deem proper, for the
protection of Landlord and the Premises, and any other party having an interest
therein, from mechanics' and materialmen's liens, and Tenant shall give to
Landlord at least ten (10) business days' prior written notice of the date of
commencement of any work relating to alterations, additions or improvements in
or to the Premises.
8. MAINTENANCE AND REPAIRS
8.1 Landlord's Obligations. Subject to Sections 15 and 16, Landlord
shall maintain in good order, condition and repair the structural portions of
the Building including the exterior walls, underflooring and roof, the basic
heating, ventilating, air conditioning, plumbing, electrical, and fire detection
and security systems, and all other portions of the Premises not the obligation
of Tenant or any other tenant in the Building. However, if any such maintenance
or repair becomes necessary in whole or in part because of wrongful acts or
omissions by Tenant or Tenant's employees, agents, invitees or customers, or
because of a breaking and entering, Tenant shall pay the entire cost thereof
upon demand. Landlord shall not be liable to Tenant, and rent shall not be
abated, for any failure by Landlord to maintain and repair areas which are being
used in connection with construction of improvements, or for any failure to make
any repairs or perform any maintenance unless such failure
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shall continue for an unreasonable time after written notice of the need
therefor is given to Landlord by Tenant. Landlord shall also not be liable under
any circumstances for loss of profits or for injury to or interference with
Tenant's business arising from or in connection with the making of or the
failure of Landlord to make any repairs, maintenance, alterations or
improvements in or to any portion of the Building or the Common Areas or in or
to fixtures, appurtenances and equipment therein.
8.2 Tenant's Obligations
(i) Tenant shall maintain the Premises in good
order, condition and repair including the interior surfaces of the ceilings,
walls and floors, all doors, interior windows, and all plumbing pipes, valves
and fixtures, electrical wiring, panels, switches, and all other fixtures and
equipment installed for the use of the Premises by Tenant. Tenant expressly
waives the benefit of any statute, ordinance or judicial decision now or
hereafter in effect which would otherwise afford Tenant the right to make
repairs at Landlord's expense or to terminate this Lease because of Landlord's
failure to keep the Premises in good order, condition and repair.
(ii) Upon the Expiration Date or the earlier
termination of this Lease, Tenant shall surrender the Premises in the same
condition as received, except for ordinary wear and tear and damage by fire,
earthquake, acts of God or the elements, not caused by the wrongful omission of
Tenant or Tenant's agents, and shall promptly remove or cause to be removed, at
Tenant's expense, from the Premises and the Building any signs, notices and
displays placed by Tenant.
(iii) Tenant shall repair any damage to the Premises
or the Building caused by or in connection with the removal of any articles of
personal property, business or trade fixtures, machinery, equipment,
cabinetwork, furniture, movable partitions or permanent improvements or
additions, including without limitation, repairing the floor and patching and
painting the walls where required by Landlord to Landlord's reasonable
satisfaction, but excluding any damage caused by reasonable use. Tenant shall
indemnify Landlord against any 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.
(iv) Tenant shall do all acts required to comply with
all applicable laws, ordinances, regulations and rules of any public authority
relating to Tenant's use and occupancy of the premises.
(v) If Tenant fails to maintain the Premises in good
order, condition and repair, or to comply with applicable laws, ordinances,
regulations or rules, Landlord shall give Tenant notice to do such acts as are
reasonably required to satisfy its obligations under this paragraph. If Tenant
fails to promptly commence such work and diligently prosecute it to completion,
Landlord shall have the right, but no obligation, to do such acts and expend
such funds as are reasonably required to perform such work. Any amount so
expended by Landlord shall be paid by Tenant promptly after demand with interest
at the Overdue Rate from the date of such work.
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Landlord shall have no liability to Tenant for any damage, inconvenience or
interference with the use of the Premises by Tenant as a result of performing
any such work.
9. INDEMNITY AND EXEMPTIONS OF LANDLORD
9.1 Indemnity. Tenant shall indemnify, hold harmless, and defend
Landlord against any and all claims of liability for any death or injury to any
person or damage to any property whatsoever occurring in, on or about the
Premises or any part thereof, or occurring in, on or about any of the Common
Areas, when such injury or damage is caused in whole or in part by the act,
negligence, fault or omission of any duty with respect to the same by Tenant,
its agents, contractors, employees, invitees or customers. Tenant shall further
indemnify, hold harmless and defend Landlord from and against any and all
claims, actions and liabilities arising from (a) any breach or default in the
performance of any obligation on Tenant's part to be performed under this Lease,
or (b) arising from any act or negligence of Tenant, or any of its agents,
contractors, invitees or employees, or (c) any Environmental Damages arising
from the presence of Hazardous Materials upon, within or about the Premises due
to any act or omission of Tenant or any of its agents, contractors, invitees or
employees, or (d) violation of any Environmental Requirements pertaining to the
Premises or the activities therein, and (e) from and against all costs,
attorneys' fees, expenses and liabilities incurred in the defense of any such
claim, action or liability, and any proceeding brought thereon. In case any
action or proceeding be brought against Landlord by reason of any such claim,
Tenant, upon notice from Landlord, shall defend the same at Tenant's expense by
counsel reasonably satisfactory to Landlord; provided, however, that Tenant
shall not be liable for damage to property or death or injury to person(s)
occasioned by the active negligence or intentional misconduct of Landlord or its
agents or employees unless covered by insurance Tenant is required to provide.
9.2 Exemption of Landlord From Liability. Tenant hereby assumes all
risk of damage to property or injury to persons in, upon or about the Premises
from any cause other than the active negligence or intentional misconduct of
Landlord and its agents or employees. Without limiting the generality of the
foregoing, Landlord shall not be liable for injury or damage which may be
sustained by the person, goods, wares, merchandise or property of Tenant, its
employees, invitees or customers, or any other person in or about the Premises
caused by or resulting from fire, steam, electricity, gas, water or rain, which
may leak or flow from or into any party of the Premises, or from the breakage,
leakage, obstruction or other defects of the pipes, sprinklers, wires,
appliances, plumbing, heating, air conditioning or lighting fixtures of the
same, whether the damage or injury results from conditions arising upon the
Premises or upon other portions of the Building or from other sources. Landlord
shall not be liable for any damages arising from any act or omission of any
other tenant or occupant of the Building.
10. INSURANCE
10.1 Tenant's Insurance.
(i) At all times during the Term Tenant shall
maintain in effect policies of casualty insurance covering (a) all alterations,
additions or improvements in, on or to the Premises as may be made or paid for
by Tenant (other than building standard improvements), and
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(b) all trade fixtures, merchandise and other personal property from time to
time in, on or upon the Premises, in an amount not less than their actual
replacement cost, providing protection against any peril included within the
classification "Fire and Extended Coverage" together with insurance against
sprinkler damage, vandalism and malicious mischief, including cost of debris
removal and demolition. Replacement cost for purposes hereof shall be determined
by mutual agreement, or failing such agreement by an accredited appraiser
selected by Landlord, with the cost of such appraisal to be borne by Tenant. The
proceeds of such insurance shall be used for the repair or replacement of the
property so insured. Upon termination of this Lease following a casualty as set
forth in Section 16, the proceeds under clause (a) above shall be paid to
Landlord, and the proceeds under clause (b) above shall be paid to Tenant.
(ii) At all times during the Term Tenant shall
maintain in effect workers' compensation insurance and comprehensive public
liability and property damage insurance adequate to protect Landlord against
liability for injury to or death of any person or loss or injury to any property
in connection with the activities of Tenant in, on or about the Premises or with
the use, operation or condition of the Premises. Such insurance at all times
shall afford combined single limit coverage in an amount of not less than Two
Million Dollars ($2,000,000). The limits of such insurance shall not limit the
liability of Tenant under this Lease. All public liability and property damage
policies shall contain a provision that Landlord, although named as insured,
shall nevertheless be entitled to recovery under said policies for any loss
occasioned to it, its servants, agents or employees by reason of Tenant's
negligence.
(iii) All insurance required to be carried by Tenant
hereunder shall be issued by responsible insurance companies acceptable to
Landlord and any Mortgagee. All policies of insurance provided for in this Lease
shall be issued by insurance companies licensed to do business in the State of
California, with general policy holder's rating of not less than "A" and a
financial rating of not less than "Class X" as rated in the most current
available "Best's Insurance Reports." Each policy shall name Landlord and at
Landlord's request any Mortgagee as an additional insured, as their respective
interests may appear, and a duplicate original of all policies or certificates
evidencing the existence and amounts of such insurance shall be delivered to
Landlord by Tenant at least ten (10) days prior to Tenant's occupancy of the
Premises. All policies of insurance delivered to Landlord must contain a
provision that the company writing said policy will give Landlord thirty (30)
days' written notice in advance of any cancellation or lapse of or any change in
such insurance. All public liability, property damage and other casualty
insurance policies shall be written as primary policies, not contributing with,
and not in excess of coverage which Landlord may carry. Tenant shall furnish
Landlord with renewals or "binders" of any such policy at least thirty (30) days
prior to the expiration thereof. If Tenant does not procure and maintain such
insurance, Landlord may (but shall not be required to) obtain such insurance on
Tenant's behalf and charge Tenant the premiums therefor which shall be payable
upon demand, and no such action by Landlord shall constitute a waiver of
Tenant's default hereunder. Tenant may carry such insurance under a blanket
policy, provided such blanket policy expressly affords the coverage required by
this Lease by a Landlord's protective liability endorsement or otherwise.
