<PAGE>
As filed with the Securities and Exchange Commission on March 2, 2000
Registration No. 333-92461
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 4 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
PRIME RESPONSE, INC.
(Exact name of registrant as specified in its charter)
------------------
<TABLE>
<S> <C> <C>
Delaware 7372 13-3972166
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification Number)
Incorporation or
Organization)
</TABLE>
150 CambridgePark Drive
Cambridge, Massachusetts 02140
(617) 876-8300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------
Peter J. Boni
President and Chief Executive Officer
Prime Response, Inc.
150 CambridgePark Drive
Cambridge, Massachusetts 02140
(617) 876-8300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------
Copies to:
<TABLE>
<S> <C>
John A. Burgess, Esq. Mark H. Burnett, Esq.
Peter B. Tarr, Esq. Kathy A. Fields, Esq.
Hale and Dorr LLP Testa, Hurwitz & Thibeault, LLP
60 State Street 125 High Street
Boston, Massachusetts 02109 Boston, Massachusetts 02110
Telephone: (617) 526-6000 Telephone: (617) 248-7000
Telecopy: (617) 526-5000 Telecopy: (617) 248-7100
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date hereof.
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,
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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.[_]
------------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered be Registered(1) per Share(2) Offering Price(2) Registration Fee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value...................... 4,025,000 shares $15.00 $60,375,000 $15,939.00
Paid previously............. $13,813.80
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Paid with this filing....... $2,125.20
</TABLE>
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(1) Includes 525,000 shares which the underwriters have the option to
purchase from the registration to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of
1933.
------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment 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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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 2, 2000
[LOGO OF PRIME RESPONSE]
3,500,000 Shares
Common Stock
Prime Response, Inc. is offering 3,500,000 shares of its common stock. This
is our initial public offering and no public market currently exists for our
shares. We have applied for approval for quotation on the Nasdaq National
Market under the symbol "PRME" for the shares we are offering. We have also
applied to list the shares we are offering on EASDAQ under the symbol "PRME."
We anticipate that the initial public offering price will be between $13.00 and
$15.00 per share.
--------------
Investing in the common stock involves risks.
See "Risk Factors" beginning on page 5.
--------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price........................................... $ $
Underwriting Discounts and Commissions.......................... $ $
Proceeds to Prime Response, Inc................................. $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
Prime Response has granted the underwriters a 30-day option to purchase up to
an additional 525,000 shares of common stock to cover over-allotments.
--------------
Robertson Stephens
Dain Rauscher Wessels
SG Cowen
DLJdirect Inc.
The date of this Prospectus is , 2000.
<PAGE>
[Insert Graphics, inside cover]
[email protected], the name of our principal product, followed by:
[email protected] is a Web-based, multi-channel marketing solution that
integrates Internet channels - such as e-mail and the Web - with traditional
marketing channels like direct mail, call centers, direct sales systems and
mass marketing advertising.
Underneath this description is a two tone wheel the center of which contains
the product name [email protected](TM) and the perimeter of which contains the
following words: Point of Sale; Call Center; Direct Mail; Web; Sales
Automation Systems; Retail/Branch; E-mail; Mass Market and Advertising, each
of which is attached to the center by circular arrows. The perimeter circle is
surrounded by descriptions of the various product functions. These functions
are: Compiles real time customer behavioral data from various media channels;
dedicated support, flexibility and scalability; collects data to create
personalized web pages; automated e-mail marketing; act fast to launch
personalized marketing campaigns in various media.
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock. In this prospectus, "Prime
Response," "we," "us" and "our" refer to Prime Response, Inc. (formerly Prime
Response Group Inc.) together with its wholly owned subsidiaries Prime Response
U.S., Inc., Prime Response Limited, Prime Response Pty. Ltd. and Prime Response
SARL (unless the context otherwise requires).
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 5
Note Regarding Forward-Looking Statements................................ 15
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 19
Selected Consolidated Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 22
Business................................................................. 34
Management............................................................... 47
Certain Transactions..................................................... 56
Principal Stockholders................................................... 59
Description of Capital Stock............................................. 61
Shares Eligible for Future Sale.......................................... 63
Underwriting............................................................. 65
Material United States Federal Tax Consequences for Non-U.S. Holders..... 68
EASDAQ Information....................................................... 70
Legal Matters............................................................ 73
Experts.................................................................. 73
Where You Can Find More Information...................................... 73
Index to Financial Statements............................................ F-1
</TABLE>
---------------------
Prime Response, Prime Vantage, Vantage, Prime-Response.com and Prime-
Vantage.com are trademarks of Prime Response. All other trademarks and trade
names used in the prospectus are the property of their respective owners.
<PAGE>
SUMMARY
You should read the following summary together with the more detailed
information in this prospectus, including risk factors, regarding our company
and the common stock being sold in this offering.
Our Company
We develop and sell advanced software solutions that permit a company to
promote its products or services over both the Internet and more traditional
marketing channels on an automated and integrated basis. Our solutions enable
businesses with large numbers of customers to create, manage and execute
targeted Internet and traditional marketing campaigns to build more loyal and
profitable customer relationships. We have drawn on over twelve years of
experience in the design, implementation and management of marketing campaigns
to develop products that draw on all of the business's data regarding its
customers, including information generated by its sales, marketing, service and
accounting organizations, to formulate highly targeted marketing campaigns. Our
products are designed to permit clients to more effectively market and sell to
their customers by delivering highly personalized marketing messages over a
customer's marketing channel, whether it is the Internet, or traditional
channels such as direct mail or radio and television advertising.
Using our products, business are able to:
. lower the cost of acquiring and retaining customers;
. focus marketing efforts on their most profitable customers;
. optimize the use of marketing channels based on customer preferences;
. increase customer retention and loyalty; and
. maximize their lifetime value of customers through more effective cross
selling.
Our latest product offerings, Prime@Vantage and [email protected], which
were released in December 1999, provide clients with a web-based, multi-channel
marketing solution. Using [email protected], our clients are able to create and
manage comprehensive marketing campaigns that utilize inbound and outbound e-
mail, customized website content, banner advertising and other internet
advertising, along with more traditional direct and indirect marketing
techniques, to develop and deploy immediate, personalized marketing messages to
existing and potential customers.
We focus on key vertical industries that have a critical need for advanced
marketing management solutions, including communications and media, financial
services and retail and e-commerce. Our clients include Fortune 1000 businesses
as well as leading e-commerce businesses. Today, more than 70 clients use our
products to manage millions of customer relationships. Our clients include
leaders in communications and media, including Air Touch and Media One, in the
financial services industry, such as Deutsche Bank and the Royal Bank of
Scotland, in retail and e-commerce, including Boots and CVS, as well as such
other major enterprises as British Airways and Dell Computer. We utilize our
direct sales force and key industry partners such as Andersen Consulting, NCR
and SAS Institute to sell and market our products.
We were founded in 1987 in the United Kingdom. Prior to 1999, our corporate
headquarters were located in London, and our primary focus was on the European
market. In 1998, we began to increasingly target the United States market, and
in July 1999, moved our corporate headquarters to Cambridge, Massachusetts. Our
strategy is to become a leading supplier of integrated eMarketing solutions by
building on our position in Europe, rapidly expanding our presence in the
United States and other key markets, continuing to grow our direct sales force
and expanding our strategic marketing relationships.
1
<PAGE>
Our Address
Prime Response's principal executive offices are located at 150
CambridgePark Drive, Cambridge, Massachusetts 02140 and our telephone number at
that location is (617) 876-8300. Our website is located at
www.primeresponse.com. Information contained in our website is not part of this
prospectus.
--------------------
The Offering
<TABLE>
<C> <S>
Common stock offered............................ 3,500,000 shares
Common stock outstanding after the offering..... 19,828,002 shares
Use of proceeds................................. An aggregate of approximately
$10.4 million of the net
proceeds will be paid to some
holders of series B preferred
stock upon the closing of
this offering in accordance
with the terms of the
preferred stock,
approximately $4.3 million
will be used to pay a
promissory note to be issued
to one of our stockholders,
and the remaining net
proceeds will be used to
expand our United States
operations and to fund
continued growth and
expansion of our business,
product development,
potential acquisitions and
other general corporate
purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol.......... PRME
Proposed EASDAQ symbol.......................... PRME
</TABLE>
--------------------
Common stock outstanding after the offering is based on the number of
shares outstanding as of December 31, 1999, and except as otherwise noted, all
information in this prospectus:
. reflects the issuance of 251,538 shares of common stock upon exercise
of warrants at $0.0133 per share immediately prior to the completion of
this offering;
. reflects the automatic conversion of all of our outstanding shares of
preferred stock into an aggregate of 6,323,867 shares of common stock
upon completion of this offering;
. reflects the conversion of 427,807 shares of redeemable common stock
into common stock upon completion of this offering;
. reflects the issuance of an aggregate of 2,871,284 shares of common
stock to holders of the preferred stock upon completion of this
offering in payment of accrued dividends and as required by other terms
of the preferred stock and assumes the closing of this offering on
March 7, 2000 (includes 29,801 shares of common stock issued for
dividends accrued in the period January 1, 2000 through March 7, 2000);
. reflects the exercise of the option to repurchase 1,249,500 shares of
redeemable common stock from a principal shareholder at $3.42 per share
upon completion of this offering;
. excludes 3,600,000 shares issuable under our 1998 stock option Stock
Issuance Plan and upon the exercise of outstanding warrants, for
additional information regarding these shares. Please see
"Capitalization.";
. reflects a three-for-four reverse stock split of all of our outstanding
shares of common stock which was effected on February 2, 2000; and
. assumes no exercise of the underwriters' over-allotment option.
2
<PAGE>
Summary Consolidated Financial Data
(dollars in thousands, except per share data)
Set forth below are summary consolidated statements of operations data for
the years ended December 31, 1997, 1998 and 1999. Also set forth below are
summary consolidated balance sheet data as of December 31, 1999, which were
prepared as follows:
. on an actual basis, without any adjustments to reflect subsequent
events or anticipated events;
. on a pro forma basis to reflect the following:
. automatic conversion of all outstanding shares of preferred stock
into an aggregate of 6,323,867 shares of common stock;
. reflects the conversion of 427,807 shares of redeemable common
stock into common stock upon completion of this offering;
. issuance of an aggregate of 2,841,483 shares of common stock to
holders of the preferred stock in payment of accrued dividends and
participation feature and an aggregate cash payment of $10.3
million to some holders of preferred stock; and
. on a pro forma as adjusted basis to reflect the following:
. issuance of 251,538 shares of common stock upon the exercise of
warrants at $0.0133 per share immediately prior to the completion
of this offering;
. sale of the 3,500,000 shares of common stock offered by us in this
offering and our receipt of the estimated net proceeds, after
deducting the estimated underwriting discounts and commissions and
the estimated offering expenses that we expect to pay in connection
with this offering;
. accretion of preferred stock dividends of approximately $497,000
from January 1, 2000 through March 7, 2000 which will be paid in a
cash payment of approximately $140,000 and 29,801 shares of common
stock; and
. exercise of option to repurchase 1,249,500 shares of redeemable
common stock from a principal shareholder at $3.42 per share.
3
<PAGE>
This information should be read in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1997 1998 1999
------- -------- --------
(in thousands, except per
share data)
<S> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenues:
Software licenses................................ $ 2,933 $ 8,495 $ 10,134
Services and support............................. 2,495 4,214 6,519
Applications hosting............................. 4,754 3,827 3,869
------- -------- --------
Total revenues.................................. 10,182 16,536 20,522
Net loss.......................................... (2,245) (14,603) (20,419)
Preferred stock dividends and recognition of
beneficial conversion feature on preferred
stock........................................... (607) (2,015) (5,034)
------- -------- --------
Net loss attributable to common
stockholders.................................... $(2,852) $(16,618) $(25,453)
Net loss per share--basic and diluted............. $ (2.43) $ (2.36) $ (3.44)
Weighted average shares used in computing basic
and diluted net loss per share.................. 1,173 7,035 7,405
Unaudited pro forma net loss per share--basic and
diluted......................................... $ (1.71)
Shares used in computing unaudited pro forma basic
and diluted net loss per share.................. 14,906
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------
Pro Pro Forma
Actual Forma As Adjusted
-------- -------- -----------
(unaudited)
(in thousands)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents..................... $ 3,999 $ -- $39,123
Working capital............................... (1,280) (11,589) 28,238
Total assets.................................. 25,515 21,516 59,934
Short-term and long-term debt and capital
lease obligations........................... 2,600 2,600 6,873
Redeemable convertible preferred stock and
redeemable common stock..................... 51,371 4,275 --
Stockholders' equity (deficit)................ (44,496) (7,709) 36,395
</TABLE>
4
<PAGE>
RISK FACTORS
You should carefully consider the following risks before making an
investment decision. The risks described below are not the only ones that we
face. Additional risks that are not yet identified or that we currently think
are immaterial may also impair our business operations. Our business,
operating results and financial condition could be adversely affected by any
of the following risks. The trading price of our common stock could decline
due to any of these risks, and you could lose all or part of your investment.
You should also refer to the other information set forth in this prospectus,
including our financial statements and the related notes.
Risk Related To Our Business
We have incurred substantial operating losses, and we may not be profitable in
the future.
In 1995, we began to transition from a marketing database service bureau
to a software company. Since that time, we have incurred substantial operating
losses. We cannot be certain if or when we will become profitable. Failure to
achieve profitability within the timeframe expected by investors or to
maintain profitability may adversely affect the market price of our common
stock. At December 31, 1999, we had an accumulated deficit of $46.1 million
and negative equity of $44.5 million. In recent periods, we have increased
expenditures in certain areas, particularly in sales and marketing in the
United States and in product development. We expect our sales and marketing
expenses to continue to increase. As a result, we expect to incur net losses
and negative operating cash flow for the foreseeable future. Although we have
experienced revenue growth in recent periods, we cannot be certain that these
growth rates are sustainable, or that we will ever generate revenues at a
level sufficient to cover our anticipated expenses, if at all.
Our independent accountants have included in their report an explanatory
paragraph relating to our ability to continue as a going concern. This
explanatory paragraph includes the following language: "The accompanying
financial statements have been prepared assuming that the Company will
continue as a going concern. The Company has incurred losses and negative cash
flows from operations since its reorganization in 1997, which raise
substantial doubt about the Company's ability to continue as a going concern."
We cannot be certain that we will be able to continue as a going concern. The
report of our independent accountants on our financial statements for the year
ending December 31, 2000 may also contain an explanatory paragraph relating to
our ability to continue as a going concern.
Our quarterly operating results may fluctuate because we depend on a small
number of large orders.
We derive a significant portion of our software license revenues in each
quarter from a small number of relatively large orders. The criteria for a
client's acceptance of a product may delay our ability to recognize revenue
from the products we ship. Our operating results for a particular fiscal
period could be materially adversely affected if we are unable to complete
those transactions, or satisfy our clients' acceptance criteria, on schedule
at anticipated levels.
Disappointing quarterly revenues or operating results could cause the price of
our common stock to fall.
Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter. Therefore, you should not
rely on period-to-period comparisons of revenues or results of operations as
an indication of future performance. If our quarterly revenues or operating
results fall below the expectations of investors or securities analysts, the
price of our common stock could fall substantially.
Our quarterly license revenues may fluctuate as a result of a variety of
factors, including the following:
. software license revenues in any quarter depend on contracts closed,
orders shipped and the satisfaction of clients' acceptance criteria in
that quarter;
. the market in which we compete is relatively new and rapidly evolving;
. we expect that, for the foreseeable future, revenues will come from
licenses to a small number of clients, so delays, cancellations of
orders, or acceptance of our software by a few clients can
significantly impact revenues within a quarter;
5
<PAGE>
. our sales cycle is relatively long; and
. revenues will be affected by the timing of introduction of new
products or product enhancements by us or our competitors.
Any decline in license revenues could also cause a decline in our services
and support revenues in the same quarter or in subsequent quarters.
Seasonal trends may cause our quarterly operating results to fluctuate, which
may adversely affect the market price of our common stock.
In the future, we may experience seasonality in our business, particularly
because we do a significant percentage of our business in Europe, which
typically experiences a slowdown in business during August, and because our
products typically involve a significant initial investment, the availability
of which is often dependent on a client's fiscal period. Accordingly, we may
generate lower revenues during the summer months and higher revenues during the
calender year-end months. If we do experience these revenue fluctuations,
market analysts and investors may not be able to predict our quarterly or
annual operating results, and if we fail to meet expectations of market
analysts or investors, the price of our common stock could decline.
Our results of operations would be adversely affected if our investments in
personnel and infrastructure do not correspond with the timing of revenue
generated as a result of such investments.
Most of our expenses, such as employee compensation, sales and marketing
expenses, computer equipment costs and rent for properties, are either
relatively fixed in the short term or incurred in advance of sales. Moreover,
our expense levels are based in part on our expectations regarding future
revenues. As a result, if revenues for a particular quarter are below
expectations, we will most likely not be able to proportionately reduce
operating expenses for that quarter. Therefore, a shortfall in revenues would
have a disproportionate effect on our expected operating results for that
quarter and could cause the trading price of our common stock to decline.
We may incur charges against our earnings which could have an adverse impact on
our results of operations.
We have issued warrants which become exercisable upon the attainment of
certain revenue targets and market capitalization levels. Because we cannot
predict if and when these targets will be attained, we cannot predict when
charges to expenses related to these warrants will be incurred. Furthermore,
the amount of these charges will depend on the price of our common stock when
the warrants are earned.
We are releasing a new product family and are dependent on its market
acceptance.
We have released the latest generation of our marketing management
solutions--Prime@Vantage, which introduces a new software architecture, and
[email protected], which introduces new functionality, including the ability to
generate immediate and personalized marketing initiatives over the internet.
Achievement of our overall business goals is dependent upon the sustained
market acceptance at desired pricing levels of these new products. If these
products do not achieve and sustain market acceptance due to bugs, a lack of
functionality considered important in the marketplace, or any other reason, we
will experience a material adverse effect on our business, prospects, operating
results and financial condition.
Our management team may not successfully implement our business strategy
because it has only recently begun to work together.
Only two members of our senior management team in the United States were
employed with us before January 1, 1999. Members of our senior management team
in the United States have worked together, and with members of our senior
management outside the United States, for only a short period of time. They may
not work together successfully and may be unable to implement our growth plans
in the United States or elsewhere.
6
<PAGE>
Our failure to increase our United States revenues and operations would
adversely affect our operating results and financial condition.
Although to date a significant portion of our revenues have been derived
from our international operations, and the growth of such revenues will remain
an important factor to the successful growth of our business, we believe that
we must continue to expand our marketing and sales activities, product and
service offerings and operations in the United States in order to achieve and
maintain profitability. Our failure to effectively manage expansion in the
United States could have a material adverse effect on the delivery of our
products and services, our ability to attract and retain key personnel and our
business operations and prospects.
We may not be able to continue to develop new products or enhance existing
products on a timely basis.
To be competitive, we must continue to develop and introduce on a timely
basis new products and product enhancements. Our failure to develop and
introduce new products and enhancements successfully and on a timely basis, or
the failure of new products to achieve and sustain market acceptance, could
have a material adverse effect on our business, prospects, operating results
and financial condition. We are obligated under a limited number of client
contracts to deliver new products or product enhancements by specified dates,
and failure to do so could result in the loss of one or more of those clients
or expose us to contractual liability. We have in the past encountered
circumstances that made it impractical to provide required enhancements to a
customer, and we may be unable to do so on future occasions.
Our sales cycle is relatively long and difficult to predict.
The decision by a prospective client to purchase our products frequently
involves several functional departments within its business. In addition, the
purchase and implementation of our products typically involve a significant
cost to our clients, including training and integration costs. These
implementations can also include a substantial commitment of resources by our
clients or their consultants over an extended period of time. As a result, our
sales cycle generally ranges from three to nine months, with our average sales
cycle lasting approximately six months. Consequently, the relatively long and
unpredictable nature of our sales cycle makes it difficult to predict our
revenues.
Intense competition may adversely affect our financial condition and operating
results.
The market for internet-based integrated eMarketing solutions is becoming
intensely competitive. If we are unable to compete effectively, our business,
prospects, financial condition and operating results would be materially
adversely affected. Some of our current and potential competitors have greater
name recognition and substantially greater financial, technical, marketing,
management, service, support and other resources than we do. Therefore, they
may be able to respond more quickly than we can to new or changing
opportunities, technologies, standards, or client requirements.
In addition, we expect that new competitors will enter the market with
competing products as the size and visibility of the market opportunity
increases. We also expect that competition will increase as a result of
consolidations and formations of alliances among industry participants.
Increased competition could result in pricing pressures, reduced margins, and
failure of our products to achieve or maintain market acceptance.
We depend on a few industries for most of our sales, and we may not continue to
be successful in those markets and in expanding beyond those limited markets.
A substantial portion of our revenues have been derived from sales to
communications and media businesses, financial institutions, and retail and e-
commerce businesses. In order to reach and maintain profitability, we must
continue to succeed in these markets. We may not be successful in doing so. In
addition, we must expand the number of markets we address in order for our
business to grow as planned, and we may not be successful in doing so.
7
<PAGE>
If we are unable to manage our growth and the related expansion in our
operations effectively, our business may be harmed.
Our ability to successfully offer products and services and implement our
business plan in a rapidly evolving market requires effective planning and
management. Our growth has placed, and our anticipated future operations will
continue to place, a significant strain on our management, information systems,
network and other resources. To manage future growth effectively, we must
continue to improve our financial and accounting systems and controls, enhance
our reporting systems and procedures, integrate new personnel and manage
expanded operations. We will also need to hire additional personnel and we may
be unable to recruit qualified employees as needed.
We are largely dependent on our international operations.
In addition to our presence in the United States, we have offices in five
other countries and customers in more than 19 other countries. In the year
ended December 31, 1999, 83.0% of our total revenues resulted from sales
outside the United States, reflecting our historical presence in the United
Kingdom and elsewhere in Europe. Although we believe that we must increase our
operations in the United States to reach and maintain profitability, we must
also continue to expand our sales in international markets for our business to
grow as planned. This may require us to establish additional international
operations and hire additional personnel. Our failure to do so in a timely and
effective manner would have a material adverse effect on our business,
prospects, financial condition and operating results. Our operations and our
plans to expand internationally may be affected by a number of risks,
including:
. challenges inherent in managing geographically dispersed operations;
. the need to develop local distribution channels through third parties;
. multiple, conflicting and changing governmental laws and regulations;
and
. foreign currency exchange rate fluctuations.
Our failure to expand our direct sales force would impede our revenue growth
and financial condition.
To increase our revenues, we must increase the size of our direct sales
force. It can take a considerable amount of time to hire, train and integrate
new sales personnel. In addition, there is intense competition for qualified
sales personnel. We may not be successful in attracting, integrating,
motivating or retaining qualified personnel for these positions on a timely
basis or at all. A failure to do so would have a material adverse effect on our
business and operating results.
Failure to expand our relationships with consulting firms and systems
integrators would impede acceptance of our products and growth of our revenues.
Consultants, systems integrators, and service providers who recommend,
install and support our products with their customers are a major source of our
sales. To increase our revenues and implementation capabilities, we must
continue to develop and expand relationships with consultants, systems
integrators, service providers and other potential industry partners. A failure
to do so would have a material adverse effect on our ability to generate
increased revenues. Consultants, systems integrators and service providers may
market or recommend products that compete with ours. Moreover, if these firms
fail to implement our products successfully for their clients, we may not have
the resources to implement our products on the schedule required by the client,
which could have a material adverse effect on our ability to generate increased
revenues.
Our business will be adversely affected if internet solutions are not widely
adopted.
Because one of our new products addresses, among other markets, the
emerging market for internet marketing solutions, our future success depends in
part upon the widespread adoption of the internet as a primary medium for
commerce and business applications. The failure of this market to develop, or a
delay in
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<PAGE>
the development of this market, would have a material adverse effect on our
business, financial condition and operating results. The internet has
experienced, and is expected to continue to experience, significant user and
traffic growth, which has, at times, caused user frustration with slow access
and download times. The internet infrastructure may not be able to support the
demands placed on it by the continued growth upon which our success in part
depends. Moreover, critical issues concerning the commercial use of the
internet, such as security, reliability, cost, accessibility, taxation of e-
commerce and quality of service, remain unresolved and may negatively affect
the growth of internet use or the attractiveness of commerce and business
communication over the internet. In addition, the internet could suffer
declines in its viability due to delays in the development or adoption of new
standards and protocols to handle increased activity or due to increased
government regulation and taxation of internet commerce.
Our revenues might be harmed by a resistance to adopt our software by internal
information technology departments.
Some businesses may have already made a substantial investment in other
third-party or internally developed software designed to integrate data from
disparate sources and analyze this data or manage marketing campaigns. These
businesses may be reluctant to abandon these investments in favor of our
software. In addition, information technology departments of potential clients
may resist purchasing our software for a variety of other reasons, particularly
the potential displacement of their historical role in creating and running
software and concerns that packaged software products are not sufficiently
customizable for their enterprises. If the demand for our products does not
grow for any of these reasons, our revenues may be harmed.
If our security system is breached, our business and reputation could suffer.
We must securely receive and transmit confidential information over public
networks and maintain that information on internal systems. Our failure to
prevent security breaches could damage our reputation, expose us to risk of
loss or liability, result in a loss of our clients and adversely affect our
ability to obtain new clients. Although we have implemented network security
measures, our servers are vulnerable to computer viruses, which could lead to
interruptions, delays or loss of data. We may be required to expend significant
capital and other resources to license encryption technology and additional
technologies to protect against security breaches or to alleviate problems
caused by any breach.
If the delivery of our e-mails is limited or blocked, then our clients may
discontinue the use of our products thereby reducing demand for our products.
Our business model relies on our ability to deliver e-mails to recipients
over the internet through internet service providers, commonly referred to as
ISPs, and to recipients in major corporations. America Online and other ISPs
are able to block unwanted messages to their users. In addition, certain
currently available internet browsers allow users to modify their browser
settings to return unwanted e-mails. If these companies or individual users
limit or halt the delivery of our e-mails, demand for our products could
decrease which would have a material adverse affect on our business.
Our failure to operate our professional services organization at a profit would
adversely affect our financial condition.
Our failure to operate our professional services organization at a profit
would have a material adverse effect on our operating results and financial
condition. To gain initial acceptance of our products by clients in our
targeted industries, we may elect on occasion to assist customers with the
implementation of our products at a loss. In the past, our cost of services
revenues have been significantly higher than our services revenues. We cannot
be certain that our professional services organization will achieve or sustain
profitability.
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Loss of key personnel could adversely affect our business.
Our future success depends to a significant degree on the skills,
experience and efforts of James Carling, our founder and Chief Technology
Officer, Peter J. Boni, our President and Chief Executive Officer, Allen Swann,
our President, International, Paul Lavallee, our President, Americas, and
Frederick Phillips, our Chief Financial Officer. The loss of the services of
any of these individuals could have a material adverse effect on us. We also
depend on the ability of our executive officers and other members of senior
management to work effectively as a team. The loss of one or more of our
executive officers and other members of senior management could have a material
adverse effect on us. Many of our executive officers, members of senior
management or other employees are not subject to an agreement that prohibits
them from competing with us after the termination of their employment with us.
We do not maintain "key man" insurance on any of our executive officers or
senior management personnel.
We may be unable to hire and retain the skilled personnel we need to succeed.
Qualified personnel are in great demand throughout the software industry.
Our success depends in large part upon our ability to attract, train, motivate
and retain highly skilled employees, particularly sales and marketing personnel
and other senior personnel. Our failure to attract and retain the highly-
trained technical personnel that are integral to our product development,
professional services and support teams may limit the rate at which we can
develop new products or product enhancements. This could have a material
adverse effect on our business, prospects, operating results and financial
condition.
We may be unable to protect our proprietary technology rights.
Our success depends to a significant degree upon the protection of our
software and other proprietary technology rights. We rely on trade secret,
copyright and trademark laws and confidentiality agreements with employees and
third parties, all of which offer only limited protection. Moreover, the laws
of the countries in which we develop and market our products may afford little
or no effective protection of our proprietary technology. The reverse
engineering, unauthorized copying or other misappropriation of our proprietary
technology could enable third parties to benefit from our technology without
paying us for it. This could have a material adverse effect on us. Legal
proceedings to enforce our intellectual property rights could divert the time
and attention of management, be expensive and involve uncertainty of success.
Claims by other companies that our products infringe their proprietary rights,
copyrights or patents could adversely affect our financial condition.
If any of our products are alleged to violate third-party proprietary
rights, we may be required to reengineer our products or seek to obtain
licenses from third parties to continue offering our products without
substantial reengineering. Any efforts to reengineer our products or obtain
licenses from third parties may be unsuccessful and, in any case, could
substantially increase our costs and have a material adverse effect on us. We
do not conduct comprehensive patent searches to determine whether the
technology used in our products infringes patents held by third parties. In
addition, product development is inherently uncertain in a rapidly evolving
technological environment in which there may be numerous patent applications
pending, many of which are confidential when filed, with regard to similar
technologies.
Claims by other companies that our names infringe their proprietary rights
could adversely affect our financial condition.
Third parties have claimed, and may in the future claim, that our company
name or our product names violate their trademark or trade name rights. We have
applied for registration of some of our trademarks in the United States, Canada
and the European Community but have not yet received any approvals. Our use of
the names Prime Response, Prime@Vantage and [email protected], as well as the
use of other names, may result in costly litigation, divert management's
attention and resources, cause product shipment delays, or require us to pay
damages or to enter into royalty or license agreements. We may be required to
stop using
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certain names currently used for our products. Any of these events could have a
material adverse effect on our business, prospects, operating results and
financial condition.
Our business could be adversely affected if our products fail to perform
properly.
Software products as complex as ours may contain undetected errors, or
bugs, which result in product failures, or otherwise fail to perform in
accordance with client expectations. Our products may be particularly
susceptible to bugs or performance degradation because of the emerging nature
of internet technologies and the stress that may be placed on our products by
the full deployment of our products over the internet. Product performance
problems could result in loss of or delay in revenues, loss of market share,
failure to achieve market acceptance, diversion of development resources, or
injury to our reputation, any of which could have a material adverse effect on
our business, prospects, operating results and financial condition.
We could incur substantial costs as a result of product liability claims
relating to our clients' marketing efforts.
Our products may be critical to our clients' marketing efforts. If one of
our products fails, a client may assert a claim for substantial damages against
us, regardless of our responsibilities for such failure. Although our form of
license agreement contains provisions limiting liability, product liability
claims could require us to spend significant time and money in litigation or to
pay significant damages. There can be no assurance that our product liability,
errors and commissions or general liability insurance will prove sufficient to
cover one or more large claims, or that the insurer will not disclaim coverage
as to any future claim.
We may be affected by Year 2000 technology problems.
Many existing computer systems and software products do not properly
recognize dates after December 31, 1999. As a result, many companies' software
and computer systems may need to be upgraded or replaced to become Year 2000
compliant. In addition, despite the fact that many computer systems are
currently processing 21st century dates correctly, these companies, including
us, could experience latent Year 2000 problems.
Changing purchasing patterns of clients impacted by Year 2000 issues or
Year 2000 concerns may result in reduced resources available for purchases of
integrated eMarketing solutions. In addition, there can be no assurance that
Year 2000 errors or defects will not be discovered in our products or in our
internal software systems. If such errors or defects are discovered, the cost
of making such systems Year 2000 compliant could be material.
Year 2000 errors or defects in the internal systems maintained by our
vendors could require us to incur significant unanticipated expenses to remedy
any problems or replace affected vendors. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000 Readiness
Disclosure."
Acquisitions could cause financial or operational problems.
Our success depends on our ability to continually enhance and broaden our
product offerings in response to changing technologies, customer demands and
competitive pressures. To this end, we may choose to acquire new and
complementary businesses, products, or technologies instead of developing them
ourselves. We may face competition for acquisition targets from larger and more
established companies with greater financial resources, making it more
difficult for us to complete acquisitions. We do not know if we will be able to
complete any acquisitions, or whether we will be able to successfully integrate
any acquired business, operate it profitably or retain its key employees.
Integrating any business, product or technology we acquire could be expensive
and time-consuming, could disrupt our ongoing business and could distract our
management. In addition, in order to finance any acquisitions, we might need to
raise additional funds through public or private equity or debt financings. In
that event, we could be forced to obtain financing on terms that are not
favorable
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to us and, ultimately, our stockholders. Specifically, in the case of an equity
financing, the issuance of additional stock would result in dilution to our
stockholders, and in the case of a debt financing, we may be forced to accept
restrictions on our ability to incur additional debt, make prepayments on
certain indebtedness, make acquisitions and other investments, issue additional
capital stock and engage in mergers and consolidations, all of which could
impede our long term plans for expansion and on our ability to pay dividends to
our stockholders. If we are unable to integrate any acquired entities, products
or technologies effectively, our business, financial condition and operating
results will suffer. In addition, any amortization of goodwill or other assets
or charges resulting from the costs of acquisitions could harm our business and
operating results.
Our business is subject to government regulation of the internet and other
legal uncertainties, which could negatively impact our operations.
Laws and regulations directly applicable to communications or commerce over
the internet are becoming more prevalent. The United States Congress recently
enacted internet laws regarding privacy, copyrights, taxation and other
matters. In addition, the European Union recently enacted privacy regulations.
The laws governing the use of the internet, however, remain largely unsettled,
even in areas where there has been some legislative action. It may take years
to determine whether and how existing laws such as those governing intellectual
property, privacy, libel and taxation apply to the internet. In addition, the
growth and development of the market for online commerce may prompt calls for
more stringent consumer protection laws, both in the United States and abroad,
that may impose additional burdens on companies conducting business online. The
adoption or modification of laws or regulations relating to the internet could
adversely affect our business. In particular, new regulations affecting the use
of unsolicited e-mail advertising would impair our clients' marketing efforts
and could reduce the demand for our products.
Privacy concerns and legislation may limit the information our clients can
gather, which could reduce the demand for our products.
Privacy concerns may cause website visitors to resist providing personal
data or avoid websites that track the internet behavioral information necessary
to support online profiling capabilities. Even the perception of security or
privacy concerns, whether or not valid, may have a similar effect. The European
Union recently adopted a directive addressing data privacy that may limit the
collection and use of certain information regarding internet users. This
directive may limit our clients' ability to target advertising or collect and
use information in certain European countries. In addition, legislative or
regulatory requirements may heighten these concerns if businesses must notify
website users that the data captured after visiting their websites may be used
to direct product promotion and advertising to that user. Other countries and
political entities, such as the European Union, have adopted these types of
restrictions. The United States may adopt similar legislation or regulatory
requirements. If privacy legislation is enacted or consumer privacy concerns
are not adequately addressed, our business, prospects, financial condition and
operating results could be harmed.
Websites typically use bits of information keyed to a specific server, file
pathway or directory location, commonly referred to as "cookies," which are
placed on a customer's hard drive, possibly without the customer's knowledge or
consent, to track demographic information and target advertising. Our clients
may use cookies for a variety of reasons, including the collection of data
derived from the customer's internet activity. Most currently available
internet browsers allow our clients' customers to remove cookies at any time or
to prevent cookies from being stored on their hard drives. In addition, some
commentators, privacy advocates and governmental bodies have suggested limiting
or eliminating the use of cookies. Any reduction or limitation in the use of
cookies could limit the effectiveness of our clients' sales and marketing
efforts. The Federal Trade Commission and several states are investigating the
use by internet companies of personal information. New regulations regarding
the use of personal information could adversely impact the demand for our
products.
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Risks Associated with This Offering of Our Common Stock
The price of our common stock after this offering may be lower than the price
you pay.
The price of our common stock that will prevail in the market after this
offering may be lower than the price you pay. Prior to this offering, there has
been no public market for our common stock. After this offering, an active
trading market in our stock might not develop or continue. If you purchase
shares of our common stock in this offering, you will pay a price that was not
established in a competitive market. Rather, you will pay a price that we
negotiated with the representatives of the underwriters based upon several
factors. See "Underwriting."
Our common stock is particularly subject to volatility because of our industry.
The stock market in general has recently experienced extreme price and
volume fluctuations. In addition, the market prices of securities of technology
companies, particularly internet-related companies, have been extremely
volatile, and have experienced fluctuations that have often been unrelated or
disproportionate to the operating performance of such companies. These broad
market fluctuations could adversely affect the market price of our common
stock.
We could be subject to class action litigation due to stock price volatility,
which, if it occurs, will distract our management and could result in
substantial costs or large judgments against us.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market prices of their
securities. We may be the target of similar litigation in the future.
Securities litigation could result in substantial costs and divert our
management's attention and resources, which could cause serious harm to our
business, operating results and financial condition or dilution to our
stockholders.
The significant control over stockholder voting matters that may be exercised
by our executive officers and directors will deprive you of the ability to
influence corporate actions.
After this offering, our executive officers and directors and their
affiliates will together control 15,836,306 shares or approximately 79.1% of
the outstanding common stock. As a result, these stockholders, if they act
together, will be able to control all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. This concentration of ownership may have the effect of delaying,
preventing or deterring a change in control of Prime Response, could deprive
our stockholders of an opportunity to receive a premium for their common stock
as part of a sale of Prime Response and might affect the market price of our
common stock.
We plan to adopt anti-takeover provisions that could affect the market price of
our common stock or our ability to sell our business.
Certain provisions of our amended and restated certificate of incorporation
and our by-laws, which will be in effect upon the closing of this offering,
could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. In addition, certain provisions of
Delaware law may also have the effect of discouraging, delaying or preventing a
sale.
Our existing stockholders will receive a substantial benefit from this
offering.
Our preferred stock will convert into common stock and holders of our
preferred stock will receive either common stock or cash in payment of
liquidation preferences and accrued dividends. Pursuant to the terms of our
charter, some holders of our series B preferred stock will receive an aggregate
payment of approximately $10.4 million (including $140,000 in respect of
dividends which accrued during the period from January 1, 2000 to March 7,
2000) from us upon the closing of this offering. Another existing stockholder
will also receive a payment in the principal amount of approximately $4.3
million in satisfaction of a promissory note to be issued to him.
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Future sales by existing security holders could depress the market price of our
common stock.
If our existing stockholders sell a large number of shares of our common
stock, the market price of the common stock could decline significantly.
Moreover, the perception in the public market that our existing stockholders
might sell shares of common stock could depress the market price of the common
stock. Immediately after this offering, approximately 19,828,002 shares will be
outstanding. Of these shares, 3,500,000 shares will be available for resale in
the public market without restriction immediately following this offering. In
addition, 671,443 shares will be available for resale in the public market
without restriction 90 days after the date of this prospectus. All of which
shares are subject to lock-up agreements restricting their sale for at least
180 days after the date of this prospectus. The remaining 15,656,559 shares
held by existing stockholders become eligible for resale in the public market
at various dates thereafter, all of which shares are subject to lock-up
agreements restricting the sale of common stock for 180 days after the date of
this prospectus.
Some of our existing stockholders have the right to require us to register
their shares of common stock with the Securities and Exchange Commission. If we
register their shares of common stock, they can freely sell those shares in the
public market.
After this offering, we intend to register approximately 3,773,225 shares
of our common stock that we have issued or may issue under our stock plans.
Once we register these shares, they can be freely sold in the public market
upon issuance, subject to the lock-up provisions contained in our 1998 Stock
Option/Stock Issuance Plan.
Our broad discretion in using the proceeds from this offering may negatively
impact our financial condition.
Our decisions regarding the use of the proceeds of this offering could have
a material adverse effect on our business, operating results and financial
condition. We have not identified specific uses for a portion of the proceeds
from this offering, and we will have broad discretion in how we use them. In
addition, we are unable to determine how much of the proceeds will be used for
any identified purpose because circumstances regarding our planned uses of the
unallocated proceeds may change. You will not have the opportunity to evaluate
the economic, financial or other information on which we base our decisions on
how to use these proceeds.
Investors will experience immediate and substantial dilution in the book value
of their investment.
If you purchase shares of our common stock in this offering, you will
experience immediate and substantial dilution, in that the price you pay will
be substantially greater than the net tangible book value per share of the
shares you acquire. This dilution is due in large part to the fact that earlier
investors in Prime Response paid substantially less than the public offering
price when they purchased their shares of common stock. You will experience
additional dilution upon the exercise of outstanding stock options or warrants
to purchase common stock.
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus constitute forward-
looking statements. These statements relate to future events or other future
financial performance, and are identified by terminology such as "may," "will,"
"should," "expects," "scheduled," "plans," "intends," "anticipates,"
"believes," "estimates," "potential," or "continue" or the negative of such
terms or other comparable terminology. These statements are only predictions.
Actual events or results may differ materially. In evaluating these statements,
you should specifically consider various factors, including the risks outlined
under "Risk Factors." These factors may cause our actual results to differ
materially from any forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of such
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform such statements to
actual results.
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USE OF PROCEEDS
The net proceeds we will receive from the sale of 3,500,000 shares of
common stock offered by us are estimated to be $44.1 million ($51.0 million if
the underwriters' over-allotment option is exercised in full) after deducting
the estimated underwriting discounts and commissions and offering expenses
payable by us and assuming an initial public offering price of $14.00.
The principal purposes of this offering are:
. to increase our equity capital;
. to create a public market for our common stock;
. to facilitate future access by us to public equity markets;
. to provide increased visibility and credibility in a marketplace in
light of the fact that several of our current and potential
competitors are, or may in the future be, public companies; and
. to enhance our ability to use our common stock as consideration for
acquisitions and as a means of attracting and retaining key employees.
We intend to pay approximately $10.4 million of our net proceeds to General
Atlantic Partners 48, L.P., General Atlantic Partners 52, L.P., GAP
Coinvestment Partners L.P. and GAP Coinvestment Partners II, L.P., which are
each holders of series B preferred stock in accordance with the provisions of
our certificate of incorporation. This amount, which represents accrued but
unpaid dividends and other payments, will be payable as a result of the
completion of this offering. Approximately $4.3 million of the net proceeds
from this offering will be used to pay a promissory note to be issued to Kite
Limited, one of our stockholders. The note will be issued for the purpose of
purchasing 1,249,500 shares from Kite Limited which we will make available for
issuance upon the exercise of options under our 1998 Stock Option/Stock
Issuance Plan. We have an option to acquire such shares for that purpose at an
exercise price of $3.42 per share through September 30, 2000, on which date
Kite Limited has a right to put these shares to us at the same price. The
series B preferred stock, along with our other outstanding series of preferred
stock, will convert into common stock automatically upon the completion of this
offering. We expect to use the remaining net proceeds from this offering for
working capital and other general corporate purposes and capital expenditures,
expansion of our business, product development and potential acquisitions. We
have not identified specific uses for such proceeds and management will have
discretion over their use and investment. Pending such uses, we will invest the
net proceeds from this offering in investment grade, interest-bearing
securities.
We intend to seek acquisitions of businesses, products and technologies
that are complementary to ours, and a portion of the net proceeds may be used
for such acquisitions. While we discuss potential acquisitions from time to
time, we currently have no commitments or agreements for any such acquisitions
and there can be no assurances that any acquisitions will be made.
DIVIDEND POLICY
We have not declared or paid cash dividends on our common stock since our
reorganization in October 1997. Upon closing of this offering, we will be
paying accrued dividends to our preferred stockholders in cash and in shares of
common stock in accordance with the terms of the preferred stock. We currently
intend to retain earnings, if any, to fund the development and growth of our
business and do not anticipate paying cash dividends in the foreseeable future.
Payment of future dividends, if any, will be at the discretion of our board of
directors after taking into account various factors, including our financial
condition, operating results, current and anticipated cash needs and plans for
expansion. In addition, our financing agreement with Greyrock Capital prohibits
the payment of cash dividends.
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CAPITALIZATION
The following table describes our capitalization as of December 31, 1999:
. on an actual basis, without any adjustments to reflect subsequent
events or anticipated events;
. on a pro forma basis to reflect the following:
. automatic conversion of all outstanding shares of preferred stock
into an aggregate of 6,323,867 shares of common stock;
. reflects the conversion of 427,807 shares of redeemable common
stock into common stock upon completion of this offering;
. issuance of an aggregate of 2,841,483 shares of common stock to
holders of the preferred stock in payment of accrued dividends and
participation feature and an aggregate cash payment of $10.3
million to some holders of preferred stock; and
. on a pro forma as adjusted basis to reflect the following:
. issuance of 251,538 shares of common stock upon the exercise of
warrants at $0.0133 per share immediately prior to the completion
of this offering;
. sale of 3,500,000 shares of common stock offered by us in this
offering and our receipt of the estimated net proceeds, after
deducting the estimated underwriting discounts and commissions and
the estimated offering expenses that we expect to pay in
connection with this offering;
. accretion of preferred stock dividends of approximately $497,000
from January 1, 2000 through March 7, 2000 which will be paid in a
cash payment of approximately $140,000 and 29,801 shares of common
stock; and
. exercise of option to repurchase 1,249,500 shares of redeemable
common stock from a principal shareholder at $3.42 per share.
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<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Pro Forma As
Actual Forma Adjusted
-------- -------- ------------
(unaudited)
(in thousands, except share
data)
<S> <C> <C> <C>
Short-term and long-term debt and capital
lease obligations........................... $ 2,600 $ 2,600 $ 6,873
Redeemable common stock, $0.01 par value,
1,677,307 shares issued and outstanding at
December 31, 1999 and 1,249,500 shares
issued and outstanding on a pro forma basis
and 0 shares issued and outstanding on a pro
forma as adjusted basis..................... 8,295 4,275 --
Series A redeemable convertible preferred
stock, $0.01 par value, 1,155,000 shares
authorized; 1,155,000 shares issued and
outstanding at December 31, 1999 and 0
shares issued and outstanding on a pro forma
basis and a pro forma as adjusted basis..... 27,842 -- --
Series B redeemable convertible preferred
stock, $0.01 par value, 1,700,000 shares
authorized; 1,699,834 shares issued and
outstanding at December 31, 1999, and 0
shares issued and outstanding on a pro forma
basis and a pro forma as adjusted basis..... 10,343 -- --
Series C redeemable convertible preferred
stock, $0.01 par value, 3,000,000 shares
authorized; 1,833,331 shares issued and
outstanding at December 31, 1999, and 0
shares issued and outstanding on a pro forma
basis and a pro forma as adjusted basis..... 4,891 -- --
Common stock, $0.01 par value, 27,750,000
shares authorized (including redeemable
common stock); 6,453,506 shares issued and
outstanding at December 31, 1999;
16,046,663 shares issued and outstanding on
a pro forma basis, and 19,828,002 shares
issued and outstanding on a pro forma as
adjusted basis.............................. 65 161 199
Treasury stock, at cost, 0 and 0 shares issued
and outstanding at
December 31, 1999 and on a pro forma basis,
and 1,249,500 shares issued and outstanding
on a pro forma as adjusted basis............ -- -- (4,275)
Additional paid-in capital.................... 6,520 83,936 132,276
Accumulated other comprehensive income........ (12) (12) (12)
Accumulated deficit........................... (46,127) (86,852) (86,852)
Note receivable from shareholder.............. (2,545) (2,545) (2,545)
Deferred compensation......................... (2,397) (2,397) (2,397)
-------- -------- -------
Total capitalization..................... $ 9,475 $ (834) $43,267
======== ======== =======
</TABLE>
The number of shares of common stock outstanding as of December 31, 1999
does not reflect 1,387,473 shares issuable under options outstanding as of
December 31, 1999 with a weighted-average exercise price of $4.88 per share and
1,217,746 additional shares reserved for issuance under our stock plans or
1,246,319 shares issuable under outstanding warrants as of December 31, 1999
with a weighted-average exercise price of $5.98.
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DILUTION
The pro forma net tangible book value of our common stock as of December
31, 1999 was $(10,696,000), or $(0.62) per share, after giving effect to the
automatic conversion of all outstanding shares of preferred stock into common
stock, and the issuance and payment of all required shares and amounts, upon
the closing of this offering and recognition of significant events which
occurred subsequent to December 31, 1999. After giving effect to the sale of
3,500,000 shares of common stock pursuant to this offering at an assumed
initial public offering price of $14.00 per share and deducting estimated
underwriting discounts and offering expenses, the pro forma as adjusted net
tangible book value at December 31, 1999 would have been $29,131,000 or $1.47
per share.