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(iv) Every three (3) years during the Term or
whenever Tenant materially improves or alters the Premises. Tenant shall
increase the policy limits for the insurance to be carried by Tenant under this
Section 10 to such amounts as Landlord reasonably determines are appropriate.
10.2 Landlord's Insurance. At all times during the Term Landlord
shall maintain in effect a policy or policies of insurance covering the Building
in an amount not less than ninety percent (90%) of full replacement cost
(exclusive of the cost of excavations, foundations, footings and all tenant
improvements constructed at the request or cost of Tenant, but inclusive of the
cost of building standard tenant improvements) from time to time during the
Term, providing protection against any peril generally included in the
classification "Fire and Extended Coverage" together with insurance against
sprinkler damage, vandalism and malicious mischief. Landlord's obligation to
carry the insurance provided for herein may be brought within the coverage of
any blanket policy or policies of insurance carried and maintained by Landlord.
In addition to the coverage required by this paragraph. Landlord shall be
entitled to procure (and include the premiums therefor in Operating Costs) such
other types of insurance and in such amounts as Landlord may deem to be
necessary or appropriate.
10.3 Subrogation Waiver. Landlord and Tenant each hereby waive any
and all rights of recovery against the other or against the officers, partners,
employees, agents and representatives of the other, on account of loss or damage
of such waiving party or its property, or the property of others under its
control, to the extent that such loss or damage is insured against under any
fire and extended coverage insurance policy which either may have in force at
the time of such loss or damage. Tenant shall upon obtaining the policies of
insurance required under this Lease, give notice to its insurance carrier(s)
that the foregoing mutual waiver of subrogation is contained in this Lease. The
waivers set forth herein shall be required and effective only to the extent such
waivers are available from each party's insurer without additional premium; if
an extra charge is incurred to obtain such waiver, it shall be paid by the party
in whose favor the waiver runs within fifteen (15) days after written notice
from the other party, and, if not so paid, such other party's waiver under this
paragraph shall be neither required nor effective.
11. ASSIGNMENT AND SUBLETTING
11.1 Landlord's Consent Required. Tenant shall not sell, assign,
mortgage, pledge, hypothecate, encumber or otherwise transfer this Lease or any
interest therein, and shall not sublet the Premises or any part thereof, or
suffer or permit the Premises or any part thereof to be occupied by any other
person (the agents, employees, and invitees of Tenant excepted), without the
prior written consent of Landlord in each instance; and any attempt to do so
without such consent shall be voidable and, at Landlord's election, shall
constitute a noncurable default under this Lease. No interest of Tenant in this
Lease or the Premises shall be assignable by operation of law. Subject to the
terms and conditions contained in this section, Landlord shall not unreasonably
withhold its consent to a voluntary assignment of this Lease or a subletting of
the Premises.
11.2 Tenant's Application. If Tenant desires at any time to assign
this Lease or to sublet the Premises or any portion thereof, Tenant shall submit
to Landlord at least thirty (30) days prior to
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the proposed effective date of the assignment or sublease, in writing: (a) a
notice of intent to assign or sublease, setting forth the proposed effective
date thereof; (b) the name of the proposed assignee or subtenant; (c) the nature
of the proposed assignee's or subtenant's business to be carried on in the
Premises; (d) the terms and provisions of the proposed assignment or sublease;
and (e) such financial information as Landlord may request concerning the
proposed assignee or subtenant, including recent financial statements and bank
references.
11.3 Required Provisions. All assignment or sublease agreements shall
(a) contain such terms as are described in Tenant's notice under Paragraph 11.2
above or as otherwise agreed by Landlord, (b) prohibit further assignments or
subleases except with Landlord's written consent, (c) impose the same
obligations and condition on the assignee or sublessee as are imposed on Tenant
by this Lease (except as to rent and term or as otherwise agreed by Landlord),
(d) be expressly subject and subordinate to each and every provision of this
Lease, (e) have a term that expires on or before the Expiration Date, and (f)
provide that Tenant and/or the assignee or sublessee shall pay Landlord the
amount of any additional costs or expenses incurred by Landlord for repairs,
maintenance or otherwise as a result of any change in the nature of occupancy
caused by the assignment or sublease.
11.4 Bonus Rent. Landlord shall be entitled to receive all Bonus Rent
payable in connection with any assignment or sublease. Within fifteen (15) days
after written request by Landlord, Tenant shall provide and certify to Landlord
all financial information required for the calculation of Bonus Rent.
11.5 Fees for Review. If Landlord retains the services of an attorney
to review any aspect of the proposed assignment or sublease transaction, Tenant
shall pay to Landlord all attorneys' fees reasonably incurred by Landlord in
connection therewith. Tenant shall pay such attorneys' fees to Landlord within
thirty (30) days after written request therefor.
11.6 No Release of Tenant. No consent of Landlord to any assignment
or subletting by Tenant shall relieve Tenant of the obligations to be performed
by Tenant under this Lease, whether accruing before or after such assignment, or
subletting, and notwithstanding any subsequent modification, extension or
renewal of this Lease made with or without Tenant's consent. The consent by
Landlord to any transfer or subletting shall not relieve Tenant from the
obligation to obtain Landlord's express prior written consent to any other
transfer or subletting. The acceptance by Landlord of payment from any other
person shall not be deemed to be a waiver by Landlord of any provision of this
Lease or to be a consent to any transfer or sublease, or to be a release of
Tenant from any obligation under this Lease. If this Lease is assigned, or if
the Premises or any part thereof are sublet or occupied by any person other than
Tenant, Landlord may, after default by Tenant, collect the rent from any such
assignee, transferee, subtenant or occupant and apply the net amount collected
to the rent reserved herein, and no such action by Landlord shall be deemed a
consent to such assignment, transfer, sublease or occupancy.
11.7 Assumption of Obligations. Each assignee of Tenant shall assume
all obligations of Tenant under this Lease and shall be and remain liable
jointly and severally with Tenant for the payment of the rent and the
performance of all the terms, covenants, conditions and agreements
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herein contained on Tenant's part to be performed for the Term. No assignment
shall be binding on Landlord unless the assignee or Tenant delivers to Landlord
a counterpart of the assignment instrument in recordable form which contains a
covenant of assumption by the transferee satisfactory in substance and form to
Landlord, consistent with the requirements of this section. The failure or
refusal of any assignee to execute such instrument of assumption shall not
release or discharge the assignee from its liability to Landlord hereunder.
Landlord shall have no obligation whatsoever to perform any duty to or respond
to any request from any sublessee, it being the obligation of Tenant to
administer the terms of its subleases.
11.8 Deemed Transfers. If Tenant is a privately held corporation, or
is an unincorporated association or partnership, the transfer, assignment or
hypothecation of any stock or interest in such corporation, association or
partnership in the aggregate from the Lease Date in excess of fifty percent
(50%) shall be deemed an assignment or transfer within the meaning of this
section. However, nothing in this section shall prohibit Tenant from assigning
this Lease or subletting the Premises or any part thereof to any corporation
which controls Tenant, is controlled by Tenant, or is under common control with
Tenant, provided Tenant gives Landlord at least thirty (30) days prior written
notice of such subletting or assignment and such subletting or assignment shall
not release or discharge Tenant from any liability under this Lease.
11.9 Landlord's Option to Recapture. Landlord reserves the option, to
be exercised by giving notice to Tenant within fifteen (15) days after receipt
of Tenant's notice of intent to assign or sublease (it being agreed that no
revocation or withdrawal by Tenant of such notice of intent to assign or
sublease shall affect Landlord's option) to recapture the portion of the
Premises described in Tenant's notice for the remainder of the Term, and to
terminate this Lease with respect to such recaptured Premises. The effective
date of such recapture and termination shall be as specified in Landlord's
notice of exercise of its recapture option, but shall not be less than thirty
(30) days nor more than sixty (60) days after the delivery of such notice. The
option to recapture reserved to Landlord hereunder shall also arise in the event
Tenant shall, voluntarily or involuntarily, sell, assign, mortgage, pledge,
encumber or otherwise transfer this Lease or any interest herein, or sublet the
Premises or any portion thereof, or suffer or permit the Premises to be occupied
by any third person (the agents, employees, invitees and customers of Tenant
excepted), without first obtaining the written consent of Landlord; and in such
event the recapture option shall apply to the entire Premises and be exercisable
by Landlord at any time after the occurrence of the event for which Landlord's
consent was required but not obtained by Tenant. If this Lease is terminated
pursuant to Landlord's recapture option with respect to only a portion of the
Premises, the Base Rent required under this Lease and Tenant's Share shall be
adjusted proportionately based on the rentable square footage retained by Tenant
and the rentable square footage of the Premises leased by Tenant immediately
prior to such recapture and cancellation, and Landlord and Tenant shall
thereupon execute an amendment of this Lease in accordance therewith. If
Landlord so recaptures a portion of the Premises, it shall construct and erect
at its sole cost such partitions as may be required to sever the space retained
by Tenant from the space recaptured by Landlord; provided, however, that Tenant
shall bear the cost of painting, covering or otherwise decorating the surfaces
of such partitions which face the remaining Premises. Landlord may, without
limitation, lease the recaptured portion of the
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Premises to the proposed subtenant or assignee, on the same or different terms
as were proposed by Tenant, without liability to Tenant.
12. SUBORDINATION AND ATTORNMENT
12.1 Subordination. Upon the written request of Landlord or any
Mortgagee, Tenant will in writing subordinate its rights under this Lease to the
lien of any mortgage or deed of trust now or hereafter in force against the
Premises, the Building or the underlying land and to all advances made or
hereafter to be made upon the security thereof, and to all extensions,
modifications and renewals thereunder. Tenant shall also, upon Landlord's
request, subordinate its rights hereunder to any ground or underlying lease
which may not exist or hereafter be executed affecting the Building and/or the
underlying land. Tenant shall have the right to condition its subordination upon
the execution and delivery of an attornment and nondisturbance agreement, as
described in Paragraph 12.2, between the Mortgagee or the lessor under such
ground or underlying lease and Tenant. Tenant shall not subordinate its rights
hereunder to any lien other than that of a first mortgage or first deed of
trust, except with the prior written consent of the Mortgagee holding such first
mortgage or deed of trust.
12.2 Attornment. Upon the written request of the Landlord or any
Mortgagee or any lessor under a ground or underlying lease, Tenant shall attorn
to any such Mortgagee or lessor, provided such Mortgagee or lessor agrees that
if Tenant is not in default under this Lease, Tenant's possession of the
Premises in accordance with the terms of this Lease shall not be disturbed. Such
agreement shall provide, among other things, (a) that this Lease shall remain in
full force and effect, (b) that Tenant pay rent to said Mortgagee or lessor from
the date of said attornment, (c) that said Mortgagee or lessor shall not be
responsible to Tenant under this Lease except for obligations accruing
subsequent to the date of such attornment, and (d) that Tenant, in the event of
foreclosure or a deed in lieu thereof or a termination of the ground or
underlying lease, will enter into a new lease with the Mortgagee, lessor or
other person having or acquiring title on the same terms and conditions as this
Lease and for the balance of the Term.
12.3 Nonmaterial Amendments. If any lender should require any
modification of this Lease as a condition of loans secured by a lien on the
Premises, the Building or the land underlying the Building, or if any such
modification is required as a condition to a ground or underlying lease, Tenant
will approve and execute any such modifications, promptly after request by
Landlord provided no such modification shall relate to the rent payable
hereunder, the length of the Term or otherwise materially change the rights or
obligations of Landlord or Tenant.
13. DEFAULT BY TENANT
13.1 Acts Constituting Default. In addition to the events specified
as a default elsewhere in this Lease, the failure of Tenant to perform each
covenant made under this Lease, or any abandonment of the Premises by Tenant,
shall constitute a default hereunder. However, Landlord shall not commence any
action to terminate Tenant's right of possession as a consequence of a default
until any period of grace with respect thereto has elapsed; provided, that any
such period of
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grace shall be in lieu of and not in addition to the period during which Tenant
may cure such default following the delivery of notice pursuant to California
Code of Civil Procedure Section 1161.
(i) Subject to the limitation expressed in Paragraph
13.1.3. Tenant shall have a period of three (3) days from the date of written
notice from Landlord within which to cure any default in the payment of any
monetary obligations of Tenant under this Lease.
(ii) Tenant shall have a period of fifteen (15) days
from the date of written notice from Landlord within which to cure any other
default under this Lease which is capable of being cured; provided, however,
that with respect to any default which cannot reasonably be cured within fifteen
(15) days, the default shall not be deemed to be uncured if Tenant commences to
cure within five (5) days from Landlord's notice and thereafter prosecutes
diligently and continuously to completion all acts required to cure the default.
(iii) There shall be no period of grace with respect
to any default by Tenant which is not capable of being cured. Landlord and
Tenant stipulate that the following defaults are not capable of being cured by
Tenant: (a) any default which is specified in this Lease as being incurable; (b)
any unauthorized sale, assignment, mortgage, pledge, hypothecation, encumbrance
or other transfer of this Lease or any interest herein, or any unauthorized
subletting of all or any portion of the Premises; (c) the commission of waste by
Tenant; (d) the failure of Tenant to pay rent or any other monetary obligation
of Tenant hereunder on the due date thereof where such failure occurs on more
than three (3) consecutive occasions or more than six (6) occasions during any
twelve (12) month period; and (e) any other default which is recognized under
California law as being incurable.
13.2 Landlord's Remedies. If Tenant fails to cure a default, or in
the event of a default which is not capable of being cured by Tenant, Landlord
shall have the following rights and remedies in addition to any other rights and
remedies available to Landlord at law or in equity:
(i) Landlord shall have all rights and remedies
provided by California Civil Code Section 1951.2 (or any successor statute),
including but not limited to, recovery of the worth at the time of award of the
amount by which the unpaid rent for the balance of the Term after the time of
award exceeds the amount of rental loss for the same period that Tenant proves
could be reasonably avoided, as computed pursuant to subsection (b) of said
Section 1951.2;
(ii) Landlord shall have rights and remedies provided
by California Civil Code Section 1951.4 (or any successor statute), which allows
Landlord to continue this Lease in effect and to enforce all of its rights and
remedies under this Lease, including the right to recover rent as it becomes
due, for so long as Landlord does not terminate Tenant's right to possession.
Acts of maintenance or preservation, efforts to relet the Premises, or the
appointment of a receiver upon the Landlord's initiative to protect its interest
under this Lease shall not constitute a termination of Tenant's right to
possession; and
(iii) Landlord shall have the right, but not the
obligation, to make any payment or perform any act on Tenant's part as may be
required to cure Tenant's default,
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without waiving its rights based upon such default by Tenant and without
releasing Tenant from any of its obligations. All sums so paid and all costs
incurred by Landlord, together with interest thereon at the Overdue Rate from
the date of such payment or the incurrence of such cost by Landlord, whichever
occurs first, shall be paid to Landlord on demand.
14. DEFAULT BY LANDLORD
14.1 Existence of Default. Landlord shall not be deemed to be in
default in the performance of any obligation under this Lease unless and until
it has failed to perform such obligation within thirty (30) days after receipt
of written notice by Tenant to Landlord specifying such failure; provided,
however, that if the nature of Landlord's default is such that more than thirty
(30) days are required for its cure, then Landlord shall not be deemed to be in
default if it commences such cure within the thirty (30) day period and
thereafter diligently prosecutes such cure to completion.
14.2 Mortgagee's Right To Cure. Tenant shall give any Mortgagee a
copy, by registered mail, of any notice of default served upon Landlord,
provided that Tenant previously has been notified in writing (by way of Notice
of Assignment of Rents and Leases, or otherwise), of the address of such
Mortgagee. If Landlord fails to cure such default within the time provided in
this Lease, any such Mortgagee shall have an additional forty-five (45) days
within which to cure such default by Landlord, or if such default cannot be
cured within that time, then such additional time as may be necessary if within
that forty-five (45) day period the Mortgagee has commenced and is 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 while such remedies are being so
pursued.
14.3 Judgment Against Landlord. If Tenant recovers any judgment
against Landlord for a default by Landlord under this Lease, the judgment shall
be satisfied only out of the interest of Landlord in the Building and neither
Landlord nor any of its partners, officers, employees or agents shall be
personally liable for any such default or for any deficiency.
15. CONDEMNATION
15.1 Termination Due To Taking. If all or any part of the Premises
are the subject of a Taking, either Landlord or Tenant may, by written notice
given to the other within thirty (30) days of receipt of notice of such Taking,
elect to terminate this Lease as of the date possession is transferred pursuant
to the Taking; provided, however, that before Tenant may terminate this Lease
for a Taking, such Taking must be of such an extent and nature as to
substantially impede Tenant's use of the Premises. If any part of the Building
other than the Premises shall be the subject of a Taking, Landlord may elect to
terminate this Lease. If there is a Taking of all or a part of the Parking
Facilities and the parking rights granted to Tenant under Paragraph 2.4 are
substantially reduced thereby, Landlord shall have the right to provide
replacement parking to compensate for such reduction within other parking areas
serving the Office Complex. If such replacement parking is not provided, then
for a period of thirty (30) days after Landlord notifies Tenant that such
replacement parking cannot be provided. Tenant shall have the right to terminate
this Lease, effective at a time specified by Tenant not to exceed thirty (30)
days from the date of the notice.
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15.2 No Termination Due To Taking. If a partial Taking of the
Premises does not result in a termination of this Lease, Base Rent, Tenant's
Share of Increased Operating Costs and Tenant's parking rights shall be reduced
in proportion to what the area of the Premises taken bears to the area of the
Premises immediately prior to the Taking. No temporary taking of the Premises or
any part of the Building shall terminate this Lease, except at Landlord's
election, or give Tenant any right to any abatement of Base Rent or Increased
Operating Costs, except that Base Rent and Operating Costs shall be reduced in
accordance with the preceding sentence during that portion of any temporary
Taking of the Premises lasting more than thirty (30) days. Each party hereto
waives the provisions of California Code of Civil Procedure Section 1265.130 (or
any successor statute) allowing either party to file a petition to terminate
this Lease for a partial Taking.