Pro forma net tangible book value per share before the offering has been
determined by dividing pro forma net tangible book value (total pro forma
tangible assets less total liabilities) by the pro forma number of shares of
common stock outstanding as of December 31, 1999. This offering will result in
an immediate increase pro forma as adjusted net tangible book value per share
of $2.09 to existing stockholders and dilution in pro forma as adjusted net
tangible book value per share of $12.53 to new investors who purchase shares in
this offering. Dilution is determined by subtracting pro forma as adjusted net
tangible book value per share from an assumed initial public offering price of
$14.00 per share. The following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $14.00
Pro forma net tangible book value per share at December 31,
1999....................................................... $(0.62)
Increase attributable to sale of common stock in this
offering................................................... 2.09
------
Pro forma as adjusted net tangible book value per share after
this offering................................................ 1.47
------
Dilution of net tangible book value per share to new investors
who purchase shares in this offering......................... $12.53
======
</TABLE>
If the underwriters exercise their option to purchase additional shares in
this offering, the pro forma as adjusted net tangible book value per share
after the offering would be $1.72 per share, the immediate increase in pro
forma as adjusted net tangible book value per share to existing stockholders
would be $2.34 per share and the dilution to persons who purchase shares in the
offering would be $12.28 per share.
The following table summarizes, on a pro forma as adjusted basis as of
December 31, 1999, the differences between the total consideration paid and the
average price per share paid by the existing stockholders and the new investors
with respect to the number of shares of common stock purchased from us based
upon an assumed initial public offering price of $14.00 per share:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Shares purchased in this
offering............... 3,500,000 17.7% $49,000,000 51.5% $14.00
Shares owned by existing
stockholders........... 16,328,002 82.3 46,055,000 48.5 2.82
---------- ----- ----------- -----
Total.................. 19,828,002 100.0% $95,055,000 100.0%
========== ===== =========== =====
</TABLE>
These tables assume no exercise of stock options or warrants outstanding as
of December 31, 1999. At December 31, 1999, there were 1,387,473 shares of
common stock issuable upon exercise of outstanding stock options at a weighted
average exercise price of $4.88 per share. As of December 31, 1999, there were
warrants exercisable for 1,246,319 shares of common stock at a weighted-average
exercise price of $5.98 per share. To the extent that outstanding options or
warrants are exercised in the future, there will be further dilution to new
investors. Since December 31, 1999, we authorized options for the issuance of
an additional 311,182 shares at an exercise price of $10.80, 11,500 shares at
an exercise price of $12.00 and 125,000 shares at an exercise price equal to
the initial public offering price.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data at December 31, 1996, 1997, 1998 and
1999 and for the years ended December 31, 1996, 1997, 1998 and 1999 are derived
from the financial statements of Prime Response, Inc., which have been audited
by PricewaterhouseCoopers LLP, independent auditors.
You should refer to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the more complete financial
information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1996 1997 1998 1999
------- -------- -------- --------
(in thousands, except per share
data)
<S> <C> <C> <C> <C>
Consolidated Statement of Operations
Data:
Revenues:
Software licenses....................... $ 795 $ 2,933 $ 8,495 $ 10,134
Services and support.................... 1,410 2,495 4,214 6,519
Applications hosting ................... 4,764 4,754 3,827 3,869
------- -------- -------- --------
Total revenues......................... 6,969 10,182 16,536 20,522
------- -------- -------- --------
Cost of revenues:
Software licenses....................... 144 83 152 --
Services and support.................... 1,927 3,052 6,477 4,522
Applications hosting.................... 1,777 1,923 2,477 2,776
Non-cash cost of revenues............... -- -- -- 113
------- -------- -------- --------
Total cost of revenues................. 3,848 5,058 9,106 7,411
------- -------- -------- --------
Gross profit............................. 3,121 5,124 7,430 13,111
------- -------- -------- --------
Operating expenses:
Sales and marketing..................... 1,195 2,788 9,459 13,285
Non-cash sales and marketing............ -- -- -- 266
Research and development................ 1,307 2,947 6,289 10,185
Non-cash research and development....... -- -- -- 63
General and administrative.............. 1,184 1,396 4,843 4,112
Non-cash general and administrative..... -- -- -- 1,732
Amortization of goodwill and other
intangible assets..................... -- -- 1,279 1,245
------- -------- -------- --------
Total operating expenses............... 3,686 7,131 21,870 30,888
------- -------- -------- --------
Loss from operations..................... (565) (2,007) (14,440) (17,777)
Other income (expense):
Interest income......................... 5 155 219 115
Interest expense........................ (64) (227) (294) (184)
Interest expense related to beneficial
conversion feature.................... -- -- -- (2,500)
Loss on foreign exchange................ -- (7) (88) (58)
------- -------- -------- --------
Loss before income taxes................. (624) (2,086) (14,603) (20,404)
Provision for income taxes............... (26) (159) -- (15)
------- -------- -------- --------
Net loss................................. (650) (2,245) (14,603) (20,419)
Preferred stock dividends and recognition
of beneficial conversion feature on
preferred stock ....................... -- (607) (2,015) (5,034)
------- -------- -------- --------
Net loss attributable to common
stockholders........................... $ (650) $ (2,852) $(16,618) $(25,453)
======= ======== ======== ========
Net loss per share--basic and diluted.... $(6,500) $ (2.43) $ (2.36) $ (3.44)
======= ======== ======== ========
Weighted average shares used in computing
basic and diluted net loss per share... -- 1,173 7,035 7,405
======= ======== ======== ========
<CAPTION>
December 31,
-------------------------------------
1996 1997 1998 1999
------- -------- -------- --------
(in thousands)
Consolidated Balance Sheet Data:
<S> <C> <C> <C> <C>
Cash and cash equivalents................ $ 458 $ 22,106 $ 530 $ 3,999
Working capital.......................... (751) 11,482 62 (1,280)
Total assets............................. 3,026 26,722 10,152 25,515
Short-term and long-term debt and capital
lease obligations ..................... 563 1,296 973 2,600
Redeemable convertible preferred stock
and redeemable common stock............ -- 28,328 35,536 51,371
Stockholders' equity (deficit)........... (865) (16,227) (32,860) (44,496)
</TABLE>
20
<PAGE>
Prior to 1996, Prime Response financial statements were prepared under
accounting principles generally accepted in the United Kingdom and reported
results for fiscal years ending on August 31. During that time, Prime Response
earned revenue from applications hosting only, and had no license contracts or
services and support revenue. Prime Response has prepared selected financial
data including revenue and net loss for the year ended December 31, 1995 from
statutory accounts prepared under accounting principles generally accepted in
the United Kingdom for the year ended August 31, 1995 and other available
information. Prime Response has recorded necessary adjustments to report
results for the year ended December 31, 1995 under accounting principles
generally accepted in the United States.
The unaudited selected financial data includes, in the opinion of our
management, all adjustments, consisting of normal, recurring adjustments,
necessary for a fair presentation of the information set forth. The preparation
of the following unaudited selected financial data in conformity with
accounting principles generally accepted in the United States required
management to make estimates and assumptions that affect the reported amounts.
The available unaudited selected financial data for the twelve months ended
December 31, 1995 is as follows (in thousands, except per share data):
<TABLE>
<S> <C>
Revenue......................................................... $4,955
Net loss........................................................ $ (62)
Net loss per share--basic and diluted........................... $ (620)
Cash dividends per share........................................ $2,210
Weighted average shares used in computing basic and diluted net
loss per share................................................ 100
The available unaudited selected financial data as of December 31, 1995 is
as follows:
Total assets.................................................... $2,095
Total long term obligations..................................... $ 201
</TABLE>
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Prime
Response's consolidated financial statements, the related notes and the other
financial information appearing elsewhere in this prospectus. In addition to
historical information, the following discussion and other parts of this
prospectus contain forward-looking information that involves risks and
uncertainties. Prime Response's actual results could differ materially from
those anticipated by such forward-looking information due to competitive
factors, risks associated with Prime Response's expansion plans and other
factors discussed under "Risk Factors" and elsewhere in this prospectus.
Overview
Prime Response is a leading provider of integrated eMarketing software
solutions that enable businesses with large customer bases to create, manage
and execute highly targeted internet and traditional marketing campaigns that
build more loyal and profitable customer relationships. We have over 12 years
of experience in the use of technology to plan and manage marketing programs.
We were founded in 1987 in the United Kingdom. Prior to 1999, our corporate
headquarters were in London, England, and our primary focus was on the European
market. In 1998, we began to increasingly target the United States market, and
in July 1999, moved our corporate headquarters to Cambridge, Massachusetts.
Since 1995, we have incurred significant development costs to develop our
technology and new software products, particularly to introduce our latest
generation of internet-based marketing management solutions. With the
introduction of these products, we anticipate that research and development
expenses will stabilize and will decrease as a percentage of total revenues. We
intend to continue to expand our direct sales force and increase marketing
expenditures relating to the introduction of our new product offerings, and as
a result, we expect sales and marketing expenses to continue to grow, in
dollars.
We generate revenues principally from:
. licensing our software products directly to clients;
. providing related professional services, including implementation,
consulting, support and training; and
. providing applications hosting services, including providing marketing
database outsourcing services.
Our license agreements typically require our clients to pay an upfront
license fee for one or more software solutions for a specified number of
customer records in their database. The amount of the license fee varies
principally depending upon the size of the client's database and number of
databases. Clients can subsequently pay additional license fees to allow
additional entities within their corporate structure to access our applications
or to purchase additional solutions.
Revenue Recognition
Prime Response sells software licenses under master license agreements and
recognizes revenue when the agreement has been signed, the software has been
shipped (or software has been electronically delivered), the license fee is
fixed or determinable, and collection of the resulting receivable is probable.
For license agreements which require customer acceptance, license revenues are
recognized only when obligations under the license agreement are completed and
the software has been accepted by the customer. For license agreements in which
Prime Response participates in financing arrangements, the fee is not
considered to be fixed or determinable and revenue is recognized as payments
become due. Prime Response provides professional services to customers under
service contracts and recognizes revenue on a time and materials basis as the
services are performed, provided that amounts due from customers are fixed or
determinable and deemed collectible by management. These services are not
essential to the functionality of the software and are often performed by other
parties. Support revenues, including those bundled with the initial license
fee, are deferred and recognized ratably over the maintenance period. In the
event that a contract contains multiple elements, Prime Response allocates the
aggregate of the contract value to each element based
22
<PAGE>
on relative fair values as established by vendor specific objective evidence.
Vendor specific objective evidence is based on recent sales prices. Prime
Response provides applications hosting services to customers and recognizes
revenue as the services are performed.
Revenues and profits under long-term fixed price contracts are recognized
using percentage completion accounting. These contracts are assessed for
losses and such losses are provided for in total in the period in which the
losses become known.
The following table illustrates our revenues for the years ended December
31, 1997, 1998 and 1999 by geographic region:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1998 1999
------- ------- -------
(in thousands)
<S> <C> <C> <C>
United States........................................ $ 65 $ 4,370 $ 3,487
United Kingdom....................................... 10,117 12,025 15,758
Rest of the world.................................... -- 141 1,277
------- ------- -------
Total.............................................. $10,182 $16,536 $20,522
======= ======= =======
</TABLE>
In January 1998, we acquired certain intellectual property rights and
other intangible assets related to the MIND software product. Amortization of
the $2.8 million of intangible assets related to this investment will be
completed by December 31, 2000.
During the year ended December 31, 1999, Prime Response recorded deferred
compensation of $2.6 million in connection with the granting of options and
the issuance of restricted stock upon the exercise of such options. This
amount represents the difference between the estimated fair market value of
the common stock on measurement date and the exercise price of the option.
Compensation related to options which vest over time will be amortized over
the vesting periods of the related options. We recognized an expense of
$205,000 during the year ending December 31, 1999 relating to these options.
We also expect to recognize an additional expense for the issuance of options
to purchase an additional 311,182 shares at an exercise price of $10.80 since
December 31, 1999.
We do not believe that we have any material market risk exposure with
respect to derivative or other financial instruments.
As a result of our losses, we do not expect to pay United States income
taxes in the foreseeable future.
Andersen Consulting Relationship
On December 6, 1999, Prime Response and Andersen Consulting entered into a
joint marketing agreement and, along with an affiliate of Andersen Consulting,
a stock and warrant purchase agreement. Pursuant to the stock and warrant
purchase agreement, Andersen Consulting purchased 428,000 shares of common
stock and Andersen Consulting received a warrant to purchase 682,000 shares of
common stock. This warrant has an exercise price of $9.35 per share and vests
upon the earlier to occur of September 9, 2000 or the date of an acquisition
of Prime Response by another person or entity. Andersen Consulting also has a
right of first refusal to participate in any equity issuances by Prime
Response prior to its initial public offering in order to maintain its
percentage ownership interest in Prime Response, subject to specified
exceptions. The aggregate purchase price paid by Andersen Consulting for the
shares of common stock and this warrant was $4.0 million. Andersen Consulting
has no performance obligations under the stock and warrant purchase agreement
or this warrant.
Prime Response issued a performance warrant to purchase 375,000 shares of
common stock to Andersen Consulting. Of this amount, 300,000 shares will vest
in share increments determined by the extent to which $2.0 billion exceeds
Prime Response's market capitalization at the time of its initial public
offering. An additional 75,000 shares will vest in increments of 7,500 shares
for each $100.0 million that Prime Response's market capitalization exceeds
$2.0 billion, up to a maximum market capitalization of $3.0 billion. This
warrant has an exercise price of $9.35 per share. Prime Response also issued a
performance warrant to purchase 375,000 shares of common stock to Andersen
Consulting which will vest in increments of 10,500 shares for each $1.0
million of sales resulting from joint marketing efforts up to $25.0 million
and then in increments of 4,500 shares for each $1.0 million of sales from
$25.0 million to $50.0 million. This warrant also has an exercise price of
$9.35 per share.
23
<PAGE>
All warrants have a seven-year term. In the event that the marketing
agreement is terminated as a result of a breach by Andersen Consulting, no
further vesting under the warrants will occur, but those warrants already
exercisable will remain exercisable during their term to the extent they are
vested at the time of the termination.
In the event that neither an initial public offering nor any other
liquidity event occurs by January 1, 2001, Andersen Consulting or its
affiliate will have the right to require Prime Response to repurchase the
428,000 shares for $4.0 million. The repurchase amount will be payable in
three quarterly installments, plus 8.0% interest on the entire amount
beginning on January 1, 2001, plus additional interest of 7.0% per annum in
the event Prime Response fails to make any payment when due. The put right
will terminate upon an initial public offering or other liquidity event.
Prime Response is obligated to engage Andersen Consulting for consulting
services of at least $1.0 million before December 31, 2001. If designated
sales targets are met, Andersen Consulting is obligated to provide up to $1.0
million in funding for joint marketing efforts, business development
personnel, structure feedback and sales support. The expenditure of these
funds will be controlled by a committee comprised of both Andersen Consulting
and Prime Response personnel.
Results of Operations
The following table sets out selected financial data as a percentage of
revenue for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenues:
Software licenses............................... 28.8 % 51.4 % 49.4 %
Services and support............................ 24.5 25.5 31.8
Applications hosting............................ 46.7 23.1 18.8
------- ------- -------
Total revenues................................. 100.0 100.0 100.0
------- ------- -------
Cost of revenues:
Software licenses............................... 0.8 0.9 --
Services and support............................ 30.0 39.2 22.0
Applications hosting............................ 18.9 15.0 13.5
Non-cash cost of revenues....................... -- -- 0.6
------- ------- -------
Total cost of revenues......................... 49.7 55.1 36.1
------- ------- -------
Gross profit..................................... 50.3 44.9 63.9
------- ------- -------
Operating expenses:
Sales and marketing............................. 27.4 57.2 64.8
Non-cash sales and marketing.................... -- -- 1.3
Research and development........................ 28.9 38.0 49.6
Non-cash research and development............... -- -- 0.3
General and administrative...................... 13.7 29.3 20.0
Non-cash general and administrative............. -- -- 8.4
Amortization of goodwill and other intangible
assets........................................ -- 7.7 6.1
------- ------- -------
Total operating expenses....................... 70.0 132.2 150.5
Loss from operations............................. (19.7) (87.3) (86.6)
Other income (expense):
Interest income................................. 1.5 1.3 0.6
Interest expense................................ (2.2) (1.8) (0.9)
Interest expense related to beneficial
conversion feature............................ -- -- (12.2)
Loss on foreign exchange........................ (0.1) (0.5) (0.3)
------- ------- -------
Loss before income taxes......................... (20.5) (88.3) (99.4)
Provision for income taxes....................... (1.6) -- (0.1)
------- ------- -------
Net loss......................................... (22.1)% (88.3)% (99.5)%
======= ======= =======
</TABLE>
24
<PAGE>
Years Ended December 31, 1999 and 1998
Revenues
Total revenues increased by $4.0 million, or 24.2%, to $20.5 million for
the year ended December 31, 1999 from $16.5 million for the year ended December
31, 1998.
Software Licenses. Software license revenues increased by $1.6 million, or
18.8%, to $10.1 million for the year ended December 31, 1999 from $8.5 million
for the year ended December 31, 1998. Software license revenues decreased
slightly to 49.3% of total revenues for the year ended December 31, 1999 from
51.5% of total revenues for the prior year. The dollar increase in software
license revenues was due primarily to growing market acceptance of our Prime
Vantage products.
Services and Support. Revenues from services and support increased by $2.3
million, or 54.8%, to $6.5 million for the year ended December 31, 1999 from
$4.2 million for the year ended December 31, 1998. These revenues increased to
31.7% of total revenues for the year ended December 31, 1999 from 25.5% of
total revenues for the previous year. The increase in service and support
revenues was due primarily to an increase in the number of sales of software
licenses, which resulted in increased demand for services and sales of software
maintenance and technical support.
Applications Hosting. Revenues from applications hosting increased by
$40,000 or 1.0%, to $3.9 million for the years ended December 31, 1999 from
$3.8 million for the year ended December 31, 1998. These revenues represented
19.0% of total revenues for the year ended December 31, 1999 compared to 23.0%
of total revenues for the prior year. We expect the proportion of revenues
attributable to applications hosting to decline as a percentage of total
revenues as we continue to focus on licensing our software products.
Cost of Revenues
Total cost of revenues decreased by $1.7 million, or 18.7%, to $7.4 million
for the year ended December 31, 1999 from $9.1 million for the year ended
December 31, 1998.
Software Licenses. Software license costs consist primarily of expenses
incurred to translate software products and prepare related documents as well
as negligible expenses to manufacture, package and distribute our software
products. Software license costs decreased by $152,000, or 100.0%, to zero in
the year ended December 31, 1999 from $152,000 for the year ended December 31,
1998. Software license costs were zero percent of software license revenues for
the year ended December 31, 1999 compared to 1.8% of such revenues for the
prior year. The decrease in software license costs is primarily due to the fact
that costs associated with the translation of software products and preparation
of related documents occurred during 1997 and 1998.
Services and Support. Services and support costs include salary expense and
other related costs for our professional services, maintenance and telephone
support staffs, as well as third-party contractor expenses. Services and
support costs decreased by $2.0 million, or 30.8%, to $4.5 million in the year
ended December 31, 1999 from $6.5 million in the year ended December 31, 1998.
Services and support costs were 69.2% of services and support revenues for the
year ended December 31, 1999 compared to 154.8% of such revenues for the prior
year. The decrease in services and support costs was primarily due to an
initial overstaffing in this area in 1998 and investment in services and
support infrastructure. We reduced services and support staff in the fourth
quarter of 1998 in order to more closely align expenses with revenues.
Applications Hosting. Costs attributable to applications hosting consist
primarily of personnel-related costs and equipment maintained for the provision
of services to clients. These costs increased by $300,000, or 12.0%, to $2.8
million for the year ended December 31, 1999 from $2.5 million for the year
ended December 31, 1998. These costs were 72.4% of applications hosting
revenues for the year ended December 31, 1999 compared to 65.3% of such
revenues for the prior year. Typically these costs have been relatively fixed.
The non-cash cost of revenues increased to $113,000 for the year ended
December 31, 1999 from none for the year ended December 31, 1998. This expense
represents the amortization of stock compensation
25
<PAGE>
expense in connection with the granting of stock options. The expense results
from the difference between the estimated fair market value of the common stock
on measurement date and the exercise price of the option which is being
recognized over the vesting period.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and other related costs for sales and marketing personnel, sales
commissions, travel, public relations and marketing materials and trade shows.
Sales and marketing expenses increased by $3.8 million, or 40.0%, to $13.3
million for the year ended December 31, 1999 from $9.5 million for the year
ended December 31, 1998. Sales and marketing expenses increased to 64.9% of
total revenues for the year ended December 31, 1999, compared to 57.6% for the
prior year. The increase in such expenses was due primarily to increases in
staffing and personnel related costs, as we continued to expand our direct
sales force and expand our presence in North America. We anticipate that sales
and marketing expenses will continue to increase as we further expand our
direct sales force and invest heavily in the marketing and promotion of our new
generation of eMarketing management software products.
The non-cash sales and marketing expense increased to $266,000 for the year
ended December 31, 1999 from none for the year ended December 31, 1998. This
expense represents (i) the amortization of stock compensation expense in
connection with the granting of stock options, which results from the
difference between the estimated fair market value of the common stock on
measurement date and the exercise price of the option which is being recognized
over the vesting period; and (ii) the amortization of the intangible asset
recorded in connection with the Andersen Consulting agreement.
Research and Development. Research and development expenses consist
primarily of personnel and equipment-related costs directly associated with the
development of both our existing and future products. Research and development
expenses increased by $3.9 million, or 61.9%, to $10.2 million for the year
ended December 31, 1999 from $6.3 million for the year ended December 31, 1998.
Research and development expenses increased to 49.8% of total revenues in the
year ended December 31, 1999 from 38.2% for the prior year. The dollar and
percentage increase in costs was primarily due to significant investment in our
new Prime@Vantage and [email protected] products.
The non-cash research and development expense increased to $63,000 for the
year ended December 31, 1999 from none for the year ended December 31, 1998.
This expense represents the amortization of stock compensation expense in
connection with the granting of stock options. The expense results from the
difference between the estimated fair market value of the common stock on
measurement date and the exercise price of the option which is being recognized
over the vesting period.
General and Administrative. General and administrative expenses consist
primarily of employee salaries and related expenses for executive, finance and
administrative personnel as well as external professional fees and certain
centrally-borne costs. General and administrative expenses decreased by
$700,000, or 14.6%, to $4.1 million for the year ended December 31, 1999 from
$4.8 million for the year ended December 31, 1998. These expenses decreased to
20.0% of total revenues for the year ended December 31, 1999 from 29.1% for the
prior year. This decrease was primarily attributable to a period of stability
following the recruitment and development of a professional management team in
1998. After closing a financing in October 1997, we incurred significant costs
in early 1998 creating an infrastructure to manage a larger company and
establishing our North American operations.
The non-cash general and administrative expense increased to $1.7 million
for the year ended December 31, 1999 from none for the year ended December 31,
1998. This expense represents the amortization of stock compensation expense in
connection with the granting of stock options and restricted shares. The
expense results from the difference between the estimated fair market value of
the common stock on measurement date and the exercise price of the option,
primarily resulting from imputed interest on a non-interest bearing loan which
is being recognized over the vesting period.
26
<PAGE>
Amortization of Goodwill and Other Intangible Assets. Amortization expense
decreased by $30,000, or 2.3%, to $1.25 million for the year ended December 31,
1999 from $1.28 million for the year ended December 31, 1998. This expense is
solely attributable to the acquisition of certain intellectual property rights
and other intangible assets related to the MIND software product.
Interest Income. Interest income decreased by $104,000, or 47.5%, to
$115,000 for the year ended December 31, 1999 from $219,000 for the year ended
December 31, 1998.
Interest Expense. Interest expense decreased by $110,000, or 37.4%, to
$184,000 for the year ended December 31, 1999 from $294,000 for the year ended
December 31, 1998.
Interest Expense Related to Beneficial Conversion Feature. Interest expense
related to beneficial conversion feature increased to $2.5 million for the year
ended December 31, 1999 from none for the year ended December 31, 1998.
Interest expense related to beneficial conversion feature for the year ended
December 31, 1999 results from the issuance of promissory notes which were
immediately convertible into series C preferred stock with the conversion
amount determinable by dividing the principal amount of the notes by $3.00,
which represents a discount from the fair value of the common stock on the date
of issuance. The values attributable to the conversion feature on each note
represent an incremental yield, or a beneficial conversion feature, which are
recognized as additional interest on the notes.
Net Loss. As a result of the increases in revenue, operating expenses,
depreciation and amortization, and net interest expense noted above, our net
loss increased by $5.8 million, or 39.7%, to $20.4 million for the year ended
December 31, 1999, compared with a net loss of $14.6 million for the year ended
December 31, 1998.
Years Ended December 31, 1998 and 1997
Revenues
Total revenues increased by $6.3 million, or 61.8%, to $16.5 million for
1998 from $10.2 million for 1997. For 1998, the percent of total revenues
attributable to sales in North America was 26.4% and to sales in the rest of
the world was 73.6%, compared with 0.6% and 99.4%, respectively, in 1997,
reflecting the establishment of our North American based operations at the end
of 1997 and increased sales in the United States in 1998.
Software Licenses. Software license revenues increased by $5.6 million, or
193.1%, to $8.5 million in 1998 from $2.9 million in 1997. Software license
revenues increased to 51.5% of total revenues in 1998 from 28.4% of total
revenues in the prior year. The increase in software license fees was primarily
due to growing market acceptance of our Prime Advantage products and the
release of the Windows-based version of our Prime Vantage product.
Services and Support. Services and support revenues increased by $1.7
million, or 68.0%, to $4.2 million in 1998 from $2.5 million in 1997. Services
and support revenues represented 25.5% of total revenues in 1998 and 24.5% of
total revenues in 1997. The dollar increase in services and support revenues
was due primarily to an increase in the number of sales of software licenses,
which resulted in increased demand for services and sales of software
maintenance and technical support.
Applications Hosting. Revenues attributable to applications hosting
decreased by $1.0 million, or 20.8%, to $3.8 million in 1998 from $4.8 million
in 1997. This decrease reflected the loss of a single client for whom we had
provided database outsourcing services. Applications hosting revenues decreased
to 23.0% of total revenues in 1998 from 47.1% of total revenues in the prior
year.
Cost of Revenues
Total cost of revenues increased by $4.0 million, or 78.4%, to $9.1 million
for 1998, from $5.1 million for 1997.
27
<PAGE>
Software Licenses. Software license costs increased by $69,000, or 83.1% to
$152,000 in 1998 from $83,000 in 1997. Software license costs were 1.8% of
software license revenues in 1998 compared to 2.9% of such revenues in 1997.
Services and Support. Services and support costs increased by $3.4 million,
or 109.7%, to $6.5 million for 1998, from $3.1 million for 1997. Services and
support costs were 154.8% of services and support revenues in 1998 compared to
124% of such revenues in 1997. The increase in services and support costs was
primarily due to increased staffing and personnel related costs.
Applications Hosting. Applications hosting costs increased by $600,000, or
31.6%, to $2.5 million for the year ended December 31, 1998, from $1.9 million
for the year ended December 31, 1997. Applications hosting costs were 65.8% of
applications hosting revenues in 1998 compared to 39.6% of such revenues in
1997, reflecting increases in salary costs and investment in the operational
infrastructure for the activities performed.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased by $6.7
million, or 239.3%, to $9.5 million in 1998, from $2.8 million in 1997. The
increase in sales and marketing expenses resulted primarily from the continued
investment in building a direct sales organization, establishing new sales
offices, and building reseller channels, as well as increased marketing
activities. Sales and marketing expenses grew to 57.6% of total revenues in
1998 compared to 27.5% of such revenues in 1997, reflecting our increased
investment in these activities.
Research and Development. Research and development expenses increased by
$3.4 million, or 117.2%, to $6.3 million in 1998, from $2.9 million in 1997.
Research and development expenses represented 38.2% of total revenues in 1998
and 28.4% in 1997. This increase in research and development expenditures
reflected the significant investment we made during the period in developing
the Windows based version of our Prime Vantage product and commencing our new
generation of Prime@Vantage products, including the hiring of additional
development personnel and acquisition of new equipment to support research and
development activities.
General and Administrative. General and administrative expenses increased
by $3.4 million, or 242.9%, to $4.8 million in 1998 from $1.4 million in 1997.
General and administrative expenses were 29.1% of revenues in 1998 and 13.7% of
total revenues in 1997. The increase in general administrative expenditures was
due to staffing and related costs, the establishment of our North American
operations and other investments and expenses necessary to support our
expanding operations.
Amortization of Goodwill and Other Intangible Assets. Amortization costs
increased to $1.3 million in 1998 from none in 1997. The increase is solely
attributable to the acquisition of certain intellectual property rights and
other intangible assets related to the MIND software product.
Interest Income. Interest income increased by $64,000, or 41.3%, to
$219,000 in 1998 from $155,000 in 1997.
Interest Expense. Interest expense increased by $67,000, or 29.5%, to
$294,000 in 1998 from $227,000 in 1997.
Net Loss. Net loss increased by $12.4 million, or 563.6%, to $14.6 million
for 1998, from $2.2 million for 1997.
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<PAGE>
Quarterly Results
The following table sets forth certain unaudited financial data of Prime
Response for each of the quarters in 1998 and 1999. This information has been
derived from unaudited financial statements that, in the opinion of management,
reflect all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of this quarterly information. The operating
results for any quarter are not necessarily indicative of results to be
expected for any future period.
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software and licenses.. $ 1,203 $ 348 $ 1,939 $5,005 $ 1,080 $ 2,544 $ 1,654 $ 4,856
Services and support... 771 723 847 1,873 1,711 1,543 1,455 1,810
Applications hosting... 857 761 819 1,390 991 994 1,095 789
------- ------- ------- ------ ------- ------- -------- -------
Total revenues......... 2,831 1,832 3,605 8,268 3,782 5,081 4,204 7,455
------- ------- ------- ------ ------- ------- -------- -------
Cost of revenues:
Software licenses...... -- -- 10 142 -- -- -- --
Services and support... 1,769 1,149 1,498 2,061 850 1,167 1,230 1,275
Applications hosting... 590 606 698 583 775 666 647 688
Non-cash cost of
revenues............. -- -- -- -- -- 5 84 24
------- ------- ------- ------ ------- ------- -------- -------
Total cost of
revenues............. 2,359 1,755 2,206 2,786 1,625 1,838 1,961 1,987
------- ------- ------- ------ ------- ------- -------- -------
Gross profit............ 472 77 1,399 5,482 2,157 3,243 2,243 5,468
Operating expenses:
Sales and marketing.... 1,897 2,085 2,704 2,773 2,811 2,728 2,985 4,761
Non-cash sales and
marketing............ -- -- -- -- 16 3 16 231
Research and
development.......... 1,442 1,842 1,598 1,407 1,950 2,130 2,632 3,473
Non-cash research and
development.......... -- -- -- -- -- -- 34 29
General and
administrative....... 1,326 1,227 1,032 1,258 847 853 959 1,453
Non-cash general and
administrative....... -- -- -- -- -- 1,678 8 46
Amortization of
goodwill and other
intangible assets.... 318 319 318 324 314 309 308 314
------- ------- ------- ------ ------- ------- -------- -------
Total operating
expenses............. 4,983 5,473 5,652 5,762 5,938 7,701 6,942 10,307
------- ------- ------- ------ ------- ------- -------- -------
Loss from operations.... (4,511) (5,396) (4,253) (280) (3,781) (4,458) (4,699) (4,839)
Other income (expense):
Interest income........ 122 79 11 7 1 17 44 53
Interest expense....... (102) (115) (26) (51) (33) (30) (24) (97)
Interest expense
related to beneficial
conversion........... -- -- -- -- -- -- (2,500) --
Loss on foreign
exchange............. (2) (24) (51) (11) (19) (31) 1 (9)
------- ------- ------- ------ ------- ------- -------- -------
Loss before income taxes
...................... (4,493) (5,456) (4,319) (335) (3,832) (4,502) (7,178) (4,892)
Provision for income
taxes ................ -- -- -- -- (1) (1) (7) (6)
------- ------- ------- ------ ------- ------- -------- -------
Net loss................ (4,493) (5,456) (4,319) (335) (3,833) (4,503) (7,185) (4,898)
Preferred stock
dividends and
recognition of
beneficial conversion
feature on preferred
stock ................ (474) (474) (504) (563) (611) (677) (3,068) (678)
------- ------- ------- ------ ------- ------- -------- -------
Net loss attributable to
common stockholders... $(4,967) $(5,930) $(4,823) $ (898) $(4,444) $(5,180) $(10,253) $(5,576)
======= ======= ======= ====== ======= ======= ======== =======
Net loss per share--
basic and diluted..... $ (0.71) $ (0.84) $ (0.68) $(0.13) $ (0.64) $ (0.73) $ (1.35) $ (0.72)
======= ======= ======= ====== ======= ======= ======== =======
Weighted average shares
used in computing
basic and diluted net
loss per share........ 7,035 7,035 7,035 7,035 7,035 7,247 7,671 7,846
======= ======= ======= ====== ======= ======= ======== =======
</TABLE>
29
<PAGE>
The following table sets forth the unaudited quarterly total expenses as a
percentage of unaudited quarterly revenues.
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses...... 42.5% 19.0% 53.8% 60.5% 28.6% 50.1% 39.3% 65.1%
Services and support... 27.2 39.5 23.5 22.7 45.2 30.4 34.6 24.3
Applications hosting... 30.3 41.5 22.7 16.8 26.2 19.5 26.1 10.6
------ ------ ------ ----- ------ ----- ------ -----
Total revenues......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ----- ------ ----- ------ -----
Cost of revenues:
Software licenses...... -- -- 0.3 1.7 -- -- -- --
Services and support... 62.5 62.7 41.6 24.9 22.5 23.0 29.2 17.1
Applications hosting... 20.8 33.1 19.3 7.1 20.5 13.1 15.4 9.2
Non-cash cost of
revenues............. -- -- -- -- -- 0.1 2.0 0.3
------ ------ ------ ----- ------ ----- ------ -----
Total cost of
revenues............. 83.3 95.8 61.2 33.7 43.0 36.2 46.6 26.6
------ ------ ------ ----- ------ ----- ------ -----
Gross profit............ 16.7 4.2 38.8 66.3 57.0 63.8 53.4 73.4
------ ------ ------ ----- ------ ----- ------ -----
Operating expenses:
Sales and marketing.... 67.0 113.8 74.9 33.6 74.3 53.7 71.0 63.9
Non-cash sales and
marketing............ -- -- -- -- 0.4 0.1 0.4 3.1
Research and
development.......... 51.0 100.5 44.5 17.0 51.6 41.9 62.6 46.6
Non-cash research and
development.......... -- -- -- -- -- -- 0.9 0.4
General and
administrative....... 46.8 67.0 28.6 15.2 22.4 16.8 22.8 19.5
Non-cash general and
administrative....... -- -- -- -- -- 33.0 0.2 0.6
Amortization of
goodwill and other
intangible assets.... 11.2 17.4 8.8 3.9 8.3 6.0 7.3 4.2
------ ------ ------ ----- ------ ----- ------ -----
Total operating
expenses............. 176.0 298.7 156.8 69.7 157.0 151.5 165.2 138.3
------ ------ ------ ----- ------ ----- ------ -----
Loss from operations.... (159.3) (294.5) (118.0) (3.4) (100.0) (87.7) (111.8) (64.9)
Other income (expense):
Interest income........ 4.3 4.3 0.3 0.1 -- 0.3 1.0 0.7
Interest expense....... (3.6) (6.3) (0.7) (0.7) (0.8) (0.6) (0.5) (1.3)
Interest expense
related to beneficial
conversion........... -- -- -- -- -- -- (59.4) --
Loss on foreign
exchange............. (0.1) (1.3) (1.4) (0.1) (0.5) (0.6) -- (0.1)
------ ------ ------ ----- ------ ----- ------ -----
Loss before income taxes
...................... (158.7) (297.8) (119.8) (4.1) (101.3) (88.6) (170.7) (65.6)
Provision for income
taxes ................ -- -- -- -- -- -- (0.2) (0.1)
------ ------ ------ ----- ------ ----- ------ -----
Net loss................ (158.7)% (297.8)% (119.8)% (4.1)% (101.3)% (88.6)% (170.9)% (65.7)%
====== ====== ====== ===== ====== ===== ====== =====
</TABLE>
Our quarterly revenue and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter. Therefore, you should not
rely on period-to-period comparisons of results of operations as an indication
of future performance. If our quarterly revenue or operating results fall below
the expectations of investors or securities analysts, the price of our common
stock could fall substantially.
Our quarterly revenue may fluctuate as a result of a variety of factors,
including the following:
. software license revenues in any quarter depend on contracts closed,
orders shipped and the satisfaction of clients' acceptance criteria in
that quarter;
. the market in which we compete is relatively new and evolving;
. we expect that, for the foreseeable future, license revenues will come
from licenses to a small number of clients, so delays, cancellations
of orders, or acceptance of our software by a few clients can
significantly impact revenues within a quarter;
. our sales cycle is relatively long; and
. revenues will be affected by the timing of introduction of new
products or product enhancements by us or our competitors.
Many of the factors that could cause such variations are outside of our
control. We plan our operating expenditures based on revenue forecasts, and a
revenue shortfall below such forecasts in any quarter could adversely affect
our operating results for that quarter.
30
<PAGE>
For the quarter ended December 31, 1998, we recognized revenues from a
disproportionately large number of licensing transactions, including a number
involving significant license fees. We may in the future continue, for the
factors noted above, to experience significant variations in license revenues
from quarter to quarter. There can be no certainty that revenue levels will
cover operating expenses, particularly as we continue to invest in our sales
and marketing organizations and on expansion in the United States. We do,
however, expect research and development expenditures to decrease as a
percentage of total revenues, with the completion of the major investment made
in the development of our Prime@Vantage and [email protected] products.
Liquidity and Capital Resources
Since October 1997, our primary source of funding has been through the
private sale of convertible preferred stock and attached warrants, which
totaled $39.1 million in aggregate net proceeds as of December 31, 1999.
In October 1999, we entered into a $5.0 million financing arrangement with
Greyrock Capital, a Bank of America company, providing an upfront term loan of
$2.0 million with the balance being funded against our receivables position
within the United States and in the United Kingdom. The arrangement has a 12
month renewable term. To date, we have borrowed a total of $2.0 million under
this arrangement at an interest rate of 10.5%.
Cash and cash equivalents were $4.0 million at December 31, 1999 compared
to $500,000 at December 31, 1998 and $22.1 million at December 31, 1997. The
increase from December 31, 1998 is primarily attributable to equity financing
provided by General Atlantic Partners, our primary investor and Andersen
Consulting.
Net cash used in operating activities was $11.2 million during 1999, $13.7
million during 1998 and $1.5 million during 1997.
Working capital at December 31, 1999 was $(1.3) million compared to
$(100,000) at December 31, 1998. We currently intend to raise cash through this
offering, the proceeds of which are expected to exceed cash requirements for
the next twelve months. If this offering is not successfully completed, we
intend to obtain alternative financing through the private placement of debt or
equity, and reduce expenditures so as to minimize requirements for additional
financial resources. We believe that, if this offering is not completed, we
will be able to successfully execute alternative plans. There can be no
assurance that this offering will be successful or that additional financing
will be available to us or, if available, that it can be obtained on a timely
basis, on terms acceptable to us, and within the limitations contained in our
commercial lending agreements. Failure to obtain such financing could result in
the delay or abandonment of certain of our development and expansion plans and
could have a material adverse effect on us. Furthermore, there can be
no assurance that actual capital needs and expenditures will not be
significantly higher than our current estimates.
Capital expenditures were $1.4 million during 1999, $1.1 million during
1998 and $600,000 during 1997. We do not expect any major future expenditures
on property, but intend to continue to invest in our systems infrastructure to
better support our clients, improve the ongoing efficiency of our product
development process and facilitate internal communications and virtual team
working.
Our strategic initiatives include the roll-out of our new web-enabled
software products Prime@Vantage and [email protected] and the expansion of our
United States operations. These initiatives will require a substantial amount
of capital as will personnel additions and the funding of operating losses and
working capital.
While we have historically generated a high proportion of our revenues
outside of the United States, the vast majority of these have been earned in
Pounds Sterling, so that any potential foreign exchange exposure would be
limited to movements between the Pound Sterling and the Dollar. Because the
cost profile has also been similarly structured, this has provided a natural
currency hedge. Currently, we do not formally hedge any
31
<PAGE>
of our foreign currency exposure. We will continue to review this position in
light of potential growth in Euro denominated revenues and expenditures.
However, during the fiscal years 1998 and 1999, we incurred net foreign
currency exchange losses due primarily to translation differences from customer
payments.
In November 1999, Prime Response agreed to refund amounts for a software
license fee paid by a customer in 1998. The total amount of the refund is
$500,000, which is payable in the amount of $125,000 per quarter for four
quarters commencing in January 2000.
In the event that neither an initial public offering nor any other
liquidity event occurs by January 1, 2001, Andersen Consulting or its
affiliates will have the right to require Prime Response to repurchase the
428,000 shares for $4.0 million. Such repurchase will be payable in three
quarterly installments, plus 8.0% interest on the entire amount beginning on
January 1, 2001, plus addition interest of 7.0% per annum in the event Prime
Response fails to make any payment when due. The put right will terminate upon
an initial public offering or other liquidity event.
Prime Response is obligated to engage Andersen Consulting for consulting
services of at least $1.0 million during the period from contract execution to
December 31, 2001. If designated sales targets are met, Andersen Consulting is
obligated to provide up to $1.0 million in funding for joint marketing efforts,
business development personnel, structure feedback and sales support. The
expenditure of these funds will be controlled by a committee comprised of both
Andersen Consulting and Prime Response personnel.
As part of the reorganization in 1997, a shareholder issued an option to us
to repurchase 1,249,500 of his shares at an exercise price of $3.42 per share.
This option expires on September 30, 2000, on which date the shareholder has
the right to put these shares to us at the same price.
We do not have any derivative instruments.
Recent Accounting Pronouncements
In March 1998, the AICPA issued Statement of Position No. 98-4 "Deferral of
the Effective Date of a Provision of SOP 97-2, Software Revenue Recognition"
("SOP 98-4"). SOP 98-4 defers, for one year, the application of certain
passages in SOP 97-2 which limit what is considered vendor-specific objective
evidence ("VSOE") necessary to recognize revenue for software licenses on
multiple-element arrangements when undelivered elements exist. In December
1998, the AICPA issued Statement of Position No. 98-9 "Modifications of SOP 97-
2, Software Revenue Recognition, with Respect of Certain Transactions"
("SOP 98-9") which further extends the deferral of certain passages of SOP 97-2
relating to vendor specific objective evidence established in SOP 98-4 and also
defines "residual value." The provisions of SOP 98-9 have been adopted for
transactions entered during the fiscal year beginning January 1, 1999. The
Company does not anticipate that this pronouncement will have a material effect
on its results.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes a new model for accounting for derivatives and
hedging activities and supercedes and amends a number of existing standards.
SFAS 133 is effective for fiscal years beginning after June 15, 1999, but
earlier application is permitted as of the beginning of any fiscal quarter
subsequent to June 19, 1998. Upon initial application, all derivatives are
required to be recognized in the statement of financial position as either
assets or liabilities and measured at fair value. In addition, all hedging
relationships must be reassessed and documented pursuant to the provisions of
SFAS 133. Prime Response does not anticipate that this pronouncement will have
a material effect on its reported results or financial position.
Impact of Year 2000
Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit
32
<PAGE>
entries to distinguish 21st century dates from 20th century dates. As a result,
computer systems and software used by many companies and governmental agencies
may need to be upgraded to comply with these Year 2000 requirements or risk
system failure or miscalculations causing disruptions of normal business
activities. To date, we have not experienced any material Year 2000 problems in
our computer systems or operations. However, other companies, including us,
could experience latent Year 2000 problems.
State of Readiness
We have assessed the impact that the Year 2000 problem may have on our
information technology (IT) systems, including the hardware and software that
enable us to provide and deliver our integrated eMarketing solutions, and our
non-IT systems. Our assessment plan has consisted of (i) quality assurance
testing of our internally developed proprietary software incorporated in our
products; (ii) contacting third-party vendors and licensors of material
hardware, software and services that are both directly and indirectly related
to the delivery of our solutions to our clients; (iii) contacting vendors of
material non-IT systems used by us; (iv) assessment of repair or replacement
requirements; (v) repair or replacement; (vi) implementation; and (vii)
creation of contingency plans in the event of Year 2000 failures.
Using our Year 2000 Certification methodology we have executed tests which
confirmed the suitability of the Prime Vantage software for Year 2000
operation. We have been informed by many of our vendors of material hardware
and software components of our IT systems that the products used by us are
currently Year 2000 compliant. We have requested that vendors of our other
material hardware and software components of our IT systems provide assurances
of their Year 2000 compliance. We have completed an assessment of the
materiality of our non-IT systems and have obtained assurances of Year 2000
compliance from providers of material non-IT systems. At this time, we do not
believe that any of our IT systems or non-IT systems will need to be revised or
replaced.
Costs
To date, we have not incurred any material expenditures in connection with
identifying or evaluating Year 2000 compliance issues. Most of our expenses
have related to, and are expected to continue to relate to, the operating costs
associated with time spent by employees in the evaluation process and Year 2000
compliance matters generally. At this time, we do not possess the information
necessary to estimate the potential costs of revisions to our proprietary
software should any revisions be required or the replacement of third-party
software, hardware or services that are determined not to be Year 2000
compliant. Although we do not anticipate that these expenses will be material,
such expenses, if higher than anticipated, could have a material adverse effect
on our business, results of operations and financial condition.
Risks
To date, we have not experienced, and we are not currently aware of any
Year 2000 compliance problems relating to our proprietary software or our IT or
non-IT systems that would have a material adverse effect on us without taking
into account our efforts to avoid or fix such problems. There can be no
assurance that we will not discover Year 2000 compliance problems in our
proprietary software that will require substantial revisions. In addition,
there can be no assurance that third-party software, hardware or services
incorporated into our material IT and non-IT systems will not need to be
revised or replaced, all of which could be time consuming and expensive.
Contingency Plan
In the event of any Year-2000 problems, our contingency plan included the
following components:
. Deploying all necessary internal resources to tackle the issues as
swiftly as possible;
. Calling upon our relationships with our commercial partners, to enable
suitable escalation of issues with any third party; and
. Calling upon technical assistance from our technology partners--
including our disaster recovery service provider.
33
<PAGE>
BUSINESS
Prime Response is a leading provider of integrated eMarketing software
solutions that enable businesses with large customer bases to create, manage
and execute highly targeted internet and traditional marketing campaigns that
build more loyal and profitable customer relationships. Our software solutions
leverage our 12 years of experience in the design, implementation and
management of marketing campaigns to create tailored interactions that draw on
all of our business data regarding its customers, including information
generated by its sales, marketing, service and accounting organizations. Our
products are designed to help our clients to more effectively market and sell
to their customers by delivering more personalized marketing messages over the
customers' preferred channel, whether internet or traditional.
Industry Background
In today's competitive environment, businesses face intense pressure to
improve their overall profitability. In recent years, businesses have addressed
cost reduction and expense containment by adopting enterprise resource planning
and other back-office software applications. Businesses realize that they must
now also focus on ways to increase revenues in a cost effective manner. Today,
businesses with large customer bases invest significant resources to attract,
retain and sell to customers directly through telephone, direct mail and
personal selling efforts and increasingly via the internet, or indirectly
through use of media such as print, radio and television. Implementing and
managing these marketing campaigns--called marketing management--is both a
critical and challenging task because of the proliferation of customer
purchasing options and increased customer sophistication coupled with the high
costs associated with conducting marketing campaigns. Industry sources estimate
that direct marketing expenditures in the United States alone totaled more than
$160.0 billion in 1998 and will be more than $200 billion by 2003.