15.3 Award For Taking. No award for any partial or entire Taking
shall be apportioned, and Tenant hereby assigns to Landlord any and all rights
of Tenant to any portion of the award for a Taking. However, nothing contained
herein shall be deemed to give Landlord any interest in or to require Tenant to
assign to Landlord any award made to Tenant for taking of personal property
belonging to Tenant.
16. DAMAGE AND DESTRUCTION
16.1 Partial Damage - Insured. If the Premises or the Building are
damaged by a risk covered under fire and extended coverage insurance insuring
Landlord, then Landlord shall restore such damage provided insurance proceeds
are available to Landlord to pay ninety percent (90%) or more of the cost of
restoration, and provided such restoration by Landlord can be completed within
eight (8) months after the commencement of work in the opinion of a licensed
architect or engineer appointed by Landlord. In such event this Lease shall
continue in full force and effect, except that Tenant shall, so long as the
damage is not due to the act or omission of Tenant, be entitled to an equitable
reduction of Base Rent and Tenant's Share of Excess Building Operating Costs
while such restoration takes place, such reduction to be based upon the extent
to which the damage or restoration efforts materially interfere with Tenant's
use of the Premises.
16.2 Partial Damage - Uninsured. If the Premises or the Building are
damaged by a risk not covered by such insurance or if the insurance proceeds
available to Landlord are less than eighty percent (80%) of the cost of
restoration, or if the restoration cannot be completed within eight (8) months
after the commencement of work in the opinion of the licensed architect or
engineer appointed by Landlord, then Landlord shall have the option either to
(a) repair or restore such damage, this Lease continuing in full force and
effect, with the Base Rent and Tenant's Share of Excess Building Operating Costs
to be equitably reduced as provided in Paragraph 16.1, or (b) give notice to
Tenant at any time within ninety (90) days after such damage terminating this
Lease as of a date to be specified in such notice, which date shall be not less
than thirty (30) nor more than sixty (60) days after the giving of such notice.
If such notice is given, this Lease shall expire and any interest of Tenant in
the Premises shall terminate on the date specified in such notice. The Base Rent
and Tenant's Share of Excess Building Operating Costs during the period prior to
the termination shall be reduced as provided in Paragraph 16.1 and paid up
through the date of termination.
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16.3 Total Destruction. If the Premises are totally destroyed or in
Landlord's judgment the Premises cannot be restored as required herein under
applicable laws and regulations, notwithstanding the availability of insurance
proceeds, this Lease shall be terminated effective as of the date of the damage.
16.4 Landlord's Obligations. Any restoration by Landlord pursuant to
Paragraphs 16.1 or 16.2 shall be commenced as soon as reasonably possible after
the date of damage and prosecuted diligently to completion at the earliest
possible date. Landlord shall not be required to carry insurance of any kind on
Tenant's property and shall not be required to repair any injury or damage
thereto by fire or other causes, or to make any restoration or replacement of
any paneling, decorations, partitions, ceilings, floor covering, office fixtures
or any other improvements or property installed in the Premises by or at the
direct or indirect expense of Tenant (other than building standard tenant
improvements), and Tenant shall be required to restore or replace same in the
event of damage. Tenant shall have no claim against Landlord for any loss
suffered by reason of any such damage, destruction, repair or restoration.
Notwithstanding anything to the contrary contained in this section, Landlord
shall have no obligation to repair, reconstruct or restore the Premises with
respect to damage or destruction as described in this section occurring during
the last twelve (12) months of the Term.
16.5 Waiver by Tenant. Tenant shall have no right to terminate this
Lease as a result of any statutory provisions now or hereafter in effect
pertaining to the damage and destruction of the Premises or the Building, except
as expressly provided herein, and Tenant expressly waives the provisions of
California Civil Code Sections 1932(2) and 1933(4) with respect to any damage or
destruction of the Premises.
17. DEFINITIONS
17.1 "Base Rent" means the monthly rent payable pursuant to Paragraph
4.1, and as specified in the Basic Lease Provisions.
17.2 "Base Year" means the calendar year specified in the Basic Lease
Provisions.
17.3 "Basic Lease Provisions" means the provisions contained in
Paragraph 1.2 of this Lease.
17.4 "Bonus Rent" means the excess of (a) all consideration received
by Tenant from an assignment of this Lease or a sublease of all or any portion
of the Premises over (b) the Base Rent, Increased Operating Costs and other
charges payable by Tenant to Landlord under this Lease (prorated, in the case of
a sublease of less than all of the Premises, to reflect obligations allocable to
only the portion of the Premises so sublet). In determining the total
consideration under the foregoing clause (a), Tenant shall be entitled to
exclude therefrom reasonable leasing commissions paid by Tenant to any
unaffiliated third party, payments attributable to the amortization of the cost
of improvements Tenant must make to the Premises at its cost to ready same for
the assignee or sublessee, and other reasonable, out-of-pocket costs paid by
Tenant which are directly related to Tenant's obtaining the assignment or
sublease.
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17.5 "Building" means the highrise office building described in the
Basic Lease Provisions, the parcels of land on which such office building is
situated, all other improvements situated on the land, and all rights end
easements appurtenant thereto. Except where the context requires otherwise,
references to the "Building" shall include the Common Areas and the Parking
Facilities serving the Building and other buildings in the Office Complex.
17.6 "Commencement Date" means the date determined pursuant to
Paragraph 3.2 of this Lease for the commencement of the Term.
17.7 "Common Areas" means areas within the Building (including common
corridors and hallways, stairwells, elevators, restrooms, lobbies and other
public areas) and within the Office Complex which are available for nonexclusive
use by Tenant and other tenants of the Building or the Office Complex.
17.8 "Environmental Damages" means all claims, judgments, damages,
losses, penalties, fines, liabilities, strict costs and expenses of defense of
any claim and of any settlement or judgment, including without limitation
reasonable attorneys' fees and consultants' fees, any of which are incurred at
any time as a result of the existence of "Hazardous Material" upon, about,
beneath the Premises or migrating or threatening to migrate to or from the
Premises, or the existence of a violation of "Environmental Requirements"
pertaining to the Premises including, without limitation: (a) damages for
personal injury, or injury to property or natural resources occurring upon or
off of the Premises, foreseeable or unforeseeable, including, without
limitation, lost profits, consequential damages, interest and penalties
including but not limited to claims brought by or on behalf of employees of
Tenant, with respect to which Tenant waives any immunity to which it may be
entitled under any industrial or worker's compensation laws; (b) diminution in
the value of the Premises, and damages for the loss of or restriction on the use
of or adverse impact on the marketing of rentable or usable space or of any
amenity of the Premises; (c) fees incurred for the services of attorneys,
consultants, contractors, experts, laboratories and all other costs incurred in
connection with the investigation or remediation of such "Hazardous Materials"
or violation of "Environmental Requirements" including, but not limited to, the
preparation of any feasibility studies or reports or the performance of any
cleanup, remedial, removal, containment, restoration or monitoring work required
by any federal, state or local governmental agency or political subdivision, or
reasonably necessary to make full economic use of the Premises or any other
property or otherwise expended in connection with such conditions, and including
without limitation any attorneys' fees, costs and expenses incurred in enforcing
this agreement or collecting any sums due hereunder; and (d) liability to any
third person or governmental agency to indemnify such person or agency for costs
expended in connection with the items referenced in subparagraph (c) herein.
17.9 "Environmental Requirements" means all applicable present and
future statutes, regulations, rules, ordinances, codes, licenses, permits,
orders, approvals, plans, authorizations, concessions, franchises and similar
items, of all governmental agencies, departments, commissions, boards, bureaus
or instrumentalities of the United States, states and political subdivisions
thereof and all applicable judicial and administrative and regulatory decrees,
judgments and orders relating to the protection of human health or the
environment, including, without limitation: (a) all requirements,
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including but not limited to, those pertaining to reporting, licensing,
permitting, investigation and remediation of emissions, discharges, releases or
threatened releases of "Hazardous Materials," chemical substances, pollutants,
contaminants or hazardous or toxic substances, materials or wastes whether
solid, liquid or gaseous in nature, into the air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of chemical substances, pollutants,
contaminants or hazardous or toxic substances, materials, or wastes, whether
solid, liquid or gaseous in nature; and (b) all requirements pertaining to the
protection of the health and safety of employees or the public.
17.10 "Expiration Date" means the scheduled date on which the Term
will expire as determined pursuant to Paragraph 3.2 of this Lease.
17.11 "Hazardous Materials" means any chemical substance (a) the
presence of which requires investigation or remediation under any federal, state
or local statute, regulation, ordinance, order, action or policy; or (b) which
is or becomes defined as a "hazardous waste" or "hazardous substance" under any
federal, state or local statute, regulation or ordinance or amendments thereto;
or (c) which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated by
any governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, the State of California or any political
subdivision thereof; or (d) the presence of which on the Premises causes or
threatens to cause a nuisance upon the Premises or to adjacent properties or
poses or threatens to pose a hazard to the Premises or the health or safety of
persons on or about the Premises; or (e) without limitation, which contains
gasoline, diesel fuel or other petroleum hydrocarbons; or (f) which contains
polychlorinated bipheynols (PCBs), asbestos or urea formaldehyde foam
insulation.
17.12 "Increased Operating Costs" means the amount by which the
Operating Costs during any Subsequent Year exceed the Operating Costs for the
Base Year.
17.13 "Landlord's Work" means the work, if any, to be performed by
Landlord to ready the Premises for Tenant's occupancy, as specified in the Scope
of Work.
17.14 "Lease Date" means the date specified in the Basic Lease
Provisions, which shall be the effective date of execution of this Lease by
Landlord and Tenant unless otherwise provided in this Lease.
17.15 "Mortgagee" means the holder of any mortgage or deed of trust
secured by the Building or the Premises or any portion thereof.
17.16 "Office Complex" means the development comprised of the three
office buildings commonly known as Watergate Towers I, II and III, addressed,
respectively, as 1900 Powell Street, 2200 Powell Street and 2000 Powell Street,
respectively, Emeryville, California.
17.17 "Operating Costs" means all actual costs of ownership,
operation, maintenance, repair and management of the Building, including the
Building's share of all such costs of the Parking
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Facilities and the Common Areas which are shared with other buildings in the
Office Complex to be based on Landlord's reasonable allocation among the
buildings. If during the Base Year or any Subsequent Year the Building is less
than ninety-five percent (95%) occupied, those Operating Costs which vary based
on the level of occupancy shall be adjusted upward to reflect, in Landlord's
reasonable judgment, the Operating Costs that would apply during such year if
the Building were at least ninety-five percent (95%) occupied.
17.17.1 Operating Costs shall include:
(a) salaries, and other compensation, including
payroll taxes, vacation, holiday and other paid absences, and welfare,
retirement and other fringe benefits, paid to employees, independent contractors
or agents of Landlord engaged in the operation, repair, management or
maintenance of the Building, including (i) elevator operators, (ii) window
cleaners, miscellaneous repair personnel, janitors, cleaning personnel and
porters, (iii) security personnel and caretakers, and (iv) engineers, mechanics,
electricians and plumbers;
(b) repairs and maintenance of the Building and the
costs of supplies, tools, materials and equipment for such repairs and
maintenance that are under generally accepted accounting principles not
capitalized;
(c) premiums and other charges incurred by Landlord
for insurance on the Building and for Landlord's employees, including (i) fire
and extended coverage insurance, and earthquake, windstorm, flood and explosion
insurance, (ii) public liability and property damage insurance, (iii) workers'
compensation insurance, (iv) boiler and machinery insurance, sprinkler leakage,
water damage and related liability insurance, and burglary, fidelity and
pilferage insurance on equipment and materials, (v) health, accident and group
life insurance, (vi) all such insurance as Landlord is required to carry under
Section 10 of this Lease, and (vii) such other insurance as is customarily
carried by operators of comparable first-class office buildings in the San
Francisco Bay Area;
(d) costs incurred for inspection and servicing,
including all outside maintenance contracts necessary for the maintenance of the
Building, such as janitorial and window cleaning, rubbish removal,
exterminating, water treatment, elevator, electrical, plumbing and mechanical
equipment, and the costs of materials, tools, supplies and equipment used for
inspection and servicing of the Building;
(e) costs incurred for electricity, water, gas, fuel
and other utilities;
(f) payroll taxes, federal taxes, state and local
unemployment taxes, and social security taxes paid for the employees of Landlord
engaged in the operation, maintenance and repair of the Building;
(g) sales, use and excise taxes on goods and
services purchased by Landlord for use in the Building;
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(h) license, permit and inspection fees;
(i) accounting and legal fees;
(j) customary management fees not to exceed five
percent (5%) of the gross revenues of the Building;
(k) the annual amortization over its useful life,
with a reasonable salvage value on a straightline basis, of the costs of any
capital improvements made by Landlord and required by any changes in applicable
laws, rules or regulations of any governmental authority enacted after the
Building was completed;
(l) the annual amortization over its useful life,
with a reasonable salvage value on a straightline basis, of the costs of any
equipment or capital improvements made by Landlord after the Building was
completed as a labor-saving measure or to accomplish other savings in operating,
repairing, managing or maintaining the Building, but only to the extent of the
savings;
(m) the annual amortization, over its useful life on
a straight line basis, of the cost of any exterior window draperies provided by
Landlord and the carpeting in the Common Areas;
(n) any costs for substituting work, labor,
materials or services in place of any of the above items, or for any additional
work, labor, materials, services or improvements to comply with any governmental
laws, rules regulations or other requirements applicable to the Building enacted
after the Building was completed which are considered operating expenses under
Generally Accepted Accounting Principles;
(o) other costs reasonably necessary to maintain,
operate, repair and manage the Building in a first-class manner and condition;
(p) all real property taxes on the Building, the
land on which the Building is situated, and the various estates in the Building
and a proportion of the real property taxes on the land and improvements
comprising the Parking Facilities and the Common Areas shared with other
buildings in the Office Complex, based on Landlord's reasonable allocation among
the buildings using such facilities and areas;
(q) all personal property taxes levied on property
used in the operation of the Building;
(r) all taxes of every kind and nature whatsoever
levied or assessed in lieu of or in substitution for existing or additional real
or personal property taxes on the Building, land or personal property other than
taxes covered by paragraph 4.5, including, but not limited to, any charge, levy,
excise or assessment upon Landlord's business of leasing the Premises or other
portions of the Building or the Parking Facilities; and
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(s) the cost to Landlord of contesting the amount,
validity or applicability of any of the foregoing items.
17.17.2 Operating Costs shall exclude:
(a) leasing commissions, costs, disbursements and
other expenses incurred for leasing, renovating or improving space for tenants;
(b) the cost of electricity or other services sold
to tenants for which Landlord is to be reimbursed as a charge over the rent
payable under the leases with such tenants;
(c) costs incurred because Landlord or another
tenant violated the terms of any lease of the Building;
(d) interest on debt or amortization payments on
mortgages or deeds of trust or any other debt for borrowed money, except as
herein expressly permitted;
(e) items and services for which Tenant reimburses
Landlord or pays third parties or that Landlord provides selectively to one or
more tenants of the Building other than Tenant without reimbursement;
(f) advertising and promotional expenses;
(g) repairs or other work needed because of fire or
other casualty insured against by Landlord;
(h) costs incurred in operating the Parking
Facilities except to the extent the cost of operating the Parking Facilities
exceeds the revenues generated from operation thereof;
(i) nonrecurring costs incurred to remedy structural
defects in the original construction materials or insulation; and
(j) costs incurred by Landlord for alterations that
are considered capital improvements under generally accepted accounting
principles except to the extent the same are expressly permitted under Paragraph
17.17.1.
17.18 "Overdue Rate" means the lesser of: (a) eighteen percent (18%)
per annum; or (b) the maximum rate permitted under applicable usury law.
17.19 "Parking Charge" means the monthly amount to be paid by Tenant
for each parking permit issued to Tenant pursuant to paragraph 2.4, which amount
is specified in the Basic Lease Provisions and subject to increase.
17.20 "Parking Facilities" means the parking lot(s) and parking
structure(s) located within or adjacent to the Office Complex and designated by
Landlord as serving the Building.
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17.21 "Premises" means the portion of the Building demised by this
Lease, as designated by suite number in the Basic Lease Provisions and shown on
Exhibit A to this Lease.
17.22 "Rules and Regulations" means the rules and regulations
regulating the use of the Premises, the Common Areas, Parking Facilities and
other portions of the Building promulgated by Landlord from time to time as
provided in paragraph 5.6 of this Lease.
17.23 "Security Deposit" means the amount specified in the Basic Lease
Provisions, which is to be held by Landlord to secure Tenant's performance of
its obligations under this Lease as provided in paragraph 4.2.
17.24 "Scope of Work" means the Scope of Work Agreement if any,
executed by Landlord and Tenant concurrently with their execution of the Lease,
which will be attached as Exhibit B to this Lease and will establish the full
extent of Landlord's Work in readying the Premises for Tenant's occupancy
hereunder.
17.25 "Subsequent Year" means any calendar year during the Term after
the Base Year.
17.26 "Substantial Completion" means (a) completion, as determined in
the event of a dispute by Landlord's architect in accordance with AA standards,
of Landlord's Work except for such items as constitute a minor defect or
deficiency which can be completed or corrected after occupancy without causing
any material interference with Tenant's use of the Premises, and (b) the
issuance of a certificate of occupancy by the City of Emeryville or such other
governmental authorization as may be required for occupancy of the Premises.
17.27 "Taking" means the taking of property or any interest therein
for public or quasi public use by exercise of the power of eminent domain or
otherwise, or a taking in the nature of inverse condemnation, with or without
litigation, or a transfer of property or any interest therein pursuant to an
agreement entered into under threat of exercise of the power of eminent domain.
17.28 "Tenant Parking" means the number of permits to park passenger
automobiles in the Parking Facilities which are to be issued to Tenant pursuant
to paragraph 2.4, and as specified in the Basic Lease Provisions.
17.29 "Tenant's Share" means the ratio that the rentable square
footage of the Premises bears to the total rentable square footage of the
Building. If the rentable square footage of the Premises and/or the total
rentable square footage of the Building changes, Tenant's Share shall be
appropriately adjusted so that it at all times reflects the proportion which the
rentable square footage of the Premises bears to the total rentable square
footage of the Building.
17.30 "Term" means the term of this Lease, including any permitted
extensions or renewals thereof.