Traditional Marketing Management Tools
To improve the cost-effectiveness of marketing campaigns, businesses are
focusing on ways to exploit information gathered from their multiple marketing
activities. As part of marketing management, businesses are seeking to:
. automate the planning and implementation of their marketing campaigns;
. tailor interaction with customers based on prior interactions between
customers and businesses;
. identify profitable customer opportunities;
. measure effectiveness of current marketing initiatives to plan more
effective future campaigns; and
. determine future marketing opportunities through consolidation and
analysis of customer data.
Industry sources estimate that the market for marketing management
solutions to perform one or more of these tasks will grow from $2.3 billion in
1998 to $16.8 billion in 2003. Historically, these solutions have included:
. Automated Customer Lists. For many years, businesses have used
proprietary software, often developed by third-party service bureaus,
to access customer information maintained in large external databases.
. Database Mining Software. Database mining software permits businesses
to analyze data generated within an organization to provide a more
complete view of customer relationships.
These traditional solutions do not fully manage the planning and
implementation of marketing campaigns, do not allow for easy access to customer
data, do not support focused one-on-one marketing efforts and are difficult to
integrate across various departments within an organization. Because of these
inherent limitations, traditional marketing management solutions generally do
not enable businesses to achieve their overall goals for cost-effective
marketing and efficient use of available customer data and generally do not
address growing internet marketing needs.
34
<PAGE>
Emergence of eMarketing
The widespread adoption of the internet by consumers and businesses is
fundamentally changing the way businesses interact with their customers and is
dramatically increasing the pressure on businesses to adopt new marketing
management solutions. The number of users who buy and sell goods over the
internet is expected to increase from 142 million worldwide in 1998 to 500
million worldwide by the end of 2003. Industry sources report that the value of
goods bought and sold on the internet is expected to increase from $50.0
billion in 1998 to $1.3 trillion in 2003. The growth of the internet and e-
commerce is stimulating businesses to implement new forms of internet
advertising, such as banner ads, directed e-mail and personalized web pages.
Worldwide spending on internet advertising is expected to grow from $3.3
billion in 1999 to $33.0 billion in 2004.
On the internet, one-to-one, real-time marketing can occur each time a
customer interacts with a business's website. Businesses can observe, record
and analyze customer behavior, such as when and how often they visit a
business's website and what content they view. This information allows
businesses to generate a profile of a customer's preferences and offer a
selection of products and services tailored to each specific customer. New
opportunities exist for real-time, customized sales and marketing initiatives
ranging from targeted e-mail to banner ads to personalized coupons. In addition
to exploiting new opportunities, businesses must develop effective internet
marketing strategies to protect their customer base and retain consumers who
might otherwise decide to change vendors with the click of a button.
Although many businesses have invested in internet infrastructure software
to support their e-commerce initiatives, much of this effort has been limited
to the development of their websites and other related back-office functions,
such as transaction processing and security. Many of these businesses are only
now beginning to focus on automating their internet marketing strategies so
that they can better exploit the internet as a marketing medium in a more cost-
effective fashion. internet marketing products to date have generally been
point solutions, designed to address only one specific aspect of customer
interaction, or touch-point, such as:
. management of inbound e-mail, so that customer inquiries and
complaints are efficiently and promptly handled; or
. management of outbound e-mail, permitting businesses to generate
business through direct e-mail campaigns over the internet; or
. customized website content, with information tailored to specific
dynamic customer profiles; or
. management of internet advertising, designed to generate and manage
the use of banner ads and other internet advertising.
These marketing products typically address only internet marketing channels
and often do not integrate with a business's existing traditional marketing
channels, nor do they leverage cost-effectively a business's existing customer
databases generated from non-internet based marketing activities.
To more effectively market and sell to their customers, businesses
increasingly realize the need to exploit both internet opportunities and
traditional marketing initiatives. We believe that traditional businesses are
increasingly utilizing the internet as a sales and marketing channel and
internet retailers are increasingly utilizing more traditional media to reach
and communicate with customers. Businesses need solutions that integrate
internet and traditional marketing campaigns, through both direct and indirect
channels, to draw on all of a business's data regarding its customers including
information generated by its sales, marketing service and accounting
organizations. Drawing on this data these businesses can learn more about their
customers to develop effective marketing campaigns and build stronger
relationships with their customers. Today, businesses are hampered by the fact
that solutions designed exclusively for the internet generally do not integrate
with traditional marketing solutions, and traditional marketing solutions
generally do not integrate with internet marketing solutions. An integrated
solution would allow businesses to gather accurate and comprehensive
information about their customers and use that information throughout the
organization to develop and implement effective direct and indirect marketing
campaigns.
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The Prime Response Solution
We offer integrated eMarketing software solutions that enable businesses to
create and manage highly targeted internet and traditional marketing campaigns
to build more loyal and profitable customer relationships. We have drawn on
over 12 years of experience in the design, implementation and management of
marketing campaigns to develop products that draw on all of the business data
regarding its customers, including information generated by its sales,
marketing, service and accounting organizations to formulate highly targeted
marketing campaigns. Using [email protected], our clients will be able to
create and manage comprehensive marketing campaigns that utilize inbound and
outbound e-mail, customized websites, banner advertising and other internet
advertising together with traditional marketing media that utilizes customer
information drawn from the business' sales, marketing, service and accounting
departments.
The Prime Response solution acts as a hub for the marketing organization to
capitalize on three important trends in the marketplace: the expansion of
customer data and tools to mine and understand that data, the continual
evolution of lower cost customer touchpoints (such as the internet and e-mail),
and the decline in marginal return for marketing dollars spent. By providing
marketers with a solution that allows them to interact with customers over
virtually any channel at any time, marketing organizations can take better
advantage of their data and analysis, of the breadth of their marketing
channels and thus gain better returns on their marketing spend.
Our solutions are designed to provide our clients with critical business
advantages in effectively managing the customer lifecycle from acquisition,
through to retention and development, including the ability to:
Lower the cost of acquiring and retaining customers. Our software can
deliver process efficiencies, refined prospect and customer selection and
marketing channel optimization, thereby contributing to reduced customer
acquisition and retention costs.
Target marketing efforts on the most profitable customers. Our software
enables our clients to identify and cost-effectively focus and build on their
relationships with their most profitable customers by:
. quickly understanding and identifying who the most profitable
customers are;
. enabling the marketing professional to create and fine-tune the
appropriate marketing offer; and
. communicating the marketing offer over the most effective marketing
channel.
Optimize the use of marketing channels based on customer
preferences. Because our software solution has been developed to design, plan,
execute and track marketing campaigns over the internet and traditional
channels, it permits clients to tailor and deliver marketing messages over the
channel identified as each customer's preference.
Increase customer retention and loyalty. By maintaining a history of all
customer interactions, both inbound and outbound, and by giving the marketing
professional access to all customer data, our software helps our clients build
loyal and sustainable customer relationships.
Maximize lifetime value of customers through cross-selling. Our software
enables clients to get the most value out of their customers through enhanced
cross-selling efforts to maximize a customer's revenue potential over the
duration of the customer's relationship with a client.
The Prime Response solution is supplemented by comprehensive service and
professional support, so that our clients are able to maximize the benefits
achieved with the use of our software on a turnkey basis.
Strategy
Our strategy is to become the leading supplier of integrated eMarketing
solutions. Key elements of our strategy include:
Leverage expertise to offer leading integrated eMarketing solutions. We
have built on our 12 years of experience in the design, implementation and
management of marketing campaigns to create what we believe is
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the leading marketing solution specifically designed to operate as a web-
enabled multi-channel solution addressing both internet and traditional
campaigns. We intend to continue to apply our expertise to focus on those
potential clients and industries that require an eMarketing solution that
offers complete marketing functionality rather than a combination of disparate
point solutions. We believe that our products' open architecture will allow
them to be integrated with emerging interactive technologies, providing us with
a continued competitive advantage as the market evolves.
Expand operations in the United States. We believe that the United States
market for integrated eMarketing solutions is larger and more rapidly growing
than the European market, and although we plan to increase our international
operations, our primary focus is to further expand in the United States. We
started as a European business and in 1998 we began offering our products in
the United States, and we have continued to aggressively expand our United
States presence since January 1999. We relocated our corporate headquarters to
Cambridge, Massachusetts in July 1999. We intend to continue to make a
significant investment in this geographic expansion and plan to double our
United States sales force over the next 12 months.
Penetrate identified vertical markets. We intend to continue to focus our
marketing and direct sales activities in our key existing vertical markets:
communications and media, financial services, and retail and e-commerce. We
believe these markets provide the greatest opportunity for rapid market
penetration because of their critical need for flexible marketing management
solutions to manage large, consumer-oriented marketing campaigns; their growing
use of e-commerce; and the competitive challenges they face from e-commerce. In
order to further expand our presence in these vertical markets, we have
recently structured our sales and services organizations to provide dedicated
and focused support to each industry that we target. We also intend to leverage
our current success in our targeted industries to gain market share in other
industries with similar characteristics.
Expand direct sales force. We rely on a direct sales model because our
products address critical business needs that require close relationships with
our clients. During 1999, we increased the number of our direct sales personnel
from 14 to 36 and increased the number of our sales offices from 6 to 9. We
intend to continue to expand our direct sales force worldwide.
Build key strategic alliances. We have established strategic relationships
with key industry participants in order to broaden our market presence, reach
new geographic and vertical markets, and increase our sales penetration by
leveraging each partner's expertise in specific markets, industry reputation
and sales and marketing resources. Today we have active marketing relationships
with organizations including consultants, systems integrators and service
providers such as Andersen Consulting, platform providers such as Hewlett
Packard and Sun Microsystems, and complementary software providers such as SAS
Institute and MicroStrategy. We intend to establish additional strategic
alliances, and to continue to enhance our relationship with existing strategic
partners in order to further broaden our market penetration.
Expand and enhance professional services and customer support. We intend to
continue to make a significant investment in our consulting staff and to build
the expertise of the consulting organization along industry lines to facilitate
the rapid adoption by clients of our solutions. We also believe that a high
level of service and support is of critical importance to our clients, who
require a highly reliable, turnkey solution. We intend to sustain our
commitment to service and support through continued investment in those
activities and by leveraging our strategic alliances to add greater depth to
those services.
Products
We began in 1987 as a marketing database service bureau. In 1995, we
introduced our first data analysis and campaign management solution, one of the
first client/server based, enterprise-wide, multi-channel marketing management
software solutions configured to permit the analysis of large amounts of
customer data and the automation of marketing strategies. In 1998, we
introduced a windows-based, three-tier, client/server
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product that works on a client's own database and runs on Windows 95 and
Windows NT. Today, our marketing management solutions are used by more than 70
businesses to manage millions of customer relationships.
Our latest product offerings include Prime@Vantage, a web-based system that
incorporates an advanced user interface and new software architecture to
facilitate integration and product enhancements, and [email protected], which
provides additional functionality, including the ability to generate immediate
personalized marketing initiatives over the internet in response to information
generated across an organization. Beta shipments of Prime@Vantage and
[email protected] commenced in September 1999 and were released in December
1999.
Our solution features software architecture that makes it:
. highly flexible, so that it can be used to implement marketing plans,
regardless of complexity, channel or medium, and so that clients can
respond to rapid developments in market conditions and technology;
. scalable, so that it can continue to support major company-wide
marketing campaigns effectively to target customers and potential
customers, and so that it can handle rapid increases in data volume as
media such as the internet are implemented and exploited;
. comprehensive, to include all functions required by the end-users to
effectively manage and automate major marketing campaigns; and
. intuitive, so that it can be used in real-time, by personnel in
various departments involved in marketing campaigns, without
significant additional training or technical support.
Prime Vantage
Strategy Manager. Strategy Manager allows all departments of an
organization to participate in its marketing campaigns. Our clients' marketing
personnel can plan, execute, track and analyze marketing strategies, while
marketing departments can evaluate and budget campaigns prior to implementation
and measure the resulting return on investment. Strategy Manager also permits
the generation and reporting of campaign results for real-time distribution
throughout a business, allowing timely response to marketing data.
<TABLE>
<CAPTION>
Feature Benefit
- --------------------------------------------------------------------------------
<S> <C>
Channel Selection Allows users to select the most appropriate channel (for
example, direct mail or outbound call center) for a
particular campaign or customer.
- --------------------------------------------------------------------------------
Customer Selection Allows users to target the appropriate audience for a
campaign by analyzing the customer history and related data.
- --------------------------------------------------------------------------------
Product Selection Enables users to select the best product offering for a
customer.
- --------------------------------------------------------------------------------
Calculate Return on Allows users to calculate return on investment based on
Investment specific campaign cost and response rates.
- --------------------------------------------------------------------------------
Results Analysis Allows campaign planners to stage multi-event campaigns and
embed response criteria that are automatically triggered for
follow-up action.
</TABLE>
Campaign Manager. Campaign Manager provides users the functionality for
operational planning and campaign execution. This function allows for
comprehensive automated scheduling, rescheduling, execution and monitoring of
all tasks associated with marketing campaigns. Users can define campaign
targets and parameters, campaign components such as internet or e-mail, more
efficiently than with traditional software solutions, using a variety of
embedded tools and prompts.
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<TABLE>
<CAPTION>
Feature Benefits
- --------------------------------------------------------------------------------
<S> <C>
Campaign Builder Pulls together all components of a campaign. Segmentation
tree structures can be used to build campaigns for targeted
customers from various component menus.
- --------------------------------------------------------------------------------
Query Designer Customer audiences can be targeted based on defined criteria
and system data, such as details on previous communications
and responses. Information can be stored for reuse, further
analysis and integration with other third-party
applications.
- --------------------------------------------------------------------------------
Score Models Provides a capability to score customers' responses based on
user-defined criteria.
- --------------------------------------------------------------------------------
Derived Values Calculates values, including averages and ranks, based on
customer data, which can be used within selection criteria.
- --------------------------------------------------------------------------------
Data Categorization Allows users to personalize how data is displayed.
- --------------------------------------------------------------------------------
Treatments Campaign descriptions and costs can be stored for future use
in planning and budgeting potential campaigns through test
and roll-out strategies.
- --------------------------------------------------------------------------------
Response Models User-definable response models can measure customer
responses to campaigns, including direct responses as well
as responses such as increased transactions over a defined
time period.
- --------------------------------------------------------------------------------
Event-Driven Marketing Multi-stage, multi-channel campaigns can be tailored based
on customer events or behavioral changes.
- --------------------------------------------------------------------------------
Output Templates Data can be integrated with third-party applications through
a variety of output templates.
- --------------------------------------------------------------------------------
Communications History All communications and responses are stored centrally. Users
can include or exclude any campaign or treatment and can
establish communication frequency rules.
</TABLE>
Prime@Vantage and [email protected]
Building on our knowledge and expertise in the customer relationship
management industry, we are introducing Prime@Vantage, which will feature a
complete revision of product architecture to facilitate system flexibility,
integration with customer databases, and integration of new features as
required, without the investment or cost associated with significant code
revisions. Its updated graphical user interface will use icons and cues
typically used in web browsers, facilitating its use in an internet
environment. Prime@Vantage and [email protected] are founded on a comprehensive
published data model that allows for windows or browser-based applications and
a foundation for continued functional enhancements. [email protected] will be
offered as an add-on to our Prime@Vantage product. Prime@Vantage will offer the
functions and features described above as well as additional functionality as
described below:
Segmentation Manager. The Segmentation Manager allows the definition and
execution of a "decision tree," incorporating conditional, dependent and
exclusivity processing. It provides the following functionality:
<TABLE>
<CAPTION>
Feature Benefits
- --------------------------------------------------------------------------------
<S> <C>
Output Processing Provides full support for splitting, sampling (random and
ranked) and applying multilevel criteria.
- --------------------------------------------------------------------------------
Control Allows user defined processing control (static/dynamic and
live/test modes).
</TABLE>
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<TABLE>
<CAPTION>
Feature Benefits
- --------------------------------------------------------------------------------
<S> <C>
Results Cascading gross and net quantities can be displayed when
decision tree is executed.
- --------------------------------------------------------------------------------
Segmentation Multiple customer segments can be created from a single
process.
- --------------------------------------------------------------------------------
Base Population Base segments (high level inclusion/exclusion criteria)
and/or other criteria can be included or excluded to create
a "base population' against which the segmentation takes
place.
</TABLE>
Wizards and Assistants. The system incorporates a variety of intelligent
wizards and agents that help to guide a user through the various system
functions, such as building a marketing management campaign or defining a
segmentation strategy. Incorporation of these user aids enables non-technical
personnel to effectively utilize the Prime@Vantage solution.
We are also introducing an add-on to our Prime@Vantage product offering,
[email protected], which will offer web-based functions to support and
integrate internet and traditional marketing efforts fully across an
organization. [email protected] will allow our clients to take advantage of the
internet's ability to provide immediate, individualized responses to customer
inquiries. [email protected] will offer our clients a dynamic link to campaign
strategies from the client's home page without requiring continual assistance
from IT resources, enabling interactive, real-time control of web marketing
strategies. [email protected] enables our clients to personalize web-based
marketing in real time based on their customers profiles and allows our clients
to link their operational systems and data warehouses to e-mail, website, or
traditional marketing channels. [email protected] is designed to be a web-
based, multi-channel marketing solution that integrates internet and other
evolving channels--such as e-mail, the web, ATMs and mobile communication
systems--with traditional marketing channels such as direct mail, call centers,
point of sale, direct sales systems and mass market advertising.
The following tables describe some of the additional capabilities of
[email protected].
Web Personalization Engine. The Web Personalization Engine allows clients
instantaneously to personalize the websites that their customers view, based on
the customer's web activity and centralized business and communication
strategies. This allows clients to combine both internet data and feedback from
traditional channels. As a result, marketing efficiency can be improved through
real-time response analysis.
<TABLE>
<CAPTION>
Feature Benefit
- --------------------------------------------------------------------------------
<S> <C>
Collateral Manager Provides a user-definable library structure to view and
manipulate web marketing at the domain level, website level,
web page level, or web page element level.
- --------------------------------------------------------------------------------
Template Designer Using drag-and-drop technology, users can quickly and easily
design personalized websites for target audiences.
- --------------------------------------------------------------------------------
Response Engine Allows response criteria to drive subsequent marketing
communications and evaluate return on investment.
- --------------------------------------------------------------------------------
Logon Personalization Personalization at the logon stage makes use of information
gathered on the internet and off-line to further enhance and
personalize the online experience.
- --------------------------------------------------------------------------------
Session-Variable Permits user to generate real time personalization during,
Personalization and in response to, a customer session.
</TABLE>
E-mail Personalization Engine. With the E-mail Personalization Engine,
relevant, timely and personalized e-mails can be constructed and delivered to
target audiences. Outbound e-mails are distributed and response mail boxes can
be set up for automatic routing of inbound e-mail to the most relevant parts of
an organization. E-mails can include URL's that take the recipient back to a
personalized web page.
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<TABLE>
<CAPTION>
Feature Benefit
- --------------------------------------------------------------------------------
<C> <S>
Collateral Manager Provides a user-definable library structure to view and
manipulate e-mail marketing data.
- --------------------------------------------------------------------------------
Template Using drag-and-drop technology, users can quickly and easily
design e-mails that include personalized content for target
audiences.
- --------------------------------------------------------------------------------
Response Tracking Mail boxes can be created to capture e-mail responses and
track campaign effectiveness.
- --------------------------------------------------------------------------------
E-mail Routing Mail boxes can be created to forward incoming e-mails to
various departments within an organization.
</TABLE>
Services
In addition to our product offerings, we also provide a variety of services
to our customers to enable them to become rapidly self-sufficient and to ensure
rapid implementation and timely return on their investment. Our principal
offerings include:
Consulting Services. We offer comprehensive consulting services to
facilitate implementation and to provide our clients with a complete marketing
management solution. These consulting services cover:
. Assessment Consulting. We offer our clients a full range of assessment
services, which are designed to improve the clients' understanding of
our product and service offerings. Clients can choose their preferred
combination of products and services based on their particular needs.
. Implementation Consulting. We provide implementation services which
includes user, technical and systems administration training along
with business consulting services linked to a client-selected pilot
campaign. The objective of the implementation plan is to allow our
clients to quickly and effectively deploy our products as well as to
establish a customer-specific, repeatable process for end-to-end
management of its marketing campaigns.
. Business Consulting. We offer our clients a full-range of strategic
business consulting services designed to assist them in optimizing
their marketing management initiatives and use of our solutions. These
services include development of their internet marketing strategies,
customer segmentation models, event-driven campaign design, and
effective market testing and measurement techniques.
. eMarketing Consulting. We provide a set of service offerings to
support our customers in effective management of web-based marketing
automation through the lifecycle of analysis, planning, execution and
tracking of marketing campaigns across multiple on and off-line
customer touch points, including the web and e-mail. The focus of
these offerings is to emphasize the importance of the internet as a
new medium for building customer loyalty and the integration of this
medium with traditional channels to enhance overall marketing results.
Support and Maintenance Services. We offer internet and off-line support
and maintenance services to our customers which provides them with hotline
technical support, remote dial-in services for problem identification and
access to maintenance releases.
Applications Hosting Services. We provide outsourcing services to our
clients who choose not to host their own applications, either directly through
our service bureau or through business partners. These services also extend to
customer management solutions including analytics, data management and mining,
and consulting. We also continue to serve as a marketing database service
bureau for customers who feel it cost-effective to outsource those activities.
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Sales and Marketing
We market our products and services through a combination of our direct
sales force and strategic alliance partners. We rely on a direct sales model
because our products address critical client needs that require close
relationships with our clients. Our direct sales force is organized according
to the primary vertical markets we target, including communications and media;
financial services; and retail and e-commerce. As of December 31, 1999, our
direct sales force includes 22 sales representatives based out of our United
States offices in Cambridge, Massachusetts, Chicago, Illinois, Denver, Colorado
and San Francisco, California. We also have, as of December 31, 1999, 14 sales
representatives based out of our international offices in London, England;
Frankfurt and Munich, Germany; Paris, France; Antwerp, Belgium; and Melbourne,
Australia.
We supplement our direct sales force through alliances with industry
leaders, including consultants, systems integrators and service providers. We
also market our products and services through relationships with hardware and
software platform providers and with complementary software providers.
We build market awareness through a variety of programs, including public
relations and leadership activities such as media relations, analyst relations,
and speaking engagements. We attract potential customers through lead
generation activities that include telemarketing, direct mail programs, trade
shows, seminars and conferences, webinars and website marketing. We also
produce materials to help support sales to prospective customers such as
brochures, product sheets, white papers, presentations and product
demonstrations.
Strategic Alliance Partners
We market our products and services through strategic alliances that enable
us to leverage our partners' resources, expertise and customer base. We
currently have strategic alliances with:
. platform providers that provide platforms on which our products run;
. complementary software providers, including both generic and vertical
industry software solutions in the areas of sales and contact
management, call center support, data mining and analysis, decision
support and other solutions that are related to, but not a part of
Prime@Vantage's integrated eMarketing solution; and
. consultants, systems integrators and service providers that implement
and integrate our software for customers developing new comprehensive
marketing solutions.
Some of our strategic partners include:
<TABLE>
<S> <C>
Platform Providers Complementary Software Consultants, Systems
Providers Integrators and Service
Hewlett Packard SAS Institute Providers
Sun Microsystems Metapath Software Andersen Consulting
NCR MicroStrategy Naviant Technology
IBM Sterling Software Solutions
Customer Analytics Tessera Enterprise
(formerly ActionSystems) Systems (acquired by
IXL)
Fair, Isaac and Company
Responsys.com
</TABLE>
Andersen Consulting Relationship
On December 6, 1999, Prime Response and Andersen Consulting entered into a
joint marketing agreement and, along with an affiliate of Andersen Consulting,
a stock and warrant purchase agreement. Pursuant to the stock and warrant
purchase agreement, Andersen Consulting purchased 428,000 shares of common
stock and Andersen Consulting received a warrant to purchase 682,000 shares of
common stock. This warrant has an exercise price of $9.35 per share and vests
upon the earlier to occur of September 9, 2000 or the date of an acquisition of
Prime Response by another person or entity. Andersen Consulting also has a
right of first refusal to participate in any equity issuance by Prime Response
prior to its initial public offering in
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order to maintain its percentage ownership interest in Prime Response, subject
to specified exceptions. The aggregate purchase price paid by Andersen
Consulting for the shares of common stock and this warrant was $4.0 million.
Andersen Consulting has no performance obligations under the stock and warrant
purchase agreement or this warrant.
Prime Response issued a performance warrant to purchase 375,000 shares of
common stock to Andersen Consulting. Of this amount, 300,000 shares will vest
in share increments determined by the extent to which $2.0 billion exceeds
Prime Response's market capitalization at the time of its initial public
offering. An additional 75,000 shares will vest in increments of 7,500 shares
for each $100 million that market capitalization exceeds $2.0 billion, up to a
maximum market capitalization of $3.0 billion. This warrant has an exercise
price of $9.35 per share. Prime Response also issued a performance warrant to
purchase 375,000 shares of common stock to Andersen Consulting which will vest
in increments of 10,500 shares for each $1.0 million of sales resulting from
joint marketing efforts up to $25.0 million and then in increments of 4,500
shares for each $1.0 million of sales from $25.0 million to $50.0 million. This
warrant also has an exercise price of $9.35 per share.
All warrants have a seven-year term. In the event that the marketing
agreement is terminated as a result of a breach by Andersen Consulting, no
further vesting under the warrants will occur, but those warrants already
exercisable will remain exercisable during their term to the extent then
vested.
In the event that neither an initial public offering nor any other
liquidity event occurs by January 1, 2001, Andersen Consulting or its
affiliates will have the right to require Prime Response to repurchase the
428,000 shares for $4.0 million. The repurchase amount will be payable in three
quarterly installments, plus 8.0% interest on the entire amount beginning on
January 1, 2001, plus additional interest of 7.0% in the event Prime Response
fails to make any payment when due. The put right will terminate upon an
initial public offering or other liquidity event.
Prime Response is obligated to engage Andersen Consulting for consulting
services of at least $1.0 million before December 31, 2001. If designated sales
targets are met, Andersen Consulting is obligated to provide up to $1.0 million
in funding for joint marketing efforts, business development personnel,
structure feedback and sales support. The expenditure of these funds will be
controlled by a committee comprised of both Andersen Consulting and Prime
Response personnel.
Clients
We target clients in those vertical markets that we believe have the most
urgent requirements for advanced, integrated customer relationship management
solutions, including financial services, communications and media, and retail
and e-commerce. Within those vertical markets, we target businesses that have
multi-channel requirements and large customer bases.
Today, more than 70 clients use our products to manage millions of customer
relationships. Some of the customers who have purchased licenses and/or
professional services from us include:
Financial Communications & Retail and e- Other
Services Media Commerce British
Allianz Air Touch Boots Airways
Deutsche Bank KPN CVS Pharmacy Dell
Provident MediaOne Edgars Stores Computer
Bank Rodgers Cantel Limited Scottish
The Royal Bank of TeleDanmark Yves Rocher Power
Scotland Telstra Trusthouse
Standard Life Forte
United Bank of UPS
Switzerland
Competition
The market for our products and services is intensely competitive and
rapidly evolving. Our primary competitors include:
. vendors of internet-enabled marketing software, including E.piphany,
Annuncio, Market First and Rubric;
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. vendors of inbound e-mail management systems, including eGain, Kana
and Mustang.com;
. vendors of outbound e-mail management systems, including Click Action,
Exactis and Match Logic;
. traditional marketing automation software companies such as Exchange
Applications and Recognition Systems;
. traditional marketing database vendors and service bureaus that
provide a combination of service bureau capabilities and proprietary
software such as Axciom, Epsilon, Experian and Harte-Hanks;
. enterprise software vendors that are expanding their product lines to
offer campaign management applications such as Oracle and Siebel; and
. in-house development efforts by prospective customers to design their
own systems.
The principal competitive factors affecting the market are:
. depth and breadth of functionality offered;
. variety of marketing channels served;
. scalability and flexibility of use;
. speed and ease of implementation and use;
. price; and
. customer service and support.
We believe that we have competitive advantages that differentiate our
products and services from those of our competitors. We believe that our highly
functional product offerings that serve multiple channels provide us an
advantage over our competitors. We also believe that the features of our
Prime@Vantage and [email protected] offerings will be an important competitive
advantage, permitting clients to integrate personalized internet content and e-
mail with traditional marketing channels.
Despite these advantages, many of our competitors have longer operating
histories and significantly greater financial, technical, marketing and other
resources than we do. As a result, they may be able to undertake more extensive
promotional activities, offer more attractive pricing terms, and bundle their
products in a manner that would put us at a competitive disadvantage.
Proprietary Rights and Licensing
We regard our copyrights, service marks, trademarks, trade dress, trade
secrets, proprietary technology and similar intellectual property as critical
to our success, and we rely on trademark and copyright law, trade secret
protection and confidentiality and/or license agreements with its employees,
customers, independent contractors, partners and others to protect its
proprietary rights. Despite our precautions, it may be possible for third
parties to obtain and use our intellectual property without our authorization.
Furthermore, the validity, enforceability and scope of protection of
intellectual property in internet-related industries is uncertain and still
evolving. The laws of some foreign countries do not protect intellectual
property to the same extent as do the laws of the United States.
We pursue the registration of our trademarks in the United States and the
United Kingdom. We may not be able to secure adequate protection of our
trademarks in the United States and other countries. We have registered
trademarks for Prime Response and Vantage in the United Kingdom and Prime
Vantage in the United States. We currently have applied for trademark
registrations in the United States for "Prime Response," "Prime Vantage,"
"Prime Vantage DCV," "Prime-Response.com," and "Prime-Vantage.com." There is no
guarantee that we will be able to maintain our current or obtain additional
trademark registrations in the United States or the United Kingdom, or both,
for one or more of these trademarks, in which case we would be unable to fully
enforce our statutory trademark rights against third parties for these
trademarks, and/or we may decide to replace these trademarks with new
trademarks. This could have a material adverse effect on our business,
financial condition, and results of operations.
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There can be no assurance that the steps that we take to protect our
proprietary rights will be adequate or that third parties will not infringe or
misappropriate our copyrights, trademarks, trade secrets, trade dress and
similar proprietary rights. Effective trademark protection may not be available
in every country in which we conduct business, and policing unauthorized use of
our marks is difficult and expensive. In addition, there can be no assurance
that other parties will not independently develop substantially equivalent
intellectual property.
We have been subject to claims and expect to be subject to legal
proceedings and claims from time to time in the ordinary course of our
business, including claims of alleged infringement of the trademarks and other
intellectual property rights of third parties. Such claims, even if not
meritorious, could result in the expenditure of significant financial and
managerial resources. There can be no assurance that such legal proceedings
will not adversely affect our business.
We may be required to obtain licenses from others to refine, develop,
market and deliver new products and services. There can be no assurance that we
will be able to obtain any such license on commercially reasonable terms or at
all or that rights granted pursuant to any licenses will be valid and
enforceable.
Regulatory Environment
A range of existing laws and regulations apply to transactions and other
activities on the internet. However, the precise applicability of these laws
and regulations to the internet is sometimes uncertain. Many were adopted prior
to the advent of the internet and, as a result, do not contemplate or address
the unique issues of the internet or electronic commerce. Nevertheless,
numerous federal and state government agencies have already been successful in
promoting consumer protection and enforcing other regulatory and disclosure
statutes on the internet. Additionally, due to the increasing use of the
internet as a medium for commerce and communication, it is likely that new laws
and regulations may be enacted with respect to the internet and electronic
commerce covering issues such as user privacy, freedom of expression,
advertising, pricing, content and quality of products and services, taxation,
intellectual property rights and information security.
Congress has enacted quite a number of specific laws and regulations
concerning the use of the internet. As directed by Congress in the Children's
Online Privacy Protection Act, also known as COPPA, the Federal Trade
Commission recently adopted regulations, effective April 21, 2000, prohibiting
unfair and deceptive acts and practices in connection with the collection and
use of personal information from children under 13 years old on the internet.
The Child Online Protection Act of 1998, also known as COPA, prohibits harmful
commercial communications over the World Wide Web that are available to any
person under 17 years old. This act, however, was declared unconstitutional by
a federal district court on February 1, 1999, and that decision is currently on
appeal before a federal circuit court. If the district court's decision is
overturned and that ruling is upheld upon further appeal, providing information
to minors over the internet would be greatly limited. However, because our
website is not directed at children and we do not anticipate its widespread use
by children, COPPA and the FTC's regulations, as well as provisions under COPA,
should they be enforceable, should not have a significant effect upon our
business. Nevertheless, the FTC has strongly advocated that even general
audience websites establish privacy policies that include procedures to
disclose and notify users of privacy and security policies, obtain consent from
users for collection and use of information, and provide users with the ability
to access, correct and delete personal information stored by the company. While
we have adopted a privacy policy regarding use of personal user information and
have posted this policy on our website, our policies may not conform with
regulations adopted or policies advocated by the FTC or any other federal or
state governmental entity.
The European Union recently enacted its own privacy regulations. The
European Union Directive on the Protection of Personal Data, which became
effective in October 1998, fosters electronic commerce by establishing a stable
framework to ensure both a high level of protection for private individuals and
the free movement of personal data within the European Union. The European
Union and the U.S. Department of Commerce are currently negotiating an
agreement under which the privacy policies of American businesses may be deemed
to be adequate under the European Union Directive. Until an agreement is
reached, the
45
<PAGE>
European Union has voluntarily agreed to a moratorium on enforcement of the
European Union Directive against U.S. businesses. The European legislation and
its adoption through any agreement could adversely affect our ability to expand
our sales efforts to Europe by limiting how information about us can be sent
over the internet in the European Union restricting our ability to collect
information from European users.
It is also possible that "cookies" may become subject to laws limiting or
prohibiting their use. Certain currently available internet browsers allow our
clients' customers to modify their browser settings to remove cookies at any
time or prevent cookies from being stored on their hard drives. In addition, a
number of internet commentators, advocates and governmental bodies in the
United States and other countries have urged the passage of laws limiting or
abolishing the use of cookies. Limitations on or elimination of the use of
cookies could restrict the effectiveness of our targeting of advertisements.
We retain on our website personal information about our customers that we
obtain with their consent. We have a stringent privacy policy covering this
information. As a matter of corporate policy, we do not supply customer lists
to third parties. However, if third persons were able to penetrate our network
security and gain access to, or otherwise misappropriate, our users' personal
information, we could be subject to liability and our reputation would be
harmed. Liability could include claims for missuses of personal information,
such as for unauthorized marketing purposes or unauthorized use of credit
cards. These claims could result in litigation, our involvement in which,
regardless of the outcome, could require us to expend significant financial
resources.
Legislative proposals have been made by the federal government that would
afford broader protection to owners of databases of information, such as stock
quotes and sports scores. Such protection already exists in the European Union.
If enacted, this legislation could result in an increase in the price of
services that provide data to websites. In addition, such legislation could
create potential liability for unauthorized use of such data.
Employees
As of December 31, 1999, Prime Response had a total of 178 full-time
employees in the United States and abroad, including 55 primarily engaged in
research and development, 55 in sales and marketing, 46 in client services and
support and 22 in finance and administration. We also had 21 contractors,
primarily engaged in research and development. None of our employees is
represented by a collective bargaining unit and, to date, we have not
experienced a work stoppage. Our future depends on our ability to attract,
retain and motivate highly-skilled employees. Competition for employees in our
industry is intense.
Properties
Our principal offices are located at 150 CambridgePark Drive in Cambridge,
Massachusetts, where we lease approximately 4,705 square feet. Our lease for
this facility expires in June, 2005. We also maintain regional sales offices
and research and development facilities in Chicago, Illinois, Denver, Colorado,
San Francisco, California, Melbourne, Australia, London, England, Frankfurt and
Munich, Germany, Paris, France, and Antwerp, Belgium. Effective December 31,
1999, our office in Dublin, Ireland was closed and consolidated with our office
in London, England.
Legal Proceedings
We are not a party to any material legal proceedings. From time to time, we
may become a party to legal proceedings incidental to the conduct of our
business.
46
<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
Our directors, executive officers and other key employees, their ages as of
December 31, 1999 and their positions are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Peter J. Boni............. 54 President, Chief Executive Officer and Director
Terence H. Osborne
(1)(2).................. 61 Chairman of the Board
James Carling............. 39 Chief Technology Officer and Director
Richard S. Braddock, Sr.
(1)(2).................. 58 Director
William E. Ford (1)(2).... 38 Director
Frederick H. Phillips..... 51 Senior Vice President, Chief Financial Officer,
Treasurer and Secretary
Allen A. A. Swann......... 49 President, International
Paul B. Lavallee.......... 45 President, the Americas
Gary Daniels.............. 45 Vice President, Product Development
James P. Plantan.......... 42 Vice President, Business Development
Richard S. Braddock, Jr... 31 Vice President, Product Marketing
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mr. Boni has served as Chief Executive Officer, President and Director of
the Company since February, 1999. Prior to joining Prime Response, Mr. Boni
held executive management positions at several companies including President
and Chief Executive Officer of Cayenne Software from August 1993 to January
1998, President of the Software and Information Services Group of Paramount
Communications Inc., from April 1990 to July 1993 and President of On-line
Software International, from March 1989 to March 1990. Mr. Boni had previously
been chief executive officer at Summa Four, Inc., a provider of
telecommunications equipment, and held executive positions at Data General
Corporation.
Mr. Osborne has served as a Director of Prime Response since November 1997,
and as the Chairmanof the Board since February 1999. He also served as our
Chief Executive Officer on an interim basisfrom September 1998 to February
1999. Mr. Osborne previously served as the Chairman of the Board ofDr.
Solomon's Group PLC, a software company, from September 1996 to August 1998.
From September 1994 to October 1996, Mr. Osborne served as President of System
Software Associates Inc. Prior to that time,Mr. Osborne held a variety of
positions with IBM in both the USA and Europe including Vice President General
Systems Division and Vice President Marketing for Europe. Mr. Osborne is a
director of Mapics Inc. and Dendrite International Inc. He also serves on the
advisory boards of other US and European software companies and is a Special
Adviser to General Atlantic Partners, LLC, an affiliate of Prime Response.
Mr. Carling founded Prime Response's predecessor entity in 1990 and
currently serves as the Company's Chief Technical Officer and as a Director.
From 1990 to 1998, Mr. Carling served as the President and Chief Executive
Officer of the Company. Prior to that time, Mr. Carling served as Director,
Computer Services and as General Manager of Mailforce Limited, a direct
marketing company. Mr. Carling has also held various positions as a developer
of information technology with both American Express and the British
Government.
Mr. Braddock, Sr. has served as a Director of Prime Response since October
1997. Since August 1998, Mr. Braddock has served as the Chairman and Chief
Executive Officer of Priceline.com, Inc., a provider of internet pricing
systems. From December 1997 to January 1999, Mr. Braddock served as the non-
executive Chairman of True North Communications Inc., an advertising and
communications holding company. Prior to that time, Mr. Braddock served as
Chief Executive Officer of Medco Containment Services Inc., a managed health
care provider, and as a principal at Clayton Dubilier & Rice, Inc., a private
equity investment firm. From
47
<PAGE>
1973 to 1992, Mr. Braddock held a variety of positions at Citicorp and its
principal subsidiary, Citibank, N.A., including President and Chief Operating
Officer. Mr. Braddock also serves as a director of NewSub Services, Inc.,
Eastman Kodak Company, E*Trade Group, Inc., Cadbury Schweppes PLC, Amtec, Inc.
and Walker Digital.
Mr. Ford has served as a Director of Prime Response since October 1997. Mr.
Ford has served as a managing member of General Atlantic Partners, LLC (or its
predecessor), a private equity firm, and an affiliate of Prime Response, that
invests globally in information technology companies, since 1991. Mr. Ford also
serves as a director of Priceline.com, Inc., E*Trade Group, Inc., Eclipsys
Corporation, LHS Group Inc., Tickets.com, Inc. Quintiles Transnational Corp.
and several private information technology companies.
Mr. Phillips joined Prime Response in October 1999 as Senior Vice
President, Chief Financial Officer, Treasurer and Secretary. Prior to joining
the Company, Mr. Phillips served as Vice President, Finance & Administration
and Chief Financial Officer of Cayenne Software from July 1996 to November
1998. From October 1988 to February 1995, Mr. Phillips served as the Assistant
Treasurer at Lotus Development Corporation. Prior to that time, Mr. Phillips
held various positions, including Vice President, Corporate Development
Division and Vice President, National Banking Department at Mellon Bank.
Mr. Swann joined Prime Response in February 1998 as Senior Vice President,
International Operations and has served as President, International, since
October 1999. Prior to joining Prime Response, Mr. Swann served as the Director
of Sales and the Director of Alliances at Oracle UK Ltd., from April 1986 to
January 1998. Mr. Swann was previously employed at Comshare, a provider of
financial and database modeling solutions, and at British Gas, where he worked
in the operational research division.
Mr. Lavallee joined Prime Response in October 1999 as President, the
Americas. Prior to joining the Company, Mr. Lavallee served as an Executive
Vice President at FirePond, Inc., an e-business, sales and marketing company,
from May 1998 to March 1999. From May 1995 to May 1998, Mr. Lavallee served as
President, Americas at System Software Associates, Inc. From February 1990 to
May 1995. Mr. Lavallee served as the President of Effective Management Systems
Inc., a provider of business management software.
Mr. Daniels joined Prime Response in November 1998 as Vice President,
Product Development. From October 1997 to November 1998, Mr. Daniels served as
Senior Vice President of Product Development at Armature Ltd., a provider of
integrated retail solutions. From December 1986 to October 1997, Mr. Daniels
held various senior management positions at The Santa Cruz Operation Ltd., a
provider of server software, including Vice President of the Platform Products
Division and Vice President of the European Product Development Centre. Mr.
Daniels previously served as Group Director of Logica Software Products Ltd.
Mr. Plantan joined Prime Response in September 1999 as Vice President,
Business Development. Prior to joining the Company, Mr. Plantan served as the
Director of Strategic Alliances and Customer Relationship Management for
Information Advantage, a software company, from July 1996 to August 1999. Mr.
Plantan previously served as the Director of Partnership Marketing at Danmark
International, an information based direct marketing company, from March 1990
to April 1996. Prior to that time, Mr. Plantan was employed as a manager at
Andersen Consulting.
Mr. Braddock, Jr. joined Prime Response in March 1998 as Director of
Business Development and has served as Vice President, Product Marketing since
August 1999. Prior to joining the Company, Mr. Braddock served as a Product
Manager and Program Manager at Intel Corp. from June 1996 to February 1998. Mr.
Braddock previously was employed as a consultant at Booz, Allen & Hamilton, a
management and technology consulting firm, from August 1992 to July 1994.
Mr. Marc McMorris has been designated to become a director of Prime
Response following the closing of the initial public offering. Mr. McMorris is
a Principal with General Atlantic Partners, LLC, an affiliate of
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<PAGE>
Prime Response, and has been with General Atlantic since July 1999. From May
1998 to August 1999, Mr. McMorris served as a Vice President in the High
Technology Group of Goldman, Sachs & Co. From June 1996 to May 1998,
Mr. McMorris served as an Associate in that same group. From August 1994 to
June 1996, Mr. McMorris served as an Associate in the Mergers, Acquisitions and
Restructuring Department of Morgan Stanley Dean Witter. Prior to that time, Mr.
McMorris worked in the Bank Supervision Group of the Federal Reserve Bank of
New York.
Board Composition
Upon the closing of this offering, our board of directors will be divided
into three staggered classes, each of whose members will serve for a three-year
term. The board will consist of one Class I Director (Mr. Boni), two Class II
Directors (Messrs. Braddock and Ford) and two Class III Directors (Messrs.
Carling and Osborne). Following the closing of the initial public offering, the
Board intends to increase the total number of directors to seven, and to
appoint Marc McMorris as a Class I director. The Board intends to fill the
seventh vacancy with an individual familiar with e-commerce applications and
experience in the United States market as promptly as practicable thereafter.
At each annual meeting of stockholders, a class of directors will be elected
for a three-year term to succeed the directors of the same class whose terms
are then expiring. The terms of the Class I Directors, Class II Directors and
Class III Directors will expire upon the election and qualification of
successor directors at the annual meeting of stockholders to be held during
calendar years 2001, 2002 and 2003, respectively.
Each officer serves at the discretion of the board of directors and holds
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal. Richard S. Braddock, Sr. is the father of
Richard S. Braddock, Jr. There are no other family relationships among any of
the directors or executive officers of Prime Response.
Board Committees
The board of directors has a compensation committee composed of Messrs.
Braddock, Ford and Osborne, which makes recommendations concerning salaries and
incentive compensation for our employees and administers and grants stock
options under our stock option plans. The board also has an audit committee
composed of Messrs. Braddock, Ford and Osborne, which reviews the results and
scope of the audit and other services provided by our independent public
auditors.
Director Compensation
We reimburse each director for reasonable out-of-pocket expenses incurred
in attending meetings of the board of directors and any of its committees.
Neither employee nor non-employee directors receive compensation for services
performed in their capacity as directors. Non-employee directors will be
eligible for formula option grants under our 1999 Non-Employee Director Stock
Option Plan.
Compensation Committee Interlocks and Insider Participation
The current members of our compensation committee are Messrs. Braddock,
Ford and Osborne. Mr. Osborne was our President and Chief Executive Officer
from September 1998 to February 1999. No executive officer has served as a
director or member of the compensation committee, or other committee serving an
equivalent function, of any entity whose executive officers served as a member
of the compensation committee of our board of directors. Prior to the formation
of the compensation committee, the board of directors as a whole made decisions
relative to the compensation of executive officers. For a description of
transactions between us and certain entities affiliated with Messrs. Braddock
and Ford, see "Certain Transactions" below.
49
<PAGE>
Executive Compensation
The following table presents the total compensation paid or accrued in 1999
for our chief executive officers and our other most highly compensated
executive officers who were serving as executive officers on December 31, 1999
and whose total annual salary and bonuses were in excess of $100,000 in 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation Awards
---------------------------------- -------------------
Name and Principal Other Annual Securities
Position Salary Bonus Compensation Underlying Options
- ------------------ --------- --------- ------------ -------------------
<S> <C> <C> <C> <C>
Peter J. Boni (1)....... $276,000 $ 72,500 $ 103,019(3) 636,225
President and Chief Ex-
ecutive Officer
James Carling........... $248,543 $ 30,000 -- --
Chief Technical Officer
Allen A. A. Swann....... $231,000 $140,000 -- 82,198
President, Interna-
tional
Gary Daniels............ $231,000 $ 62,500 -- 105,000
Vice President, Product
Development
Richard S. Braddock,
Jr. ................... $112,179 $ 13,000 $ 12,000(4) 16,875
Vice President, Product
Marketing
Terence H. Osborne (2).. -- -- -- 70,995
Chief Executive Officer
</TABLE>
- --------
(1) Mr. Boni became Chief Executive Officer in February 1999.
(2) Mr. Osborne served as Chief Executive Officer on an interim basis from
September 1998 to February 1999.
(3) Consists solely of imputed interest on a non interest bearing loan of
$2,545,000 from the Company.
(4) Consists solely of commission earned on sales during the year ended
December 31, 1999.
50
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth grants of stock options for the year ended
December 31, 1999 to our chief executive officers and to each of our other most
highly compensated executive officers whose salary and bonus for such fiscal
year were in excess of $100,000. We have never granted any stock appreciation
rights. The potential realizable value is calculated based on the term of the
option at its time of grant. It is calculated assuming that the fair market
value of common stock on the date of grant appreciates at the indicated annual
rate compounded annually for the entire term of the option and that the option
is exercised and sold on the last day of its term for the appreciated stock
price. These numbers are calculated based on the requirements of the Securities
and Exchange Commission and do not reflect our estimate of future stock price
growth. Actual gains, if any, on stock option exercises are dependent on the
future performance of the common stock and overall stock market conditions. The
amounts reflected in the table may not necessarily be achieved. The percentage
of total options granted to employees in the last fiscal year is based on
options to purchase an aggregate of 1,613,144 shares of common stock granted
under our option plans.