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18. MISCELLANEOUS PROVISIONS
18.1 Estoppel Certificates. Within ten (10) days following any
written request Landlord may make from time to time, Tenant without any charge
therefor, shall execute, acknowledge and deliver a statement certifying: (a) the
Commencement Date of this Lease; (b) the fact that this Lease is unmodified and
in full force and effect (or, if there have been modifications hereto, that this
Lease is in full force and effect, as modified, and stating the date and nature
of such modifications); (c) the date to which the rent and other sums payable
under this Lease have been paid; (d) the fact that there are no current defaults
under this Lease by either Landlord or Tenant except as specified in the
statement; and (e) such other matters as may be reasonably requested by
Landlord. Landlord and Tenant intend that any statement delivered pursuant to
this paragraph may be relied upon by a mortgagee, beneficiary, purchaser or
prospective purchaser of the Building or any interest therein. Tenant's failure
to deliver any such statement within said ten (10) day period shall constitute a
material default, and Tenant shall indemnify and hold Landlord harmless from and
against any and all liability, loss, cost, damage and expense which Landlord may
sustain or incur as a result of or in connection with Tenant's failure or delay
in delivering such statement. If Landlord elects to sell the Building or to
obtain loans secured by a lien on the Building, Tenant, promptly after demand,
shall provide to any such purchaser or lender financial statements of Tenant
reasonably required by the purchaser or lender. The financial statements so
provided shall be kept confidential as to any parties other than the purchaser
or lender.
18.2 Surrender of Premises. A voluntary or other surrender of this
Lease by Tenant or the mutual cancellation of this Lease shall not work a merger
and shall, at the option of Landlord, terminate all or any existing subleases or
subtenancies, or may, at the option of Landlord, operate as an assignment to it
of any or all such subleases or subtenancies.
18.3 Light and Air. No diminution of light, air or view by any
structure which may hereafter be erected (whether or not by Landlord) shall
entitle Tenant to any reduction of rent under this Lease, result in any
liability of Landlord to Tenant, or in any other way affect this Lease.
18.4 Waiver. If either Landlord or Tenant waives the performance of
any term, covenant or condition continued in this Lease, such waiver shall not
be deemed to be a waiver of the term, covenant or condition itself or a waiver
of any subsequent breach of the same or any other term, covenant or condition
contained herein. Furthermore, the acceptance of rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, regardless of Landlord's knowledge of such preceding
breach at the time Landlord accepts such rent. Failure by Landlord to enforce
any of the terms, covenants or conditions of this Lease for any length of time
shall not be deemed to waive or to decrease the right of Landlord to insist
thereafter upon strict performance by Tenant. Waiver by Landlord of any term,
covenant or condition contained in this Lease may only be made by a written
document signed by Landlord.
18.5 Attorneys' Fees. In the event that any action or proceeding
(including arbitration) is brought to enforce or interpret any term, covenant or
condition of this Lease on the part of Landlord or Tenant, the prevailing party
in such action or proceeding (whether after trial or appeal) shall be entitled
to recover from the party not prevailing its expenses therein, including
reasonable attorneys'
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fees and all allowable costs. If Landlord is made a party to any action or
proceeding commenced by a third party due to any actual or alleged act or
omission of Tenant or Tenant's agents, employees, contractors, invitees or
subtenants, Tenant shall indemnify and hold Landlord harmless from all costs
incurred in such action or proceeding, including reasonable attorneys' fees. If
Tenant requests Landlord's consent to, approval of or signature on any
instrument or agreement which would alter or affect Landlord's legal rights and
duties, Tenant shall reimburse Landlord upon demand for Landlord's reasonable
attorneys' fees incurred in connection with the review and evaluation of the
requested action.
18.6 Notices. Any notice required or permitted under this Lease shall
be in writing and shall be delivered either personally or by depositing same in
the United States Mail, postage prepaid, registered or certified, return receipt
requested, addressed to the intended recipient at such party's address set forth
in the Basic Lease Provisions or at such other address as such party has
theretofore specified by written notice delivered in accordance with this
paragraph. Any notice delivered by mail in the manner specified in this
paragraph shall be deemed delivered on the earlier of the third day following
deposit thereof in the United States Mail or on the delivery date shown on the
return receipt prepared in connection therewith; and any such notice specifying
a default by Tenant shall be deemed sufficient for all purposes under California
Code of Civil Procedure Sections 1161 and 1162, notwithstanding the fact that
such notice is not personally served on Tenant or that such notice does not
demand possession of the Premises as an alternative to Tenant's curing of such
default.
18.7 Merger. Notwithstanding the acquisition (if same should occur)
by the same party of the title and interests of both Landlord and Tenant under
this Lease, there shall never be a merger of the estates of Landlord and Tenant
under this Lease, but instead the separate estates, rights, duties and
obligations of Landlord and Tenant, as existing hereunder, shall remain
unextinguished and continue, separately, in full force and effect until this
Lease expires or otherwise terminates in accordance with the express provisions
herein contained.
18.8 Headings. Words used in neuter gender include the feminine and
masculine, where applicable. If there is more than one Tenant, the obligations
imposed under this Lease upon Tenant shall be joint and several. The headings
and titles to the sections and paragraphs of this Lease are used for convenience
only and shall have no effect upon the construction or interpretation of this
Lease.
18.9 Time And Applicable Law. Time is of the essence of this Lease
and all of its provisions. This Lease shall in all respects be governed by and
interpreted in accordance with the laws of the State of California.
18.10 Successors And Assigns. Each conveyance by Landlord or its
successors in interest of Landlord's interest in the Building or the Premises
prior to the expiration or termination of this Lease shall be subject to this
Lease and shall relieve the grantor of all further liability or obligations as
Landlord, except for such liability or obligations accruing prior to the date of
such conveyance. If any Security Deposit has been given to Landlord, Landlord
shall deliver such Security Deposit to Landlord's successor in interest and
thereupon be released of all further liability with regard thereto, without the
requirement of any notice thereof to Tenant. Tenant agrees to attorn to
Landlord's
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successors in interest, whether such interest is acquired by sale, transfer,
foreclosure, deed in lieu of foreclosure or otherwise. Subject to the foregoing
and to the provisions of Section 16, the terms, covenants and conditions
contained herein shall be binding upon and inure to the benefit of the heirs,
successors, executors, administrators and assigns of the parties hereto.
18.11 Entry by Landlord. Landlord and its authorized representatives
shall have the right to enter the Premises: (a) to inspect the Premises; (b) to
supply any service provided to Tenant hereunder; (c) to show the Premises to
prospective brokers, agents, purchasers, lenders or tenants; (d) to post notices
of non-responsibility; (e) to alter, improve or repair the Premises and any
other portion of the Building; and (f) to erect scaffolding and other necessary
structures, where required by the work to be performed, all without reduction or
abatement of rent. Tenant hereby waives any claim for damages for any injury to
or interference with Tenant's business or quiet enjoyment of the Premises or any
other loss occasioned by such entry. Landlord shall at all times have a key to
unlock all doors in and about the Premises, excluding Tenant's vaults and safes,
and Landlord shall have the right to use any means which Landlord deems proper
to open said doors in an emergency, and any such entry to the Premises shall not
under any circumstances be construed or deemed to be a forcible or unlawful
entry into the Premises or a detainer of the Premises or an eviction of Tenant
from any portion of the Premises.
18.12 Entire Agreement. This Lease, together with its exhibits,
contains all the agreements of the parties hereto and supersedes any previous
negotiations. There have been no representations made by the Landlord or
understandings made between the parties other than those set forth in this Lease
and its exhibits. This Lease may not be modified except by a written instruction
duly executed by the parties hereto.
18.13 Severability. If any provision of this Lease or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Lease and the application of such provision to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
18.14 Signs. Tenant shall not place or permit to be placed in or upon
the Premises where visible from outside the Premises or any part of the
Building, any signs, notices, drapes, shutters, blinds or window coatings, or
displays of any type without the prior written consent of Landlord. Landlord
shall consent to the location at the cost of Tenant of a building standard sign
on or near the entrance of the Premises and shall include Tenant in the Building
directories located in the Building. Landlord reserves the right in Landlord's
sole discretion to place and locate on the roof and exterior of the Building and
in any area of the Building not leased to Tenant, such signs, notices, displays
and similar items as Landlord deems appropriate in the proper operation of the
Building.
18.15 Execution By Landlord. The submission of this document for
examination and negotiation does not constitute an offer to lease, or a
reservation of, or option for, the Premises. This document becomes effective and
binding only upon execution and delivery hereof by Tenant and by Landlord. No
act or omission of any employee or agent of Landlord or of Landlord's broker
shall alter, change or modify any of the provisions hereof.
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<PAGE> 31
18.16 Brokers. Tenant shall hold Landlord harmless from all damages
(including attorneys' fees and costs) resulting from any claims that may be
asserted against Landlord by any broker, finder, or other person with whom
Tenant has or purportedly has dealt, except the leasing agent for the Building
duly appointed by Landlord.
18.17 Name Of Building. Tenant shall not use the name of the Building
for any purpose other than the address of the business to be conducted by Tenant
in the Premises. Tenant shall not use any picture of the Building in its
advertising, stationery or in any other manner so as to imply that the entire
Building is leased by Tenant. Landlord expressly reserves the right at any time
to change the name or street address of the Building without in any manner being
liable to Tenant therefor.
18.18 Nonrecordability Of Lease. Tenant agrees that in no event shall
this Lease or a memorandum hereof be recorded without Landlord's express prior
written consent, which consent Landlord may withhold in its sole discretion.