<TABLE>
<CAPTION>
Individual Grants(1)
---------------------------------------------
Potential Realizable
Value
at Assumed Annual
Rates
Percent of of Stock Price
Number of Total Options Appreciation for
Securities Granted to Option
Underlying Employees Exercise Term(2)
Options in Fiscal Price Per Expiration ---------------------
Granted(1) Year Share Date 5% 10%
---------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Peter J. Boni (3)....... 636,225 39.4% $4.00 02/01/09 $1,600,474 $4,055,915
James Carling........... -- -- -- -- --
Allen A. A. Swann....... 18,495 1.1% 4.00 02/11/09 46,525 117,905
15,846 0.9% 6.66 10/07/09 66,369 168,194
47,857 2.9% 10.80 11/17/09 325,047 823,734
Gary Daniels............ 26,250 1.6% 4.00 03/31/09 66,033 167,342
26,250 1.6% 4.00 10/07/09 66,033 167,342
52,500 3.2% 6.66 10/07/09 219,892 557,251
Richard S. Braddock,
Jr. .................. 16,875 1.0% 4.00 10/07/09 42,450 282,655
Terence H. Osborne...... 70,995 4.4% 4.00 02/11/09 178,593 452,591
</TABLE>
- --------
(1) Each option represents the right to purchase one share of common stock. The
options shown in this column were granted pursuant to our 1998 Stock
Option/Stock Issuance Plan. The options shown in this table, except as
otherwise indicated below, become exercisable at a rate of 25.0% annually
over a four year period from the date of grant. The first 25.0% vests on
the first anniversary of the date of grant, and the remainder vests in
equal installments over the next 36 months.
(2) These assumed rates of appreciation are required by the rules of the
Securities and Exchange Commission and do not represent predictions as to
actual stock performance.
(3) Pursuant to the terms of his employment agreement, Mr. Boni's option was
immediately exercisable for shares of restricted common stock. The
restrictions on Mr. Boni's stock lift at a rate of 25.0% annually over a
four year period from the date of the grant of the option. The restrictions
on the first 25.0% of the stock are removed on the first anniversary of the
date of grant, and the remainder of the restrictions are removed in equal
installments over the next 36 months.
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<PAGE>
Fiscal Year-End Option Values
The following table sets forth information with respect to unexercised
options held as of December 31, 1999 by our chief executive officers and to
each of our other most highly compensated executive officers whose salary and
bonus were in excess of $100,000 in 1999.
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money
Options at Fiscal Options at Fiscal
Year-End Year-End(1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Peter J. Boni........... -- -- -- --
James Carling........... -- -- -- --
Allen A. A. Swann....... 48,125 139,074 $355,483 $611,430
Gary Daniels............ 7,109 97,891 48,341 525,659
Richard S. Braddock,
Jr. .................. 2,734 23,516 9,332 135,167
Terence H. Osborne...... 28,438 95,057 210,062 660,504
</TABLE>
- --------
(1) Calculated by determining the difference between the exercise price and the
deemed fair market value of $10.80 per share of the securities underlying
the options at December 31, 1999.
Stock Incentive Plans
1998 Stock Option/Stock Issuance Plan. Our 1998 Stock Option/Stock Issuance
Plan was adopted by our board of directors on April 22, 1998. As of December
31, 1999, options to purchase an aggregate of 1,387,473 shares of common stock
at a weighted average exercise price of $4.88 per share were outstanding under
the 1998 Plan. As of December 31, 1999, 668,006 shares of common stock had been
issued upon exercise of options outstanding under the 1998 plan.
The 1998 Plan is divided into two separate equity programs:
. The option grant program under which eligible persons may be granted
options intended to qualify under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") and non-statutory options; and
. The stock issuance program under which eligible persons may be issued
shares of common stock directly, either through immediate purchase or
as a bonus for services rendered (collectively, any such option or
issuance is referred to herein as an "Award").
Awards may be made to any employee, non-employee member of the board of
either the company, or any subsidiary, or consultants and other independent
advisors to the company or any subsidiary. Under present law, however,
incentive stock options may only be granted to employees. No participant may
receive an Award for more than 1,000,000 shares in any calendar year.
We may grant options at an exercise price less than, equal to or greater
than the fair market value of the common stock on the date of grant. Under
present law, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Code may not be
granted at an exercise price less than the fair market value of the common
stock on the date of grant (or less than 110.0% of the fair market value in the
case of incentive stock options granted to optionees holding more than 10.0% of
the voting power of our Company). The 1998 plan permits the board of directors
to determine how optionees may pay the exercise price of their options,
including by cash, check or in connection with a "cashless exercise" through a
broker, by surrender of shares of common stock, by delivery of a promissory
note, or by any combination of the permitted forms of payment.
52
<PAGE>
Our board of directors administers the 1998 plan. It has the authority to
adopt, amend and repeal the administrative rules, guidelines and practices
relating to the 1998 plan. It may delegate authority under the 1998 plan to one
or more committees of the board of directors and, subject to certain
limitations, to one or more of our executive officers. The board of directors
has authorized the compensation committee to administer the 1998 plan,
including the granting of options to executive officers. Subject to any
applicable limitations contained in the 1998 plan, the board of directors, the
compensation committee or any other committee or executive officer to whom the
board of directors delegates authority, as the case may be, selects the
recipients of awards and determines:
. the number of shares of common stock covered by options and the dates
upon which such options become exercisable;
. the exercise price of options;
. the duration of options; and
. the number of shares of common stock subject to any restricted stock
or other stock-based awards and the terms and conditions of such
awards, including the conditions for repurchase, issue price and
repurchase price.
In the event of a merger or consolidation in which more than 50.0% of the
combined voting power of our shares are transferred or the sale, transfer or
disposition of all or substantially all of our assets, all Awards will
automatically vest, except for shares subject to an outstanding option if:
. The option is assumed by any successor company in the merger or
consolidation; or
. The option is replaced with a cash incentive program of the successor
company which preserves the value of the spread existing on unvested
options at the time of the transaction.
No Award may be granted under the 1998 plan after April 22, 2008, but the
vesting and effectiveness of Awards previously granted may extend beyond that
date. The board of directors may amend, suspend or terminate the 1998 plan or
any portion thereof at any time.
1999 Outside Director Stock Option Plan. Our 1999 Outside Director Stock
Option Plan was adopted by our Board of Directors in November 1999 and approved
by our stockholders in January 2000. Under the terms of the Director Plan,
directors who are not employees of Prime Response or its subsidiaries receive
nonstatutory options to purchase shares of our common stock. A total of 200,000
shares of our common stock may be issued upon exercise of options granted under
the Director Plan.
The Board of Directors administers the Director Plan. The Board of
Directors has the authority to adopt, amend and repeal the administrative
rules, guidelines and practices relating to the Director Plan. Under the terms
of the Director Plan, each non-employee director continuing as a director
following this offering will receive an option to purchase 20,000 shares of our
common stock on the effective date of this offering at a price per share
equivalent to the public offering price. In addition, each such non-employee
director will receive an option to purchase 10,000 shares of our common stock
on the date of each annual meeting of stockholders commencing with the 2000
annual meeting of stockholders, at an exercise price per share equal to the
closing price of our common stock on the date of grant. In addition,
individuals who become directors after this offering and are not our employees
will receive an option to purchase 20,000 shares of common stock on the date of
his or her initial election to the Board of Directors and an option to purchase
10,000 shares of our common stock on the date of each annual meeting of
stockholders after his or her election. The exercise price per share of such
options will be the closing price per share of our common stock on the date of
the grant. All options granted under the Director Plan will be fully vested
upon grant.
1999 Employee Stock Purchase Plan. Our 1999 Employee Stock Purchase Plan
was adopted by our board of directors in November 1999, and approved by our
stockholders in January 2000. The 1999 plan authorizes the issuance of up to a
total of 300,000 shares of common stock to participating employees.
53
<PAGE>
All of our employees, including our directors who are employees, and all
employees of any participating subsidiaries, other than employees who are
"highly compensated" within the meaning of Section 414(a) of the Code, whose
customary employment is more than 20 hours per week for more than five months
in any calendar year, are eligible to participate in the 1999 plan. Employees
who would immediately after the grant own five percent or more of the total
combined voting power or value of our stock or any subsidiary are not eligible
to participate. As of December 31, 1999, approximately 26 of our employees
would have been eligible to participate in the 1999 plan.
On the first day of a designated payroll deduction period (the "offering
period"), we will grant to each eligible employee who has elected to
participate in the 1999 plan an option to purchase shares of common stock as
follows: the employee may authorize an amount (up to 10.0% of such employee's
base pay) to be deducted from such employee's base pay during the offering
period. On the last day of the offering period, the employee is deemed to have
exercised the option, at the option exercise price, to the extent of
accumulated payroll deductions. Under the terms of the 1999 plan, the option
price is an amount equal to 85% of the average market price (as defined) per
share of the common stock on either the first day or the last day of the
offering period, whichever is lower. In no event may an employee purchase in
any one offering period a number of shares which exceeds the number of shares
determined by dividing the product of (i) $2,083 and (ii) the number of months
in the offering period by the closing market price of a share of common stock
on the commencement date of the offering period or such other number as may be
determined by the board prior to the commencement date of the offering period.
The compensation committee may, in its discretion, choose an offering period of
12 months or less for each offering and may choose a different offering period
for each offering.
An employee who is not a participant on the last day of the offering
period, as a result of voluntary withdrawal or termination of employment or for
any other reason, is not entitled to exercise any option, and the employee's
accumulated payroll deductions will be refunded. However, upon termination of
employment because of death, the employee's beneficiary has certain rights to
elect to exercise the option to purchase the shares that the accumulated
payroll deductions in the participant's account would purchase at the date of
death.
Because participation in the 1999 plan is voluntary, we cannot now
determine the number of shares of common stock to be purchased by any
particular current executive officer, by all current executive officers as a
group or by non-executive employees as a group.
401(k) Plan
We offer a 401(k) plan to our United States employees who meet certain
defined requirements. Under the terms of the 401(k) plan, eligible employees
may elect to make tax-deferred contributions, and we may match 25.0% of the
lesser of the contributing employee's elective deferral or 4.0% of the
contributing employee's total salary. During 1998 and 1999, we contributed
approximately $11,000 and $20,000 respectively, to the 401(k) plan. We made no
contributions during 1997.
We offer comparable benefits to certain employees located outside the
United States.
Employment Agreements
On January 13, 1999, we entered into an employment agreement with Mr. Boni.
Under the terms of that agreement, Mr. Boni receives an annual base salary of
$290,000 and is eligible to receive an annual performance bonus of up to 50.0%
of his annual base salary. The agreement also provides that Mr. Boni's
employment may be terminated by either Mr. Boni or us at any time. If Mr.
Boni's employment is terminated without cause, or in the event of an
acquisition Mr. Boni is asked to take a position of lesser responsibility,Mr.
Boni is entitled to receive twelve months of base salary and bonus. In
addition, we granted Mr. Boni an option to purchase 636,225 shares of our
common stock, subject to certain restrictions on its transfer, at a per share
exercise price of $4.00. Mr. Boni also was granted an interest free loan to
exercise his option. In the event of a change in control of Prime Response, all
of the restrictions on Mr. Boni's stock will terminate.
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<PAGE>
On November 10, 1999, we entered into an employment agreement with Mr.
Carling. Under the terms of that agreement, Mr. Carling receives an annual base
salary of $250,000 and is eligible to receive an annual performance bonus of up
to 30.0% of his annual base salary.
On February 2, 1998, we entered into an employment agreement with Mr.
Swann. Under the terms of that agreement, Mr. Swann receives an annual base
salary of (Pounds)140,000, approximately $231,000 at an exchange rate of $1.65
to (Pounds)1.00, and a discretionary bonus based primarily on sales
performance. Mr. Swann's employment may be terminated by either party upon six
months' notice, although we may elect to pay Mr. Swann in lieu of any notice
period. Moreover, in lieu of any six-month notice period, we may place Mr.
Swann on "gardening leave," during which time Mr. Swann would cease to perform
his job responsibilities, but would nevertheless be prohibited from undertaking
other employment. In addition, we granted Mr. Swann options to purchase up to
1% of our stock on a fully diluted basis as of the date of the closing of this
initial public offering.
On November 30, 1998, we entered into an employment agreement with Mr.
Daniels. Under the terms of that agreement, Mr. Daniels receives an annual base
salary of (Pounds)140,000, approximately $231,000 at an exchange rate of $1.65
to (Pounds)1.00, and a discretionary bonus paid primarily on company earnings.
Mr. Daniels' employment may be terminated by either party upon six months'
notice. We may elect to pay Mr. Daniels in lieu of any notice period or may
place Mr. Daniels on "gardening leave," during which time Mr. Daniels would
cease to perform his job responsibilities, but would nevertheless be prohibited
from undertaking other employment.
On October 22, 1999, we entered into an employment agreement with Mr.
Lavallee. Under the terms of that agreement, Mr. Lavallee receives an annual
base salary of $250,000 and is eligible for incentive compensation equal to
50.0% of his annual base salary. If Mr. Lavallee's employment is terminated
without cause, or if Mr. Lavallee is asked to take a position of lesser
responsibility or is not granted a promotion in the event that a higher
position is created or vacated, he is entitled to receive twelve months of base
salary and bonus, as well as his benefit package. In addition, we granted Mr.
Lavallee an option to purchase 150,000 shares of our common stock at a per
share exercise price of $6.66. Twenty percent of that option (30,000 shares)
vested immediately. The remaining eighty percent of the option (120,000 shares)
will vest in accordance with the terms of our 1998 Stock Option/Stock Issuance
Plan. In the event of a change of control, if Mr. Lavallee's employment is
terminated, or if he is asked to assume a position of lesser responsibility,
Mr. Lavallee's option shall become 100.0% vested.
On October 21, 1999, we entered into an employment with Mr Phillips. Under
the terms of that agreement, Mr. Phillips receives an annual base salary of
$180,000 and is eligible for an incentive bonus equal to 35.0% of his annual
base salary. In the event that Mr. Phillips is terminated without cause, he is
entitled to his base salary and bonus for a period of one year. In addition, we
granted Mr. Phillips an option to purchase 93,750 shares of our common stock at
a per share exercise price of $6.66. Should Mr. Phillips be terminated as a
result of a change in control of Prime Response, his option shall become 100.0%
vested.
On August 5, 1999, we entered into an employment agreement with Mr. Richard
S. Braddock, Jr. Under the terms of that agreement, Mr. Braddock receives an
annual base salary of $125,000 and is eligible to receive an annual performance
bonus of up to 30.0% of his annual base salary. In addition, we granted Mr.
Braddock an option to purchase 16,845 shares of our common stock at a per share
exercise price of $5.33 per share.
On August 11, 1999, we entered into an agreement with Mr. Plantan. Under
the terms of that agreement, Mr. Plantan receives an annual base salary of
$125,000 and is eligible to receive an annual performance bonus of up to 30.0%
of his annual base salary. In the event that Mr. Plantan's employment is
terminated without cause he is entitled to receive severance pay and medical
benefits for a period of six months. In addition, we granted Mr. Plantan
options to purchase 26,250 shares of our common stock at a per share price of
$5.33 per share.
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<PAGE>
CERTAIN TRANSACTIONS
Reorganization
In October, 1997, shortly after our incorporation, we reorganized and
purchased all of the issued and outstanding ordinary shares of Prime Response
Limited, a company incorporated in the United Kingdom in 1987. Prior to this
purchase, the issued and outstanding share capital of Prime Response Limited
consisted of 100 ordinary shares, 50 of which were owned by James Carling and
50 of which were owned by Nevin Prakash. In connection with this purchase, Mr.
Carling transferred his 50 ordinary shares of Prime Response Limited for
5,260,000 shares of our common stock, and Mr. Prakash transferred his 50
ordinary shares of Prime Response Limited for 1,774,500 shares of our common
stock and a promissory note in the principal amount of $7,899,000. Immediately
after the reorganization, Messrs. Carling and Prakash held all of the issued
and outstanding shares of our common stock.
Sale of Series A Convertible Preferred Stock
In October, 1997, in connection with the reorganization described above we
sold 1,155,000 shares of series A convertible preferred stock for $20.5169 per
share, for an aggregate purchase price of $23,697,000. General Atlantic
Partners 42, L.P. purchased 909,858 shares and GAP Coinvestment Partners, L.P.
purchased 245,142 shares. Upon completion of this offering, each share of
series A convertible preferred stock will automatically convert into 3.12819225
shares of common stock. Upon completion of this offering, holders of series A
preferred stock will also receive an additional 0.546 shares of common stock in
accordance with the terms of the series A preferred stock and an additional 0.1
shares of common stock in payment of accrued but unpaid dividends, for each
share of series A preferred stock.
Sale of Series B Convertible Preferred Stock and Warrants for Common Stock
In September, 1998, we sold 866,500 shares of series B convertible
preferred stock for $6.00 per share, for an aggregate purchase price of
$5,199,000. General Atlantic Partners 48, L.P. purchased 607,131 shares, GAP
Coinvestment Partners, L.P. purchased 145,619 shares, Richard S. Braddock Sr.,
one of our directors, purchased 13,750 shares and Allen A.A. Swann, our
President, Europe, purchased 100,000 shares.
In March, 1999, we sold 833,334 shares of series B convertible preferred
stock for $6.00 per share, for an approximate aggregate purchase price of
$5,001,004. General Atlantic Partners 52, L.P. purchased 680,200 shares and GAP
Coinvestment Partners II, L.P. purchased 153,134 shares.
Upon completion of this offering, each share of series B convertible
preferred stock will automatically convert into 0.78584925 shares of common
stock. Upon completion of this offering, holders of series B preferred stock
will receive either $6.00 or an additional 0.5 shares of common stock in
accordance with the terms of the series B preferred stock and either $0.672 or
an additional 0.056 shares of common stock in payment of accrued but unpaid
dividends, for each share of series B preferred stock.
In March, 1999, we also sold a warrant to General Atlantic Partners 52,
L.P. to purchase 255,075 shares of our common stock at an exercise price of
$3.4133 per share, subject to adjustment, and a warrant to GAP Coinvestment
Partners II, L.P. to purchase 57,425 shares of our common stock at an exercise
price of $3.4133 per share, subject to adjustment.
Sale of Series C Convertible Stock and Warrants for Common Stock
In July, 1999, we sold 1,000,000 shares of series C preferred convertible
stock for $3.00 per share for an aggregate price of $3,000,000. General
Atlantic Partners 52, L.P. purchased 814,285 shares and GAP Coinvestment
Partners II, L.P. purchased 185,715 shares. In July, 1999 we also sold a
warrant to General
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<PAGE>
Atlantic Partners 52, L.P. to purchase 204,824 shares of our common stock at an
exercise price of $0.0133 per share, subject to adjustment, and a warrant to
GAP Coinvestment Partners II, L.P. to purchase 46,714 shares of our common
stock at an exercise price per share of $0.0133, subject to adjustment.
Upon the completion of this offering, each share of series C convertible
preferred stock will automatically convert into 0.75 shares of common stock.
Upon completion of this offering, holders of series C preferred stock will also
receive 0.333 additional shares of common stock in accordance with the terms of
the series C preferred stock for each share of series C preferred stock.
In each of August 1999 and September 1999 we issued a convertible
promissory note to General Atlantic Service Corporation in the principal
amounts of $1.0 million and $1.5 million, respectively. On October 19, 1999,
these notes were transferred to General Atlantic Partners 57, L.P. and GAP
Coinvestment Partners II, L.P. On October 19, 1999, these notes were converted
and an aggregate of 698,415 shares of series C preferred stock were issued to
General Atlantic Partners 57, L.P. and an aggregate of 134,916 shares were
issued to GAP Coinvestment Partners II, L.P. On November 5, 1999, General
Atlantic Partners 57, L.P. and GAP Coinvestment Partners II, L.P. transferred
an aggregate of 25,000 shares of series C preferred stock to Paul Lavallee.
As of December 31, 1999, General Atlantic Partners, LLC and its affiliates
owned approximately 59.6% of our capital stock on a fully diluted basis.
Option to Purchase Shares Owned By Kite Limited
In October 1997, in connection with the sale of our series A convertible
stock, one of our stockholders, Nevin Prakash, granted us an option to purchase
from him 1,249,500 shares of our common stock at a price of approximately $3.42
per share. As of September 13, 1999, Mr. Prakash transferred these shares to a
trust for which Kite Limited acts as trustee. We may exercise this option in
part or in full at any time until September 30, 2000, at which time we are
obligated to purchase any remaining shares that are subject to the option.
Shares of common stock purchased in connection with this option are re-issued
to optionees exercising stock options granted under our 1998 Stock Option/Stock
Issuance Plan.
We intend to exercise this option in full and deliver a promissory note to
Mr. Prakash in the amount of approximately $4.3 million as payment for the
shares and pay the promissory note in full with proceeds we receive from this
offering.
Andersen Consulting
On December 6, 1999, Prime Response and Andersen Consulting entered into a
joint marketing agreement and, along with an affiliate of Andersen Consulting,
a stock and warrant purchase agreement. Pursuant to the stock and warrant
purchase agreement, Andersen Consulting purchased 428,000 shares of common
stock and Andersen Consulting received a warrant to purchase 682,000 shares of
common stock. This warrant has an exercise price of $9.35 per share and vests
upon the earlier to occur of September 9, 2000 or the date of an acquisition of
Prime Response. Andersen Consulting also has a right of first refusal to
participate in any equity issuances by Prime Response prior to its initial
public offering in order to maintain its percentage ownership interest in Prime
Response, subject to specified exceptions. The aggregate purchase price paid by
Andersen Consulting for the shares of common stock and this warrant was $4.0
million. Andersen Consulting has no performance obligations under the stock and
warrant purchase agreement or this warrant.
Prime Response issued a performance warrant to purchase 375,000 shares of
common stock to Andersen Consulting. Of this amount, 300,000 shares will vest
in share increments determined by the extent to which $2.0 billion exceeds
Prime Response's market capitalization at the time of its initial public
offering. An additional 75,000 shares will vest in increments of 7,500 shares
for each $100.0 million that market
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capitalization exceeds $2.0 billion, up to a maximum market capitalization of
$3.0 billion. This warrant has an exercise price of $9.35 per share. Prime
Response also issued a performance warrant to purchase 375,000 shares of common
stock to Andersen Consulting which will vest in increments of 10,500 shares for
each $1.0 million of sales resulting from joint marketing efforts up to $25.0
million and then in increments of 4,500 shares for each $1.0 million of sales
from $25.0 million to $50.0 million. This warrant also has an exercise price of
$9.35 per share.
All warrants have a seven-year term. In the event that the marketing
agreement is terminated as a result of a breach by Andersen Consulting, no
further vesting under the warrants will occur, but those warrants already
exercisable will remain exercisable during their term to the extent then
vested.
In the event that neither an initial public offering nor any other
liquidity event occurs by January 1, 2001, Andersen Consulting or its
affiliates will have the right to require Prime Response to repurchase the
428,000 shares for $4.0 million. The repurchase amount will be payable in three
quarterly installments, plus 8.0% interest on the entire amount beginning on
January 1, 2001, plus additional interest of 7.0% per annum in the event Prime
Response fails to make any payment when due. The put right will terminate upon
an initial public offering or other liquidity event.
Prime Response is obligated to engage Andersen Consulting for consulting
services of at least $1.0 million before December 31, 2001. If designated sales
targets are met, Andersen Consulting is obligated to provide up to $1.0 million
in funding for joint marketing efforts, business development personnel,
structure feedback and sales support. The expenditure of these funds will be
controlled by a committee comprised of both Andersen Consulting and Prime
Response personnel.
Other Relationships
Priceline.com, Inc., a provider of internet pricing systems, is currently
one of our clients. Richard S. Braddock, Sr., one of our directors, is the
Chairman and Chief Executive Officer of Priceline.com, Incorporated and William
E. Ford, another one of our directors, serves as a director of Priceline.com,
Incorporated.
Mr. Ford is also a managing member of General Atlantic Partners, LLC, which
as of December 31, 1999 held approximately 17.4% of the outstanding Common
Stock of Priceline.com, Incorporated.
Loan to Mr. Peter J. Boni
In June 1999, Peter J. Boni, our Chief Executive Officer, purchased 636,225
shares of our common stock at a purchase price of $4.00 per share as part of a
restricted stock award granted under our 1998 Stock Option/Stock Issuance Plan.
In connection with that award, we loaned $2,545,000 to Mr. Boni for 10 years,
interest-free, pursuant to a promissory note secured by the shares of common
stock.
Stock Options Granted to Executive Officers
For additional information regarding the grant of stock options to
executive officers and directors, see "Management--Director Compensation," "--
Management Compensation," and "--1998 Stock Option/Stock Issuance Plan" and
"Principal Stockholders."
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of December 31, 1999, by:
. each person or entity or group of affiliated persons or entities known
by us to be the beneficial owner of five percent (5%) or more of the
outstanding shares of common stock;
. each director and each executive officer named in the summary
compensation table; and
. all of our directors and executive officers as a group.
Unless otherwise indicated, the address of each beneficial owner listed
below is c/o Prime Response, Inc., 150 CambridgePark Drive, Cambridge,
Massachusetts 02139.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. The information is not necessarily
indicative of beneficial ownership for any other purpose. Except as indicated
by the footnotes below, none of these persons or entities has a relationship
with us or, to our knowledge, any of the underwriters or their respective
affiliates. Unless otherwise indicted, each person or entity named in the table
below has sole voting and investment power (or shares such power with his or
her spouse) with respect to all shares of common stock shown as beneficially
owned by them, subject to applicable community property laws. Percentage of
beneficial ownership is based on 16,328,002 shares of common stock outstanding
as of December 31, 1999, assuming the conversion of the outstanding shares of
our preferred stock, and the payment of additional shares of common stock to
the holders of preferred stock, as a result of this offering, and assuming
completion of this offering on March 7, 2000. In computing the number of shares
of common stock beneficially owned by a person and the percentage ownership of
that person, shares of common stock subject to options held by that person that
are currently exercisable or exercisable within 60 days of December 31, 1999
are deemed outstanding. These shares, however, are not deemed outstanding for
the purpose of computing the percentage ownership of any other person.
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Owned
Prior to Offering After Offering
------------------ ------------------
Name of Beneficial Owner Number Percent Number Percent
- ------------------------ ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
General Atlantic Partners, LLC (1)...... 9,596,590 57.6% 9,596,590 47.6%
3 Pickwick Plaza
Suite 200
Greenwich, CT 06830
Peter J. Boni........................... 625,225 3.8 625,225 3.2
Terence H. Osborne (2).................. 35,248 * 35,248 *
James Carling........................... 5,260,500 32.2 5,260,500 26.5
Allen A.A. Swann (3).................... 217,801 1.3 217,801 1.1
Richard S. Braddock, Sr. (4)............ 33,795 * 33,795 *
William Ford (1)........................ 9,596,590 59.6 9,596,590 47.6
Richard S. Braddock, Jr. (2)............ 4,491 * 4,491 *
Gary Daniels (2)........................ 7,656 * 7,656 *
Nevin Prakash (5)....................... 1,774,500 10.9 1,774,500 9.1
All directors and executive officers as
a group (11 persons) (6)............... 15,836,306 95.7 15,836,306 79.1
</TABLE>
- --------
* Less than 1%
(1) Includes 4,696,988 shares held by General Atlantic Partners 42, L.P.,
477,113 shares held by General Atlantic Partners 48, L.P., 1,553,642
shares and warrants to purchase 255,075 shares held by General Atlantic
Partners 52, L.P., 677,461 shares held by General Atlantic Partners 57,
L.P., 1,379,937 shares
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held by GAP Coinvestment Partners, L.P., and 483,637 shares and warrants to
purchase 57,425 shares held by GAP Coinvestment Partners II, L.P. Also
includes 15,312 shares subject to stock options held by Mr. Ford which are
exercisable within 60 days of December 31, 1999. Mr. Ford is a managing
member of General Atlantic Partners, LLC, which is the general partner of
each of General Atlantic Partners 42, L.P., General Atlantic Partners 48,
L.P. and General Atlantic Partners 52, L.P. and General Atlantic
Partners 57, L.P. Mr. Ford is also a general partner of GAP Coinvestment
Partners, L.P. and GAP Coinvestment Partners II, L.P. Mr. Ford disclaims
beneficial ownership with respect to any of these shares, except to the
extent of any pecuniary interest therein.
(2) Consists solely of shares subject to stock options exercisable within 60
days of December 31, 1999.
(3) Includes 83,373 shares subject to stock options exercisable within 60 days
of December 31, 1999.
(4) Includes 15,312 shares subject to stock options exercisable within 60 days
of December 31, 1999.
(5) Includes 1,249,500 shares which Prime Response has the option to
repurchase. Prime Response intends to exercise this option prior to
completion of this offering.
(6) Includes 191,392 shares subject to stock options exercisable within 60
days of December 31, 1999.
In December, 1999, we sold 427,806 shares of our common stock and issued
warrants to purchase up to an aggregate of 1,432,282 shares of common stock to
Andersen Consulting and one of its affiliates. See "Certain Transactions."
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DESCRIPTION OF CAPITAL STOCK
General
After this offering, our authorized capital stock of Prime Response will
consist of 60,000,000 shares of common stock, $.01 par value per share, and
1,000,000 shares of preferred stock, $.01 par value per share.
As of December 31, 1999, there were outstanding (i) 8,130,813 shares of
common stock and redeemable common stock held by 13 stockholders of record,
(ii) 4,688,165 shares of convertible preferred stock held by nine stockholders
of record and (iii) options and warrants to purchase an aggregate of 2,633,792
shares of common stock.
The following summary of certain provisions of our securities and various
provisions of our amended and restated certificate of incorporation and our
amended and restated by-laws, in each case in effect following this offering,
is not intended to be complete and is qualified by reference to the provisions
of applicable law and to our amended and restated certificate of incorporation
and amended and restated by-laws included as exhibits to the Registration
Statement of which this prospectus is a part. See "Additional Information."
Common Stock and Redeemable Common Stock
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive
proportionately any such dividends declared by the board of directors, subject
to any preferential dividend rights of outstanding preferred stock. Upon our
liquidation, dissolution or winding up, the holders of our common stock are
entitled to receive ratably our net assets available after the payment of all
debts and other liabilities and subject to the prior rights of any outstanding
preferred stock. Holders of redeemable common stock have the right to put
common stock back to Prime Response at certain prices on certain dates. Holders
of common stock have no preemptive, subscription, redemption or conversion
rights. The outstanding shares of common stock are, and the shares offered by
us in this offering will be, when issued and paid for, fully paid and
nonassessable. The rights, preferences and privileges of holders of common
stock are subject to the rights of the holders of shares of any series of
preferred stock which we may designate and issue in the future. Certain holders
of common stock have the right to require us to register their shares of common
stock under the Securities Act in certain circumstances. See "Shares Eligible
for Future Sale."
Preferred Stock
Under the terms of our amended and restated certificate of incorporation,
our board of directors is authorized to issue shares of preferred stock in one
or more series without stockholder approval. The Board has discretion to
determine the rights, preferences, privileges and restrictions, including
voting rights, dividend rights, conversion rights, redemption privileges and
liquidation preferences of each series of preferred stock.
The purpose of authorizing our board of directors to issue preferred stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of preferred stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could make it more difficult for a third-party to
acquire, or could discourage a third-party from acquiring, a majority of our
outstanding voting stock. We have no present plans to issue any shares of
preferred stock.
Warrants
As of December 31, 1999 we had warrants outstanding to purchase an
aggregate of 1,246,319 shares of our common stock at a weighted average
exercise price of $5.98 per share. Certain holders of warrants are entitled to
registration rights with respect to the shares of common stock issuable upon
exercise of the warrants. See "Shares Eligible for Future Sale Registration
Rights."
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Delaware Anti-Takeover Law and Certain Charter and By-law Provisions
We are subject to the provisions of Section 203 of the General Corporation
Law of Delaware. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a business combination with an interested
stockholder for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A business combination
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
interested stockholder is a person who, together with affiliates and
associates, owns, or within three years did own, 15.0% or more of the
corporation's voting stock.
The amended and restated by-laws provide for the division of our board of
directors into three classes as nearly equal in size as possible with
staggered three-year terms. See "Management." Under the by-laws, any vacancy
on the board of directors, including a vacancy resulting from an enlargement
of the board of directors, may only be filled by vote of a majority of the
directors then in office. The classification of the board of directors and the
limitation on and filling of vacancies could make it more difficult for a
third-party to acquire, or discourage a third-party from acquiring, control of
our company.
The amended and restated by-laws also provide that after this offering,
any action required or permitted to be taken by our stockholders at an annual
meeting or special meeting of stockholders may only be taken if it is properly
brought before such meeting and may not be taken by written action in lieu of
a meeting. Our amended and restated by-laws further provide that special
meetings of the stockholders may only be called by our chairman of the board,
the president or our board of directors. In order for any matter to be
considered "properly brought" before a meeting, a stockholder must comply with
certain requirements regarding advance notice and provide us with certain
information. These provisions could have the effect of delaying until the next
stockholders meeting stockholder actions which are favored by the holders of a
majority of the outstanding voting securities of Prime Response. These
provisions could also discourage a third-party from making a tender offer for
the common stock, because even if it acquired a majority of our outstanding
voting securities, it would be able to take action as a stockholder (such as
electing new directors or approving a merger) only at a duly called
stockholders' meeting, and not by written consent.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case
may be, requires a greater percentage. Our by-laws require the affirmative
vote of holders of at least 75.0% of the votes which all the stockholders
would be entitled to cast in any annual election of directors or class of
directors to amend or repeal any of the provisions described in the prior two
paragraphs.
Our amended and restated certificate of incorporation contains certain
provisions permitted under the General Corporation Law of Delaware relating to
the liability of directors. The provisions eliminate a director's liability
for monetary damages for a breach of fiduciary duty, except in certain
circumstances involving wrongful acts, such as the breach of a director's duty
of loyalty or acts or omissions which involve intentional misconduct or a
knowing violation of law. Further, our amended and restated certificate of
incorporation contains provisions to indemnify our directors and officers to
the fullest extent permitted by the General Corporation Law of Delaware. We
have also entered into agreements to indemnify its directors and officers, in
addition to the indemnification provided for in our amended and restated by-
laws. We believe that these provisions and agreements will assist us in
attracting and retaining qualified individuals to serve as directors.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American Stock
Transfer and Trust Company.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. We cannot predict the effect, if any, that sales of shares of common
stock to the public or the availability of shares for sale to the public will
have on the market price of the common stock prevailing from time to time.
Nevertheless, if a significant number of shares of common stock are sold in the
public market, or if people believe that such sales may occur, the prevailing
market price of our common stock could decline and could impair our future
ability to raise capital through the sale of our equity securities.
Upon completion of this offering, we will have an aggregate of 19,828,002
shares of common stock outstanding, assuming no exercise of the underwriters'
over-allotment option. Of the outstanding shares, the 3,500,000 shares sold in
this offering will be freely tradeable, without restriction under the
Securities Act of 1933, as amended (the "Securities Act"), except for any such
shares which may be acquired by an "affiliate" of Prime Response, which shares
will be subject to the volume limitations of Rule 144 under the Securities Act.
As defined in Rule 144, an "affiliate" of an issuer is a person who, directly
or indirectly, through one or more intermediaries, controls or is controlled
by, or is under common control with, such issuer. Substantially all of the
remaining 16,328,002 shares of common stock outstanding will be "restricted
securities" as that phrase is defined in Rule 144 and may not be resold in the
absence of registration under the Securities Act or pursuant to an exemption
from such registration, including the exemption provided by Rule 144 under the
Securities Act.
In connection with this offering, our directors, officers and stockholders,
holding 16,328,002 shares in the aggregate, have agreed that, without the prior
written consent of FleetBoston Robertson Stephens Inc. on behalf of the
underwriters and EASDAQ, during the period ending 180 days after the date of
this prospectus, they will not directly or indirectly offer to sell, contract
to sell, or otherwise sell, dispose of, loan, pledge, or grant any right with
respect to, any shares of common stock or any securities convertible into or
exchangeable for shares of common stock, whether such shares or any such
securities are then owned by such person or are thereafter acquired directly
from us.
Subject to the foregoing and to the lock-up agreements, under Rule 144 as
currently in effect, beginning 180 days after the date of this prospectus,
holders of restricted securities will be entitled to sell a number of shares of
common stock within any three-month period equal to the greater of 1.0% of the
then outstanding shares of the common stock (approximately 198,280 shares
following the offering) or the average weekly reported volume of trading of the
common stock on the Nasdaq National Market during the four calendar weeks
preceding such sale, provided that certain manner of sale and notice
requirements and requirements as to the availability of current public
information concerning Prime Response are satisfied.
Immediately after the offering, based on the number of options outstanding
on December 31, 1999, there will be options to purchase approximately 1,387,473
shares of common stock outstanding. Subject to the provisions of the lock-up
agreements described below, holders of these options may rely on the resale
provisions of Rule 701 under the Securities Act, which permits nonaffiliates to
sell shares without having to comply with the current public information,
holding period, volume limitation or notice provisions of Rule 144 and permits
affiliates to sell their shares without having to comply with the holding
period provision of Rule 144, in each case beginning 90 days after the
consummation of this offering. In addition, immediately after this offering,
Prime Response intends to file a registration statement on Form S-8 covering
all options granted under the 1998 Stock Option/Stock Issuance Plan, 1999
Director Plan and Employee Stock Purchase Plan. Shares of common stock
registered under such registration statement will, subject to Rule 144 volume
limitations applicable to affiliates, be available for sale in the open market,
unless such shares are subject to vesting restrictions with Prime Response or
the lock-up agreements described above. See "Management--Stock Plans--1998
Stock Incentive Plan."
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We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of the prospectus, except we
may issue, and grant options to purchase, shares of common stock under the 1998
Stock Option/Stock Issuance Plan.
Following this offering, under specified conditions and subject to
customary exceptions, holders of shares of common stock will have demand
registration rights with respect to their shares of common stock (subject to
the 180-day lock-up arrangement described above) to require us to register
their shares of common stock under the Securities Act, and they will have
rights to participate in any future registration of securities by us. We are
not required to effect more than two demand registrations on behalf of these
holders.
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UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Dain Rauscher Incorporated, SG Cowen
Securities Corporation, and DLJdirect Inc. have severally agreed with us to
purchase from us the number of shares of common stock set forth opposite their
names below. The underwriters are committed to purchase and pay for all such
shares if any are purchased.
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
FleetBoston Robertson Stephens Inc.................................
Dain Rauscher Incorporated.........................................
SG Cowen Securities Corporation....................................
DLJdirect Inc. ....................................................
</TABLE>
<TABLE>
<CAPTION>
International Underwriter
-------------------------
<S> <C>
FleetBoston Robertson Stephens International Limited...............
Dain Rauscher Incorporated.........................................
Societe Generale...................................................
---------
Total............................................................ 3,500,000
=========
</TABLE>
The underwriters' representatives have advised us that the underwriters
propose to offer the shares of common stock to the public at the initial public
offering price set forth on the cover page of this prospectus and to certain
dealers at such price less a concession of not in excess of $ per share, of
which $ may be reallowed to other dealers. After this offering, the public
offering price, concession, and reallowance to dealers may be reduced by the
representatives. No such reduction shall change the amount of proceeds to be
received by us as set forth on the cover page of this prospectus. The common
stock is offered by the underwriters as stated herein, subject to receipt and
acceptance by them and subject to their right to reject any order in whole or
in part.
An electronic prospectus will be made available on the Web site maintained
by DLJdirect. Other than the prospectus in electronic format, the information
on the Web site maintained by DLJdirect relating to this offering is not part
of this prospectus and has not been approved and/or endorsed by us or any
underwriter, other than DLJdirect.
Prior to this offering, there has been no public market for the common
stock. Consequently, the public offering price for the common stock offered by
this prospectus has been determined through negotiations among the
representatives and us. Among the factors considered in such negotiations were
prevailing market conditions, certain of our financial information, market
valuations of other companies that we and the representatives believe to be
comparable to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.
The underwriters have informed us that they do not intend to confirm sales
to any accounts over which they exercise discretionary authority.
Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 525,000 additional shares of common stock at the same price per
share as we will be paid for the 3,500,000 shares that the underwriters have
agreed to purchase. To the extent that the underwriters exercise such option,
each of the underwriters will have a firm commitment to purchase approximately
the same percentage of such additional shares that the number of shares of
common stock to be purchased by it shown in the above table represents as a
percentage of the 3,500,000 shares offered hereby. If purchased, these
additional shares will be sold by the underwriters on the same terms as those
on which the shares are being sold. We will be obligated, pursuant to the over-
allotment option, to sell shares to the underwriters to the extent the option
is exercised. The underwriters may exercise such option only to cover over-
allotments made in connection with the sale of the shares of common stock
offered in this offering. If such option is exercised in full, the total public
offering price, underwriting discounts and commissions and proceeds to company
will be $ million, $ million and $ million, respectively.
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Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representation and warranties contained in the underwriting agreement.
Lock-Up Agreements. Each director, officer and stockholder of Prime
Response has agreed, during the period ending 180 days after the date of this
prospectus (the "lock-up period"), subject to specified exceptions, not to
offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or
grant any rights with respect to any shares of common stock or any options or
warrants to purchase any shares of common stock, or any securities convertible
into or exercisable for shares of common stock owned as of the date of this
prospectus or thereafter acquired directly by such holders or with respect to
which they have the power of disposition, without the prior written consent of
FleetBoston Robertson Stephens Inc. and EASDAQ. The are no existing agreements
between the representatives of the underwriters and any of our stockholders
providing consent to the sale of shares prior to the expiration of the lock-up
period.
In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of FleetBoston Robertson Stephens Inc. and
EASDAQ, subject to certain exceptions, (i) consent to the disposition of any
shares held by stockholders subject to lock-up agreements prior to the
expiration of the lock-up period or (ii) issue, sell, contract to sell, or
otherwise dispose of, any shares of common stock, any options to purchase any
shares of common stock or any securities convertible into, exercisable for or
exchangeable for shares of common stock other than our sale of shares in this
offering, the issuance of common stock upon the exercise of outstanding options
and the issuance of options under existing stock option and incentive plans
provided such options do not vest prior to the expiration of the lock-up
period. See "Shares Eligible for Future Sale."
Listing. Application has been made to have the shares of common stock
approved for quotation on the Nasdaq National Market under the symbol "PRME."
Application has also been made to list the shares on EASDAQ under the symbol
"PRME."
Stabilization. The underwriters have advised us that, pursuant to
Regulation M under the Securities Act, certain persons participating in the
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of common stock on behalf of the
underwriters for the purpose of fixing or maintaining the price of the common
stock. A "syndicate covering transaction" is the bid for or the purchase of the
common stock on behalf of the underwriters to reduce a short position incurred
by the underwriters in connection with this offering. A "penalty bid" is an
arrangement permitting the representatives to reclaim the selling concession
otherwise accruing to an underwriter or syndicate member in connection with
this offering if the common stock originally sold by such underwriter or
syndicate member is purchased by the representatives of the underwriters in a
syndicate covering transaction and has therefore not been effectively
placed by such underwriter or syndicate member. The representatives of the
underwriters have advised us that such transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
The following table summarizes the compensation to be paid to the
underwriters by Prime Response:
<TABLE>
<CAPTION>
Total
-------------------
Without With
Per Over- Over-
Share allotment allotment
----- --------- ---------
<S> <C> <C> <C>
Underwriting discounts and commissions payable
by Prime Response............................ $ $ $
</TABLE>
Prime Response estimates expenses payable by us in connection with this
offering, other than the underwriting discounts and commissions referred to
above, will be approximately $1.45 million.
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Directed Share Program. At our request, the underwriters have reserved up
to 175,000 shares of common stock to be issued by us and offered hereby for
sale, at the initial public offering price, to directors, officers, employees,
business associates and persons otherwise connected to Prime Response. The
number of shares of common stock available for sale to the general public will
be reduced to the extent such individuals purchase such reserved shares. Any
reserved shares which are not purchased will be offered by the underwriters to
the general public on the same basis as the other shares offered in this
offering.
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MATERIAL UNITED STATES FEDERAL
TAX CONSEQUENCES FOR NON-U.S. HOLDERS
The following is a general summary of material United States federal income
and estate tax consequences relating to the ownership and disposition of common
stock by "Non-U.S. Holders" (as defined below). This discussion is based on
existing provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations promulgated thereunder, judicial decisions and
administrative rulings, all of which are subject to change or alternative
construction, possibly with retroactive effect. This summary does not address
all federal income and estate tax consequences that may be relevant to a Non-
U.S. Holder in light of such holder's particular circumstances, or to certain
Non-U.S. Holders that may be subject to special treatment under U.S. federal
income tax laws, such as life insurance companies, tax-exempt organizations,
banks or other financial institutions or certain expatriates or former long-
term residents of the United States. For purposes of this summary, the term
"Non-U.S. Holder" means a beneficial owner of common stock that for federal
income tax purposes is not (i) a citizen or resident of the United States, (ii)
a corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is subject to United States federal income taxation regardless of its
source and (iv) a trust if either (a) a U.S. court is able to exercise primary
supervision over the trust's administration and one or more U.S. persons have
the authority to control all of the trust's substantial decisions or (b) the
trust was in existence on August 20, 1996 and, in general, would have been
treated as a U.S. Holder under rules applicable prior to such time, provided
the trust elects to continue such treatment thereafter.
EACH PROSPECTIVE NON-U.S. HOLDER IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISORS WITH RESPECT TO THE UNITED STATES FEDERAL INCOME AND ESTATE TAX
CONSEQUENCES OF OWNING AND DISPOSING OF SHARES OF COMMON STOCK, AS WELL AS ANY
TAX CONSEQUENCES OF OWNING AND DISPOSING OF SHARES OF COMMON STOCK UNDER THE
LAWS OF ANY STATE, LOCAL OR OTHER TAXING JURISDICTION.
Dividends. Dividends paid to a Non-U.S. Holder generally will be subject to
United States federal withholding tax at a 30% rate (or lower rate provided
under an applicable income tax treaty) unless the dividends are taxable as
effectively connected with the conduct of a trade or business in the United
States and the Non-U.S. Holder delivers IRS Form W-8ECI to the payor. If the
dividends are effectively connected with the conduct of a trade or business in
the United States by the Non-U.S. Holder, such dividends will not be subject to
the withholding tax described above and will instead be subject to U.S. federal
income tax on a net income basis as if such Non-U.S. Holder were a U.S.
resident. If such Non-U.S. Holder is a foreign corporation, it may also be
subject to a United States branch profits tax on such effectively connected
income at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty.
Under current Treasury Regulations, dividends paid to an address in a
foreign country are presumed to be paid to a resident of that country (unless
the payor has knowledge to the contrary) for purposes of the withholding rules
discussed above and, under the current interpretation of Treasury regulations,
for purposes of determining the applicability of an income tax treaty rate.
However, under recently issued Treasury regulations (the "New Regulations"),
that generally will be effective for distributions after December 31, 2000, a
Non-U.S. Holder of common stock who wishes to claim the benefit of an
applicable treaty rate generally would be required to provide an Internal
Revenue Service Form W-8 (or suitable substitute form) certifying such Non-U.S.
Holder's entitlement to benefits under the treaty. Special procedures are
provided in the New Regulations for payments through qualified intermediaries.
In addition, under the New Regulations, in the case of a Non-U.S. Holder that
is fiscally transparent (e.g., a partnership) for U.S. federal income tax
purposes, the certification requirements generally would be applied to each of
the ultimate beneficial owners of the entity. Non-U.S. Holders are advised to
consult their tax advisors regarding the effect, if any, of the New
Regulations.
Disposition of Common Stock. A Non-U.S. Holder of common stock generally
will not be subject to United States federal income tax withholding tax on any
gain realized on the sale, exchange, retirement or other disposition of common
stock, unless (i) the gain is effectively connected with a United States trade
or business
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of the Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder who is an
individual and who holds the common stock as a capital asset, such holder is
present in the United States for a period or periods aggregating 183 days or
more during the taxable year of the disposition, and either such holder has a
"tax home" in the United States or the disposition is attributable to an office
or other fixed place of business maintained by such holder in the United
States, (iii) the Non-U.S. Holder is subject to tax pursuant to the provisions
of the Code applicable to certain United States expatriates whose loss of U.S.
citizenship had as one of its principal purposes the avoidance of U.S. taxes,
or (iv) Prime Response is then or has been within a specified period a United
States real property holding corporation. Prime Response does not believe that
it is, or is likely to become, a United States real property holding
corporation. To the extent that the amount of cash and the fair market value of
any property received upon the sale or other disposition of common stock is
deemed a dividend distribution, the Non-U.S. Holder may be subject to tax on
such cash or other property as described above under "Dividends."
Federal Estate Tax. An individual Non-U.S. Holder who is treated as the
owner of or has made certain lifetime transfers of an interest in common stock
will be required to include the value thereof in his or her gross estate for
U.S. federal estate tax purposes and may be subject to U.S. federal estate tax
unless an applicable estate tax treaty provides otherwise.
U.S. Information Reporting Requirements and Backup Withholding Tax. The
Company must report annually to the IRS and to each Non-U.S. Holder any
dividend that is subject to withholding, or that is exempt from U.S.
withholding tax (pursuant to a tax treaty or the exceptions described above),
and any tax withheld with respect to such dividends. Copies of the information
returns reporting such dividends and withholding may be made available to the
tax authorities in the country in which the Non-U.S. Holder is a resident under
the provisions of an applicable income tax treaty.
U.S. backup withholding, which is imposed at the rate of 31.0% on certain
payments to persons that fail to furnish information under the U.S. information
reporting requirements, generally will not apply to dividends paid to Non-U.S.
Holders that are subject to the 30.0% withholding tax described above or that
are subject to treaty reduction, or, under current law, to a Non-U.S. Holder at
an address outside the United States.
Under the rules in effect for payments made on or before December 31, 2000,
payment of the proceeds of the sale or other disposition of common stock to or
through a United States office of a broker, U.S. or foreign, will be subject to
information reporting and possible backup withholding at a rate of 31.0% unless
the owner certifies its non-United States status under penalties of perjury or
otherwise establishes an exemption (provided the broker does not have actual
knowledge that the holder is a U.S. person or that the conditions of any other
exemption are not, in fact, satisfied). Payment of the proceeds of the sale of
common stock to or through a foreign office of a foreign broker that is not a
"U.S. related person" generally will not be subject to information reporting or
backup withholding tax. For this purpose, a "U.S. related person" is (i) a
"controlled foreign corporation" for United States federal income tax purposes
or (ii) a foreign person 50.0% or more of whose gross income from all sources
for a specified period is derived from activities that are effectively
connected with the conduct of a United States trade or business. In the case of
the payment of proceeds from the disposition of common stock to or through a
foreign office of a broker that is either a United States person or a U.S.
related person, information reporting is required on the payment unless the
broker has documentary evidence in its files that the owner is a Non-U.S.
Holder and the broker has no actual knowledge to the contrary.
With respect to payments made after December 31, 2000, the New Regulations,
subject to certain transition rules, alter the foregoing rules in certain
respects. Those regulations provide presumptions under which a Non-U.S. Holder
is subject to information reporting and backup withholding at a rate of 31.0%
unless Prime Response receives certification from the holder (or the Non-U.S.
Holder satisfies certain documentary evidence requirements) establishing non-
U.S. status. Depending on the circumstances, this certification will need to be
provided (i) directly by the Non-U.S. Holder, (ii) in the case of a Non-U.S.
Holder that is treated as a partnership or other fiscally transparent entity,
by the partners, shareholders or other beneficiaries of such entity, or (iii)
certain qualified financial institutions or other qualified entities on behalf
of the Non-U.S. Holder.
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Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's United States federal income tax provided that the required
information is furnished to the IRS. Non-U.S. Holders of Common Stock should
consult their own tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption.
U.S. Federal Estate Tax Consequences. Non-U.S. Holders should be aware that
their gross estate for purposes of U.S. estate taxes generally will include the
value of common stock held by them at the date of their death. Relief from U.S.
estate taxes may be available under an estate tax treaty between the U.S. and
the Non-U.S. Holder's country of residence.
EASDAQ INFORMATION
Belgium Restrictions
Prior to trading on EASDAQ the common stock shall not, whether directly or
indirectly, be offered, sold, transferred or delivered in Belgium to any
individual or entity other than institutional investors referred to in Article
3.2 of the Belgian Royal Decree of July 7, 1999 on the public nature of
financial transactions, acting on their own account.
Approval by the Banking and Finance Commission
On [ ], the Banking and Finance Commission (Commission bancaire et
financiere/Commissie voor het Bank- en Financiewezen) approved this prospectus
in accordance with article 29 ter, (S) 1 of the royal decree 185 of July 9,
1935 on the supervision of banks and the issue of securities as supplemented by
the law of March 9, 1989. This approval does not imply any judgement as to the
appropriateness or the quality of this initial public offering and the
admission to trading of our common stock on EASDAQ, nor of our situation. The
notice required by article 29 ter, (S) 1 will be published in the press on the
first day of trading on EASDAQ.
Approval of the Offering
On November 15, 1999, the Board of Directors of Prime Response approved the
issuance of the shares to be offered in this offering.
Responsibility for the Prospectus
Prime Response takes responsibility for the contents of this prospectus.
Prime Response, having made all reasonable enquiries, accepts
responsibility for, and confirms that this prospectus contains, all information
with regard to us and our common stock that is material in the context of the
offering and sale of our common stock, that the information contained in this
prospectus is true and correct in all material respects and is not misleading,
that the opinions and our intentions expressed herein are honestly held and
that there are no other facts the omission of which makes this prospectus as a
whole or any of such information or the expression of any such opinions or
intentions misleading.
Copies of the Registration Statement, along with copies of our certificate
of incorporation and other (corporate) documents, will be available for review
at the offices of Robertson Stephens International, 39 Victoria Street, London,
England SW1H OED. Please call the offices of Robertson Stephens International
at +44-171-798-6600 for more information.
Belgian Taxation
The following generally summarises the Belgian income and stamp tax
consequences of the acquisition, direct ownership and disposition of our common
stock by Belgian residents. It is based on tax law applicable in Belgium as in
effect on the date of this prospectus, and is subject to changes to Belgian
law, including changes that could have retroactive effect. The following
summary does not take into account or discuss tax laws of any country other
than Belgium nor does it take into account the individual circumstances of each
investor.
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Prospective Belgian investors are advised to consult their own tax advisers
as to the tax consequences of the acquisition, ownership and disposition of our
common stock.
Belgian withholding tax
Dividends distributed on our common stock (gross of Belgian taxation but
net of any foreign withholding tax deducted) are subject to Belgian dividend
withholding tax at the rate of 25.0%. when paid or attributed through a
financial intermediary in Belgium. However, no Belgian dividend withholding tax
is due if the Belgian resident is a company subject to Belgian corporate income
tax.
To the extent that dividends on our common stock are attributed or paid
outside Belgium, without the intervention of a paying agent or any other
financial intermediary in Belgium, no Belgian dividend withholding tax is due.
However, Belgian resident entities subject to Belgian legal entities tax (such
as pension funds) must pay the dividend withholding tax to the Belgian
Treasury.
The withholding tax may be subject to exemptions or reductions provided by
Belgian law. For instance, in certain cases the above-mentioned 25.0% rate of
dividend withholding tax will be reduced to 15.0%. The reduced rate applies in
particular to:
1. dividends distributed on shares publicly issued on or after January
1, 1994;
2. dividends distributed on shares that have been privately issued on or
after January 1, 1994 in exchange for cash contributions, provided the
shares are registered, or are bearer shares placed in open custody, to a
financial institution in Belgium as of the date of their issuance.
In principle, the reduced rate of 15% is applicable to dividends on our common
stock, when paid or attributed through a financial intermediary in Belgium.
Income tax for Belgian resident individuals
The Belgian dividend withholding tax is a final tax for Belgian resident
individuals holding our common stock as a private investment, and the dividends
need to be reported in such individuals' annual income tax returns. If no
withholding tax has been levied (for example where payment or attribution is
made outside Belgium), such individuals are required to report the dividends in
their tax returns, and will be taxed at the rate of either 25.0% or 15.0%, in
each case increased by a municipal surcharge (generally varying from 5.0% to
8.0% of the tax due).
Belgian resident individuals whose holdings of our common stock are
connected with a business will be taxed on the dividends at the ordinary rates
for business income, varying from 25.0% to 55.0% and increased by the
appropriate municipal surcharge and a 3.0% crisis contribution. Any Belgian
withholding tax is creditable against the final income tax due, provided the
holder of our common stock has full ownership of that stock at the time of
attribution or payment of the dividends and the dividend distribution does not
entail a reduction in value or capital loss on the shares.
Corporate income tax for companies resident in Belgium
Dividends received by companies resident in Belgium are, in principle,
subject to corporate income tax at the rate of 40.1%, i.e. the standard rate of
39.0%, increased by the additional tax of 3.0% of the corporate income tax due.
Lower rates may be applicable to Belgian resident companies which, among other
conditions, are not 50.0% or more owned by another company and whose taxable
income is below certain thresholds fixed by law.
Belgian resident companies which satisfy the minimum holding requirement of
either a participation of at least 5.0% in Prime Response or an acquisition
value of at least BEF 50 million at the time of attribution or payment of
dividends will be taxed on only 5.0% of the dividends received (so-called
dividends-received deduction or DRD), unless Prime Response falls within one of
the categories expressly excluded from the DRD. DRD entitlement is assessed on
a case by case basis at the time of attribution by reference to the origin of
our revenue used to distribute the dividend. If our common stock is traded on
EASDAQ, and we continue to have an active business in the US, it is highly
unlikely that DRD would be denied.
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Income tax for Belgium resident entities subject to Belgian legal entities
tax
The Belgian dividend withholding tax is a final tax for Belgium resident
entities subject to the Belgian legal entities tax.
Belgian capital gains taxation
(a) Income tax for individuals resident in Belgium
Individuals holding our common stock as a private investment will not be
subject to Belgian capital gains taxation on the disposal of that stock.
Individuals may, however, be subject to a 33.0% tax (increased by the
appropriate municipal surcharge and the 3.0% crisis contribution) if the
capital gain is deemed to be "speculative" in nature as defined by Belgian case
law.
(b) Corporate income tax for companies resident in Belgium
Capitals gains realised by companies resident in Belgium on the disposal of
our common stock are exempt from Belgian capital gains taxation if our
dividends qualify for the DRD. It is not necessary to satisfy the minimum
holding requirement for DRD to benefit from this exemption.
Capital losses are only tax-deductible on a liquidation and distribution of
all our assets and liabilities. In that event, capital losses are tax-
deductible to the extent that they represent fully paid-up capital.
(c) Belgium resident entities subject to the Belgian legal entities tax
Entities subject to the Belgian legal entities tax are not subject to
Belgian capital gains taxation on the disposal of our common stock.
Belgian indirect taxes
(a) Stamp tax on securities transactions
In principle, a Belgian stamp tax is levied upon the subscription or
purchase or sale of our common stock in Belgium through a professional
intermediary. The rate applicable to subscriptions for new shares is 0.35%
subject to an upper limit of BEF 10,000 or (Euro) 248 per transaction. The rate
applicable to sales and purchases of existing shares in Belgium through a
professional intermediary is 0.17% subject to an upper limit of BEF 10,000 or
(Euro) 248 per transaction.
An exemption is available to professional intermediaries (such as credit
institutions), insurance companies, pension funds and collective investment
vehicles acting for their own account. Non-Belgian resident holders of our
common stock acting for their own account will also be entitled to an exemption
from this stamp tax if they deliver to the issuer or the professional
intermediary in Belgium, as the case may be, an affidavit confirming non-
Belgian resident status.
(b) Tax on physical delivery of bearer securities
A tax is levied upon the physical delivery of our common stock pursuant to
their subscription or acquisition for consideration in Belgium. This tax is
also due on the delivery of our common stock pursuant to a withdrawal of such
stock from "open custody" in Belgium. An exemption is available if the
acquisition for consideration does not take place through a professional
intermediary.
This tax is due, at the rate of 0.2% on the sums payable by the subscriber
or acquirer on a subscription of acquisition of the sales value of our common
stock, as estimated by the custodian, on a withdrawal form "open custody".
If Belgian residents hold our common stock in book-entry form, such stock
will not be physically delivered and the Belgian tax on the physical delivery
of bearer securities will not apply.
Settlement and Clearance
The following summarizes our understanding of the operation of the clearing
system which will be in place. Persons proposing to trade the common stock on
EASDAQ should inform themselves about the costs of such trading.
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Transactions in the common stock executed in the United States generally
will be settled by book-entry through financial institutions that are
participants in DTC.
DTC is a limited-purpose trust company that was created to hold securities
for its participating organizations (collectively, "DTC Participants") and to
facilitate the clearance settlements of transactions in such securities between
participants through electronic book-entry changes in accounts of DTC
Participants. DTC Participants include securities brokers and dealers, banks
and trust companies, clearing corporations and certain other organizations,
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, "DTC Indirect
Participants") that clear through or maintain a custodial relationships with a
DTC Participant, either directly or indirectly. Persons which are DTC
Participants may beneficially own securities held by or on behalf of DTC only
through DTC Participants or DTC Indirect Participants.
Our common stock is expected to be quoted on EASDAQ in USD. Transactions in
the common stock on EASDAQ will be settled in USD or any other Euroclear or
Clearstream eligible currency through the Euroclear or Cedelbank Systems.
Investors in the common stock on EASDAQ must have a securities account with a
financial institution which directly or indirectly has access to Euroclear or
Clearstream. Euroclear and Clearstream are DTC Indirect Participants.
Euroclear and Clearstream hold securities and book-entry interests in
securities for their direct participants, which include banks, securities
brokers and dealers, other professional intermediaries and foreign depositories
and facilitate the clearance and settlements of securities transactions between
their respective participants, and between their participants and participants
of certain other securities intermediaries, including DTC, through electronic
book-entry changes in accounts of such participants or other securities
intermediaries.
Euroclear and Clearstream provide their respective participants, among
other things, with safekeeping, administration, clearance and settlement,
securities lending and borrowing, and related services. Euroclear and
Clearstream participants are investment banks, securities brokers and dealers,
banks central banks, supranationals, custodians, investment managers,
corporations, trust companies and certain other organizations and include
certain of the underwriters.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for Prime Response by Hale and Dorr LLP, Boston, Massachusetts, and for
the underwriters by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of Prime Response, Inc. as of
December 31, 1998 and 1999 and for each of the three years in the period ended
December 31, 1999 included in this prospectus, have been so included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission a Registration Statement on Form S-1.
This prospectus, which is a part of the Registration Statement, does not
contain all of the information included in the Registration Statement. Certain
information is omitted and you should refer to the Registration Statement and
its exhibits. With respect to references made in this prospectus to any
contract, agreement or other document of Prime Response, such references are
not necessarily complete and you should refer to the exhibits attached to the
73
<PAGE>
Registration Statement for copies of the actual contract, agreement or other
document. You may review a copy of the Registration Statement, including
exhibits, at the Commission's public reference room at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 or Seven World Trade Center, 13th
Floor, New York, New York 10048 or Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Please call the Commission at 1-800-SEC-
0330 for further information on the operation of the public reference rooms.
We will also file annual, quarterly and current reports, proxy statements
and other information with the Commission. You may read and copy any reports,
statements or other information on file at the public reference rooms. You can
also request copies of these documents, for a copying fee, by writing to the
Commission.
Our Commission filings and the Registration Statement can also be reviewed
by accessing the Commission's internet site at http://www.sec.gov, which
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
Quarterly and annual earnings releases, along with any price sensitive
information, will be made available to investors in Europe through the EASDAQ
Regulatory Company Reporting System and international information vendors.
74
<PAGE>
PRIME RESPONSE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999............. F-3
Consolidated Statements of Operations for the Years Ended December 31,
1997, 1998 and 1999................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the Years
Ended December 31, 1997, 1998 and 1999................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1998 and 1999.................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Prime Response, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in stockholders'
equity (deficit) and of cash flows present fairly, in all material respects,
the financial position of Prime Response, Inc. and its subsidiaries at December
31, 1998 and 1999, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1999 in conformity
with accounting principles generally accepted in the United States. 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 of these statements in accordance with
auditing standards generally accepted in the United States, 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.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses and negative cash flows
from operations since its reorganization in 1997, which raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 2, 2000
F-2
<PAGE>
PRIME RESPONSE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31, Pro Forma
------------------ December 31,
1998 1999 1999
-------- -------- ------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 530 $ 3,999 $ --
Accounts receivable, net of allowance for
doubtful accounts of $43 and $147,
respectively............................... 4,815 9,057 9,057
Prepaid and other current assets............. 1,163 2,595 2,595
-------- -------- -------
Total current assets........................ 6,508 15,651 11,652
Property and equipment, net................... 2,111 2,602 2,602
Goodwill and other intangible assets, net..... 1,533 7,262 7,262
-------- -------- -------
Total assets................................ $ 10,152 $ 25,515 $21,516
======== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................. $ 1,692 $ 3,920 $ 3,920
Short-term debt and capital lease
obligations................................ 443 2,289 2,289
Accrued expenses and other liabilities....... 2,702 4,472 10,782
Accrued interest income...................... -- 176 176
Deferred revenue............................. 1,609 6,074 6,074
-------- -------- -------
Total current liabilities................... 6,446 16,931 23,241
Long-term debt and capital lease obligations.. 530 311 311
Long-term accrued interest income............. -- 1,398 1,398
Other long-term liabilities................... 500 -- --
Commitments and contingencies (Note 6)
Redeemable common stock, $0.01 par value,
1,249,500 shares issued and outstanding at
December 31, 1998; 1,677,307 shares issued
and outstanding at December 31, 1999 and
1,249,500 shares issued and outstanding on a
pro forma basis............................. 4,275 8,295 4,275
Series A redeemable convertible preferred
stock, $0.01 par value, 1,155,000 shares
authorized; 1,155,000 shares issued and
outstanding at December 31, 1998 and 1999,
and 0 shares issued and outstanding on a pro
forma basis (liquidation value:
$51,546,000)................................ 25,946 27,842 --
Series B redeemable convertible preferred
stock, $0.01 par value; 1,700,000 shares
authorized; 866,500 issued and outstanding
at December 31, 1998, 1,699,834 shares
issued and outstanding at December 31, 1999,
and 0 shares issued and outstanding on a pro
forma basis (liquidation value:
$21,263,000)................................ 5,315 10,343 --
Series C redeemable convertible preferred
stock, $0.01 par value, 3,000,000 shares
authorized; 1,833,331 shares issued and
outstanding at December 31, 1999, and 0
shares issued and outstanding on a pro forma
basis (liquidation value: $11,000,000)...... -- 4,891 --
Stockholders' equity (deficit):
Common stock, $0.01 par value: 27,750,000
shares authorized (including redeemable
common stock); 5,785,500 shares issued and
outstanding at December 31, 1998; 6,453,506
issued and outstanding at December 31,
1999, and 16,046,663 shares issued and
outstanding on a pro forma basis........... 58 65 161
Additional paid-in capital................... (12,232) 6,520 83,936
Accumulated other comprehensive income....... (12) (12) (12)
Accumulated deficit.......................... (20,674) (46,127) (86,852)
Note receivable from shareholder............. -- (2,545) (2,545)
Deferred compensation........................ -- (2,397) (2,397)
-------- -------- -------
Total stockholders' equity (deficit)........ (32,860) (44,496) (7,709)
-------- -------- -------
Total liabilities and stockholders' equity
(deficit)................................. $ 10,152 $ 25,515 $21,516
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
PRIME RESPONSE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Software licenses............................. $ 2,933 $ 8,495 $ 10,134
Services and support.......................... 2,495 4,214 6,519
Applications hosting.......................... 4,754 3,827 3,869
---------- ---------- ----------
Total revenues............................. 10,182 16,536 20,522
---------- ---------- ----------
Cost of revenues:
Software licenses............................. 83 152 --
Services and support.......................... 3,052 6,477 4,522
Applications hosting.......................... 1,923 2,477 2,776
Non-cash cost of revenues..................... -- -- 113
---------- ---------- ----------
Total cost of revenues..................... 5,058 9,106 7,411
---------- ---------- ----------
Gross profit.................................... 5,124 7,430 13,111
---------- ---------- ----------
Operating expenses:
Sales and marketing........................... 2,788 9,459 13,285
Non-cash sales and marketing.................. -- -- 266
Research and development...................... 2,947 6,289 10,185
Non-cash research and development............. -- -- 63
General and administrative.................... 1,396 4,843 4,112
Non-cash general and administrative........... -- -- 1,732
Amortization of goodwill and other intangible
assets....................................... -- 1,279 1,245
---------- ---------- ----------
Total operating expenses................... 7,131 21,870 30,888
---------- ---------- ----------
Loss from operations............................ (2,007) (14,440) (17,777)
Other income (expense):
Interest income............................... 155 219 115
Interest expense.............................. (227) (294) (184)
Interest expense related to beneficial
conversion feature........................... -- -- (2,500)
Loss on foreign exchange...................... (7) (88) (58)
---------- ---------- ----------
Loss before income taxes........................ (2,086) (14,603) (20,404)
Provision for income taxes...................... (159) -- (15)
---------- ---------- ----------
Net loss...................................... (2,245) (14,603) (20,419)
Preferred stock dividends and recognition of
beneficial
conversion feature on preferred stock.......... (607) (2,015) (5,034)
---------- ---------- ----------
Net loss attributable to common stockholders.... $ (2,852) $ (16,618) $ (25,453)
========== ========== ==========
Net loss per share-basic and diluted............ $ (2.43) $ (2.36) $ (3.44)
========== ========== ==========
Weighted average shares used in computing basic
and diluted net loss per share................. 1,173,000 7,035,000 7,405,000
========== ========== ==========
Unaudited pro forma net loss per share-basic and
diluted........................................ $ (1.71)
==========
Weighted average shares used in computing
unaudited pro forma basic and diluted net loss
per share...................................... 14,906,000
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
PRIME RESPONSE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except share data)
<TABLE>
<CAPTION>
Accumulated Retained Total
Ordinary Shares Common Stock Additional Other Earnings Stockholders'
----------------- ---------------- Paid-in Comprehensive (Accumulated Note Deferred Equity
Shares Amount Shares Amount Capital Income Deficit) Receivable Compensation (Deficit)
------- ------- --------- ------ ---------- ------------- ------------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December
31, 1996........ 100 -- -- -- -- $(40) $ (825) -- -- $ (865)
Net loss........ -- -- -- -- -- -- (2,245) -- -- (2,245)
Foreign currency
translation
adjustments.... -- -- -- -- -- 46 -- -- -- 46
--------
Total
comprehensive
income......... (2,199)
Dividends
declared....... -- -- -- -- -- -- (385) -- -- (385)
Reorganization.. (100) -- 5,785,500 58 (12,232) -- -- -- -- (12,174)
Accrual of
dividends on
redeemable
convertible
preferred stock
and accretion
to redemption
value.......... -- -- -- -- -- -- (604) -- -- (604)
------- ------- --------- --- ------- ---- -------- ------- ------- --------
Balance, December
31, 1997........ -- -- 5,785,500 58 (12,232) 6 (4,059) -- -- (16,227)
Net loss........ -- -- -- -- -- -- (14,603) -- -- (14,603)
Foreign currency
translation
adjustments.... -- -- -- -- -- (18) -- -- -- (18)
--------
Total
comprehensive
income......... (14,621)
Accrual of
dividends on
redeemable
convertible
preferred stock
and accretion
to redemption
value.......... -- -- -- -- -- -- (2,012) -- -- (2,012)
------- ------- --------- --- ------- ---- -------- ------- ------- --------
Balance, December
31, 1998........ -- -- 5,785,500 58 (12,232) (12) (20,674) -- -- (32,860)
Net loss and
total
comprehensive
income......... -- -- -- -- -- -- (20,419) -- -- (20,419)
Issuance of
common stock
and warrants... -- -- -- -- 8,467 -- -- -- -- 8,467
Recognition of
beneficial
conversion
feature on
preferred
stock.......... -- -- -- -- 2,391 -- (2,391) -- -- --
Recognition of
beneficial
conversion
feature on
convertible
debt........... -- -- -- -- 2,500 -- -- -- -- 2,500
Accrual of
dividends on
redeemable
convertible
preferred stock
and accretion
to redemption
value.......... -- -- -- -- -- -- (2,643) -- -- (2,643)
Exercise of
stock options.. -- -- 31,781 1 109 -- -- -- -- 110
Exercise of
stock options
in exchange for
notes
receivable..... -- -- 636,225 6 2,539 -- -- (2,545) -- --
Compensation
related to
grants of stock
options........ -- -- -- -- 2,746 -- -- -- (2,602) 144
Amortization of
deferred
compensation... -- -- -- -- -- -- -- -- 205 205
------- ------- --------- --- ------- ---- -------- ------- ------- --------
Balance, December
31, 1999........ -- $ -- 6,453,506 $65 $ 6,520 $(12) $(46,127) $(2,545) $(2,397) $(44,496)
======= ======= ========= === ======= ==== ======== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
PRIME RESPONSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1997 1998 1999
-------- --------- --------
<S> <C> <C> <C>
Cash flows used in operating activities:
Net loss....................................... $ (2,245) $ (14,603) $(20,419)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization of property and
equipment................................... 304 654 1,032
Amortization of goodwill and intangibles...... -- 1,279 1,394
Gain on sale of fixed assets.................. -- (12) --
Compensation expense related to stock
options..................................... -- -- 2,025
Interest expense related to beneficial
conversion feature.......................... -- -- 2,500
Changes in assets and liabilities:
Accounts receivable.......................... (1,106) (1,739) (4,313)
Prepaid and other current assets............. (442) (560) (1,448)
Accounts payable............................. 1,098 (98) 2,258
Accrued expenses and other liabilities....... 877 1,426 1,329
Deferred revenue............................. (34) (94) 4,492
-------- --------- --------
Net cash used in operating activities...... (1,548) (13,747) (11,150)
-------- --------- --------
Cash flows used in investing activities:
Purchase of property and equipment............. (575) (1,086) (1,428)
Proceeds from sale of fixed assets............. -- 20 --
Payment for acquired business.................. -- (2,812) --
-------- --------- --------
Net cash used in investing activities...... (575) (3,878) (1,428)
-------- --------- --------
Cash flows provided by (used in) financing
activities:
Proceeds from issuance of redeemable common
stock and warrants........................... 4,275 -- 4,000
Proceeds from issuance of preferred stock
(Series A, B and C) and warrants, net of
issuance costs............................... 19,171 5,199 8,001
Proceeds from credit facility.................. -- -- 2,000
Repayment of bank loans........................ (110) (275) (162)
Proceeds from shareholder loans................ -- -- 2,500
Repayment of capital lease..................... (112) (197) (329)
Repayment of directors' loans.................. -- (8,113) --
Increase (decrease) in line of credit.......... 728 (561) --
Dividends paid................................. (227) -- --
Proceeds from exercise of stock options........ -- -- 110
-------- --------- --------
Net cash provided by (used in) financing
activities............................... 23,725 (3,947) 16,120
-------- --------- --------
Effect of exchange rate on cash................. 46 (4) (73)
-------- --------- --------
Net increase (decrease) in cash and cash
equivalents................................... 21,648 (21,576) 3,469
Cash and cash equivalents, beginning of year.... 458 22,106 530
-------- --------- --------
Cash and cash equivalents, end of year.......... $ 22,106 $ 530 $ 3,999
======== ========= ========
Supplemental disclosure of non-cash
transactions:
Assets acquired under capital leases........... $ 229 $ 710 $ 132
======== ========= ========
Promissory note issued for directors'
shareholdings in connection with group
reorganization............................... $ 7,899 -- --
======== ========= ========
Issuance of restricted common stock in exchange
for note receivable from shareholder......... -- -- $ 2,545
======== ========= ========
Conversion of shareholder loan to Series C
preferred stock.............................. -- -- $ 2,500
======== ========= ========
Supplemental cash flow disclosure:
Interest paid.................................. $ 227 $ 294 $ 147
======== ========= ========
Income taxes paid.............................. $ 256 -- $ 15
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business and Summary of Significant Accounting Policies
The Company
Prime Response, Inc. ("PRI") together with its consolidated subsidiaries
("Prime Response") is a leading provider of integrated eMarketing software
solutions that enable businesses with large customer bases to create, manage
and execute highly targeted internet and traditional marketing campaigns to
build more loyal and profitable customer relationships. Prime Response's
customers consist primarily of Fortune 1000 businesses as well leading e-
commerce businesses primarily based in the United States and Europe. Prime
Response sells its products through multiple distribution channels including
direct sales and resellers.
Basis of Presentation
The financial statements have been prepared in accordance with generally
accepted accounting principles in the United States.
These financial statements represent the consolidated results of PRI and
its predecessor, Prime Response Limited ("PRL"). PRI was formed as a holding
company on September 26, 1997 and acquired 100% of the outstanding ordinary
shares of PRL (a company incorporated in the United Kingdom in 1987) on October
23, 1997. Refer to Note 5 for discussion of the reorganization of Prime
Response.
Prime Response is subject to risks and uncertainties common to growing
technology-based companies, including rapid technological developments,
reliance on continued development and acceptance of the internet, intense
competition and a limited operating history. Prime Response has sustained
losses and negative cash flows from its operations since its reorganization in
October 1997 (see Note 5). These matters raise substantial doubt about Prime
Response's ability to continue as a going concern for at least the next twelve
months. Management currently intends to raise cash through a firm commitment
underwritten initial public offering, the proceeds of which are expected to
exceed cash requirements for the next twelve months. If the initial public
offering is not successfully completed, management intends to obtain
alternative financing through the private placement of debt or equity, and
reduce expenditures so as to minimize requirements for additional financial
resources. Management believes that, if this offering is not completed, Prime
Response will be able to successfully execute its alternative plans. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Prime Response declared a 0.75 for 1 reverse common stock split on February
2, 2000. All share and per share amounts presented relating to common stock
have been restated to reflect the common stock split.
Principles of Consolidation
The consolidated financial statements include the accounts of PRI and its
wholly-owned domestic and foreign subsidiaries. All intercompany accounts and
transactions have been eliminated.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Concentration of Credit Risk
Prime Response's financial instruments that are exposed to concentrations
of credit risk consist primarily of cash, cash equivalents, and accounts
receivable. Prime Response's accounts receivable result primarily from
operations and reflect a broad customer base both in the United States and
Europe. Prime Response does not require collateral for its receivables.
Fair Value of Financial Instruments
Prime Response's financial instruments consist of cash, cash equivalents
and debt and redeemable instruments. The carrying amounts of these instruments
at December 31, 1999 approximate their fair values.
Cash and Cash Equivalents
Prime Response considers all highly liquid investments which have an
original maturity of three months or less when acquired to be cash equivalents.
Software Development Costs
Software development costs are included in research and development
expenses and are expensed as incurred. Statement of Financial Accounting
Standards No. 86, "Accounting for the Cost of Computer Software to be Sold,
Leased, or Otherwise Marketed" (SFAS 86) requires the capitalization of certain
software development costs once technological feasibility is established. The
capitalized cost is then amortized on a straight-line basis over the estimated
product life, or on the ratio of current revenues to total projected product
revenues, whichever is greater. To date, the period between achieving
technological feasibility, which Prime Response has defined as the
establishment of a working model, and the general availability of such software
has been short and software development costs qualifying for capitalization
have not been material. Accordingly, Prime Response has not capitalized any
software development costs.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided using
the straight line method over the assets' estimated useful lives, based on the
following asset lives:
<TABLE>
<S> <C>
Motor vehicles.................................................... 4 years
Computer equipment................................................ 3 years
Furniture and equipment........................................... 6 years
</TABLE>
The cost of significant additions and improvements is capitalized and
depreciated while expenditures for maintenance and repairs are charged to
expense as incurred. Upon retirement or sale, the cost and related accumulated
depreciation of the assets are removed from the accounts and any resulting gain
or loss is reflected in the determination of net income or loss.
Goodwill and Other Intangible Assets
Prime Response amortizes goodwill and related intangible assets over
estimated useful lives. Prime Response performs impairment reviews whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. In performing the review for recoverability Prime
Response estimates the future cash flows expected to result from the use of the
asset. If the sum of the expected future cash flows (undiscounted and without
interest charges) is less than the carrying amount of the asset, an impairment
loss is recognized.
F-8
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Revenue Recognition
Prime Response sells software licenses under master license agreements and
recognizes revenue when the agreement has been signed, the software has been
shipped (or software has been electronically delivered), the license fee is
fixed or determinable, and collection of the resulting receivable is probable.
For license agreements which require customer acceptance, license revenues are
recognized only when obligations under the license agreement are completed and
the software has been accepted by the customer. For license agreements in which
Prime Response participates in financing arrangements, the fee is not
considered to be fixed or determinable and revenue is recognized as payments
become due. Prime Response provides professional services to customers under
service contracts and recognizes revenue on a time and materials basis as the
services are performed, provided that amounts due from customers are fixed or
determinable and deemed collectible by management. These services are not
essential to the functionality of the software and are often performed by other
parties. Support revenues, including those bundled with the initial license
fee, are deferred and recognized ratably over the support period. In the event
that a contract contains multiple elements, Prime Response allocates the
aggregate of the contract value to each element based on relative fair values
as established by vendor specific objective evidence. Vendor specific objective
evidence is based on recent sales prices. Prime Response provides applications
hosting services to customers and recognizes revenue as the services are
performed.
Revenues and profits under long-term fixed price contracts are recognized
using percentage completion accounting. These contracts are assessed for losses
and such losses are provided for in total in the period in which the losses
become known.
Prime Response typically does not grant to its customers a contractual
right to return software products. When approved by management, however, Prime
Response has accepted returns of certain software products and has provided an
allowance for those specific products. Prime Response also provides reserves
for customer receivable balances which are considered potentially
uncollectible. Prime Response's allowances amounted to $112,000, $43,000 and
$147,000 as of December 31, 1997, 1998 and 1999, respectively. The provision
charged to the statement of operations was $92,000, $147,000 and $104,000 in
1997, 1998 and 1999, respectively, and write-offs against the allowances were
$0, $216,000, and $0 in 1997, 1998 and 1999 respectively.
Cost of Revenues
All costs associated with software license production and distribution,
primarily preparation and translation of user manuals, are recorded as cost of
revenues for license fees. All costs associated with the services and support,
comprising mainly labor and overhead costs, are recorded as cost of revenues
for services and support. Services and support cost of revenues include any
unbillable time related to the personnel associated with the professional
services group. All costs associated with applications hosting, comprising
mainly labor, equipment and overhead costs, are recorded as cost of revenues
for applications hosting.
Foreign Currency Translation
Prime Response has determined that the functional currency of each foreign
operation is the respective local currency. Transactions in a foreign currency
are recorded at the rate of exchange on the date of the transaction. Assets and
liabilities at year end are translated at the rate of exchange in effect at the
period end. Translation gains or losses are included as a component of
accumulated other comprehensive income in stockholders' equity.
Income Taxes
Prime Response recognizes deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
consolidated financial statements or tax returns. Deferred tax liabilities
F-9
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
and assets are determined on the basis of the difference between the income tax
basis of assets and liabilities and their respective financial reporting
amounts at tax rates in effect for the periods in which the differences are
expected to reverse. Prime Response provides a valuation allowance for deferred
tax assets when it is more likely than not, based on available evidence, that
some portion or all of the deferred tax assets will not be realized.
Net Loss per Share
Basic net loss per share is computed by dividing the net loss for the
period by the weighted average number of common shares outstanding during the
period. Diluted net loss per share does not differ from basic net loss per
share since potential common shares from conversion of preferred stock and
exercise of stock options and warrants are antidilutive for all periods
presented. For the year ended December 31, 1996, basic and diluted net loss per
share is computed by dividing the net loss for the period by the weighted
average number of ordinary shares outstanding during the period.
Pro forma net loss per share for the years ended December 31, 1999 is
computed using the weighted average number of common shares outstanding,
including the pro forma effects of the automatic conversion of Prime Response's
Series A, B and C convertible preferred stock into shares of common stock
effective upon the closing of Prime Response's initial public offering as if
such conversion occurred at the date of the original issuance. The number of
shares to be issued for the participation payment is calculated based on $12.00
per share market value.
Options to purchase 737,000 and 1,387,000 shares of common stock at
exercise prices ranging from $3.41 to $10.80 per share, respectively, and
warrants to purchase none and 1,246,000 shares of common stock at exercise
prices ranging from $0.01 to $9.35 per share, respectively, have been excluded
from the computation of diluted net loss per share for the years ended December
31, 1998 and 1999, respectively.
Pro Forma Balance Sheet (Unaudited)
Upon the closing of Prime Response's initial public offering, all shares of
Series A, B and C convertible preferred stock outstanding at December 31, 1999
will automatically convert into 6,324,000 shares of Prime Response's common
stock, 428,000 shares of redeemable common stock will convert into 428,000
shares of common stock, 2,841,000 shares of common stock will be issued to
holders of the preferred stock in payment of accrued dividends and
participation feature and an aggregate cash payment of $10.3 million will be
made to some holders of preferred stock. The unaudited pro forma presentation
of the balance sheet has been prepared assuming the conversion of the preferred
stock into common stock and issuance of common stock for the participation and
dividend payments as of December 31, 1999.
Stock Based Compensation
Prime Response accounts for stock-based employee compensation arrangements
in accordance with provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and complies with the disclosure
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation."
Segment Information
Prime Response has adopted Statement of Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related Information,"
which requires companies to report selected information about operating
segments, as well as enterprise-wide disclosures about products, services,
geographic areas, and major customers. Operating segments are determined based
on the way management organizes its business for
F-10
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
making operating decisions and assessing performance. Prime Response has
determined that it conducts its operations in three business segments, software
licenses, applications hosting and services and support.
Comprehensive Income
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," ("SFAS 130").
Prime Response adopted SFAS 130 on January 1, 1998. SFAS 130, established
standards for reporting comprehensive income and its components, and is
presented in the consolidated statements of stockholders' equity. The
measurement and presentation of net income did not change. Comprehensive income
is comprised of net income and other comprehensive income. Other comprehensive
income includes certain changes in equity that are excluded from net income,
such as translation adjustments.
Recent Accounting Pronouncements
In March 1998, the AICPA issued Statement of Position No. 98-4 "Deferral of
the Effective Date of a Provision of SOP 97-2, Software Revenue Recognition"
("SOP 98-4"). SOP 98-4 defers, for one year, the application of certain
passages in SOP 97-2 which limit what is considered vendor-specific objective
evidence ("VSOE") necessary to recognize revenue for software licenses on
multiple-element arrangements when undelivered elements exist. In December
1998, the AICPA issued Statement of Position No. 98-9 "Modifications of SOP 97-
2, Software Revenue Recognition, with Respect of Certain Transactions" ("SOP
98-9") which further extends the deferral of certain passages of SOP 97-2
relating to vendor specific objective evidence established in SOP 98-4 and also
defines "residual value." The provisions of SOP 98-9 have been adopted for
transactions entered during the fiscal year beginning January 1, 1999. Prime
Response does not anticipate that this pronouncement will have a material
effect on its results.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes a new model for accounting for derivatives and
hedging activities and supersedes and amends a number of existing standards.
SFAS 133 is effective for fiscal years beginning after June 15, 1999, but
earlier application is permitted as of the beginning of any fiscal quarter
subsequent to June 19, 1998. Upon initial application, all derivatives are
required to be recognized in the statement of financial position as either
assets or liabilities and measured at fair value. In addition, all hedging
relationships must be reassessed and documented pursuant to the provisions of
SFAS 133. Prime Response does not anticipate that this pronouncement will have
a material effect on its reported results or financial position.
2. Balance Sheet Components
<TABLE>
<CAPTION>
December 31,
--------------
1998 1999
------ ------
<S> <C> <C>
Property and equipment (in thousands):
Furniture and equipment................................... $ 561 $ 621
Furniture and equipment under capital lease............... 504 560
Computer equipment........................................ 2,668 3,698
Computer equipment under capital lease.................... 438 760
Motor vehicles under capital lease........................ 96 94
------ ------
4,267 5,733
Accumulated depreciation on owned assets.................... (1,879) (2,561)
Accumulated amortization on assets under capital lease...... (277) (570)
------ ------
$2,111 $2,602
====== ======
</TABLE>
F-11
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Depreciation expense for the years ended December 31, 1997, 1998 and 1999
was $250,000, $439,000, and $724,000, respectively.
Amortization expense for the years ended December 31, 1997, 1998 and 1999
was $55,000, $215,000, and $308,000, respectively.
<TABLE>
<CAPTION>
December 31,
-------------
1998 1999
------ ------
<S> <C> <C>
Accrued expenses and other liabilities (in thousands):
Accrued compensation and related payroll taxes.............. $1,263 $1,917
Dividends payable........................................... -- --
Accrued reseller commissions................................ 466 --
VAT payable................................................. -- 276
Amounts due to customer* ................................... -- 500
Other creditors and accruals................................ 973 1,779
------ ------
$2,702 $4,472
====== ======
</TABLE>
* In November 1999 Prime Response agreed to refund amounts for a software
license fee paid by a customer in 1998. This amount is payable in the
amount of $125,000 per quarter for four quarters commencing in January
2000. No revenue was recognized in relation to this sale.
3. Debt
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
December
31,
------------
1998 1999
---- ------
<S> <C> <C>
Bank line of credit......................................... $167 $ --
Term loans.................................................. -- 2,000
---- ------
Total debt.................................................. 167 2,000
---- ------
Less: short-term debt and current maturities of
long-term debt........................................... (167) (2,000)
---- ------
Long-term debt.............................................. $ -- $ --
==== ======
</TABLE>
Bank Line of Credit
The Line of Credit expired on December 1, 1999. At December 31, 1998,
borrowings under the Line of Credit bore interest, payable quarterly, at the
lender's base rate plus 2.75% (9.00% at December 31, 1998). Borrowings under
the Line of Credit were collateralized by a security interest in substantially
all of the assets of Prime Response. The Line of Credit also required Prime
Response to comply with certain affirmative and negative covenants, including
the maintenance of specified financial ratios.
Term Loans
On October 28, 1999, Prime Response entered into an agreement with Greyrock
Capital which provided for a term loan of $2,000,000 which was received by
Prime Response upon execution of the agreement. This term loan is payable in
quarterly installments for one year beginning on February 28, 2000. Interest
accrues at
F-12
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
prime plus 2.00% (10.50% at December 31, 1999) and is payable monthly. The
agreement also will allow Prime Response to borrow against outstanding
receivable balances up to $3,000,000. This agreement will automatically renew
on November 30, 2000 and each year thereafter unless terminated by either
party.
4. Redeemable Convertible Preferred Stock
Issuance
The following table sets forth the redeemable convertible preferred stock
("preferred stock") activity (in thousands):
<TABLE>
<CAPTION>
Series A Series B Series C Total
--------------- --------------- --------------- ---------------
Carrying Carrying Carrying Carrying
Shares Value Shares Value Shares Value Shares Value
------ -------- ------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance October 1997 1,155 $23,446 -- $ -- -- $ -- 1,155 $23,446
Accrual of cumulative
dividends and
accretion to
redemption value -- 604 -- -- -- -- -- 604
----- ------- ----- ------- ----- ------ ----- -------
Balance December 31,
1997 1,155 24,050 -- -- -- -- 1,155 24,050
Issuance September 1998 -- -- 867 5,199 -- -- 867 5,199
Accrual of cumulative
dividends and
accretion to
redemption value -- 1,896 -- 116 -- -- -- 2,012
----- ------- ----- ------- ----- ------ ----- -------
Balance December 31,
1998 1,155 25,946 867 5,315 -- -- 2,022 31,261
Issuance March 1999 -- -- 833 4,281 -- -- 833 4,281
Issuance July 1999 -- -- -- -- 1,000 2,391 1,000 2,391
Issuance October 1999 -- -- -- -- 833 2,500 833 2,500
Accrual of cumulative
dividends and
accretion to
redemption value -- 1,896 -- 747 -- -- -- 2,643
----- ------- ----- ------- ----- ------ ----- -------
Balance December 31,
1999 1,155 $27,842 1,700 $10,343 1,833 $4,891 4,688 $43,076
===== ======= ===== ======= ===== ====== ===== =======
</TABLE>
Redemption
The holders of Series A, B and C preferred stock are entitled to receive a
payment of $20.52, $6.00 and $3.00, respectively, to be paid in cash or, at the
option of Prime Response or the surviving entity, in securities of Prime
Response or the surviving entity or other consideration received by the holders
of shares of common stock in the event of a merger.
Prime Response is required to reserve and keep available for issuance upon
the conversion of the Series A, B and C preferred stock, such number of its
authorized but unissued shares of common stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Series A, B
and C preferred stock, and is required to take all action to increase the
authorized number of share of common stock if at anytime there shall be
insufficient authorized but unissued share of common stock to permit such
reservation or to permit the conversion of all outstanding share of Series A, B
and C preferred stock.
These contractual terms make the Series A, B and C preferred stock
redeemable.
When issued, each share of Series C preferred stock in the July 1999
issuance was convertible into 0.75 shares of common stock, which represents a
discount from the fair value of common stock on the date of the
F-13
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Series C issuance. The value attributable to this conversion feature represents
an incremental yield, or a beneficial conversion feature, which will be
recognized as a return to the preferred stockholders. This amount, equal to the
net proceeds from the Series C offering of approximately $2,391,000, has been
recorded as accretion of preferred stock to redemption value in the
consolidated statement of operations in the year ended December 31, 1999, and
represents a non-cash charge in the determination of net loss attributable to
common stockholders.
In August and September 1999, Prime Response obtained loans of $1,000,000
and $1,500,000, respectively, from a shareholder which were converted into
833,000 shares of Series C preferred stock in October 1999. When issued, both
the August and September loans were immediately convertible into Series C
preferred stock at the option of the holder. The number of shares of Series C
preferred stock to be issued is calculated by dividing the principal amount of
the notes by $3.00, which represents a discount from the fair value of common
stock on the date of issuance. The values attributable to the conversion
feature on each loan represent an incremental yield, or a beneficial conversion
feature, which are recognized as additional interest on the loans. These
amounts, equal to the proceeds from each loan of $1,000,000 and $1,500,000,
respectively, have been charged to interest expense in the consolidated
statement of operations in the year ended December 31, 1999, reflecting a non-
cash expense.
Conversion
Each share of Series A, B and C are convertible into 3.1282, 0.7858 and
0.75 shares, respectively, of common stock ("common stock") at the option of
the holders of the preferred stock or automatically upon closing of an initial
public offering.
At December 31, 1999, the Series A, B and C preferred shares were
convertible into a total of 6,324,000 shares of common stock. Prime Response
has reserved 3,613,000, 1,336,000 and 1,375,000 shares for the conversion of
Series A, B and C preferred stock, respectively.
Liquidation
In the event of any liquidation of Prime Response, the holders of Series A,
B and C preferred stock are entitled to receive, in preference to common
stockholders and all others, on a pro-rata basis, $20.52, $6.00 and $3.00 per
share, respectively, plus all accrued and unpaid dividends whether or not
declared.
Dividends
The holders of Series A and B preferred stock are entitled to receive
cumulative dividends in the amount of $3.59 and $0.51 per share, respectively,
accruing daily, whether or not declared by the Board of Directors. These
dividends are payable upon initial public offering, liquidation or merger of
Prime Response. Cumulative
and unpaid dividends on the Series A and B preferred stock at December 31, 1999
were $4,145,000 and $863,000, respectively. The holders of Series C preferred
stock are not entitled to dividends. Dividends awarded to holders of Series A
preferred stock are payable in shares of common stock. Dividends awarded to
holders of Series B preferred stock are payable in cash or in shares of common
stock, at the option of the preferred stock holder.
Participation Payment
In the event of an initial public offering the holders of Series A and C
preferred stock are entitled to receive, in addition to accrued dividends and
the common stock conversion feature, $20.52 and $3.00 per share,
F-14
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
respectively, to be paid in shares of common stock. The number of shares of
common stock to be issued will be calculated based on the valuation of the
initial public offering. In the event of an initial public offering, the
holders of Series B preferred stock are entitled to receive, in addition to
accrued dividends and the conversion payment, $6.00 per share to be paid in
shares of common stock or cash, as elected by the holder. If payment in common
stock is elected, the number of shares of common stock to be issued will be
calculated based on the valuation of the initial public offering.
In the event of a merger or sale prior to an initial public offering, the
holders of Series A, B and C preferred stock are entitled to receive, in
addition to accrued dividends and the liquidation payment, a cash payment of
$20.52, $6.00 and $3.00 per share, respectively.