18.19 Construction. All provisions hereof, whether covenants or
conditions, shall be deemed to be both covenants and conditions. The definitions
contained in this Lease shall be used to interpret the Lease. All rights and
remedies of Landlord and Tenant shall, except as otherwise expressly provided,
be cumulative and non-exclusive of any other remedy at law or in equity.
18.20 Inability To Perform. This Lease and the obligations of Tenant
hereunder shall not be affected or impaired because Landlord is unable to
fulfill any of its obligations hereunder or is delayed in doing so, if such
inability or delay is caused by reason of force majeure, strike, labor troubles,
acts of God, acts of government, unavailability of materials or labor, or any
other cause beyond the control of Landlord.
18.21 Authority. If Tenant is a corporation, each individual executing
this Lease on behalf of Tenant represents and warrants that Tenant is qualified
to do business in California and that he is duly authorized to execute and
deliver this Lease on behalf of Tenant and shall deliver appropriate
certification to that effect if requested. If Tenant is a partnership, joint
venture, or other unincorporated association, each individual executing this
Lease on behalf of Tenant represents and warrants that he is duly authorized to
execute and deliver this Lease on behalf of Tenant and that this Lease is
binding on Tenant. Furthermore, Tenant agrees that the execution of any written
consent hereunder, or any written modification or termination of this Lease, by
any general partner of Tenant or any other authorized agent of Tenant, shall be
binding on Tenant.
18.22 Quiet Enjoyment. So long as Tenant is not in default under this
Lease, Tenant shall have quiet enjoyment of the Premises for the Term, subject
to all the terms and conditions of this Lease and all liens and encumbrances
prior to this Lease.
19. CONTINGENCY: The effectiveness of this Lease is specifically
conditioned on the full execution of the Termination Agreement between Sybase as
Tenant and Spieker Properties, L.P. as Landlord for reduced premises equaling
3,403 rentable square feet and 2,934 useable square feet. If
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<PAGE> 32
said Termination Agreement is not fully executed and commenced, this Lease shall
be of no further force or effect and without recourse to either party.
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<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and the year first above written.
LANDLORD
SPIEKER PROPERTIES, L.P., A CALIFORNIA
LIMITED PARTNERSHIP
By: Spieker Properties, Inc.,
a Maryland corporation,
its general partner
By:
---------------------------------
Its:
--------------------------------
Date:
-------------------------------
TENANT
EXTENSITY, INC.
A DELAWARE CORPORATION
By:
-------------------------------------
Its:
------------------------------------
Date:
-----------------------------------
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<PAGE> 34
Exhibit B
Scope of Work
1. Scope of Work to that certain Lease between Spieker Properties, L.P., a
California limited partnership ("Landlord"), and Extensity, Inc., a Delaware
corporation ("Tenant"), dated January 12, 1997.
2. The Premises will be delivered "as is" in their current condition,
however Landlord at Landlord's sole cost and expense shall cause to have the
following work completed utilizing Building Standard materials:
1. Provide new carpet and paint in the area as depicted in Exhibit
B-1.
2. Construct one office and wing wall near reception area.
3. Construct demising wall as depicted and construct encased
opening to Suite 400.
3. Tenant, at Tenant's sole cost and expense, shall be responsible for the
cost of telephone and computer installation, including wiring.
"LANDLORD"
SPIEKER PROPERTIES, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
By: Spieker Properties, Inc.
a Maryland Corporation
Its: General Partner
BY Date:
-------------------------------- ----------------------------
John Winther
Senior Vice President
"TENANT"
EXTENSITY, INC.
A DELAWARE CORPORATION
BY Date:
-------------------------------- ----------------------------
Its:
-------------------------------
Print Name:
-------------------------
<PAGE> 1
EXHIBIT 10.9
OFFER LETTER
February 16, 1999
Mr. Robert Spinner
50 Lupine Place
Alamo, CA 94507
Dear Bob:
On behalf of Extensity, ("Extensity" or the "Company") and its Board of
Directors, I am pleased to offer you employment on the terms and conditions
stated in this letter. Extensity is offering you the position of President and
Chief Executive Officer, working out of the Company's headquarters in
Emeryville, California. Assuming that you accept the terms of employment
described in this letter, you would also become a member of the Board of
Directors of Extensity. Subject to fulfillment of the conditions imposed by this
letter agreement, you will start in this new position on April 1, 1999 (the
"Start Date").
You will be paid a monthly salary of $25,000.00, which is equivalent to
$300,000.00 on an annualized basis. Your salary will be payable according to
regular payroll policy.
You will also be eligible for a $100,000 performance bonus payable in 2
installments on September 30, 1999 and March 31, 2000, subject to meeting
objectives mutually agreed to by yourself and the Board. These objectives will
be set within 60 days after your start date. After the first year, the amount of
your salary and bonus eligibility and the relevant bonus objectives will be
determined by the Board of Directors. Your total salary and target bonus amount
will not be reduced after the first year.
On your Start Date, the Board of Directors will grant you an incentive
stock option (the First Option) to purchase 1,188,764 shares (7.5%) of the
Company's Common Stock at a purchase price equal to the fair market value on the
date of the grant (the fair market value of the most recent option grants was
$0.33). Your right to the shares will be subject to vesting over a four-year
period, with 12.5% vesting on September 1, 1999, and the balance vesting in
equal monthly installments over the subsequent 42 months, assuming continued
employment. At your election, you can purchase all of these shares up-front
subject to the right of the company to repurchase any unvested shares at cost in
the event of termination of your employment.
<PAGE> 2
Mr. Robert Spinner
February 16, 1999
Page 2
In addition, on your Start Date, the Board will grant you an option
(Special Option) to purchase up to 77,306 shares (.5%) of Common Stock of the
Company. This Special Option shall vest in full seven (7) years from your Start
Date, provided that if the company achieves in your first year the objectives to
be mutually agreed between you and the Board, then the vesting of the Special
Option will become the same as the four year vesting schedule defined in the
preceding paragraph (with vesting based on continuous employment over four (4)
years). The Board of Directors will be solely responsible for determining
whether these criteria have been met. This Special Option shall also be an
incentive stock and have the same exercise price as the First Option.
Involuntary termination without cause or constructive termination. In the
event the Company terminates your employment involuntarily (other than for
cause, as defined herein), or if your employment is constructively terminated
(as defined herein), then you will be entitled to receive, as severance, six
months continuation of salary (and, in addition, if the termination is in the
first six (6) months of your employment, you will be entitled to 1/48 vesting of
your First Option for each month of employment through the termination date,
notwithstanding the six month vesting cliff otherwise applicable). For the
purposes hereof, the following definitions shall apply: "Cause" shall mean
habitual failure to report to work or repeated failure to use best efforts to
follow the directives of the Board of Directors, intoxication on the job, sexual
harassment, material violation of the Company's confidential and proprietary
information protection policies or other material breach of fiduciary duties to
the Company, conviction of a felony, or other malevolent action materially
impugning your or the Company's reputation. "Constructive termination" shall
mean that, without your consent, you shall no longer serve as Chief Executive
Officer of the Company reporting to the Board of Directors, or your duties shall
cease to be commensurate with such position.
Involuntary termination without cause or constructive termination
following a change in control. In the event that within one year following any
change in control of the Company, (1) the Company terminates your employment
involuntarily (other than for cause, as defined above) or (2) your employment is
constructively terminated (as defined herein) or (3) you are forced to move to a
location greater than 50 miles from your current location or (4) your total
compensation is reduced, then you will be entitled to receive, as severance,
additional vesting of one half of the portion of your First Option which is
otherwise unvested on the date of termination (and one-half of the portion of
your Special Option which is otherwise unvested on the date of termination if
the first year objectives shall have been met). For the purposes hereof, a
change in control shall mean the sale of the Company, by means of share sale,
merger or sale of assets, to another operating entity, unless the shareholders
of the Company prior to the transaction retain following the transaction,
directly or indirectly, more than 50% of the entity
<PAGE> 3
Mr. Robert Spinner
February 16, 1999
Page 3
surviving to the Company's business. For the purposes hereof, constructive
termination shall mean a change in your position with the Company without your
consent such that you no longer hold the same position as you held within the
Company prior to the change in control.
Other Termination. If the Company shall terminate your employment for
cause (as defined above), you shall be entitled to no severance or other
continuing remuneration from the Company.
Extensity will provide you with standard medical and dental benefits
according to the Company's current policies. You will be entitled to three
weeks' paid vacation per year.
Your employment with Extensity, should you accept this offer, will not be
for any specific term and may be terminated at any time, with or without cause
and with or without notice, by you or by the Company for any reason. Any
contrary representations or agreements which may have been made to you are
superseded by this offer. The at-will nature of your employment described in
this offer letter shall constitute the entire agreement between you and
Extensity concerning the duration of your employment and the circumstances under
which either you or the Company may terminate the employment relationship. No
person affiliated with Extensity has the authority to enter into any oral
agreement that changes the at-will status of employment with the Company. The
at-will term of your employment with the Company can only be changed in a
writing signed by you and the Chairperson of the Company's Board of Directors
which expressly states the intention to modify the at-will term of your
employment. By signing below and accepting this offer, you acknowledge and agree
that length of employment, promotions, positive performance reviews, pay
increases, bonuses, increases in job duties or responsibilities and other
changes during employment will not change the at will term of your employment
with Extensity and will not create any implied contract requiring cause for
termination of employment.