Voting
The holders of preferred stock shares are entitled to vote, together with
holders of common stock on all matters submitted to stockholders for vote. Each
preferred stock holder is entitled to a number of votes equal to the number of
shares of common stock into which each preferred stock share is convertible at
the time of such vote.
5. Common Stock
Reorganization
Prime Response Group Inc. was incorporated on September 26, 1997. In
October 1997 Prime Response Group Inc. affected a reorganization involving an
exchange of common stock in Prime Response Group Inc. and a Promissory Note
("Note") for all of the outstanding ordinary shares of PRL. Additionally
certain subsidiary companies of PRL became direct subsidiaries of Prime
Response Group Inc. Prior to this reorganization, Prime Response Group Inc. had
no operating activities of its own, all operations were conducted by PRL and
its subsidiaries.
In order to effect this reorganization, on October 23, 1997 Prime Response
Group Inc. issued 7,035,000 shares of common stock and a Note for $7,899,000 to
the former shareholders of PRL, a company incorporated in the United Kingdom in
1987 and PRI's principal operating subsidiary. The Note was repaid in July
1998. In exchange, the former shareholders of PRL transferred their shares in
that company to Prime Response Group Inc. and issued an option to Prime
Response Group Inc. to repurchase 1,249,500 of these shares at an exercise
price of $3.42 per share and expires on September 30, 2000 on which date the
shareholder has the right to put these shares to Prime Response at the same
price. Prime Response has recorded the 1,249,500 as redeemable common stock and
the remaining 5,785,500 as common stock.
In 1999, the Company changed its name from Prime Response Group Inc. to
Prime Response, Inc. The shares in PRL are held by Prime Response, Inc. as an
investment in that subsidiary and are eliminated in consolidation. The exchange
of shares in PRL for those in Prime Response Group Inc. represents various
equity and debt transactions executed to facilitate investment by a U.S.
venture capitalist and to allow an existing investor to liquidate a portion of
his interest and therefore no change in control was recorded. In October 1997,
in connection with the reorganization described above, Prime Response Group
Inc. sold 1,155,000 shares of Series A convertible preferred stock for $20.52
per share, for an aggregate purchase price of $23,697,000, General Atlantic
Partners 42, L.P. purchased 909,858 shares and GAP Coinvestment Partners, L.P.
purchased 245,142 shares.
Holders of PRI's common stock are entitled to one vote per share.
Employee Stock Option Plan
In April 1998 Prime Response's Board of Directors adopted, and the
stockholders subsequently approved the 1998 Stock Option/Stock Issuances Plan
(the "1998 Plan"). The 1998 Plan serves as the successor equity incentive
program to the Company's 1997 Employee Stock Option Plan under which no options
were issued.
F-15
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The 1998 Plan is divided into two separate components: (i) the
Discretionary Option Grant Program; and (ii) the Stock Issuance Program. The
1998 Plan will terminate on April 21, 2008 unless terminated earlier by the
Board. The number of shares authorized in the 1998 Plan document of 1,250,000
was increased to 1,512,000 on September 30, 1998 and further increased to
2,148,000 on July 10, 1999. In October, 1999, Prime Response's Board of
Directors authorized an increase in the number of shares authorized for grant
to 2,898,000 and in November 1999, the Board of Directors further increased
the number of shares authorized to 3,273,000.
Options for common stock granted under the 1998 Plan are for exercise
within periods not to exceed ten years and must be issued at prices not less
than 100% and 85%, for incentive and non-qualified stock options,
respectively, of the fair value of the stock on the date of grant, unless a
lower value is approved by the Board of Directors. Incentive stock options
granted to stockholders who own greater than 10% of the outstanding stock are
for periods not to exceed five years and must be issued at prices not less
than 110% of the fair market value of the stock on the date of grant.
Options granted under the 1998 Plan vest in steps over a four-year period,
from commencement date, with the first 25% vesting after one year, and the
remainder vesting in 36 equal monthly installments.
Prime Response accounts for stock options granted to employees in
accordance with the provisions of Accounting Principles Board Opinion No. 25.
In connection with the grant of certain stock options to employees during the
period from commencement of the 1998 Plan (April 1998) to December 31, 1998
and during the year ended December 31, 1999, Prime Response recorded deferred
stock compensation of none and $2,602,000, respectively, representing the
difference between the estimated fair market value of the common stock on
measurement date and the exercise price. Compensation related to options which
vest over time was recorded as a component of stockholders' deficit and is
being amortized over the vesting periods of the related options. Prime
Response recorded compensation expense of none, none and $205,000 in 1997,
1998 and 1999, respectively in relation to these options. Compensation expense
related to restricted shares was recorded on grant date. Prime Response
recorded compensation expense of none, none and $1,677,000 in 1997, 1998 and
1999, respectively, in relation to these options. Compensation expense related
to remeasurement of stock options due to extensions of exercise periods was
recognized on the remeasurement date. Prime Response recorded compensation
expense of none, none and $143,000 in 1997, 1998 and 1999, respectively, in
relation to these options. Compensation expense is disclosed as a non-cash
expense in the related Statement of Operations line items.
Valuation of Stock Options
Had compensation expense for the Plans been determined based upon the
estimated grant date fair value pursuant to SFAS 123, Prime Response's net
loss for years ended December 31, 1998 and 1999 would have been as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1999
----------------- -----------------
<S> <C> <C>
Net loss (in thousands):
As reported......................... $(14,603) $(20,419)
Pro forma........................... $(14,710) $(20,574)
Net loss per share attributable to
common stockholders--basic and
diluted:
As reported......................... $ (2.36) $ (3.44)
Pro forma........................... $ (2.38) $ (3.46)
</TABLE>
F-16
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The fair value of these stock awards at the date of grant was estimated
using the minimum value method with the following assumptions:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1999
----------------- -----------------
<S> <C> <C>
Risk free interest rate................ 5.24% 5.43%
Dividend yield......................... 0% 0%
Expected volatility.................... 0% 0%
Expected life.......................... 10 years 10 years
</TABLE>
The determination of the fair value of all options granted should Prime
Response become a public entity will include an expected volatility factor,
additional option grants are expected to be made subsequent to December 31,
1999, and most options vest over several years, the above pro forma effects are
not necessarily indicative of the pro forma effects on future years.
Summary of Stock Options
A summary of the status of Prime Response's options as of December 31,
1998 and 1999 and changes during the periods then ended are presented
below.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1999
------------------- ---------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
-------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of period... -- -- 736,538 $3.41
Granted............................ 783,600 $3.41 1,613,144 4.92
Exercised.......................... -- -- (668,006) 3.97
Cancelled.......................... (47,062) 3.41 (294,203) 3.49
-------- ----- ---------- -----
Outstanding at end of period......... 736,538 $3.41 1,387,473 $4.88
======== ===== ========== =====
Options available for grant at end of
period............................. 775,462 1,217,746
======== ==========
Options granted at fair value:
Weighted average exercise price.... $ 3.41 $ 4.31
======== ==========
Weighted average fair value........ $ 1.42 $ 1.72
======== ==========
Options granted below fair value:
Weighted average exercise price.... $ 3.41 $ 6.09
======== ==========
Weighted average fair value........ $ 1.82 $ 7.45
======== ==========
</TABLE>
F-17
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Vested and Exercisable
------------------------
Weighted-
Average
Remaining
Contractual Number
Number Life (in of Weighted-Average
Exercise Price Outstanding Years) Shares Exercise Price
-------------- ----------- ----------- ------- ----------------
<S> <C> <C> <C> <C>
$3.41 452,593 7.53 251,382 $ 3.41
4.00 450,052 8.82 87,828 4.00
6.67 436,970 9.82 -- 6.67
10.80 47,858 9.92 -- 10.80
--------- ---- ------- ------
1,387,473 8.75 339,210 $ 3.56
========= ==== ======= ======
</TABLE>
Issuance of Warrants
During 1999, Prime Response issued warrants to purchase up to 313,000 and
251,000 shares of Prime Response's Common Stock at an exercise price of $3.41
and $.01 per share, respectively, in conjunction with the Series B and Series C
preferred stock issuance, respectively. The warrants have terms of five years
and seven years, respectively. The fair value of these warrants was determined
to be $2.69 and $11.84 per share, respectively, using the Black-Scholes option
pricing model, based on the following assumptions: 85.00% volatility, a term of
five and seven years, respectively, and interest rates of 5.87% and 6.07%,
respectively. The value of the warrants have been recorded as $720,000 and
$609,000, respectively, and have been included in additional paid in capital.
Also during 1999, Prime Response issued 682,000 warrants to Andersen
Consulting. See details of this warrant issuance in Note 6.
Shareholder Note Receivable and Restricted Stock
At December 31, 1999, Prime Response held a note receivable in the amount
of $2,545,000 from an employee shareholder in consideration for the issuance of
restricted stock. The note is non-interest bearing and is due on January 31,
2009. Imputed interest of $1,678,000 has been recognized for this note and will
be amortized as income over the life of the loan. Compensation expense of
$1,678,000 for the discount from fair value due to imputed interest was
recognized at the time the shares were issued. Shares vest and restrictions
lapse in accordance with the terms of the 1998 Stock Option/Stock Issuance
Plan. In the event employment is terminated, Prime Response can elect to
repurchase, and the employee is obligated to sell, any of the vested shares for
fair market value and any unvested shares for the original purchase price.
During 1999, 636,000 shares of common stock were issued subject to such time-
based restrictions and all remain unvested at December 31, 1999.
6. Andersen Consulting Relationship
On December 6, 1999, Prime Response and Andersen Consulting entered into a
joint marketing agreement and, along with an affiliate of Andersen Consulting,
a stock and warrant purchase agreement. Pursuant to the stock and warrant
purchase agreement, Andersen Consulting purchased 428,000 shares of common
stock and Andersen Consulting received a warrant to purchase 682,000 shares of
common stock. This warrant has an exercise price of $9.35 per share and vests
upon the earlier to occur of September 9, 2000 or the date of an acquisition of
Prime Response. Andersen Consulting also has a right of first refusal to
participate in any equity issuances by Prime Response prior to its initial
public offering in order to maintain its percentage
F-18
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
ownership interest in Prime Response, subject to specified exceptions. The
aggregate purchase price paid by Andersen Consulting for the common stock and
this warrant was $4,000,000. Andersen Consulting has no performance obligations
under the stock and warrant purchase agreement or this warrant.
Prime Response has recorded the stock at fair value and based on a value
equal to 90% of the estimated mid-point of the initial public offering range.
The fair value of the stock is $4,622,400. Prime Response calculated the fair
value of the warrants on date of grant using Black Scholes model with the
following assumptions: 7 year useful life (life of warrant), 6.07% risk-free
interest rate, zero dividends and 85.19% volatility. Based on this calculation,
the extended fair value of the warrants is $6,536,080. Prime Response has
recorded an intangible asset of $7,010,000 which is equal to the excess of the
aggregate fair values of the common stock and warrants over the purchase price.
This asset is being amortized as a non-cash sales and marketing expense over
its estimated useful life of four years, which reflects the term of the
marketing agreement.
Prime Response issued a performance warrant to purchase 375,000 shares of
common stock to Andersen Consulting. Of this amount, 300,000 shares will vest
in share increments determined by the extent to which $2.0 billion exceeds
Prime Response's market capitalization at the time of its initial public
offering. An additional 75,000 shares will vest in increments of 7,500 shares
for each $100.0 million that market capitalization exceeds $2.0 billion, up to
a maximum market capitalization of $3.0 billion. This warrant has an exercise
price of $9.35 per share. Prime Response will measure the fair value of the
warrants when achievement of the market capitalization targets is probable. No
subsequent remeasurement will be necessary. Achievement of these targets was
not considered probable at December 31, 1999.
Prime Response also issued a performance warrant to purchase 375,000 shares
of common stock to Andersen Consulting which will vest in increments of 10,500
shares for each $1.0 million of sales resulting from joint marketing efforts up
to $25 million and then in increments of 4,500 shares for each $1.0 million of
sales from $25 million to $50 million. This warrant also has an exercise price
of $9.35 per share. Prime Response will measure the value of these warrants at
the time such targets are probable and will record an expense for the value of
the warrant at that time. This charge will be adjusted to the final value of
the warrant at the time the sales targets are met. Achievement of these targets
was not considered probable at December 31, 1999.
All warrants have a seven-year term. In the event that the marketing
agreement is terminated as a result of a breach by Andersen Consulting, no
further vesting under the warrants will occur, but those warrants already
exercisable will remain exercisable during their term to the extent then
vested.
In the event that neither an initial public offering nor any other
liquidity event occurs by January 1, 2001, Andersen Consulting or its
affiliates will have the right to require Prime Response to repurchase the
428,000 shares of common stock for $4,000,000. The repurchase amount will be
payable in three quarterly installments, plus 8% interest on the entire amount
beginning on January 1, 2001, plus additional interest of 7% per annum in the
event Prime Response fails to make any payment when due. This put right will
terminate upon an initial public offering or other liquidity event. As a result
of this put right, the common stock recorded in relation to this transaction
was classified as mandatorily redeemable common stock.
Prime Response is obligated to engage Andersen Consulting for consulting
services of at least $1.0 million before December 31, 2001. Services under this
agreement will be expensed as incurred; any short-fall from the $1.0 million
obligation will be expensed when considered probable.
F-19
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
If designated sales targets are met, Andersen Consulting is obligated to
provide up to $1.0 million in funding for joint marketing efforts, business
development personnel, structure feedback and sales support. The expenditure of
these funds will be controlled by a committee comprised of both Andersen
Consulting and Prime Response personnel. This obligation has not been recorded,
as the probability of achieving the designated sales targets is uncertain as of
December 31, 1999.
7. Commitments and Contingencies
Leases
Prime Response has several operating lease agreements primarily involving
real estate and computers and equipment. These leases are noncancelable and
expire on various dates through 2013. Rent expense for operating leases totaled
$897,000, $2,291,000, and $2,465,000 for the years ended December 31, 1997,
1998, and 1999, respectively. Future minimum rental payments under leases with
initial or remaining terms of one year or more are as follows:
<TABLE>
<CAPTION>
Operating Capital
--------- -------
(in thousands)
Year ending December 31,
<S> <C> <C>
2000....................................................... $1,847 $347
2001....................................................... 1,149 213
2002....................................................... 653 116
2003....................................................... 564 --
2004....................................................... 321 --
Thereafter................................................. 1,468 --
------ ----
Total future minimum lease payments........................ $6,002 $676
------ ----
Less: portion representing interest........................ (76)
----
$600
====
</TABLE>
8. Income Taxes
Prime Response, Inc.'s statutory and effective tax rates were 34% and 0%,
respectively, for each of the years ended December 31, 1998 and 1999. The
effective tax rate was 0% due to net operating losses ("NOL") and
nonrecognition of any deferred tax asset. For December 31, 1997 there was a
provision for income taxes relating to non-U.S. operations of $159,000
resulting in an effective tax rate of 7.6%.
Deferred tax assets (liabilities) are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1999
------- --------
<S> <C> <C>
Net operating loss carryforwards.......................... $ 4,049 $ 8,708
Other deferred tax assets................................. 768 1,412
------- --------
Gross deferred tax asset.................................. 4,817 10,120
Valuation allowance....................................... (4,817) (10,120)
------- --------
Net deferred taxes........................................ $ -- $ --
======= ========
</TABLE>
F-20
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Prime Response, Inc. has provided a full valuation allowance for the
deferred tax assets since it is more likely than not that these future benefits
will not be realized. If Prime Response, Inc. achieves profitability, a
significant portion of these deferred tax assets could be available to offset
future income taxes.
At December 31, 1999, Prime Response, Inc. has federal and state net
operating loss carryforwards of approximately $9,000,000 available to reduce
future federal and state income taxes payable. These net operating loss
carryforwards begin to expire in 2017 for federal purposes and 2003 for state
purposes. Prime Response, Inc. also has non-US net operating loss carryforwards
of $16,000,000, some of which begin to expire in 2003.
Under the Internal Revenue Code, certain substantial changes in Prime
Response, Inc.'s ownership could result in an annual limitation on the amount
of net operating loss and tax credit carryforwards which can be utilized in
future years.
Ownership changes, as defined in the Internal Revenue Code, including those
resulting from the issuance of common stock in connection with an initial
public offering, may limit the amount of net operating loss and tax credit
carryforwards that can be utilized to offset future taxable income or tax
liability. The amount of the annual limitation is determined in accordance with
Section 382 of the Internal Revenue Code.
9. Segment Analysis
Prime Response earned all of its revenue from external customers. Prime
Response is organized into three segments, software licenses, services and
support and applications hosting, to reflect the key sales lines. The
distribution of revenues and total assets by geographic location is as follows
(in thousands):
<TABLE>
<CAPTION>
Year Ended December 31, 1999
------------------------------------------------------------------------------------------------
1997 1998 1999
------------------------------ -------------------------------- ------------------------------
Rest Rest Rest
of of of
US UK World Total US UK World Total US UK World Total
------- ------- ----- ------- ------ ------- ------ ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software licenses..... $ 65 $ 2,868 $-- $ 2,933 $3,295 $ 5,094 $ 106 $ 8,495 $ 1,462 $ 7,797 $ 875 $10,134
Services and support.. -- 2,495 -- 2,495 1,075 3,104 35 4,214 2,025 4,092 402 6,519
Applications hosting.. -- 4,754 -- 4,754 -- 3,827 -- 3,827 -- 3,869 -- 3,869
------- ------- --- ------- ------ ------- ------ ------- ------- ------- ------ -------
Total revenues....... $ 65 $10,117 $-- $10,182 $4,370 $12,025 $ 141 $16,536 $ 3,487 $15,758 $1,277 $20,522
======= ======= === ======= ====== ======= ====== ======= ======= ======= ====== =======
Gross profit:
Software licenses..... $ 59 $ 2,791 $-- $ 2,850 $3,290 $ 4,947 $ 106 $ 8,343 $ 1,462 $ 7,797 $ 875 $10,134
Services and support.. -- (557) -- (557) (631) (1,597) (35) (2,263) 118 1,745 21 1,884
Applications hosting.. -- 2,831 -- 2,831 -- 1,350 -- 1,350 -- 1,093 -- 1,093
------- ------- --- ------- ------ ------- ------ ------- ------- ------- ------ -------
Total gross profit... $ 59 $ 5,065 $-- $ 5,124 $2,659 $ 4,700 $ 71 $ 7,430 $ 1,580 $10,635 $ 896 $13,111
======= ======= === ======= ====== ======= ====== ======= ======= ======= ====== =======
Total assets......... $21,573 $ 5,149 $-- $26,722 $3,847 $ 3,555 $2,750 $10,152 $13,481 $11,392 $ 643 $25,515
======= ======= === ======= ====== ======= ====== ======= ======= ======= ====== =======
</TABLE>
10. Acquisitions
On January 19, 1998, Prime Response acquired certain intellectual property
rights and other intangible assets related to the MIND software business from
an Irish company, Admiral IT Services Limited, for consideration of $2,812,000.
The acquisition was accounted for under the purchase method of accounting. The
purchase price has been allocated to the assets acquired based upon the fair
market values as determined by Prime Response at the date of acquisition and
will be amortized on a straight-line basis over the estimated economic lives of
two years, principally for goodwill.
F-21
<PAGE>
PRIME RESPONSE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At December 31, 1999, Prime Response had accumulated amortization relating
to this intangible asset of $2,560,000.
11. Related Party Transactions
During the year ended December 31, 1999, Prime Response made sales
totaling $540,000 to a company which is partly owned by a significant
shareholder of Prime Response. At December 31, 1999, $110,000 remained
outstanding from this related party.
During the year ended December 31, 1999, Prime Response made sales
totaling $27,000 to a company which is partly owned by a significant
shareholder and which two of our Directors hold management and directorship
positions, respectively. At December 31, 1999, $27,000 remained outstanding
from this related party.
There were no material related party transactions during the years ended
December 31, 1997 and 1998.
12. Employee Benefit Plan
Prime Response offers a 401(k) plan to its our United States employees who
meet certain defined requirements. Under the terms of the 401(k) plan,
eligible employees may elect to make tax-deferred contributions, and Prime
Response may match 25% of the lesser of the contributing employee's elective
deferral or 4% of the contributing employee's total salary. During 1998 and
the year ended December 31, 1999, Prime Response contributed approximately
$11,000 and $20,000, respectively, to the 401(k) plan. Prime Response made no
contributions during 1997.
Prime Response offers comparable benefits to certain employees located
outside the United States.
F-22
<PAGE>
[INSERT GRAPHICS, INSIDE BACK COVER]
[email protected](TM), the name of our principle product, followed by:
[email protected](TM) can help our clients to build more profitable and loyal
customer relationships by developing and deploying immediate, personalized
marketing messages to existing and potential customers.
Underneath this description is a picture of a computer screen shot depicting
other carrier's marketing campaign and offering links to descriptions of the
Company's Marketing Strategies.
Below the screen shot is the following description:
This Event Logic Tree visually illustrates a multi-stage, multi-channel
marketing campaign aimed to help reduce customer "churn" for a fictitious
telcom company. The campaign segments the audience, allowing consistent
marketing messages to be delivered through various channels.
<PAGE>
[PRIME RESPONSE LOGO APPEARS HERE]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee....................................... $ 13,813.80
NASD filing fee............................................ 57,325.50
Nasdaq National Market listing fee......................... 95,000.00
Blue Sky fees and expenses................................. 10,000.00
Transfer Agent and Registrar fees.......................... 30,000.00
Accounting fees and expenses............................... 500,000.00
Legal fees and expenses.................................... 450,000.00
Director and Officer Liability Insurance................... 143,860.70
Printing and mailing expenses.............................. 150,000.00
-------------
Total.................................................... $1,450,000.00
=============
</TABLE>
Item 14. Indemnification of Directors and Officers
Article EIGHTH of the Registrant's Third Amended and Restated Certificate
of Incorporation (the "Restated Certificate of Incorporation") provides that no
director of the Registrant shall be personally liable for any monetary damages
for any breach of fiduciary duty as a director, except to the extent that the
Delaware General Corporation Law prohibits the elimination or limitation of
liability of directors for breach of fiduciary duty.
Article NINTH of the Registrant's Restated Certificate of Incorporation
provides that a director or officer of the Registrant (a) shall be indemnified
by the Registrant against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement incurred in connection with any litigation
or other legal proceeding (other than an action by or in the right of the
Registrant) brought against him by virtue of his position as a director or
officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him by virtue of his position as a
director or officer of the Registrant if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Registrant, except that no indemnification shall be made with respect to any
matter as to which such person shall have been adjudged to be liable to the
Registrant, unless a court determines that, despite such adjudication but in
view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to the extent that a director or
officer has been successful, on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, he is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his request, provided that he undertakes to repay the amount
advanced if it is ultimately determined that he is not entitled to
indemnification for such expenses.
Indemnification is required to be made unless the Registrant determines
that the applicable standard of conduct required for indemnification has not
been met. In the event of a determination by the Registrant that
II-1
<PAGE>
the director or officer did not meet the applicable standard of conduct
required for indemnification, or if the Registrant fails to make an
indemnification payment within 60 days after such payment is claimed by such
person, such person is permitted to petition the court to make an independent
determination as to whether such person is entitled to indemnification. As a
condition precedent to the right of indemnification, the director or officer
must give the Registrant notice of the action for which indemnity is sought and
the Registrant has the right to participate in such action or assume the
defense thereof.
Article NINTH of the Registrant's Restated Certificate of Incorporation
further provides that the indemnification provided therein is not exclusive,
and provides that in the event that the Delaware General Corporation Law is
amended to expand the indemnification permitted to directors or officers the
Registrant must indemnify those persons to the fullest extent permitted by such
law as so amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent
of the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, in any criminal proceeding, if such
person had no reasonable cause to believe his conduct was unlawful; provided
that, in the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such
person shall have been adjudged to be liable to the corporation unless and only
to the extent that the adjudicating court determines that such indemnification
is proper under the circumstances.
Under Section 8 of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of Underwriting Agreement filed
as Exhibit 1 hereto.
Item 15. Recent Sales of Unregistered Securities
Set forth in chronological order is information regarding shares of common
stock issued and options granted by the Registrant since November 1, 1996.
Further included is the consideration, if any, received by the Registrant for
such shares, warrants and options and information relating to the section of
the Securities Act of 1933, as amended (the "Securities Act"), or rule of the
Securities and Exchange Commission under which exemption from registration was
claimed.
(a) Issuances of Capital Stock.
In October 1997, in connection with a reorganization, we issued 7,034,500
shares of our common stock in exchange for 100 ordinary shares of Prime
Response Limited, and a promissory note in the principal amount of $7,899,000.
In October, 1997, we issued and sold an aggregate of 1,155,000 shares of
Series A convertible preferred stock in a private financing for an aggregate
price of $23,697,000.
On September 21, 1998, we issued and sold an aggregate of 866,500 shares of
Series B convertible preferred stock in a private financing for an aggregate
purchase price of $5,199,000.
On March 2, 1999, we issued and sold an aggregate of 833,334 shares of
Series B convertible preferred stock in a private financing for an aggregate
purchase price of $5,001,004.
In March, 1999, we issued two warrants to purchase an aggregate of 312,500
shares of common stock at an exercise price of $3.4133 per share.
In June, 1999, we issued 636,225 shares our common stock to our chief
executive officer, Peter Boni, at a purchase price of $4.00 per share.
II-2
<PAGE>
On July 15, 1999, we issued and sold 1,000,000 shares of Series C
convertible preferred stock in a private financing for an aggregate purchase
price of $3,000,000.
On July 15, 1999, we issued two warrants to purchase an aggregate of
251,539 shares of common stock at an exercise price of $0.01 per share.
On October 19, 1999, we issued 833,331 shares of Series C convertible
preferred stock to two of our investors upon conversion of promissory notes
totaling $2,500,000.
On December 9, 1999, we issued warrants to purchase up to 1,432,282 shares
of common stock to Andersen Consulting. Of these, a warrant to purchase 682,233
shares of common stock was immediately exercisable, a warrant to purchase up to
375,000 shares of common stock vests upon market valuation on certain dates,
and a warrant to acquire 375,000 shares of common stock vests upon the
achievement of certain marketing goals. The exercise price of all such warrants
is $9.346 per share.
On December 9, 1999, we issued 427,806 shares of common stock to an
affiliate of Andersen Consulting for $4,000,000.
(b) Certain Grants and Exercises of Stock Options. As of December 31, 1999,
options to purchase 668,006 shares of common stock had been exercised for a
consideration of $2,655,000 under the Registrant's 1998 Stock Option/Stock
Issuance Plan and options to purchase 1,387,473 shares of common stock were
outstanding under the Registrant's 1998 Stock Option/Stock Issuance Plan. No
options to purchase shares of common stock are outstanding under the
Registrant's 1999 Non-Employee Director Stock Option Plan.
The securities issued in the foregoing transactions were either (i) offered
and sold in reliance upon exemptions from Securities Act registration set forth
in Sections 3(b) and 4(2) of the Securities Act, or any regulations promulgated
thereunder, relating to sales by an issuer not involving any public offering,
or (ii) in the case of certain options to purchase shares of common stock and
shares of common stock issued upon the exercise of such options, such offers
and sales were made in reliance upon an exemption from registration under Rule
701 of the Securities Act. No underwriters were involved in the foregoing sales
of securities.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of Prime
Response, as amended
3.2 Second Amended and Restated Certificate of Incorporation of Prime
Response, to be filed with the Secretary of State of the State of
Delaware on February 2, 2000
3.3 Form of Third Amended and Restated Certificate of Incorporation of
Prime Response to be filed with the Secretary of State of the
State of Delaware and effective upon the closing of the offering
3.4 By-laws of Prime Response, as amended, as currently in effect
3.5 Form of Amended and Restated By-laws of Prime Response to be
effective upon the effectiveness of the offering
4.1 Specimen Certificate for shares of Common Stock of Prime Response
5.1 Opinion of Hale and Dorr LLP
10.1 1998 Stock Option/Stock Issuance Plan, with United Kingdom
Addendum
10.2 Amendment No. 1 to 1998 Stock Option/Stock Issuance Plan
10.3 Amendment No. 2 to 1998 Stock Option/Stock Issuance Plan
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.4 1998 Stock Option/Stock Issuance Plan (United Kingdom) Form of
Notice of Grant of Stock Option
10.5 1998 Stock Option/Stock Issuance Plan (United Kingdom) Form of
Stock Option Agreement, with Addendum
10.6 1998 Stock Option/Stock Issuance Plan (United Kingdom) Form of
Stock Purchase Agreement
10.7 1998 Stock Option/Stock Issuance Plan (United States) Form of
Notice of Grant of Stock Option
10.8 1998 Stock Option/Stock Issuance Plan (United States) Form of
Stock Option Agreement, with Addendum
10.9 1998 Stock Option/Stock Issuance Plan (United States) Form of
Stock Purchase Agreement, with Addendum
10.10 1998 Stock Option/Stock Issuance Plan (United States) Form of
Stock Issuance Agreement, with Addendum
10.11 1999 Outside Director Stock Option Plan
10.12 1999 Employee Stock Purchase Plan
10.13 Stock Purchase Agreement dated as of October 1, 1997 by and among
Prime Response, General Atlantic Partners 42, L.P. and GAP
Coinvestment Partners, L.P.
10.14 Amendment No. 1 to Stock Purchase Agreement dated as of October
23, 1997
10.15 Stock Purchase Agreement dated as of September 21, 1998 by and
among Prime Response and certain other stockholders
10.16 Stock and Warrant Purchase Agreement dated as of March 2, 1999
among Prime Response, General Atlantic Partners 52, L.P. and GAP
Coinvestment Partners II, L.P.
10.17 Stock and Warrant Purchase Agreement dated as of July 15, 1999
among Prime Response, General Atlantic Partners 52, L.P. and GAP
Coinvestment Partners II, L.P.
10.18 Common Stock Purchase Warrant of Prime Response issued to General
Atlantic Partners 52, L.P. dated February 28, 1999
10.19 Common Stock Purchase Warrant of Prime Response issued to GAP
Coinvestment Partners II, L.P. dated February 28, 1999
10.20 Common Stock Purchase Warrant of Prime Response issued to General
Atlantic Partners 52, L.P. dated July 15, 1999
10.21 Common Stock Purchase Warrant of Prime Response issued to GAP
Coinvestment II, L.P. dated July 15, 1999
10.22 Amended and Restated Registration Rights Agreement among Prime
Response, General Atlantic Partners 42, L.P., GAP Coinvestment
Partners, L.P. and the Stockholders named therein dated December
6, 1999
10.23 Common Stock and Warrant Purchase Agreement dated as of December
6, 1999 by and among Prime Response, Andersen Consulting LLP and
AC Ventures B.V.
10.24 Warrant Purchase Agreement dated as of December 6, 1999 by and
between Prime Response and Andersen Consulting LLP
10.25 Common Stock Purchase Warrant No. AC-1 of Prime Response issued to
Andersen Consulting LLP dated December 9, 1999
10.26 Common Stock Purchase Warrant No. AC-2 of Prime Response issued to
Andersen Consulting LLP dated December 9, 1999
10.27 Common Stock Purchase Warrant No. AC-3 of Prime Response issued to
Andersen Consulting LLP dated December 9, 1999
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.28 Marketing Agreement dated December 6, 1999 between Prime Response
and Andersen Consulting LLP
10.29 Consulting Services Agreement dated as of December 6, 1999 between
Prime Response and Andersen Consulting LLP
10.30 Loan and Security Agreement, with schedule, dated October 28, 1999
between Greyrock Capital and Prime Response U.S., Inc. (formerly,
Prime Response Inc.)
10.31 Security Agreement dated October 28, 1999 between Prime Response
U.S., Inc. (formerly, Prime Response Inc.) and Greyrock Capital
10.32 Continuing Guaranty dated October 28, 1999 by Prime Response U.S.,
Inc. (formerly, Prime Response Inc.) in favor of Greyrock Capital
10.33 Streamlined Facility Agreement dated October 28, 1999 between
Greyrock Capital and Prime Response U.S., Inc. (formerly, Prime
Response, Inc.)
10.34 Letter of Credit Agreement dated November 24, 1999 between
Greyrock Capital and Prime Response U.S., Inc.
10.35 Employment Agreement between Prime Response and Peter Boni dated
January 13, 1999
10.36 Employment Agreement between Prime Response and James Carling
dated November 10, 1999
10.37 Employment Agreement between Prime Response Limited and Allen
Swann dated February 2, 1998
10.38 Employment Agreement between Prime Response and Gary Daniels dated
November 30, 1998
10.39 Employment Agreement between Prime Response and Paul Lavallee
dated October 22, 1999
10.40 Employment Agreement between Prime Response and Frederick H.
Phillips dated October 21, 1999
10.41 Employment Agreement between Prime Response and James P. Plantan
dated August 10, 1999
10.42 Employment Agreement between Prime Response and Brad Braddock
dated August 5, 1999
10.43 Office Lease and License Agreements for Denver Place Plaza Tower
between Prime Response U.S., Inc. (formerly, Prime Response Inc.)
and Denver-Stellar Associated Limited Partnership dated January
20, 1999
10.44 Office Lease, Subordination Agreement and Subsequent Amendments
for China Basin Landing Premises between Prime Response U.S., Inc.
(formerly, Prime Response Inc.) and BRE/CBL, LLC dated March 25,
1999
10.45 Office Lease for Goat Wharf Premises between Prime Response
Limited and PDFM Limited dated December 29, 1995
10.46 Office Lease for Cambridge Park Drive premises between Prime
Response and Spaulding and Slye Services Limited Partnership
commencing June 1, 1999
10.47 Lease Agreement for Collins Street Business Centre between Prime
Response Pty. Ltd. and Merdene Pty. Ltd. dated November 24, 1999
21.1 List of Subsidiaries
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Hale and Dorr LLP (included in Exhibit 5.1)
24.1 Powers of Attorney (included on the signature page of the
registration statement)
27.1 Financial Data Schedule
99.1 Consent of Marc McMorris
</TABLE>
II-5
<PAGE>
(b) Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts
All other schedules have been omitted because they are not required or
because the required information is given in the Registrant's Financial
Statements or Notes thereto.
Item 17. Undertakings
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 contained in the Amended and Restated
Certificate of Incorporation of the Registrant and the laws of the State of
Delaware, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes 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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted form the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 4 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Boston,
Massachusetts, on this 2nd day of March, 2000.
Prime Response, Inc.
*
By: _________________________________
Peter J. Boni
President and Chief Executive
Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Prime Response, Inc., hereby
severally constitute and appoint Peter J. Boni and John A. Burgess, and each of
them singly, our true and lawful attorneys with full power to them, and each of
them singly, to sign for us and in our names in the capacities indicated below,
the Registration Statement on Form S-1 filed herewith and any and all pre-
effective and post-effective amendments to said Registration Statement, and any
subsequent Registration Statement for the same offering which may be filed
under Rule 462(b), and generally to do all such things in our names and on our
behalf in our capacities as officers and directors to enable Prime Response,
Inc. to comply with the provisions of the Securities Act of 1933, as amended,
and all requirements of the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorneys, or any of them, to said Registration Statement and any and all
amendments thereto or to any subsequent Registration Statement for the same
offering which may be filed under Rule 462(b).
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* President, Chief Executive February 29, 2000
______________________________________ Officer and Director
Peter J. Boni (principal executive
officer)
* Chief Financial Officer February 29, 2000
______________________________________ (principal accounting
Frederick H. Phillips officer)
* Director February 29, 2000
______________________________________
Richard S. Braddock
* Director February 29, 2000
______________________________________
James Carling
* Director February 29, 2000
______________________________________
William E. Ford
</TABLE>
<TABLE>
<S> <C> <C>
* Director February 29, 2000
______________________________________
Terry Osborne
*By: /s/ John A. Burgess
______________________________________
John A. Burgess
As Attorney-In-Fact
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
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<C> <S>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of Prime
Response, as amended
3.2 Second Amended and Restated Certificate of Incorporation of Prime
Response, to be filed with the Secretary of State of the State of
Delaware on February 2, 2000
3.3 Form of Third Amended and Restated Certificate of Incorporation of
Prime Response to be filed with the Secretary of State of the
State of Delaware and effective upon the closing of the offering
3.4 By-laws of Prime Response, as amended, as currently in effect
3.5 Form of Amended and Restated By-laws of Prime Response to be
effective upon the effectiveness of the offering
4.1 Specimen Certificate for shares of Common Stock of Prime Response
5.1 Opinion of Hale and Dorr LLP
10.1 1998 Stock Option/Stock Issuance Plan, with United Kingdom
Addendum
10.2 Amendment No. 1 to 1998 Stock Option/Stock Issuance Plan
10.3 Amendment No. 2 to 1998 Stock Option/Stock Issuance Plan
10.4 1998 Stock Option/Stock Issuance Plan (United Kingdom) Form of
Notice of Grant of Stock Option
10.5 1998 Stock Option/Stock Issuance Plan (United Kingdom) Form of
Stock Option Agreement, with Addendum
10.6 1998 Stock Option/Stock Issuance Plan (United Kingdom) Form of
Stock Purchase Agreement
10.7 1998 Stock Option/Stock Issuance Plan (United States) Form of
Notice of Grant of Stock Option
10.8 1998 Stock Option/Stock Issuance Plan (United States) Form of
Stock Option Agreement, with Addendum
10.9 1998 Stock Option/Stock Issuance Plan (United States) Form of
Stock Purchase Agreement, with Addendum
10.10 1998 Stock Option/Stock Issuance Plan (United States) Form of
Stock Issuance Agreement, with Addendum
10.11 1999 Outside Director Stock Option Plan
10.12 1999 Employee Stock Purchase Plan
10.13 Stock Purchase Agreement dated as of October 1, 1997 by and among
Prime Response, General Atlantic Partners 42, L.P. and GAP
Coinvestment Partners, L.P.
10.14 Amendment No. 1 to Stock Purchase Agreement dated as of October
23, 1997
10.15 Stock Purchase Agreement dated as of September 21, 1998 by and
among Prime Response and certain other stockholders
10.16 Stock and Warrant Purchase Agreement dated as of March 2, 1999
among Prime Response, General Atlantic Partners 52, L.P. and GAP
Coinvestment Partners II, L.P.
10.17 Stock and Warrant Purchase Agreement dated as of July 15, 1999
among Prime Response, General Atlantic Partners 52, L.P. and GAP
Coinvestment Partners II, L.P.
10.18 Common Stock Purchase Warrant of Prime Response issued to General
Atlantic Partners 52, L.P. dated February 28, 1999
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
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<C> <S>
10.19 Common Stock Purchase Warrant of Prime Response issued to GAP
Coinvestment Partners II, L.P. dated February 28, 1999
10.20 Common Stock Purchase Warrant of Prime Response issued to General
Atlantic Partners 52, L.P. dated July 15, 1999
10.21 Common Stock Purchase Warrant of Prime Response issued to GAP
Coinvestment II, L.P. dated July 15, 1999
10.22 Amended and Restated Registration Rights Agreement among Prime
Response, General Atlantic Partners 42, L.P., GAP Coinvestment
Partners, L.P. and the Stockholders named therein dated December
6, 1999
10.23 Common Stock and Warrant Purchase Agreement dated as of December
6, 1999 by and among Prime Response, Andersen Consulting LLP and
AC Ventures B.V.
10.24 Warrant Purchase Agreement dated as of December 6, 1999 by and
between Prime Response and Andersen Consulting LLP
10.25 Common Stock Purchase Warrant No. AC-1 of Prime Response issued to
Andersen Consulting LLP dated December 9, 1999
10.26 Common Stock Purchase Warrant No. AC-2 of Prime Response issued to
Andersen Consulting LLP dated December 9, 1999
10.27 Common Stock Purchase Warrant No. AC-3 of Prime Response issued to
Andersen Consulting LLP dated December 9, 1999
10.28 Marketing Agreement dated December 6, 1999 between Prime Response
and Andersen Consulting LLP
10.29 Consulting Services Agreement dated as of December 6, 1999 between
Prime Response and Andersen Consulting LLP
10.30 Loan and Security Agreement, with schedule, dated October 28, 1999
between Greyrock Capital and Prime Response U.S., Inc. (formerly,
Prime Response Inc.)
10.31 Security Agreement dated October 28, 1999 between Prime Response
U.S., Inc. (formerly, Prime Response Inc.) and Greyrock Capital
10.32 Continuing Guaranty dated October 28, 1999 by Prime Response U.S.,
Inc. (formerly, Prime Response Inc.) in favor of Greyrock Capital
10.33 Streamlined Facility Agreement dated October 28, 1999 between
Greyrock Capital and Prime Response U.S., Inc. (formerly, Prime
Response, Inc.)
10.34 Letter of Credit Agreement dated November 24, 1999 between
Greyrock Capital and Prime Response U.S., Inc.
10.35 Employment Agreement between Prime Response and Peter Boni dated
January 13, 1999
10.36 Employment Agreement between Prime Response and James Carling
dated November 10, 1999
10.37 Employment Agreement between Prime Response Limited and Allen
Swann dated February 2, 1998
10.38 Employment Agreement between Prime Response and Gary Daniels dated
November 30, 1998
10.39 Employment Agreement between Prime Response and Paul Lavallee
dated October 22, 1999
10.40 Employment Agreement between Prime Response and Frederick H.
Phillips dated October 21, 1999
10.41 Employment Agreement between Prime Response and James P. Plantan
dated August 10, 1999
10.42 Employment Agreement between Prime Response and Brad Braddock
dated August 5, 1999
10.43 Office Lease and License Agreements for Denver Place Plaza Tower
between Prime Response U.S., Inc. (formerly, Prime Response Inc.)
and Denver-Stellar Associated Limited Partnership dated January
20, 1999
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
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<C> <S>
10.44 Office Lease, Subordination Agreement and Subsequent Amendments
for China Basin Landing Premises between Prime Response U.S., Inc.
(formerly, Prime Response Inc.) and BRE/CBL, LLC dated March 25,
1999
10.45 Office Lease for Goat Wharf Premises between Prime Response
Limited and PDFM Limited dated December 29, 1995
10.46 Office Lease for Cambridge Park Drive premises between Prime
Response and Spaulding and Slye Services Limited Partnership
commencing June 1, 1999
10.47 Lease Agreement for Collins Street Business Centre between Prime
Response Pty. Ltd. and Merdene Pty. Ltd. dated November 24, 1999
21.1 List of Subsidiaries
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Hale and Dorr LLP (included in Exhibit 5.1)
24.1 Powers of Attorney (included on the signature page of the
registration statement)
27.1 Financial Data Schedule
99.1 Consent of Marc McMorris
</TABLE>
<PAGE>
Exhibit 1.1
Underwriting Agreement
[Date]
FleetBoston Robertson Stephens Inc.
Dain Rauscher Incorporated
SG Cowen Securities Corporation
DLJdirect, Inc.As Representatives of the several Underwriters
c/o FleetBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, CA 94104
Ladies and Gentlemen:
Introductory. Prime Response, Inc., a Delaware corporation (the "Company),
proposes to issue and sell to the several underwriters named in Schedule A (the
----------
"Underwriters") an aggregate of 3,500,000 shares (the "Firm Shares") of its
Common Stock, par value $.01 per share (the "Common Shares"). In addition, the
Company has granted to the Underwriters an option to purchase up to an
additional 525,000 Common Shares (the "Option Shares") as provided in Section 2.
The Firm Shares and, if and to the extent such option is exercised, the Option
Shares are collectively called the "Shares". FleetBoston Robertson Stephens
Inc., Dain Rauscher Incorporated, SG Cowen Securities Corporation, and
DLJdirect, Inc. have agreed to act as representatives of the several
Underwriters (in such capacity, the "Representatives") in connection with the
offering and sale of the Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File No.
333-92461), which contains a form of prospectus to be used in connection with
the public offering and sale of the Shares. Such registration statement, as
amended, including the financial statements, exhibits and schedules thereto, in
the form in which it was declared effective by the Commission under the
Securities Act of 1933 and the rules and regulations promulgated thereunder
(collectively, the "Securities Act"), including any information deemed to be a
part thereof at the time of effectiveness pursuant to Rule 430A or Rule 434
under the Securities Act, is called the "Registration Statement". Any
registration statement filed by the Company pursuant to Rule 462(b) under the
Securities Act is called the "Rule 462(b) Registration Statement", and from and
after the date and time of filing of the Rule 462(b) Registration Statement the
term "Registration Statement" shall include the Rule 462(b) Registration
Statement. Such prospectus, in the form first used by the Underwriters to
confirm sales of the Shares, is called the "Prospectus"; provided, however, if
the Company has, with the consent of
<PAGE>
FleetBoston Robertson Stephens Inc., elected to rely upon Rule 434 under the
Securities Act, the term "Prospectus" shall mean the Company's prospectus
subject to completion (each, a "preliminary prospectus") dated [___] (such
preliminary prospectus is called the "Rule 434 preliminary prospectus"),
together with the applicable term sheet (the "Term Sheet") prepared and filed by
the Company with the Commission under Rules 434 and 424(b) under the Securities
Act and all references in this Agreement to the date of the Prospectus shall
mean the date of the Term Sheet. All references in this Agreement to the
Registration Statement, the Rule 462(b) Registration Statement, a preliminary
prospectus, the Prospectus or the Term Sheet, or any amendments or supplements
to any of the foregoing, shall include any copy thereof filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
System ("EDGAR").
The Company hereby confirms its agreements with the Underwriters as
follows:
Section 1. Representations and Warranties.
The Company hereby represents and warrants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration Statement
and any Rule 462(b) Registration Statement have been declared effective by the
Commission under the Securities Act. The Company has complied to the
Commission's satisfaction with all requests of the Commission for additional or
supplemental information. No stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement is in effect
and no proceedings for such purpose have been instituted or are pending or, to
the best knowledge of the Company, are contemplated or threatened by the
Commission.
Each preliminary prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Shares. Each
of the Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto, at the time it became effective and at all
subsequent times, complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Each preliminary
prospectus, as of its date, and the Prospectus, as amended or supplemented, as
of its date and at all subsequent times, did not and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The representations and warranties set forth in
the two immediately preceding sentences do not apply to statements in or
omissions from the Registration Statement, any Rule 462(b) Registration
Statement, or any post-effective amendment thereto, or the Prospectus, or any
amendments or supplements thereto, made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
the Representatives expressly for use therein. There are no contracts or
2
<PAGE>
other documents required to be described in the Prospectus or to be filed as
exhibits to the Registration Statement which have not been described or filed as
required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representatives four complete conformed copies of the
Registration Statement and of each consent and certificate of experts filed as a
part thereof, and conformed copies of the Registration Statement (without
exhibits) and preliminary prospectuses and the Prospectus, as amended or
supplemented, in such quantities and at such places as the Representatives have
reasonably requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company. The Company has not
distributed and will not distribute, prior to the later of the Second Closing
Date (as defined below) and the completion of the Underwriters' distribution of
the Shares, any offering material in connection with the offering and sale of
the Shares other than a preliminary prospectus, the Prospectus or the
Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) Authorization of the Shares. The Shares to be purchased by the
Underwriters from the Company have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(g) No Material Adverse Change. Subsequent to the respective dates as of
which information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (any such change or effect, where the
context so requires, is called a "Material Adverse Change" or a "Material
Adverse Effect"); (ii) the Company and its subsidiaries, considered as one
entity, have not incurred any material liability or obligation, indirect, direct
or contingent, not in the ordinary course of business nor entered into any
material transaction or agreement not in the ordinary course of business; and
(iii) there has been no dividend or distribution of any kind declared, paid or
made by the Company or, except for dividends paid to the Company or other
subsidiaries, any of its subsidiaries on any class of capital stock or
repurchase or redemption by the Company or any of its subsidiaries of any class
of capital stock.
3
<PAGE>
(h) Independent Accountants. PricewaterhouseCoopers LLP, who have
expressed their opinion with respect to the financial statements (which term as
used in this Agreement includes the related notes thereto) and supporting
schedules filed with the Commission as a part of the Registration Statement and
included in the Prospectus, are independent public or certified public
accountants as required by the Securities Act.