Your employment pursuant to this offer is contingent upon your executing
the enclosed Proprietary Information and Inventions Agreement and upon your
providing the Company with the legally-required proof of your identity and
authorization to work in the United States.
As an employee of Extensity, you will be required to comply with all
Company policies and procedures. In particular, you will be required to
familiarize yourself with and to comply with Extensity's policy prohibiting
unlawful harassment and
<PAGE> 4
Mr. Robert Spinner
February 16, 1999
Page 4
discrimination and the policy concerning drugs and alcohol. Violations of these
policies may lead to immediate termination of employment.
If you wish to accept this offer, please sign below and return the fully
executed letter to us, along with the executed Proprietary Information and
Inventions Agreement. You should keep one copy of this letter for your own
records. This offer, if not accepted, will expire on February 20, 1999.
We are looking forward to having you join us at Extensity. If you have any
questions, please call me at 650-233-3387.
Very truly yours,
EXTENSITY
By:_________________________________________
Ted Schlein
For the Board of Directors
I have read and accept this employment offer.
Dated:__________________________ ____________________________________________
Robert Spinner
<PAGE> 1
EXHIBIT 10.10
EXTENSITY, INC.
1996 STOCK OPTION PLAN
(AS AMENDED OCTOBER 1999)
1. Purposes of the Plan. The purposes of this 1996 Stock Option Plan
are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights 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
as shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a committee of Directors appointed by
the Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Extensity, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.
(i) "Director" means a member of the Board.
<PAGE> 2
(j) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(m) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
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<PAGE> 3
(q) "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.
(r) "Option" means a stock option granted pursuant to the
Plan.
(s) "Option Agreement" means an agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price.
(u) "Optioned Stock" means the Common Stock subject to an
Option or Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or
Stock Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1996 Stock Option Plan.
(y) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
(cc) "Service Provider" means an Employee, Director or
Consultant.
(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "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 13
of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is 7,000,000
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<PAGE> 4
Shares plus an annual increase to be added on the first day of the Company's
fiscal year beginning January 1, 2001, equal to the lesser of (i) 1,300,000
shares, (ii) 3.5% of the outstanding shares on such date or (iii) a lesser
amount determined by the Board. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Stock Purchase Right,
shall not be returned to the Plan and shall not become available for future
distribution under the Plan, except that if Shares of Restricted Stock are
repurchased by the Company at their original purchase price, such Shares shall
become available for future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. Different
Committees with respect to different groups of Service Providers may administer
the Plan.
(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to
qualify transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder shall be structured to satisfy the requirements for
exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom
Options and Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common
Stock to be covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under
the Plan;
-4-
<PAGE> 5
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options or Stock Purchase Rights may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the shares of Common
Stock relating thereto, based in each case on such factors as the Administrator,
in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or
Stock Purchase Right to the then current Fair Market Value if the Fair Market
Value of the Common Stock covered by such Option or Stock Purchase Right shall
have declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option or Stock
Purchase Right (subject to Section 15(c) of the Plan), including the
discretionary authority to extend the post-termination exercisability period of
Options longer than is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. 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. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf
of the Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights
may be granted to Service Providers. Incentive Stock Options may be granted only
to Employees.
-5-
<PAGE> 6
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right
shall confer upon an Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall they
interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of
Options:
(i) No Service Provider shall be granted, in any
fiscal year of the Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial
service, a Service Provider may be granted Options to purchase up to an
additional 500,000 Shares, which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is cancelled in the same fiscal
year of the Company in which it was granted (other than in connection with a
transaction described in Section 13), the cancelled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.
-6-
<PAGE> 7
9. Option 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 determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
the Incentive Stock Option is granted, 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, 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 Employee other than an
Employee described in paragraph (A) immediately above, 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,
the per Share exercise price shall be determined by the Administrator. In the
case of a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may
be granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an Option
is granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions that must be satisfied before
the Option may be exercised.
(c) Form of Consideration. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) 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, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
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<PAGE> 8
(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to the
Optionee's participation in any Company-sponsored deferred compensation program
or arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter 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 Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
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<PAGE> 9
(c) Disability of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) 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 or electronically, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase, the price to be
paid, and the time within which the offeree must accept such offer. The offer
shall be accepted by execution of a Restricted Stock Purchase Agreement in the
form determined by the Administrator.
(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 service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original 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 a rate determined by the
Administrator.
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<PAGE> 10
(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.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder 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. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, 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 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 or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously
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<PAGE> 11
exercised, an Option or Stock Purchase Right will terminate immediately prior to
the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to
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<PAGE> 12
exercise the powers granted to it hereunder with respect to Options granted
under the Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to
the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with Applicable Laws and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise
of an Option or Stock Purchase Right, the Company may require the person
exercising such Option or Stock Purchase Right 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.
17. Inability to Obtain Authority. 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.
18. 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.
19. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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EXHIBIT 10.11
EXTENSITY, INC.
EMPLOYEE STOCK PURCHASE PLAN 2000
The following constitute the provisions of the Employee Stock Purchase
Plan 2000 of Extensity, Inc..
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company or any
committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean Extensity, Inc. and any Designated
Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
and commissions, payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each Purchase
Period.
<PAGE> 2
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock prior to the date of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board; or
(iv) For purposes of the Enrollment Date of the first
Offering Period under the Plan, the Fair Market Value shall be the initial price
to the public as set forth in the final prospectus included within the
registration statement in Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock (the
"Registration Statement").
(k) "Offering Periods" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after April 15 and
October 15 of each year and terminating on the last Trading Day in the periods
ending twenty-four months later; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
April 15, 2002. The duration and timing of Offering Periods may be changed
pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan 2000.
(m) "Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of the first Offering Period shall
commence on the Enrollment Date and end on October 15, 2000.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
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<PAGE> 3
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after April 15 and October 15 each year, or on such other date
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
April 14, 2002. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
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<PAGE> 4
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than
10,000 shares of the Company's Common Stock (subject to any adjustment pursuant
to Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of
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<PAGE> 5
the Company's Common Stock an Employee may purchase during each Purchase Period
of such Offering Period. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.
8. Exercise of Option.
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant
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<PAGE> 6
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding Offering Periods
which commence after the termination of the Offering Period from which the
participant withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any reason, he
or she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 500,000 shares plus an annual increase to be added on the first day of
the Company's fiscal year beginning in 2001, equal to the lesser of (i) 500,000
shares, (ii) 1.5% of the outstanding shares on such date or (iii) a lesser
amount determined by the Board.
(b) Notwithstanding anything to the contrary in the Plan, the
maximum number of shares of the Company's Common Stock which shall be made
available for sale under the first Purchase Period of the Plan shall not exceed
1.5% of the outstanding shares of the Company's capital stock on the first day
of such Purchase Period, and the maximum number of shares of the Company's
Common Stock which shall be made available for sale under each Purchase Period
thereafter shall not exceed 1% of the outstanding shares of the Company's
capital stock on the first day of each such Purchase Period.
(c) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(d) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
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<PAGE> 7
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
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<PAGE> 8
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 19 hereof,
no such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its shareholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option
-8-
<PAGE> 9
theretofore granted which adversely affects the rights of any participant. To
the extent necessary to comply with Section 423 of the Code (or any successor
rule or provision or any other applicable law, regulation or stock exchange
rule), the Company shall obtain shareholder approval in such a manner and to
such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering Period
ends on a new Exercise Date, including an Offering Period underway at the time
of the Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
-9-
<PAGE> 10
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
-10-
<PAGE> 11
EXHIBIT A
EXTENSITY, INC.
EMPLOYEE STOCK PURCHASE PLAN 2000
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the Extensity, Inc.
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and
subscribes to purchase shares of the Company's Common Stock in accordance
with this Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to 15%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at the
time such shares were purchased by me over the price which I paid for the
shares. I hereby agree to notify the Company in writing within 30 days
after the date of any disposition of my shares and I will make adequate
provision for Federal, state or other tax withholding obligations, if any,
which arise upon the
-11-
<PAGE> 12
disposition of the Common Stock. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period. The remainder
of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)_____________________________________________________
(First) (Middle) (Last)
_________________________ ___________________________________________
Relationship
___________________________________________
(Address)
-2-
<PAGE> 13
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ____________________________________________
Signature of Employee
____________________________________________
Spouse's Signature (If beneficiary other
than spouse)
-3-
<PAGE> 14
EXHIBIT B
EXTENSITY, INC.
EMPLOYEE STOCK PURCHASE PLAN 2000
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Extensity, Inc.
Employee Stock Purchase Plan 2000 which began on ____________, ______ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:___________________________
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated November 5, 1999,
relating to the consolidated financial statements of Extensity, Inc., which
appears in such prospectus. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
San Jose, California
November 12, 1999
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<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 DEC-31-1998
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43,648 21,269
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<CGS> 145 90
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<OTHER-EXPENSES> 15,827 10,496
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<INTEREST-EXPENSE> (19) (28)
<INCOME-PRETAX> (14,976) (10,985)
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<INCOME-CONTINUING> (14,976) (10,985)
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<NET-INCOME> (14,976) (10,985)
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