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the consolidated financial position of the
Company and its subsidiaries as of and at the dates indicated and the results of
their operations and cash flows for the periods specified. The supporting
schedules included in the Registration Statement present fairly the information
required to be stated therein. Such financial statements and supporting
schedules have been prepared in conformity with generally accepted accounting
principles as applied in the United States applied on a consistent basis
throughout the periods involved, except as may be expressly stated in the
related notes thereto. No other financial statements or supporting schedules are
required to be included in the Registration Statement. The financial data set
forth in the Prospectus under the captions "Prospectus Summary--Summary Selected
Consolidated Financial Data", "Selected Consolidated Financial Data" and
"Capitalization" (i) are in accordance with the books and records of the
Company; (ii) fairly present the information set forth therein on a basis
consistent with that of the audited financial statements contained in the
Registration Statement and (iii) have been prepared in conformity with generally
accepted accounting principles as applied in the United States applied on a
consistent basis throughout the periods involved (subject, in the case of
unaudited statements, to the absence of footnote disclosure and in the case of
unaudited interim statements to year-end adjustments, which will not be material
either individually or in the aggregate).
(j) Company's Accounting System. The Company and each of its subsidiaries
maintain a system of accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles as applied in the United States and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(k) Subsidiaries of the Company. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the subsidiaries listed in Exhibit 21 to the Registration Statement.
(l) Incorporation and Good Standing of the Company and its Subsidiaries.
Each of the Company and its subsidiaries has been duly organized and is validly
existing as a corporation or limited liability company, as the case may be, in
good standing under the laws of the jurisdiction in which it is organized with
full corporate power and authority to own its properties and conduct its
business as described in the prospectus, and is duly qualified to do business as
a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification except where the failure to be so
qualified would not have a Material Adverse Effect.
4
<PAGE>
(m) Capitalization of the Subsidiaries. All the outstanding shares of
capital stock of each subsidiary have been duly and validly authorized and
issued and are fully paid and nonassessable, and, except as otherwise set forth
in the Prospectus, all outstanding shares of capital stock of the subsidiaries
are owned by the Company either directly or through wholly owned subsidiaries
free and clear of any security interests, claims, liens or encumbrances.
(n) No Prohibition on Subsidiaries from Paying Dividends or Making Other
Distributions. No subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on such subsidiary's capital stock, from repaying to the Company
any loans or advances to such subsidiary from the Company or from transferring
any of such subsidiary's property or assets to the Company or any other
subsidiary of the Company, except as described in or contemplated by the
Prospectus.
(o) Capitalization and Other Capital Stock Matters. The authorized, issued
and outstanding capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" (other than for subsequent issuances, if any,
pursuant to employee benefit plans described in the Prospectus or upon exercise
of outstanding options or warrants described in the Prospectus). The Common
Shares (including the Shares) conform in all material respects to the
description thereof contained in the Prospectus. All of the issued and
outstanding Common Shares have been duly authorized and validly issued, are
fully paid and nonassessable and have been issued in compliance with federal and
state securities laws. None of the outstanding Common Shares were issued in
violation of any preemptive rights, rights of first refusal or other similar
rights to subscribe for or purchase securities of the Company. There are no
authorized or outstanding options, warrants, preemptive rights, rights of first
refusal or other rights to purchase, or equity or debt securities convertible
into or exchangeable or exercisable for, any capital stock of the Company or any
of its subsidiaries other than those accurately described in the Prospectus. The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder, set forth in
the Prospectus accurately and fairly presents the information required to be
shown with respect to such plans, arrangements, options and rights.
(p) Stock Exchange Listing. The Shares have been approved for inclusion on
the Nasdaq National Market, subject only to official notice of issuance.
(q) No Consents, Approvals or Authorizations Required. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the Underwriters in the manner contemplated here and in the Prospectus, (ii) by
the National Association of Securities Dealers, LLC and (iii) by the federal and
provincial laws of Canada.
(r) Non-Contravention of Existing Instruments Agreements. Neither the
issue and sale of the Shares nor the consummation of any other of the
transactions
5
<PAGE>
herein contemplated nor the fulfillment of the terms hereof will conflict with,
result in a breach or violation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries pursuant
to, (i) the charter or by-laws of the Company or any of its subsidiaries, (ii)
the terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument to which the Company or any of its subsidiaries is a party or bound
or to which its or their property is subject or (iii) any statute, law, rule,
regulation, judgment, order or decree applicable to the Company or any of its
subsidiaries of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company or any
of its subsidiaries or any of its or their properties.
(s) No Defaults or Violations. Neither the Company nor any subsidiary is
in violation or default of (i) any provision of its charter or by-laws, (ii) the
terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument to which it is a party or bound or to which its property is subject
or (iii) any statute, law, rule, regulation, judgment, order or decree of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or such subsidiary or any
of its properties, as applicable, except any such violation or default which
would not, singly or in the aggregate, result in a Material Adverse Change
except as otherwise disclosed in the Prospectus.
(t) No Actions, Suits or Proceedings. No action, suit or proceeding by or
before any court or governmental agency, authority or body or any arbitrator
involving the Company or any of its subsidiaries or its or their property is
pending or, to the best knowledge of the Company, threatened that (i) could
reasonably be expected to have a Material Adverse Effect on the performance of
this Agreement or the consummation of any of the transactions contemplated
hereby or (ii) could reasonably be expected to result in a Material Adverse
Effect.
(u) All Necessary Permits, Etc. The Company and each subsidiary possess
such valid and current certificates, authorizations or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies necessary to
conduct their respective businesses, and neither the Company nor any subsidiary
has received any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could result in a Material Adverse Change.
(v) Title to Properties. The Company and each of its subsidiaries has good
and marketable title to all the properties and assets reflected as owned in the
financial statements referred to in Section 1(h) above, in each case free and
clear of any security interests, mortgages, liens, encumbrances, equities,
claims and other defects, except such as do not materially and adversely affect
the value of such property and do not materially interfere with the use made or
proposed to be made of such property by the Company or such subsidiary. The real
property, improvements, equipment and personal property held under lease by the
Company or any subsidiary are held under valid and enforceable leases, with such
exceptions as are not material and do not
6
<PAGE>
materially interfere with the use made or proposed to be made of such real
property, improvements, equipment or personal property by the Company or such
subsidiary.
(w) Tax Law Compliance. The Company and its subsidiaries have filed all
necessary federal, state and foreign income and franchise tax returns [or have
properly requested extensions thereof and have paid all taxes required to be
paid by any of them and, if due and payable, any related or similar assessment,
fine or penalty levied against any of them except as may be being contested in
good faith and by appropriate proceedings. The Company has made adequate
charges, accruals and reserves in the applicable financial statements referred
to in Section 1(h) above in respect of all federal, state and foreign income and
franchise taxes for all periods as to which the tax liability of the Company or
any of its consolidated subsidiaries has not been finally determined. The
Company is not aware of any tax deficiency that has been or might be asserted or
threatened against the Company that could result in a Material Adverse Change.
(x) Intellectual Property Rights. Each of the Company and its subsidiaries
owns or possesses adequate rights to use all patents, patent rights or licenses,
inventions, collaborative research agreements, trade secrets, know-how,
trademarks, service marks, trade names and copyrights which are necessary to
conduct its businesses as described in the Registration Statement and
Prospectus; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not result in a
Material Adverse Change that is not otherwise disclosed in the Prospectus; the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by others with
respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights; and the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could reasonably be expected to have a Material
Adverse Change. There is no claim being made against the Company regarding
patents, patent rights or licenses, inventions, collaborative research, trade
secrets, know-how, trademarks, service marks, trade names or copyrights. The
Company and its subsidiaries do not in the conduct of their business as now or
proposed to be conducted as described in the Prospectus infringe or conflict
with any right or patent of any third party, or any discovery, invention,
product or process which is the subject of a patent application filed by any
third party and is known to the Company or any of its subsidiaries, which such
infringement or conflict could reasonably be expected to result in a Material
Adverse Change.
(y) Year 2000 Preparedness. There are no issues related to the Company's,
or any of its subsidiaries', preparedness for the Year 2000 that (i) are of a
character required to be described or referred to in the Registration Statement
or Prospectus by the Securities Act or the rules and regulations of the
Commission thereunder which have not been accurately described in the
Registration Statement or Prospectus or (ii) might reasonably be expected to
result in any Material Adverse Change or that might materially affect their
properties, assets or rights. The Company has inquired of material vendors as to
their preparedness for the Year 2000 and has disclosed in the
7
<PAGE>
Registration Statement or Prospectus any issues that might reasonably be
expected to result in any Material Adverse Change.
(z) No Transfer Taxes or Other Fees. There are no transfer taxes or other
similar fees or charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the shares.
(aa) Company Not an "Investment Company". The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Company is not, and after receipt of payment
for the Shares will not be, an "investment company" or an entity "controlled" by
an "investment company" within the meaning of the Investment Company Act and
will conduct its business in a manner so that it will not become subject to the
Investment Company Act.
(bb) Insurance. Each of the Company and its subsidiaries are insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company
and its subsidiaries against theft, damage, destruction, acts of vandalism and
earthquakes, general liability and Directors and Officers liability. The Company
has no reason to believe that it or any subsidiary will not be able (i) to renew
its existing insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change. Neither of the Company nor any
subsidiary has been denied any insurance coverage which it has sought or for
which it has applied.
(cc) Labor Matters. To the best of Company's knowledge, no labor
disturbance by the employees of the Company or any of its subsidiaries exists or
is imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers that might be
expected to result in a Material Adverse Change.
(dd) No Price Stabilization or Manipulation. The Company has not taken and
will not take, directly or indirectly, any action designed to or that might be
reasonably expected to cause or result in stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of the Shares.
(ee) Lock-Up Agreements. Each officer and director of the Company and
beneficial owner of share capital of the Company has agreed to sign an agreement
substantially in the form attached hereto as Exhibit A (the "Lock-up
---------
Agreements"). The Company has provided to counsel for the Underwriters a
complete and accurate list of all securityholders of the Company and the number
and type of securities held by each securityholder. The Company has provided to
counsel for the Underwriters true, accurate and complete copies of all of the
Lock-up Agreements presently in effect or effected hereby. The Company hereby
represents and warrants that it will not release any of its officers, directors
or other stockholders from any Lock-up Agreements,
8
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including, without limitation, any restrictions on transfer imposed under
purchase or issuance agreements relating to the Company's 1998 Stock
Option/Stock Issuance Plan, currently existing or hereafter effected without the
prior written consent of FleetBoston Robertson Stephens Inc.
(ff) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any subsidiary or any other
person required to be described in the Prospectus which have not been described
as required.
(gg) No Unlawful Contributions or Other Payments. Neither the Company nor
any of its subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any subsidiary, has made any contribution or
other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any law or of the character required to be
disclosed in the Prospectus.
(hh) ERISA Compliance. The Company and its subsidiaries and any "employee
benefit plan" (as defined under the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, its
subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in
all material respects with ERISA. "ERISA Affiliate" means, with respect to the
Company or a subsidiary, any member of any group of organizations described in
Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended,
and the regulations and published interpretations thereunder (the "Code") of
which the Company or such subsidiary is a member. No "reportable event" (as
defined under ERISA) has occurred or is reasonably expected to occur with
respect to any "employee benefit plan" established or maintained by the Company,
its subsidiaries or any of their ERISA Affiliates. No "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates, if such "employee benefit plan" were terminated, would have any
"amount of unfounded benefit liabilities" (as defined under ERISA). Neither the
Company, its subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any material "employee benefit
plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee
benefit plan" established or maintained by the Company, its subsidiaries or any
of their ERISA Affiliates that is intended to be qualified under Section 401(a)
of the Code is so qualified and nothing has occurred, whether by action or
failure to act, which would cause the loss of such qualification, which failure
to maintain such qualification would not have a Material Adverse Effect.
(ii) Consents Required in Connection with the Directed Share Program. No
consent, approval, authorization or order of, or qualification with, any
governmental body or agency, other than those obtained, is required in
connection with the offering of the Directed Shares in any jurisdiction where
the Directed Shares are being offered.
(jj) No Improper Influence in Connection with the Directed Share Program.
The Company has not offered, or caused FleetBoston Robertson Stephens Inc. or
Societe General to offer, Shares to any person pursuant to the Directed Share
Program with the specific intent to unlawfully influence (i) a customer or
supplier of the Company to alter the customer's or supplier's level or type of
business with the Company or (ii) a
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trade journalist or publication to write or publish favorable information about
the Company or its products.
Any certificate signed by an officer of the Company and delivered to the
Representatives or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
Section 2. Purchase, Sale and Delivery of the Shares.
(a) The Firm Shares. The Company agrees to issue and sell to the several
Underwriters the Firm Shares upon the terms herein set forth. On the basis of
the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company the respective number of
Firm Shares set forth opposite their names on Schedule A. The purchase price per
----------
Firm Share to be paid by the several Underwriters to the Company shall be $[___]
per share.
(b) The First Closing Date. Delivery of the Firm Shares to be purchased by
the Underwriters and payment therefor shall be made by the Company and the
Representatives at 6:00 a.m. San Francisco time, at the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109 (or at such other place as may
be agreed upon among the Representatives and the Company), (i) on the third
(3rd) full business day following the first day that Shares are traded, (ii) if
this Agreement is executed and delivered after 1:30 P.M., San Francisco time,
the fourth (4th) full business day following the day that this Agreement is
executed and delivered or (iii) at such other time and date not later that seven
(7) full business days following the first day that Shares are traded as the
Representatives and the Company may determine (or at such time and date to which
payment and delivery shall have been postponed pursuant to Section 8 hereof),
such time and date of payment and delivery being herein called the "Closing
Date;" provided, however, that if the Company has not made available to the
Representatives copies of the Prospectus within the time provided in Section
4(d) hereof, the Representatives may, in its sole discretion, postpone the
Closing Date until no later that two (2) full business days following delivery
of copies of the Prospectus to the Representatives.
(c) The Option Shares; the Second Closing Date. In addition, on the basis
of the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Company hereby grants
an option to the several Underwriters to purchase, severally and not jointly, up
to an aggregate of 600,000 Option Shares from the Company at the purchase price
per share to be paid by the Underwriters for the Firm Shares. The option granted
hereunder is for use by the Underwriters solely in covering any over-allotments
in connection with the sale and distribution of the Firm Shares. The option
granted hereunder may be exercised at any time upon notice by the
Representatives to the Company, which notice may be given at any time within 30
days from the date of this Agreement. The time and date of delivery of the
Option Shares, if subsequent to the First Closing Date, is called the "Second
Closing Date" and shall be determined by the Representatives and shall not be
earlier than three nor later than five full business days after delivery of such
notice of exercise.
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If any Option Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Option Shares (subject to such
adjustments to eliminate fractional shares as the Representatives may determine)
that bears the same proportion to the total number of Option Shares to be
purchased as the number of Firm Shares set forth on Schedule A opposite the name
----------
of such Underwriter bears to the total number of Firm Shares. The
Representatives may cancel the option at any time prior to its expiration by
giving written notice of such cancellation to the Company.
(d) Public Offering of the Shares. The Representatives hereby advise the
Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representatives, in their sole judgment, have
determined is advisable and practicable.
(e) Payment for the Shares. Payment for the Shares shall be made at the
First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer in immediately available-funds to the order of the Company.
It is understood that the Representatives have been authorized, for
their own accounts and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Shares and any Option Shares the Underwriters have agreed to purchase.
FleetBoston Robertson Stephens Inc., individually and not as a Representative of
the Underwriters, may (but shall not be obligated to) make payment for any
Shares to be purchased by any Underwriter whose funds shall not have been
received by the Representatives by the First Closing Date or the Second Closing
Date, as the case may be, for the account of such Underwriter, but any such
payment shall not relieve such Underwriter from any of its obligations under
this Agreement.
(f) Delivery of the Shares. The Company shall deliver, or cause to be
delivered, a credit representing the Firm Shares to an account or accounts at
The Depository Trust Company, as designated by the Representatives for the
accounts of the Representatives and the several Underwriters at the First
Closing Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company shall
also deliver, or cause to be delivered a credit representing the Option Shares
the Underwriters have agreed to purchase at the First Closing Date (or the
Second Closing Date, as the case may be), to an account or accounts at The
Depository Trust Company as designated by the Representatives for the accounts
of the Representatives and the several Underwriters, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the
purchase price therefor. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
(g) Delivery of Prospectus to the Underwriters. Not later than 12:00 noon
on the second business day following the date the Shares are released by the
Underwriters for sale to the public, the Company shall deliver or cause to be
delivered copies of the Prospectus in such quantities and at such places as the
Representatives shall request.
Section 3. Covenants of the Company.
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The Company further covenants and agrees with each Underwriter as follows:
(a) Registration Statement Matters. The Company will (i) use its best
efforts to cause a registration statement on Form 8-A (the "Form 8-A
Registration Statement") as required by the Securities Exchange Act of 1934 (the
"Exchange Act") to become effective simultaneously with the Registration
Statement, (ii) use its best efforts to cause the Registration Statement to
become effective or, if the procedure in Rule 430A of the Securities Act is
followed, to prepare and timely file with the Commission under Rule 424(b) under
the Securities Act a Prospectus in a form approved by the Representatives
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Securities Act and (iii)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which the Representatives shall not previously have been advised
and furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Securities Act. If
the Company elects to rely on Rule 462(b) under the Securities Act, the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) under the Securities Act prior to the time
confirmations are sent or given, as specified by Rule 462(b)(2) under the
Securities Act, and shall pay the applicable fees in accordance with Rule 111
under the Securities Act.
(b) Securities Act Compliance. The Company will advise the Representatives
promptly (i) when the Registration Statement or any post-effective amendment
thereto shall have become effective, (ii) of receipt of any comments from the
Commission, (iii) of any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any additional
information and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of the
Prospectus or of the institution of any proceedings for that purpose. The
Company will use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(c) Blue Sky Compliance. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(d) Amendments and Supplements to the Prospectus and Other Securities Act
Matters. The Company will comply with the Securities Act and the Exchange Act,
and the rules and regulations of the Commission thereunder, so as to permit the
completion of the distribution of the Shares as contemplated in this Agreement
and the Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the judgment
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of the Company or in the reasonable opinion of the Representatives or counsel
for the Underwriters, it becomes necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the circumstances
existing at the time the Prospectus is delivered to a purchaser, not misleading,
or, if it is necessary at any time to amend or supplement the Prospectus to
comply with any law, the Company promptly will prepare and file with the
Commission, and furnish at its own expense to the Underwriters and to dealers,
an appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with the law.
(e) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the period
beginning on the date hereof and ending on the later of the First Closing Date
or such date, as in the opinion of counsel for the Underwriters, the Prospectus
is no longer required by law to be delivered in connection with sales by an
Underwriter or dealer (the "Prospectus Delivery Period"), as many copies of the
Prospectus and any amendments and supplements thereto as the Representatives may
request.
(f) Insurance. The Company shall (i) obtain Directors and Officers
liability insurance in the minimum amount of $10 million which shall apply to
the offering contemplated hereby, (ii) cause FleetBoston Robertson Stephens Inc.
to be added to such policy such that up to $500,000 of its expenses pursuant to
Section 7(a) shall be paid directly by such insurer and (iii) cause FleetBoston
Robertson Stephens Inc. to be added as an additional insured to such policy in
respect of the offering contemplated hereby.
(g) Notice of Subsequent Events. If at any time during the ninety (90) day
period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Company Shares has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(h) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Shares sold by it in the manner described under the caption "Use of
Proceeds" in the Prospectus.
(i) Transfer Agent. The Company shall engage and maintain, at its expense,
a registrar and transfer agent for the Company Shares.
(j) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering a period of at least 12
months beginning after the effective date of the Registration Statement that
satisfies the provisions of Section 11(a) of the Securities Act.
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<PAGE>
(k) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under the
Exchange Act.
(l) Agreement Not to Offer or Sell Additional Securities. The Company
will not, without the prior written consent of FleetBoston Robertson Stephens
Inc., for a period of 180 days following the date of the Prospectus, offer, sell
or contract to sell, or otherwise dispose of or enter into any transaction which
is designed to, or could be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, or announce the offering of, any other Common Shares or any
securities convertible into, or exchangeable for, Common Shares; provided,
however, that the Company may (i) issue and sell Common Shares pursuant to any
director or employee stock option plan, stock ownership plan or dividend
reinvestment plan of the Company in effect at the date of the Prospectus and
described in the Prospectus so long as none of those shares may be transferred
during the period of 180 days from the date that the Registration Statement is
declared effective (the "Lock-Up Period") and the Company shall enter stop
transfer instructions with its transfer agent and registrar against the transfer
of any such Common Shares and (ii) the Company may issue Common Shares issuable
upon the conversion of securities or the exercise of warrants outstanding at the
date of the Prospectus and described in the Prospectus. The Company hereby
represents and warrants that it will not release any of its officers, directors
or other stockholders from any Lock-up Agreements, including, without
limitation, any restrictions on transfer imposed under purchase or issuance
agreements relating to the Company's 1998 Stock Option/Stock Issuance Plan,
currently existing or hereafter effected without the prior written consent of
FleetBoston Robertson Stephens Inc.
(m) Future Reports to the Representatives. During the period of five
years hereafter the Company will furnish to the Representatives (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
or certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the National Association of Securities Dealers, LLC
or any securities exchange; and (iii) as soon as available, copies of any report
or communication of the Company mailed generally to holders of its capital
stock.
(n) Directed Share Program. The Company (i) will indemnify FleetBoston
Robertson Stephens Inc. for any losses incurred in connection with the Directed
Share Program, (ii) will comply with all applicable securities and other
applicable laws, rules and regulations in each jurisdiction in which the
Directed Shares are offered in connection with the Directed Share Program and
(iii) will pay all reasonable fees and disbursements of counsel incurred by the
Underwriters in connection with the Directed
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<PAGE>
Share Program and any stamp duties, similar taxes or duties or other taxes, if
any, incurred by the underwriters in connection with the Directed Share Program.
Section 4. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein on the First Closing Date and, with respect to the Option
Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Option Shares, as of the Second Closing Date as
though then made, to the timely performance by the Company of its covenants and
other obligations hereunder, and to each of the following additional conditions:
(a) Compliance with Registration Requirements; No Stop Order; No Objection
from the National Association of Securities Dealers, LLC The Registration
Statement shall have become effective prior to the execution of this Agreement,
or at such later date as shall be consented to in writing by you; and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company or any Underwriter, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
satisfaction of Underwriters' Counsel; and the National Association of
Securities Dealers, LLC shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(b) Corporate Proceedings. All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
(c) No Material Adverse Change. Subsequent to the execution and delivery
of this Agreement and prior to the First Closing Date, or the Second Closing
Date, as the case may be, there shall not have been any Material Adverse Change
in the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or Prospectus,
which, in you're the Representatives' sole judgment, is material and adverse and
that makes it, in the Representatives' sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus.
(d) Opinion of Counsel for the Company. You shall have received on the
First Closing Date, or the Second Closing Date, as the case may be, an opinion
of Hale and Dorr LLP counsel for the Company as to the matters identified on
Exhibit B attached hereto, dated the First Closing Date, or the Second Closing
- ---------
Date, addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters.
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Counsel rendering the opinion contained in Exhibit B may rely as to
---------
questions of law not involving the laws of the United States or the State of
Delaware and the Commonwealth of Massachusetts upon opinions of local counsel,
and as to questions of fact upon representations or certificates of officers of
the Company, and of government officials, in which case their opinion is to
state that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy in any such opinion, representation or certificate.
Copies of any opinion, representation or certificate so relied upon shall be
delivered to the Representatives of the Underwriters, and to Underwriters'
Counsel.
(e) Opinion of Foreign Counsel for the Company and its Subsidiaries. You
shall have received on the First Closing Date, or the Second Closing Date, as
the case may be, an opinion of English counsel for the Company and its
subsidiary as to the matters identified in Exhibit C attached hereto.
---------
(f) Opinion of Counsel for the Underwriters. You shall have received on
the First Closing Date or the Second Closing Date, as the case may be, an
opinion of Testa, Hurwitz & Thibeault, LLP, as to the matters identified in
Exhibit D hereto. The Company shall have furnished to such counsel such
- ---------
documents as they may have requested for the purpose of enabling them to pass
upon such matters.
(g) Accountants' Comfort Letter. You shall have received on the First
Closing Date and on the Second Closing Date, as the case may be, a letter from
PricewaterhouseCoopers LLP addressed to the Underwriters, dated the First
Closing Date or the Second Closing Date, as the case may be, confirming that
they are independent certified public accountants with respect to the Company
within the meaning of the Act and the applicable published Rules and Regulations
and based upon the procedures described in such letter delivered to you
concurrently with the execution of this Agreement (herein called the "Original
Letter"), but carried out to a date not more than four (4) business days prior
to the First Closing Date or the Second Closing Date, as the case may be, (i)
confirming, to the extent true, that the statements and conclusions set forth in
the Original Letter are accurate as of the First Closing Date or the Second
Closing Date, as the case may be, and (ii) setting forth any revisions and
additions to the statements and conclusions set forth in the Original Letter
which are necessary to reflect any changes in the facts described in the
Original Letter since the date of such letter, or to reflect the availability of
more recent financial statements, data or information. The letter shall not
disclose any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise from that set forth in the Registration Statement
or Prospectus, which, in your sole judgment, is material and adverse and that
makes it, in your sole judgment, impracticable or inadvisable to proceed with
the public offering of the Shares as contemplated by the Prospectus. The
Original Letter from PricewaterhouseCoopers LLP shall be addressed to or for the
use of the Underwriters in form and substance satisfactory to the Underwriters
and shall (i) represent, to the extent true, that they are independent certified
public accountants with respect to the Company within the meaning of the Act and
the applicable published Rules and Regulations, (ii) set forth their opinion
with respect to their examination of the consolidated balance sheet of the
Company as of December 31, 1999 and related consolidated statements of
operations, shareholders' equity, and cash flows for the twelve (12) months
ended December 31, 1999, (iii) state that PricewaterhouseCoopers LLP has
performed the procedures set out in Statement on
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Auditing Standards No. 71 ("SAS 71") for a review of interim financial
information and providing the report of PricewaterhouseCoopers LLP as described
in SAS 71 on the financial statements for each of the quarters in the nine-
quarter period ended September 30, 1999 (the "Quarterly Financial Statements"),
(iv) state that in the course of such review, nothing came to their attention
that leads them to believe that any material modifications need to be made to
any of the Quarterly Financial Statements in order for them to be in compliance
with generally accepted accounting principles consistently applied across the
periods presented, and address other matters agreed upon by
PricewaterhouseCoopers LLP and you. In addition, you shall have received from
PricewaterhouseCoopers LLP a letter addressed to the Company and made available
to you for the use of the Underwriters stating that their review of the
Company's system of internal accounting controls, to the extent they deemed
necessary in establishing the scope of their examination of the Company's
consolidated financial statements as of December 31, 1999, did not disclose any
weaknesses in internal controls that they considered to be material weaknesses.
(h) Officers' Certificate. You shall have received on the First Closing
Date and the Second Closing Date, as the case may be, a certificate of the
Company, dated the First Closing Date or the Second Closing Date, as the case
may be, signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this Agreement
are true and correct, as if made on and as of the First Closing Date or the
Second Closing Date, as the case may be, and the Company has complied with
all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the First Closing Date or the Second
Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or, to the Company's knowledge, threatened under
the Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
contained all material information required to be included therein by the
Securities Act and in all material respects conformed to the requirements of
the Securities Act, the Registration Statement and the Prospectus, and any
amendments or supplements thereto, did not and does not include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
and, since the effective date of the Registration Statement, there has
occurred no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been (a) any
Material Adverse Change, (b) any transaction that is material to the Company
and its subsidiaries considered as one enterprise, except transactions
entered into in the ordinary course of business, (c) any obligation, direct
or contingent, that is material to the Company and its subsidiaries
considered as one enterprise, incurred by the
17
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Company or its subsidiaries, except obligations incurred in the ordinary
course of business, (d) any change in the capital stock or outstanding
indebtedness of the Company or any of its subsidiaries that is material to
the Company and its subsidiaries considered as one enterprise, (e) any
dividend or distribution of any kind declared, paid or made on the capital
stock of the Company or any of its subsidiaries, or (f) any loss or damage
(whether or not insured) to the property of the Company or any of its
subsidiaries which has been sustained or will have been sustained which has
a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise.
(i) Lock-up Agreement from Certain Stockholders of the Company. The
Company shall have obtained and delivered to you an agreement substantially in
the form of Exhibit A attached hereto from each officer and director of the
---------
Company and each beneficial owner of share capital of the Company.
(j) Stock Exchange Listing. The Shares shall have been approved for
inclusion on the Nasdaq National Market, subject only to official notice of
issuance.
(k) Compliance with Prospectus Delivery Requirements. The Company shall
have complied with the provisions of Sections 2(g) and 3(e) hereof with respect
to the furnishing of Prospectuses.
(l) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, as the case may be, the Representatives and counsel
for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Shares as contemplated herein, or in
order to evidence the accuracy of any of the representations and warranties, or
the satisfaction of any of the conditions or agreements, herein contained.
If any condition specified in this Section 4 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 5 (Payment of Expenses),
Section 6 (Reimbursement of Underwriters' Expenses), Section 7 (Indemnification
and Contribution) and Section 10 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.
Section 5. Payment of Expenses. The Company agrees to pay all costs, fees
and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Common Shares (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Shares to the Underwriters, (iv) all fees and expenses of the
Company's counsel, independent public or certified public accountants and other
advisors, (v) all costs and expenses incurred in connection with
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<PAGE>
the preparation, printing, filing, shipping and distribution of the Registration
Statement (including financial statements, exhibits, schedules, consents and
certificates of experts), each preliminary prospectus and the Prospectus, and
all amendments and supplements thereto, and this Agreement, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriters
in connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Shares for offer and
sale under the state securities or blue sky laws or the provincial securities
laws of Canada or any other country, and, if requested by the Representatives,
preparing and printing a "Blue Sky Survey", an "International Blue Sky Survey"
or other memorandum, and any supplements thereto, advising the Underwriters of
such qualifications, registrations and exemptions, (vii) the filing fees
incident to, and the reasonable fees and expenses of counsel for the
Underwriters in connection with, the National Association of Securities Dealers,
LLC review and approval of the Underwriters' participation in the offering and
distribution of the Common Shares, (viii) the fees and expenses associated with
including the Common Shares on the Nasdaq National Market, (ix) all costs and
expenses incident to the travel and accommodation of the Company's employees on
the "road show" , and (x) all other fees, costs and expenses referred to in Item
13 of Part II of the Registration Statement. Except as provided in this Section
5, Section 6, and Section 7 hereof, the Underwriters shall pay their own
expenses, including the fees and disbursements of their counsel.
Section 6. Reimbursement of Underwriters' Expenses. If this Agreement is
terminated by the Representatives pursuant to Section 4, Section 8 or Section 9,
or if the sale to the Underwriters of the Shares on the First Closing Date is
not consummated because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or to comply with any provision hereof,
the Company agrees to reimburse the Representatives and the other Underwriters
(or such Underwriters as have terminated this Agreement with respect to
themselves), severally, upon demand for all out-of-pocket expenses that shall
have been reasonably incurred by the Representatives and the Underwriters in
connection with the proposed purchase and the offering and sale of the Shares,
including but not limited to fees and disbursements of counsel, printing
expenses, travel expenses, postage, facsimile and telephone charges.
Section 7. Indemnification and Contribution.
(a) Indemnification of the Underwriters.
The Company agrees to indemnify and hold harmless each Underwriter,
its officers and employees, and each person, if any, who controls any
Underwriter within the meaning of the Securities Act and the Exchange Act
against any loss, claim, damage, liability or expense, as incurred, to which
such Underwriter or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (i) upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430A or
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<PAGE>
Rule 434 under the Securities Act, or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein not misleading; or (ii) upon any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; or (iii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained herein; or (iv) in whole
or in part upon any failure of the Company to perform its obligations hereunder
or under law; or (v) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials provided by the Company
or based upon written information furnished by or on behalf of the Company
including, without limitation, slides, videos, films or tape recordings, used in
connection with the marketing of the Shares, including without limitation,
statements communicated to securities analysts employed by the Underwriters; or
(vi) any act or failure to act or any alleged act or failure to act by any
Underwriter in connection with, or relating in any manner to, the Shares or the
offering contemplated hereby, and which is included as part of or referred to in
any loss, claim, damage, liability or action arising out of or based upon any
matter covered by clause (i), (ii), (iii), (iv) or (v) above, provided that the
Company shall not be liable under this clause (vi) to the extent that a court of
competent jurisdiction shall have determined by a final judgment that such loss,
claim, damage, liability or action resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such Underwriter through
its bad faith or willful misconduct; and to reimburse each Underwriter and each
such controlling person for any and all expenses (including the fees and
disbursements of counsel chosen by FleetBoston Robertson Stephens Inc.) as such
expenses are reasonably incurred by such Underwriter or such controlling person
in connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action; provided, however,
that the foregoing indemnity agreement shall not apply to any loss, claim,
damage, liability or expense to the extent, but only to the extent, arising out
of or based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Representative expressly for use in
the Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto); and provided, further, that with respect to
any preliminary prospectus, the foregoing indemnity agreement shall not inure to
the benefit of any Underwriter from whom the person asserting any loss, claim,
damage, liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The indemnity agreement
set forth in this Section 7(a) shall be in addition to any liabilities that the
Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration
20
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Statement and each person, if any, who controls the Company within the meaning
of the Securities Act or the Exchange Act, against any loss, claim, damage,
liability or expense, as incurred, to which the Company, or any such director,
officer or controlling person may become subject, under the Securities Act, the
Exchange Act, or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company by the
Representatives expressly for use therein; and to reimburse the Company, or any
such director, officer or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. The indemnity
agreement set forth in this Section 7(b) shall be in addition to any liabilities
that each Underwriter may otherwise have.
(c) Information Provided by the Underwriters. The Company hereby
acknowledges that the only information that the Underwriters have furnished to
the Company expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) are the
statements set forth in the table in the first paragraph and the second, fourth,
tenth and thirteenth paragraphs under the caption "Underwriting" in the
Prospectus; and the Underwriters confirm that such statements are correct.
(d) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 7 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses
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<PAGE>
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of such indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 7 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with local counsel), approved by the indemnifying
party (FleetBoston Robertson Stephens Inc. in the case of Section 7(b) and
Section 8), representing the indemnified parties who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying party.
(e) Settlements. The indemnifying party under this Section 7 shall not
be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes (i) an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(f) Contribution. If the indemnification provided for in this Section 7
is unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand
22
<PAGE>
and the Underwriters on the other from the offering of the Shares. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, (or actions or proceedings in respect thereof), as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 7(f) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7(f). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 7(f) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (f), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this Section 7(f) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(g) Timing of Any Payments of Indemnification. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than thirty
(30) days of invoice to the indemnifying party.
(h) Survival. The indemnity and contribution agreements contained in
this Section 7 and the representation and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor to
any Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 7.
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(i) Acknowledgements of Parties. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Securities Act and the Exchange Act.
(j) Indemnification for Directed Share Program. The Company agrees to
indemnify and hold harmless FleetBoston Robertson Stephens Inc. and its
affiliates and each person, if any, who controls FleetBoston Robertson Stephens
Inc. or its affiliates within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act ("Robertson Stephens Entities") and
Societe General and its affiliates and each person, if any, who controls Societe
General or its affiliates within the meaning of either Section 15 of the
Securities Act of Section 20 of the Exchange Act (Societe General Entities),
from and against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) (i) caused
by any untrue statement or alleged untrue statement of a material fact contained
in any material prepared by or with the consent of the Company for distribution
to participants in connection with the Directed Share Program, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; (ii)
the failure of any participant to pay for and accept delivery of Directed Shares
that the participant has agreed to purchase; or (iii) related to, arising out
of, or in connection with the Directed Share Program other than losses, claims,
damages or liabilities (or expenses relating thereto) that are finally
judicially determined to have resulted from the bad faith or gross negligence of
either the Robertson Stephens Entities or the Societe General Entities, as the
case may be.
Section 8. Default of One or More of the Several Underwriters. If, on the
First Closing Date or the Second Closing Date, as the case may be, any one or
more of the several Underwriters shall fail or refuse to purchase Shares that it
or they have agreed to purchase hereunder on such date, and the aggregate number
of Common Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase does not exceed 10% of the aggregate number of the
Shares to be purchased on such date, the other Underwriters shall be obligated,
severally, in the proportions that the number of Firm Common Shares set forth
opposite their respective names on Schedule A bears to the aggregate number of
----------
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as may be specified by the
Representatives with the consent of the non-defaulting Underwriters, to purchase
the Shares which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase on such date. If, on the First Closing Date or the Second
Closing Date, as the case may be, any one or more of the Underwriters shall fail
or refuse to purchase Shares and the aggregate number of Shares with respect to
which such default occurs exceeds 10% of the aggregate number of Shares to be
purchased on such date, and arrangements satisfactory to the Representatives and
the Company for the purchase of such Shares are not made within 48 hours after
such default, this Agreement shall terminate without liability of any party to
any other party except that the
24
<PAGE>
provisions of Section 5, and Section 7 shall at all times be effective and shall
survive such termination. In any such case either the Representatives or the
Company shall have the right to postpone the First Closing Date or the Second
Closing Date, as the case may be, but in no event for longer than seven days in
order that the required changes, if any, to the Registration Statement and the
Prospectus or any other documents or arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
8. Any action taken under this Section 8 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
Section 9. Termination of this Agreement. Prior to the First Closing Date,
this Agreement may be terminated by the Representatives by notice given to the
Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq Stock Market, or trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the National Association of
Securities Dealers, LLC; (ii) a general banking moratorium shall have been
declared by any of federal, New York , Delaware or California authorities; (iii)
there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective change in United States' or international
political, financial or economic conditions, as in the judgment of the
Representative is material and adverse and makes it impracticable or inadvisable
to market the Common Shares in the manner and on the terms described in the
Prospectus or to enforce contracts for the sale of securities; (iv) in the
judgment of the Representative there shall have occurred any Material Adverse
Change; or (v) the Company shall have sustained a loss by strike, fire, flood,
earthquake, accident or other calamity of such character as in the judgment of
the Representative may interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have been
insured. Any termination pursuant to this Section 9 shall be without liability
on the part of (a) the Company to any Underwriter, except that the Company shall
be obligated to reimburse the expenses of the Representatives and the
Underwriters pursuant to Sections 5 and 6 hereof, (b) any Underwriter to the
Company, or (c) of any party hereto to any other party except that the
provisions of Section 7 shall at all times be effective and shall survive such
termination.
Section 10. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and
payment for the Shares sold hereunder and any termination of this Agreement.
25
<PAGE>
Section 11. Notices. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representative:
FLEETBOSTON ROBERTSON STEPHENS INC.
555 California Street
San Francisco, California 94104
Facsimile: (415) 676-2696
Attention: General Counsel
If to the Company:
Prime Response, Inc.
150 Cambridge Park Drive
Cambridge, MA 02140
Facsimile: (617) 876-8383
Attention: Chief Executive Officer
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
Section 12. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto, including any substitute Underwriters pursuant
to Section 9 hereof, and to the benefit of the employees, officers and directors
and controlling persons referred to in Section 7, and to their respective
successors, and personal representatives, and no other person will have any
right or obligation hereunder. The term "successors" shall not include any
purchaser of the Shares as such from any of the Underwriters merely by reason of
such purchase.
Section 13. Partial Unenforceability. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
Section 14. Governing Law Provisions.
(a) Governing Law. This agreement shall be governed by and construed in
accordance with the internal laws of the state of New York applicable to
agreements made and to be performed in such state.
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<PAGE>
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America or the courts of the Commonwealth of Massachusetts in
each case located in the City of Boston (collectively, the "Specified Courts"),
and each party irrevocably submits to the exclusive jurisdiction (except for
proceedings instituted in regard to the enforcement of a judgment of any such
court (a "Related Judgment"), as to which such jurisdiction is non-exclusive) of
such courts in any such suit, action or proceeding. Service of any process,
summons, notice or document by mail to such party's address set forth above
shall be effective service of process for any suit, action or other proceeding
brought in any such court. The parties irrevocably and unconditionally waive
any objection to the laying of venue of any suit, action or other proceeding in
the Specified Courts and irrevocably and unconditionally waive and agree not to
plead or claim in any such court that any such suit, action or other proceeding
brought in any such court has been brought in an inconvenient forum. Each party
not located in the United States irrevocably appoints CT Corporation System,
which currently maintains a San Francisco office at 2 Oliver Street, Boston,
Massachusetts 02109, United States of America, as its agent to receive service
of process or other legal summons for purposes of any such suit, action or
proceeding that may be instituted in any state or federal court in the City of
Boston.
(c) Waiver of Immunity. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise be entitled in the Specified Courts, and with respect
to any Related Judgment, each party waives any such immunity in the Specified
Courts or any other court of competent jurisdiction, and will not raise or claim
or cause to be pleaded any such immunity at or in respect of any such Related
Proceeding or Related Judgment, including, without limitation, any immunity
pursuant to the United States Foreign Sovereign Immunities Act of 1976, as
amended.
Section 15. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in
two or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
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[The remainder of this page has been intentionally left blank.]
28
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.
Very truly yours,
PRIME RESPONSE, INC.
By:__________________________
[Title]
The foregoing Underwriting Agreement is hereby confirmed and accepted by the
Representatives as of the date first above written.
FLEETBOSTON ROBERTSON STEPHENS INC.
DAIN RAUSCHER INCORPORATED
SG COWEN SECURITIES CORPORATION
DLJdirect, INC.On their behalf and on behalf of each of the several underwriters
named in Schedule A hereto.
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By FLEETBOSTON ROBERTSON STEPHENS INC.
By:_________________________________
Authorized Signatory
29
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SCHEDULE A
Number of
Firm Common Shares
Underwriters To be Purchased
FLEETBOSTON ROBERTSON STEPHENS INC. AND
FLEETBOSTON ROBERTSON STEPHENS INTERNATIONAL
LIMITED ....................................... [___]
DAIN RAUSCHER INCORPORATED ..................... [___]
SG COWEN SECURITIES CORPORATION ................ [___]
SOCIETE GENERALE
DLJdirect, INC.
[___] .......................................... [___]
[___] .......................................... [___]
[___] .......................................... [___]
Total........................................ 3,500,000
S-B
<PAGE>
Exhibit A
A-1
<PAGE>
Exhibit B
Matters to be Covered in the Opinion of Company Counsel
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation;
(ii) The Company has the corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus;
(iii) The Company is duly qualified to do business as a foreign corporation
and is in good standing in [list jurisdictions]. To such counsel's
knowledge, the Company does not own or control, directly or indirectly, any
corporation, association or other entity other than [list subsidiaries];
(iv) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus under the caption "Capitalization" as of
the dates stated therein. The issued and outstanding shares of capital stock
of the Company outstanding prior to the issuance of the Shares have been
duly and validly issued and are fully paid and nonassessable, and, to such
counsel's knowledge, will not have been issued in violation of or subject to
any preemptive right arising under the certificate of incorporation or
Delaware General Corporation Law, co-sale right, right of first refusal or
other similar right other than any registration rights described in
paragraph (xviii) below and any rights that have been duly waived;
(v) The Firm Shares or the Option Shares, as the case may be, to be
issued by the Company pursuant to the terms of this Agreement have been duly
authorized and, upon issuance and delivery against payment therefor in
accordance with the terms hereof, will be duly and validly issued and fully
paid and nonassessable, and will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration right, right of
first refusal or other similar right except for such rights that have been
duly waived.
(vi) The Company has the corporate power and authority to enter into this
Agreement and to issue, sell and deliver to the Underwriters the Shares to
be issued and sold by it hereunder;
(vii) This Agreement has been duly authorized by all necessary corporate
action on the part of the Company and has been duly executed and delivered
by the Company and, assuming (i) due authorization, execution and delivery
by you and (ii) compliance by all parties with applicable federal and state
securities laws, is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except that a
court may refuse to enforce or limit the application of this Agreement or
certain provisions hereof as unconscionable or contrary to public policy,
and as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting
creditors' rights
<PAGE>
generally or by general equitable principles (whether relief is sought in a
proceeding at law or in equity);
(viii) The Registration Statement has become effective under the Act and,
to such counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Securities Act;
(ix) The 8-A Registration Statement complied as to form in all material
respects with the requirements of the Exchange Act; the 8-A Registration
Statement has become effective under the Exchange Act; and the Firm Shares
or the Option Shares have been validly registered under the Securities Act
and the Rules and Regulations of the Exchange Act and the applicable rules
and regulations of the Commission thereunder;
(x) The Registration Statement and the Prospectus, and each amendment or
supplement thereto (other than the financial statements (including
supporting schedules) and financial data derived therefrom as to which such
counsel need express no opinion), as of the effective date of the
Registration Statement, complied as to form in all material respects with
the requirements of the Act and the applicable Rules and Regulations;
(xi) The information in the Prospectus under the caption "Description of
Capital Stock," to the extent that it constitutes matters of law or legal
conclusions, has been reviewed by such counsel and is a fair summary of such
matters and conclusions; and the forms of certificates evidencing the Common
Stock and filed as exhibits to the Registration Statement comply with
Delaware law;
(xii) The description in the Registration Statement and the Prospectus of
the charter and bylaws of the Company and of statutes are accurate and
fairly present the information required to be presented by the Securities
Act;
(xiii) To such counsel's knowledge, there are no agreements, contracts,
leases or documents to which the Company is a party of a character required
to be described or referred to in the Registration Statement or Prospectus
or to be filed as an exhibit to the Registration Statement which are not
described or referred to therein or filed as required;
(xiv) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's charter or
bylaws or (b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a default
under, any bond, debenture, note or other evidence of indebtedness, or any
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument known to such counsel to which the
Company is a party or by which its properties are bound, or any applicable
statute, rule or regulation known to such counsel or, to such counsel's
knowledge,
B-2
<PAGE>
any order, writ or decree specifically naming the Company of any
court, government or governmental agency or body having jurisdiction over
the Company , or over any of its properties or operations;
(xv) No consent, approval, authorization or order of or qualification with
any court, government or governmental agency or body having jurisdiction
over the Company, or over any of its properties or operations is necessary
in connection with the consummation by the Company of the transactions
herein contemplated, except (i) such as have been obtained under the
Securities Act and the Exchange Act, (ii) such as may be required under
state or other securities or Blue Sky laws in connection with the purchase
and the distribution of the Shares by the Underwriters, (iii) such as may be
required by the National Association of Securities Dealers, LLC and (iv)
such as may be required under the federal or provincial laws of Canada;
(xvi) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Company that are required to
be disclosed in the Registration Statement or the Prospectus by the
Securities Act, other than those described therein;
(xvii) To such counsel's knowledge, the Company is not presently (a) in
material violation of its charter or bylaws, or (b) in material breach of
any applicable statute, rule or regulation known to such counsel or any
order, writ or decree of any court or governmental agency or body having
jurisdiction over the Company , or over any of its properties or operations;
(xviii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Company Shares or other
securities of the Company have registration rights with respect to
securities of the Company and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company having
rights known to such counsel to registration of such shares of Company
Shares or other securities, because of the filing of the Registration
Statement by the Company have, with respect to the offering contemplated
thereby, waived such rights or such rights have expired by reason of lapse
of time following notification of the Company's intent to file the
Registration Statement or have included securities in the Registration
Statement pursuant to the exercise of and in full satisfaction of such
rights; and
(xix) The Company is not and, after giving effect to the offering and the
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
Such counsel's opinion shall also include a statement to the following
effect: In connection with the preparation of the Registration Statement and
the Prospectus, such counsel has participated in conferences with officers and
representatives of the Company, counsel for the Underwriters and the independent
accountants of the Company, at which conferences such counsel has made inquiries
of such persons and others and discussed the contents of the Registration
Statement and the Prospectus. While the limitations
B-3
<PAGE>
inherent in the independent verification of factual matters and the character of
determinations involved in the registration process are such that counsel does
not pass upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, subject to the foregoing and based on such
participation, inquiries and discussions, no facts have come to the attention of
such counsel which have caused such counsel to believe that the Registration
Statement, as of the effective date of the Registration Statement and at all
times subsequent thereto up to and on the date of such opinion (but after giving
effect to changes incorporated pursuant to Rule 430A under the Securities Act),
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading (except that such counsel need not express any
such view with respect to the financial statements, including the notes and
schedules thereto, or any other financial or accounting information) or that the
Prospectus, as of the date it was filed with the Commission and at all times
subsequent thereto up to and on the date of such opinion, contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading (except that such counsel need not express any
such view with respect to the financial statements, including the notes and
schedules thereto or any other financial or accounting information.)
B-4
<PAGE>
Exhibit C
Matters to be Covered in the Opinion of UK Counsel
(i) The Subsidiary has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation;
(ii) The Subsidiary has the corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus;
(iii) The Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in [list jurisdictions]. To such
counsel's knowledge, the Subsidiary does not own or control, directly or
indirectly, any corporation, association or other entity;
(iv) All issued and outstanding shares of capital stock of the Subsidiary
have been duly authorized and validly issued and are fully paid and
nonassessable, and, to such counsel's knowledge, have not been issued in
violation of or subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right except for such rights
that have been duly waived and are owned by the Company free and clear of
any pledge, lien, security interest, encumbrance, claim or equitable
interest;
(v) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Subsidiary's charter
or bylaws or (b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a default
under, any bond, debenture, note or other evidence of indebtedness, or any
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument known to such counsel to which the
Subsidiary is a party or by which its properties are bound, or any
applicable statute, rule or regulation known to such counsel or, to such
counsel's knowledge, any order, writ or decree specifically naming the
Subsidiary of any court, government or governmental agency or body having
jurisdiction over the Subsidiary, or over any of its properties or
operations;
(vi) No consent, approval, authorization or order of or qualification with
any court, government or governmental agency or body having jurisdiction
over the Subsidiary, or over any of its properties or operations is
necessary in connection with the consummation by the Company of the
transactions herein contemplated, except ___________________;
(vii) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Subsidiary; and
C-1
<PAGE>
(viii) To such counsel's knowledge, the Subsidiary is not presently (a) in
material violation of its charter or bylaws, or (b) in material breach of
any applicable statute, rule or regulation or any order, writ or decree of
any court or governmental agency or body having jurisdiction over the
Subsidiary, or over any of its properties or operations.
C-2
<PAGE>
Exhibit D
Matters to be Covered in the Opinion of Underwriters' Counsel
(i) The [Firm Shares] [Option Shares] have been duly authorized and, upon
issuance and delivery and payment therefor in accordance with the terms of
the Underwriting Agreement, will be validly issued, fully paid and non-
assessable.
(ii) The Registration Statement complied as to form in all material
respects with the requirements of the Act; the Registration Statement has
become effective under the Act and, to such counsel's knowledge, no stop
order proceedings with respect thereto have been instituted or threatened or
are pending under the Act.
(iii) The 8-A Registration Statement complied as to form in all material
respects with the requirements of the Exchange Act; the 8-A Registration
Statement has become effective under the Exchange Act; and the Firm Shares
or the Option Shares have been validly registered under the Securities Act
and the Rules and Regulations of the Exchange Act and the applicable rules
and regulations of the Commission thereunder;
(iv) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
Such counsel shall state that such counsel has reviewed the opinions
addressed to the Representatives fromHale and Dorr, LLP and
__________________________, each dated the date hereof, and furnished to you in
accordance with the provisions of the Underwriting Agreement. Such opinions
appear on their face to be appropriately responsive to the requirements of the
Underwriting Agreement.
In addition, such counsel shall state that such counsel has participated in
conferences with officials and other representatives of the Company, the
Representatives, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not verified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the First Closing Date or Second Closing Date, as the case may be, the
Registration Statement and any amendment or supplement thereto (other than the
financial statements including supporting schedules and other financial and
statistical information derived therefrom, as to which such counsel need express
no comment) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the First Closing Date or the Second
Closing Date, as the case may be, the Registration Statement, the Prospectus and
any amendment or supplement thereto (except as aforesaid) contained any untrue
statement of a material fact or omitted to state
<PAGE>
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PRIME RESPONSE GROUP INC.
PRIME RESPONSE GROUP Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"General Corporation Law"),
DOES HEREBY CERTIFY:
FIRST: That the Corporation was originally incorporated in Delaware
under the name PRIME RESPONSE GROUP Inc. and the date of its filing of its
original Certificate of Incorporation with the Secretary of State of the State
of Delaware was September 26, 1997.
SECOND: That the Board of Directors fully adopted resolutions
proposing to amend and restate the Certificate of Incorporation of the
Corporation, declaring said amendment and restatement to be advisable and in the
best interests of the Corporation and its stockholders, and authorizing the
appropriate officers of the Corporation to solicit the consent of the
stockholders of the issued and outstanding Common Stock, par value $.01 per
share (the "Common Stock"), Series A Convertible Participating Preferred Stock,
par value $.01 per share (the "Series A Preferred Stock"), Series B Convertible
Participating Preferred Stock, par value $.01 per share (the "Series B Preferred
Stock") and Series C Convertible Preferred Stock, par value $.01 per share (the
"Series C Preferred Stock"), in accordance with the applicable provisions of
Sections 228, 242 and 245 of the General Corporation Law;
THIRD: That the resolution setting forth the proposed amendment and
restatement is as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended and restated in its entirety as follows:
<PAGE>
2
ARTICLE I
NAME
The name of the corporation is PRIME RESPONSE GROUP Inc. (the
"Corporation").
ARTICLE II
REGISTERED OFFICE
The address of the Corporation's registered office is
1209 Orange Street, in the City of Wilmington, County of New Castle, State of
Delaware; and its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
POWERS
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law.
ARTICLE IV
CAPITAL STOCK
The Corporation is authorized to issue two classes of stock to be
designated respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is Forty-Five Million
(45,000,000) shares. Thirty-Seven Million (37,000,000) shares shall be
designated as Common Stock, par value $.01 per share (the "Common Stock"), and
Eight Million (8,000,000) shares shall be designated as Preferred Stock, par
value $.01 per share (the "Preferred Stock").
The Preferred Stock shall be divided into three series. The first
series shall consist of One Million One Hundred Fifty-Five Thousand (1, 155,000)
shares designated as Series A Convertible Participating Preferred Stock having
the powers, designations, preferences and rights set forth in Article IV(B)
below (the "Series A Preferred Stock"), the second series shall consist of One
Million Seven Hundred Thousand (1,700,000) shares designated as Series B
Convertible Participating Preferred Stock having the powers, designations,
preferences and rights set forth in Article IV(B) below (the "Series B Preferred
Stock"), the third series shall consist of Three Million (3,000,000) shares
designated as Series C Convertible Participating Preferred Stock having the
powers, designations, preferences and rights set forth in
<PAGE>
3
Article IV(B) below (the "Series C Preferred Stock"), and the remaining Two
Million One Hundred Forty-Five Thousand (2,145,000) shares of Preferred Stock
shall be undesignated as of the date hereof (the "Undesignated Preferred Stock")
and may be designated with powers, preferences and rights in accordance with
Article IV(B) below.
All references in this Article IV to Sections hereof shall be
references to Sections of Article IV(B), unless otherwise stated or required by
the context. The designation, relative rights, preferences and limitations of
the shares of each class and series are as follows:
A. Common Stock.
------------
1. Rank. The Common Stock shall, with respect to the distribution
----
of assets and rights upon a Liquidation, Merger or Sale rank junior to (a) the
Series A Preferred Stock, (b) the Series B Preferred Stock, (c) the Series C
Preferred Stock and (d) all classes or series of Capital Stock of the Company
hereafter created which rank senior to the Common Stock.
2. Dividends. The holders of Common Stock shall be entitled to
---------
receive dividends, if any, out of funds legally available therefor only at such
times and in such amounts as the Board of Directors may determine in its sole
discretion.
3. Voting Rights. The holder of each share of Common Stock shall be
-------------
entitled to one vote for each such share as determined on the record date for
the vote or consent of stockholders and shall vote together with the holders of
the Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock as a single class upon any items submitted to a vote of
stockholders, except to the extent that the Series A Preferred Stock, the Series
B Preferred Stock and/or the Series C Preferred Stock is entitled to vote as a
separate class under the General Corporation Law or as otherwise provided
herein.
B. Preferred Stock.
---------------
1. Undesignated Preferred Stock. Shares of Undesignated Preferred
----------------------------
Stock may be issued from time to time in one or more series of any number of
shares, provided that the aggregate number of such shares of Preferred Stock
issued and not cancelled of any and all such series shall not exceed the total
number of such shares of Preferred Stock hereinabove authorized, and with
distinctive serial designations, all as shall hereafter be stated and expressed
in the resolution or resolutions providing for the issue of such shares of
Preferred Stock from time to time adopted by the Board of Directors pursuant to
authority so to do which is hereby vested in the Board of Directors. Each
series of shares of Preferred Stock may have such voting powers, full or
limited, or may be without voting power and may have such powers, designations
and preferences, and such relative, participating, optional or other special
rights, and such qualifications, limitations or restrictions as shall be
<PAGE>
4
stated in said resolution or resolutions providing for the issuance of such
shares of Preferred Stock and as may be permitted by the General Corporation
Law. Any of the voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of any such series of Preferred
Stock may be made dependent upon facts ascertainable outside of the resolution
or resolutions providing for the issue of such Preferred Stock adopted by the
Board of Directors pursuant to the authority vested in it by this Article
IV(B)(1), provided that the manner in which such facts shall operate upon the
voting powers, designations, preferences, rights and qualifications, limitations
or restrictions of such series of Preferred Stock is clearly and expressly set
forth in the resolution or resolutions providing for the issuance of such
Preferred Stock. The term "facts" as used in the next preceding sentence shall
have the meaning given to it in Section 151(a) of the General Corporation Law.
Shares of Preferred Stock of any series that have been redeemed (whether through
the operation of a sinking fund or otherwise) or that if convertible or
exchangeable, have been converted into or exchanged for shares of any other
class or classes shall have the status of authorized and unissued shares of
Preferred Stock of the same series and may be reissued as a part of the series
of which they were originally a part or may be reclassified and reissued as part
of a new series of shares of Preferred Stock to be created by resolution or
resolutions of the Board of Directors or as part of any other series of shares
of Preferred Stock, all subject to the conditions or restrictions on issuance
set forth in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of a series of shares of Preferred Stock.
2. Rank.
----
(a) With respect to distributions of assets and rights upon the
occurrence of a Liquidation, the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock shall rank (a) pari passu with
---- -----
each other and (b) senior to (i) all classes of common stock of the Corporation
(including, without limitation, the Common Stock) and (ii) each other class or
series of Capital Stock of the Corporation hereafter created which does not
expressly rank pari passu with or senior to the Series A Preferred Stock, the
---- -----
Series B Preferred Stock and the Series C Preferred Stock (the "Junior Stock").
(b) With respect to payment of the Automatic Conversion Payment
upon the occurrence of a Sale, a Merger or the Initial Public Offering, the
Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock shall rank pari passu with each other and senior to the Junior
---- -----
Stock.
3. Dividends.
---------
(a) Series A Preferred Stock and Series B Preferred Stock. The
-----------------------------------------------------
holders of shares of Series A Preferred Stock shall be entitled to receive, out
of funds legally available therefor, dividends at an annual rate equal to 8% of
the Series A Liquidation Preference, and the holders of shares of Series B
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, dividends at
<PAGE>
5
an annual rate equal to 8% of the Series B Liquidation Preference, in each case
calculated on the basis of a 360-day year, consisting of twelve 30-day months,
and shall accrue on a daily basis from the date of issuance thereof, whether or
not declared. The Series A Preferred Stock and the Series B Preferred Stock
shall rank pari passu with respect to such dividends and such dividends shall be
---- -----
paid to the holders of the Series A Preferred Stock and the holders of the
Series B Preferred Stock on a pro rata basis. All accrued and unpaid dividends
shall, to the extent funds are legally available therefor, be mandatorily paid
immediately prior to the earlier to occur of (i) a Liquidation, (ii) an optional
conversion of shares of Series A Preferred Stock pursuant to Section 7(a) below,
(iii) an optional conversion of shares of Series B Preferred Stock pursuant to
Section 7(a) below and (iv) an automatic conversion of shares of Series A
Preferred Stock and shares of Series B Preferred Stock pursuant to Section 7(b)
below (the "Dividend Payment Date"). On the Dividend Payment Date, all accrued
dividends shall be paid, (x) in the case of a Liquidation, in cash, (y) in the
case of the Initial Public Offering, in shares of Common Stock, and (z) in the
case of a Merger, Sale or optional conversion of shares of Series A Preferred
Stock or Series B Preferred Stock, as the case may be, pursuant to Section 7(a)
below, in shares of Common Stock or in cash, as determined by the Board of
Directors in the exercise of their fiduciary duties. If dividends are to be
paid in shares of Common Stock pursuant to the preceding sentence, the value of
such shares shall be determined, (A) in the case of the Initial Public Offering,
Merger (other than as set forth in clause (B), below) or Sale, by the net per
share price paid for shares of Common Stock in such Initial Public Offering,
Merger or Sale or (B) in the case of a Merger in which no per share price is
paid for shares of Common Stock or in the case of an optional conversion of
shares of Series A Preferred Stock or Series B Preferred Stock, as the case may
be, pursuant to Section 7(a) below, mutually by the Board of Directors and the
holders of a majority of the shares of Series A Preferred Stock or a majority of
the shares of Series B Preferred Stock, as the case may be, or, if the Board of
Directors and the holders of a majority of the shares of Series A Preferred
Stock or a majority of the shares of Series B Preferred Stock, as the case may
be, shall fail to agree, at the Corporation's expense by an appraiser chosen by
the Board of Directors and reasonably acceptable to the holders of a majority of
the shares of Series A Preferred Stock or a majority of the shares of Series B
Preferred Stock, as the case may be.
(b) Series C Preferred Stock. The holders of shares of Series C
------------------------
Preferred Stock shall not be entitled to receive dividends except in accordance
with this Section 3. If the Corporation declares and pays dividends or
distributions on the Common Stock, then, in that event, the holders of shares of
Series C Preferred Stock shall be entitled to share in such dividends on a pro
rata basis, as if their shares had been converted into shares of Common Stock
pursuant to Section 7(a) immediately prior to the record date for determining
the stockholders of the Corporation eligible to receive such dividends.
<PAGE>
6
4. Liquidation Preference.
----------------------
(a) Priority Payment. Upon the occurrence of a Liquidation, (i)
----------------
the holders of shares of Series A Preferred Stock shall be entitled to be paid
for each share of Series A Preferred Stock held thereby out of, but only to the
extent of, the assets of the Corporation legally available for distribution to
its stockholders, an amount equal to $20.52 (the "Series A Liquidation
Preference") plus, as provided in Section 3(a) above, all accrued and unpaid
dividends, if any, with respect to each share of Series A Preferred Stock, (ii)
the holders of shares of Series B Preferred Stock shall be entitled to be paid
for each share of Series B Preferred Stock held thereby, out of, but only to the
extent of, the assets of the Corporation legally available for distribution to
its stockholders, an amount equal to $6.00 (the "Series B Liquidation
Preference") plus, as provided in Section 3(a) above, all accrued and unpaid
dividends, if any, with respect to each share of Series B Preferred Stock, and
(iii) the holders of shares of Series C Preferred Stock shall be entitled to be
paid for each share of Series C Preferred Stock held thereby out of, but only to
the extent of, the assets of the Corporation legally available for distribution
to its stockholders, an amount equal to $3.00 (the "Series C Liquidation
Preference") plus, as provided in Section 3(b) above, all accrued and unpaid
dividends, if any, with respect to each share of Series C Preferred Stock, in
each case before any payment or distribution is made to any Junior Stock. Such
payment of the Series A Liquidation Preference, the Series B Liquidation
Preference and the Series C Liquidation Preference to the holders of the shares
of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock, respectively, shall be made pro rata. If the assets of the Corporation
available for distribution to the holders of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall be insufficient to permit
payment in full to such holders of the sums which such holders are entitled to
receive in such case, then all of the assets available for distribution to
holders of the Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock shall be distributed among and paid to such holders
ratably in proportion to the amounts that would be payable to such holders if
such assets were sufficient to permit payment in full.
(b) Participating Payment. Upon the completion of the
---------------------
distribution required by Section 4(a) above and any other distribution to any
other class or series of Capital Stock of the Corporation ranking senior to the
Common Stock, if assets remain in the Corporation, the remaining assets of the
Corporation available for distribution to stockholders shall be distributed
among the holders of the Series A Preferred Stock, the holders of the Series B
Preferred Stock, the holders of Series C Preferred Stock, the holders of any
other series of Preferred Stock entitled to this participating payment and the
holders of Common Stock pro rata based on the number of shares of Common Stock
held by each (assuming the conversion of all such Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock in accordance with Section
7(a) and the conversion of all such other Preferred Stock).
<PAGE>
7
(c) Notice. Written notice of a Liquidation stating a payment or
------
payments and the place where such payment or payments shall be payable, shall be
delivered in person, mailed by certified mail, return receipt requested, mailed
by overnight mail or sent by telecopier, not less than ten (10) days prior to
the earliest payment date stated therein, to the holders of record of each of
the Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock, such notice to be addressed to each such holder at its address
as shown by the records of the Corporation.
5. Redemption. The shares of Series A Preferred Stock, Series B
----------
Preferred Stock and Series C Preferred Stock shall not be redeemed or subject to
redemption, whether at the option of the Corporation or any holder thereof, or
otherwise.
6. Voting Rights.
-------------
(a) The holders of Series A Preferred Stock, the holders of
Series B Preferred Stock and the holders of Series C Preferred Stock, except as
otherwise required under Delaware law or as set forth in subsections (b) and (c)
below, shall not be entitled or permitted to vote on any matter required or
permitted to be voted upon by the stockholders of the Corporation.
(b) Each outstanding share of Series A Preferred Stock, each
outstanding share of Series B Preferred Stock and each outstanding share of
Series C Preferred Stock shall entitle the holder thereof to vote, in person or
by proxy, at a special or annual meeting of stockholders, on all matters
entitled to be voted on by holders of Common Stock voting together as a single
class with the Common Stock (and with other shares entitled to vote thereon, if
any). With respect to any such vote, each share of Series A Preferred Stock,
each share of Series B Preferred Stork and each share of Series C Preferred
Stock shall entitle the holder thereof to cast that number of votes per share as
is equal to the number of votes that such holder would be entitled to cast had
such holder converted its shares of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock, as the case may be, into shares of Common
Stock pursuant to Section 7(a) on the record date for determining the
stockholders of the Corporation eligible to vote on any such matters.
(c) If General Atlantic Partners 42, L.P., GAP Coinvestment
Partners, L.P. and/or any Affiliate thereof in the aggregate own (i) both (x) at
least a majority of the outstanding shares of Series A Preferred Stock and (y)
shares of Common Stock and/or Series A Preferred Stock or other securities of
the Corporation convertible into or exchangeable for shares of Common Stock that
represent (after giving effect to any adjustments) at least 10% of the total
number of shares of Common Stock outstanding on an as converted basis, then the
holders of the Series A Preferred Stock, voting as a separate class, shall be
entitled to elect two directors of the Corporation or (ii) both (x) at least a
majority of the outstanding shares of Series A Preferred Stock and (y) shares of
Common Stock and/or Series A Preferred
<PAGE>
8
Stock or other securities of the Corporation convertible into or exchangeable
for shares of Common Stock that represent (after giving effect to any
adjustments) less than 10 % but at least 5 % of the total number of shares of
Common Stock outstanding on an as converted basis, then the holders of the
Series A Preferred Stock, voting as a separate class, shall be entitled to elect
one director of the Corporation. The Series A Preferred Stock shall vote
together as a single class with the Common Stock (and all other classes and
series of stock of the Corporation entitled to vote thereon, if any) with
respect to the election of all of the other directors of the Corporation. If
the conditions set forth in the first sentence of this Section 6(c) necessary
for the holders of the Series A Preferred Stock to vote as a separate class for
the election of directors are not satisfied, the Series A Preferred Stock shall
vote together as a single class with the Common Stock (and all other classes and
series of stock of the Corporation entitled to vote thereon, if any) with
respect to the election of all of the directors of the Corporation elected by
such holders. At any meeting held for the purpose of electing directors at a
time when the Series A Preferred Stock is entitled to vote as a separate class
for the election of directors, the presence in person or by proxy of the holders
of a majority of the shares of Series A Preferred Stock then outstanding shall
constitute a quorum of the Series A Preferred Stock for the election of the
directors to be elected solely by the holders of the Series A Preferred Stock;
the holders of Series A Preferred Stock shall be entitled to cast one vote per
share of Series A Preferred Stock in any such election; and the directors to be
elected exclusively by the holders of Series A Preferred Stock shall be elected
by the affirmative vote of the holders of a majority of the outstanding shares
of Series A Preferred Stock. A vacancy in a directorship filled by the holders
of the Series A Preferred Stock voting as a separate class pursuant to this
Section 6(c) shall be filled only by vote or written consent of the holders of
the Series A Preferred Stock.
7. Conversion.
----------
(a) Optional Conversion. Any holder of Series A Preferred Stock,
-------------------
any holder of Series B Preferred Stock and any holder of Series C Preferred
Stock shall have the right, at its option, at any time and from time to time, to
convert, subject to the terms and provisions of this Section 7, (i) any or all
of such holder's shares of Series A Preferred Stock into such number of fully
paid and non-assessable shares of Common Stock as is equal to the product of the
number of shares of Series A Preferred Stock being so converted multiplied by
the quotient of (x) $20.52 divided by (y) the conversion price of $4.919774352
per share, subject to adjustment as provided in Section 7(d) (such price, the
"Series A Conversion Price"), (ii) any or all of such holder's shares of Series
B Preferred Stock into such number of fully paid and non-assessable shares of
Common Stock as is equal to the product of the number of shares of Series B
Preferred Stock being so converted multiplied by the quotient of (x) $6.00
divided by (y) the conversion price of $5.726289107 per share, subject to
adjustment as provided in Section 7(d) (such price, the "Series B Conversion
Price") and (iii) any or all of such holder's shares of Series C Preferred Stock
into such number of fully paid and non-assessable shares of Common Stock as is
equal to the product of the number of shares of Series C Preferred Stock being
so
<PAGE>
9
converted multiplied by the quotient of (x) $3.00 divided by (y) the conversion
price of $3.00 per share, subject to adjustment as provided in Section 7(d)
(such price, the "Series C Conversion Price"). Such conversion right shall be
exercised by the surrender of certificate(s) representing the shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as the
case may be, to be converted to the Corporation at any time during usual
business hours at its principal place of business to be maintained by it (or
such other office or agency of the Corporation as the Corporation may designate
by notice in writing to the holders of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock), accompanied by written notice
that the holder elects to convert such shares of Series A Preferred Stock, such
shares of Series B Preferred Stock or such shares of Series C Preferred Stock,
as the case may be, and specifying the name or names (with address) in which a
certificate or certificates for shares of Common Stock are to be issued and (if
so required by the Corporation) by a written instrument or instruments of
transfer in form reasonably satisfactory to the Corporation duly executed by the
holder or its duly authorized legal representative and transfer tax stamps or
funds therefor, if required pursuant to Section 7(j). All certificates
representing shares of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock, as the case may be, surrendered for conversion shall
be delivered to the Corporation for cancellation and canceled by it. As
promptly as practicable after the surrender of any shares of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock, as the case may be,
the Corporation shall (subject to compliance with the applicable provisions of
federal and state securities laws) deliver to the holder of such shares so
surrendered certificate(s) representing the number of fully paid and
nonassessable shares of Common Stock into which such shares are entitled to be
converted and, to the extent funds are legally available therefor, an amount
equal to the accrued and unpaid dividends payable with respect to such shares in
accordance with Section 3(a) or Section 3(b) above, as the case may be. At the
time of the surrender of such certificate(s), the Person in whose name any
certificate(s) for shares of Common Stock shall be issuable upon such conversion
shall be deemed to be the holder of record of such shares of Common Stock on
such date, notwithstanding that the share register of the Corporation shall then
be closed or that the certificates representing such Common Stock shall not then
be actually delivered to such Person.
(b) Automatic Conversion. Immediately prior to the closing of
--------------------
the initial Public Offering, a Merger or a Sale, each outstanding share of
Series A Preferred Stock, each outstanding share of Series B Preferred Stock and
each outstanding share of Series C Preferred Stock shall be automatically
converted, with no further action required to be taken by the Corporation or the
holder thereof, into the following:
(i) The Automatic Conversion Payment; and
(ii) The Equity Percentage.
<PAGE>
10
Such Automatic Conversion Payment shall be in addition to and not in
lieu of dividends payable in accordance with Section 3 above and shall be
payable, to the extent funds are legally available therefor, (x) in the case of
the Initial Public Offering, in shares of Common Stock or (y) in the case of a
Merger or a Sale, in cash or, at the option of the Corporation, in securities of
the Corporation or the surviving Person (in the case of a Merger) or other
consideration received by the holders of shares of the Common Stock. If the
Automatic Conversion Payment is to be paid in shares of Common Stock, the value
of such shares of Common Stock shall be determined as provided in the last
sentence of Section 3(a) above. Any securities of the surviving Person or
securities of the Corporation other than Common Stock otherwise to be delivered
to the holders of Series A Preferred Stock, the holders of the Series B
Preferred Stock and the holders of Series C Preferred Stock pursuant to this
Section 7(b) shall be valued as follows:
(i) With respect to securities that do not constitute
"restricted securities," as such term is defined in Rule 144(a)(3) promulgated
under the Securities Act, the value shall be deemed to be the Current Market
Price of such securities as of three days prior to the date of distribution.
(ii) With respect to securities that constitute "restricted
securities, " as such term is defined in Rule 144(a)(3) promulgated under the
Securities Act, and that are of the same class or series as securities that are
publicly traded, the value shall be adjusted to make an appropriate discount
from the value as set forth above in clause (i) to reflect the appropriate fair
market value thereof, as mutually determined by the Board of Directors and the
holders of a majority of the shares of Series A Preferred Stock, the holders of
a majority of the shares of Series B Preferred Stock or the holders of a
majority of the shares of Series C Preferred Stock, as the case may be, or if
there is no active public market with respect to such class or series of
securities, such securities shall be valued in accordance with clause (i) above,
giving appropriate weight, if any, to such restriction as mutually determined by
the Board of Directors and the holders of a majority of the shares of Series A
Preferred Stock, the holders of a majority of the shares of Series B Preferred
Stock or the holders of a majority of the shares of Series C Preferred Stock, as
the case may be, or if the Board of Directors and the holders of a majority of
the shares of Series A Preferred Stock, the holders of a majority of the shares
of Series B Preferred Stock or the holders of a majority of the shares of Series
C Preferred Stock, as the case may be, shall fail to agree, at the Corporation's
expense by an appraiser chosen by the Board of Directors and reasonably
acceptable to the holders of a majority of the shares of Series A Preferred
Stock, the holders of a majority of the shares of Series B preferred Stock or
the holders of a majority of the shares of Series C Preferred Stock, as the case
may be.
If the Automatic Conversion Payment is to be paid in other
consideration received by holders of shares of the Common Stock, the value of
such other consideration shall be mutually determined by the Board of Directors
and the holders of a majority of the shares of Series A Preferred Stock, the
holders of a
<PAGE>
11
majority of the shares of Series B Preferred Stock or the holders of a majority
of the shares of Series C Preferred Stock, as the case may be, or, if the Board
of Directors and the holders of a majority of the shares of Series A Preferred
Stock, the holders of a majority of the shares of Series B Preferred Stock or
the holders of a majority of the shares of Series C Preferred Stock, as the case
may be, shall fail to agree, at the Corporation's expense by an appraiser chosen
by the Board of Directors and reasonably acceptable to the holders of a majority
of the shares of Series A Preferred Stock, the holders of a majority of the
shares of Series B Preferred Stock or the holders of a majority of the shares of
Series C Preferred Stock, as the case may be.
Immediately upon conversion as provided herein, each holder of Series
A Preferred Stock, each holder of Series B Preferred Stock and each holder of
Series C Preferred Stock shall be deemed to be the holder of record of the
Common Stock issuable upon conversion of such holder's Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, as the case may be,
notwithstanding that the share register of the Corporation shall then be closed
or that certificates representing the Common Stock shall not then actually be
delivered to such Person. Upon notice from the Corporation, each holder of
Series A Preferred Stock, each holder of Series B Preferred Stock and each
holder of Series C Preferred Stock so converted shall promptly surrender to the
Corporation at its principal place of business to be maintained by it (or at
such other office or agency of the Corporation as the Corporation may designate
by such notice to the holders of Series A Preferred Stork, Series B Preferred
Stock and Series C Preferred Stock) certificates representing the shares so
converted.
(c) Termination of Rights. On the date of such optional
---------------------
conversion pursuant to Section 7(a) above or of such automatic conversion
pursuant to Section 7(b) above, all rights with respect to the shares of Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock so
converted, including the rights, if any, to receive notices and vote, shall
terminate, except only the rights of holders thereof to (i) receive certificates
for the number of shares of Common Stock into which such shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as the
case may be, have been converted, (ii) receive the Automatic Conversion Payment
in the case of an automatic conversion pursuant to Section 7(b) above, (iii) the
payment of dividends pursuant to Section 3 above and (iv) exercise the rights to
which they are entitled as holders of Common Stock.
(d) Anti-dilution Adjustments. The Series A Conversion Price,
-------------------------
the Series B Conversion Price and the Series C Conversion Price and the number
and type of securities to be received upon conversion of the Series A Preferred
Stock, the Series B Preferred Stock and the Series C Preferred Stock, shall be
subject to adjustment as follows:
(i) Dividend, Subdivision, Combination or Reclassification
--------------------------------------------------------
of Common Stock. In the event that the Corporation shall at any time or from
- ---------------
time to time, prior to conversion of the Series A Preferred Stock, the
<PAGE>
12
Series B Preferred Stock and the Series C Preferred Stock, as the case may be,
(w) pay a dividend or make a distribution (other than a dividend or distribution
paid or made to holders of shares of Series A Preferred Stock, the holders of
shares of Series B Preferred Stock and the holders of shares of Series C
Preferred Stock, or in which holders of such shares participate, in the manner
provided in Section 3 hereof) on the outstanding shares of Common Stock payable
in Capital Stock, (x) subdivide the outstanding shares of Common Stock into a
larger number of shares, (y) combine the outstanding shares of Common Stock into
a smaller number of shares or (z) issue any shares of its Capital Stock in a
reclassification of the Common Stock (other than any such event for which an
adjustment is made pursuant to another clause of this Section 7(d)), then, and
in each such case, the Series A Conversion Price, the Series B Conversion Price
and the Series C Conversion Price in effect immediately prior to such event
shall be adjusted (and any other appropriate actions shall be taken by the
Corporation) so that the holder of any share of Series A Preferred Stock, the
holder of any share of Series B Preferred Stock and the holder of any share of
Series C Preferred Stock, respectively, thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock or other
securities of the Corporation that such holder would have owned or would have
been entitled to receive upon or by reason of any of the events described above,
had such share of Series A Preferred Stock, such share of Series B Preferred
Stock and such share of Series C Preferred Stock been converted immediately
prior to the occurrence of such event. An adjustment made pursuant to this
Section 7(d)(i) shall become effective retroactively (x) in the case of any such
dividend or distribution, to a date immediately following the close of business
on the record date for the determination of holders of Common Stock entitled to
receive such dividend or distribution or (y) in the case of any such
subdivision, combination or reclassification, to the close of business on the
day upon which such corporate action becomes effective.
(ii) Issuance of Rights to Purchase Common Stock below
-------------------------------------------------
Conversion Price. If the Corporation shall at any time or from time to time
- ----------------
prior to conversion of the Series A Preferred Stock, the Series B Preferred
Stock and the Series C Preferred Stock, issue or sell any shares of Common Stock
or Common Stock Equivalents at a price per share (the "New Issue Price") of
Common Stock that is less than the Series A Conversion Price, the Series B
Conversion Price or the Series C Conversion Price then in effect as of the
record date or Issue Date referred to in the following sentence, as the case may
be (the "Relevant Date") (treating the price per share of Common Stock, in the
case of the issuance of any Common Stock Equivalent, as equal to (x) the sum of
the price for such Common Stock Equivalent plus any additional consideration
payable (without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such Common Stock Equivalent divided by (y) the number
of shares of Common Stock initially underlying such Common Stock Equivalent),
other than (A) issuances or sales for which an adjustment is made pursuant to
another paragraph of this Section 7(d) and (B) issuances of Common Stock in
connection with an Excluded Transaction, then, and in each Such case, to the
----
extent that such Series A Conversion Price, Series B Conversion Price or Series
C Conversion Price is less than the New Issue Price, such
<PAGE>
13
Series A Conversion Price, Series B Conversion Price and/or Series C Conversion
Price, as the case may be, then in effect shall be adjusted by multiplying such
-----------
Series A Conversion Price, Series B Conversion Price or Series C Conversion
Price, as the case may be, in effect on the day immediately prior to the
Relevant Date by a fraction (I) the numerator of which shall be the sum of the
number of shares of Common Stock outstanding on the Relevant Date plus the
----
number of shares of Common Stock which the aggregate consideration received by
the Corporation for the total number of such additional shares of Common Stock
so issued would purchase at such Series A Conversion Price, Series B Conversion
Price or Series C Conversion Price, as the case may be, on the Relevant Date
(or, in the case of Common Stock Equivalents, the number of shares of Common
Stock into which such Common Stock Equivalents may convert, exchange or be
exercised plus the number of shares of Common Stock which the aggregate amount
of any additional consideration initially payable upon conversion, exchange or
exercise of such Common Stock Equivalents would purchase at such Series A
Conversion Price, Series B Conversion Price or Series C Conversion Price, as the
case may be, on the Relevant Date) and (II) the denominator of which shall be
the sum of the number of shares of Common Stock outstanding on the Relevant Date
plus the number of additional shares of Common Stock issued or to be issued (or,
- ----
in the case of Common Stock Equivalents, the maximum number of shares of Common
Stock into which such Common Stock Equivalents initially may convert, exchange
or be exercised). Such adjustment shall be made whenever such shares of Common
Stock or Common Stock Equivalents are issued, and shall become effective
retroactively (x) in the case of an issuance to the stockholders of the
Corporation, as such, to a date immediately following the close of business on
the record date for the determination of stockholders entitled to receive such
shares of Common Stock or Common Stock Equivalents and (y) in all other cases,
on the date (the "Issue Date") of such issuance; provided, however, that if any
-------- -------
Common Stock Equivalents (or any portions thereof) which shall have given rise
to an adjustment pursuant to this Section 7(d)(ii) shall have expired or
terminated without the exercise thereof and/or if by reason of the terms of such
Common Stock Equivalents there shall have been an increase or increases, with
the passage of time or otherwise, in the price payable upon the exercise or
conversion thereof, then such Series A Conversion Price, Series B Conversion
Price or Series C Conversion Price, as the case may be, hereunder shall be
readjusted (but to no greater extent than originally adjusted) in order to (A)
eliminate from the computation any additional shares of Common Stock
corresponding to such Common Stock Equivalents as shall have expired or
terminated, (B) treat the additional shares of Common Stock, if any, actually
issued or issuable pursuant to the previous exercise of such Common Stock
Equivalents as having been issued for the consideration actually received and
receivable therefor and (C) treat any of such Common Stock Equivalents which
remain outstanding as being subject to exercise or conversion on the basis of
such exercise or conversion price as shall be in effect at the time.
(iii) Certain Distributions. In case the Corporation
---------------------
shall at any time or from time to time, prior to conversion of the Series A
Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock,
distribute to all holders
<PAGE>
14
of shares of the Common Stock (including any such distribution made in
connection with a merger or consolidation in which the Corporation is the
resulting or surviving Person and the Common Stock is not changed or exchanged)
cash, evidences of indebtedness of the Corporation or another issuer, securities
of the Corporation or another issuer or other assets (excluding dividends or
distributions paid or made to holders of shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock, or in which holders of
such shares participate, in the manner provided in Section 3 hereof, dividends
payable in shares of Common Stock for which adjustment is made under another
paragraph of this Section 7(d) and any distribution in connection with an
Excluded Transaction) or rights or warrants to subscribe for or purchase
securities of the Corporation (excluding those distributions in respect of which
an adjustment in such Series A Conversion Price, Series B Conversion Price and
Series C Conversion Price is made pursuant to another paragraph of this Section
7(d) and any distribution in connection with an Excluded Transaction), then, and
in each such case, the Series A Conversion Price, the Series B Conversion Price
and the Series C Conversion Price then in effect shall be adjusted (and any
other appropriate actions shall be taken by the Corporation) by multiplying such
Series A Conversion Price, Series B Conversion Price and Series C Conversion
Price in effect immediately prior to the date of such distribution by a fraction
(x) the numerator of which shall be the Current Market Price of the Common Stock
immediately prior to the date of distribution less the then fair market value
(as determined by the Board of Directors in the exercise of their fiduciary
duties) of the portion of the cash, evidences of indebtedness, securities or
other assets so distributed or of such rights or warrants applicable to one
share of Common Stock and (y) the denominator of which shall be the Current
Market Price of the Common Stock immediately prior to the date of distribution
(but such fraction shall not be greater than one); provided, however, that no
-------- -------
adjustment shall be made with respect to any distribution of rights or warrants
to subscribe for or purchase securities of the Corporation if the holder of
shares of Series A Preferred Stock, the holder of shares of Series B Preferred
Stock and the holder of shares of Series C Preferred Stock, as the case may be,
would otherwise be entitled to receive such rights or warrants upon conversion
at any time of such shares of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock into Common Stock. Such adjustment shall be made
whenever any such distribution is made and shall become effective retroactively
to a date immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iv) Other Changes. In case the Corporation at any time or
-------------
from time to time, prior to the conversion of the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock, shall take any action
affecting its Common Stock similar to or having an effect similar to any of the
actions described in any of Sections 7(d)(i) through (iii) or Section 7(g) (but
not including any action described in any such Section) and the Board of
Directors in good faith determines that it would be equitable in the
circumstances to adjust the Series A Conversion Price, Series B Conversion Price
and/or the Series C Conversion Price as a result of such action, then, and in
each such case, the Series A Conversion Price,
<PAGE>
15
Series B Conversion Price and/or the Series C Conversion Price shall be adjusted
in such manner and at such time as the Board of Directors in good faith
determines would be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
holders of the shares of Series A Preferred Stock, the holders of shares of
Series B Preferred Stock and the holders of shares of Series C Preferred Stock).
(v) De Minimis Adjustments. Notwithstanding anything
----------------------
herein to the contrary, no adjustment under this Section 7(d) need be made to
the Series A Conversion Price, the Series B Conversion Price or the Series C
Conversion Price, as the case may be, (A) if the Corporation receives written
notice from holders of all of the outstanding shares of Series A Preferred
Stock, all of the outstanding shares of Series B Preferred Stock or all of the
outstanding shares of Series C Preferred Stock, as the case may be, that no such
adjustment is required or (B) unless such adjustment would require an increase
or decrease of at least 1% of the Series A Conversion Price, the Series B
Conversion Price, or the Series C Conversion Price, as the case may be, then in
effect. Any lesser adjustment shall be carried forward and shall be made at the
time of and together with the next subsequent adjustment which, together with
any adjustment or adjustments so carried forward, shall amount to an increase or
decrease of at least 1 % of such Series A Conversion Price, such Series B
Conversion Price or such Series C Conversion Price, as the case may be. Any
adjustment to the Series A Conversion Price, the Series B Conversion Price or
the Series C Conversion Price, as the case may be, carried forward and not
theretofore made shall be made immediately prior to the conversion of any shares
of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock, as the case may be, pursuant hereto.
(e) Abandonment. If the Corporation shall take a record of the
-----------
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then no adjustment in the Series A Conversion Price, the Series
B Conversion Price or the Series C Conversion Price shall be required by reason
of the taking of such record.
(f) Certificate as to Adjustments. Upon any increase or
-----------------------------
decrease in the Series A Conversion Price, the Series B Conversion Price or the
Series C Conversion Price, the Corporation shall within a reasonable period (not
to exceed 45 days) following any of the foregoing transactions deliver to each
registered holder of Series A Preferred Stock, each registered holder of Series
B Preferred Stock and each registered holder of Series C Preferred Stock a
certificate, signed by (i) the President or a Vice President of the Corporation
and (ii) the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Series A
<PAGE>
16
Conversion Price, Series B Conversion Price and/or Series C Conversion Price
then in effect following such adjustment.
(g) Reorganization, Reclassification. In case of any capital
--------------------------------
reorganization or reclassification or other change of outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value), the Corporation shall execute and
deliver to each holder of Series A Preferred Stock, each holder of Series B
Preferred Stock and each holder of Series C Preferred Stock at least ten (10)
Business Days prior to effecting such reorganization or reclassification a
certificate stating that the holder of each share of Series A Preferred Stock,
the holder of each share of Series B Preferred Stock and the holder of each
share of Series C Preferred Stock shall have the right thereafter to convert
such share of Series A Preferred Stock, Series B Preferred Stock, and Series C
Preferred Stock into the kind and amount of shares of stock or other securities,
property or cash receivable upon such reorganization or reclassification by a
holder of the number of shares of Common Stock into which such share of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock could
have been converted immediately prior to such reorganization or
reclassification, and provision shall be made therefor in the agreement, if any,
relating to such reorganization or reclassification. Such certificate shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 7. The provisions
of this Section 7(g) and any equivalent thereof in any such certificate
similarly shall apply to successive transactions.
(h) Notices. In case at any time or from time to time:
-------
(w) the Corporation shall declare a dividend (or any other
distribution) on its shares of Common Stock;
(x) the Corporation shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe for or purchase
any shares of stock of any class or of any other rights or warrants;
(y) there shall be any reorganization or reclassification of
the Common Stock; or
(z) there shall occur the Initial Public Offering, a Merger
or a Sale;
then the Corporation shall mail to each holder of shares of Series A Preferred
Stock, each holder of shares of Series B Preferred Stock and each holder of
shares of Series C Preferred Stock at such holder's address as it appears on the
transfer books of the Corporation, as promptly as possible but in any event at
least ten (10) days prior to the applicable date hereinafter specified, a notice
stating (A) the date on which a record is to be taken for the purpose of such
dividend, distribution or granting of rights or warrants or, if a record is not
to be taken, the date as of which the holders of Common Stock of
<PAGE>
17
record to be entitled to such dividend, distribution or granting of rights or
warrants are to be determined, or (B) the date on which such reorganization,
reclassification, Initial Public Offering, Merger or Sale is expected to become
effective and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their Common Stock for shares of stock
or other securities or property or cash deliverable upon such reorganization,
reclassification, Initial Public Offering, Merger or Sale. Notwithstanding the
foregoing, in the case of any event to which Section 7(g) is applicable, the
Corporation shall also deliver the certificate described in such Section 7(g) to
each holder of Series A Preferred Stock, each holder of Series B Preferred Stock
and each holder of Series C Preferred Stock at least 10 Business Days' prior to
effecting such reorganization or reclassification as aforesaid.
(i) Reservation of Common Stock. The Corporation shall at all
---------------------------
times reserve and keep available for issuance upon the conversion of the Series
A Preferred Stock, the Series B Preferred Stock and the Series C Preferred
Stock, such number of its authorized but unissued shares of Common Stock as will
from time to time be sufficient to permit the conversion of all outstanding
shares of Series A Preferred Stock, the Series B Preferred Stock and the Series
C Preferred Stock and shall take all action to increase the authorized number of
shares of Common Stock if at any time there shall be insufficient authorized but
unissued shares of Common Stock to permit such reservation or to permit the
conversion of all outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock; provided that (i) the holders of
--------
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock vote such shares in favor of any such action that requires a
vote of stockholders and (ii) such holders cause any directors elected by them
pursuant to Section 6(c) to vote in favor of any such action that requires a
vote of the Board of Directors.
(j) No Conversion Tax or Charge. The issuance or delivery of
---------------------------
certificates for Common Stock upon the conversion of shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall be
made without charge to the converting holder of shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock for such
certificates or for any tax in respect of the issuance or delivery of such
certificates or the securities represented thereby, and such certificates shall
be issued or delivered in the respective names of, or (subject to compliance
with the applicable provisions of federal and state securities laws) in such
names as may be directed by, the holders of the shares of Series A Preferred
Stock, the holders of shares of Series B Preferred Stock or the holders of
shares of Series C Preferred Stock converted; provided, however, that the
-------- -------
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate in
a name other than that of the holder of the shares of Series A Preferred Stock,
the holders of shares of Series B Preferred Stock or the holders of shares of
Series C Preferred Stock converted, and the Corporation shall not be required to
issue or deliver such certificate unless or until the Person or Persons
requesting the issuance or delivery thereof shall have paid to the Corporation
the amount
<PAGE>
18
of such tax or shall have established to the reasonable satisfaction of the
Corporation that such tax has been paid.
8. Certain Remedies. Any registered holder of Series A Preferred
----------------
Stock, any registered holder of Series B Preferred Stock and any registered
holder of Series C Preferred Stock shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Amended and Restated
Certificate of Incorporation and to enforce specifically the terms and
provisions of this Amended and Restated Certificate of Incorporation in any
court of the United States or any state thereof having jurisdiction, this being
in addition to any other remedy to which such holder may be entitled at law or
in equity.
9. Business Day. If any payment shall be required by the terms
------------
hereof to be made on a day that is not a Business Day, such payment shall be
made on the immediately succeeding Business Day.
10. Definitions. As used in this Amended and Restated Certificate of
-----------
Incorporation, the following terms shall have the following meanings (with terms
defined in the singular having comparable meanings when used in the plural and
vice versa), and references to Sections hereof shall be references to Sections
- ---- -----
of Article IV(B) hereof, unless otherwise stated or required by the context:
"Affiliate" shall mean any Person who is an "affiliate" as defined in
Rule l2b-2 of the General Rules and Regulations under the Exchange Act. In
addition, the following shall be deemed to be Affiliates of General Atlantic
Partners 42, L.P.: (a) General Atlantic Partners, LLC, the members of General
Atlantic Partners, LLC and the limited partners of General Atlantic Partners 42,
L.P. and General Atlantic Partners 52, L.P.; (b) any Affiliate of General
Atlantic Partners, LLC, the members of General Atlantic Partners, LLC and the
limited partners of General Atlantic Partners 42, L.P. and General Atlantic
Partners 52, L.P.; and (c) any limited liability company or partnership a
majority of whose members or partners, as the case may be, are members of
General Atlantic Partners, LLC. in addition, General Atlantic Partners 42, L.P.,
General Atlantic Partners 52, L.P., GAP Coinvestment Partners, L.P. and GAP
Coinvestment Partners II, L.P. shall be deemed to be Affiliates of one another.
"Amended and Restated Certificate of Incorporation" shall mean this
Amended and Restated Certificate of Incorporation, as amended from time to time.
"Automatic Conversion Payment" means (a) with respect to each share of
Series A Preferred Stock, a payment equal to the Series A Liquidation
Preference, (b) with respect to each share of Series B Preferred Stock, a
payment equal to the Series B Liquidation Preference and (c) with respect to
each share of Series C Preferred Stock, a payment equal to the Series C
Liquidation Preference.
"Board of Directors" means the Board of Directors of the Corporation.
<PAGE>
19
"Business Day" means any day except a Saturday, a Sunday, or other day
on which commercial banks in the State of New York are authorized or required by
law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock (but excluding any debt security whether or not it is exchangeable
for or convertible into such capital stock).
"Commission" means the United States Securities and Exchange
Commission or any similar agency then having jurisdiction to enforce the
Securities Act.
"Common Stock" shall have the meaning ascribed to it in Article IV
hereof.
"Common Stock Equivalent" shall mean any security or obligation which
is by its terms convertible into shares of Common Stock or another Common Stock
Equivalent, and any option, warrant or other subscription or purchase right with
respect to Common Stock.
"Corporation" shall have the meaning ascribed to it in Article I
hereof.
"Current Market Price" per share shall mean, as of the date of
determination, (a) the average of the daily Market Price under clause (a), (b)
or (c) of the definition thereof of the Common Stock during the immediately
preceding thirty (30) trading days ending on such date, and (b) if the Common
Stock is not then listed or admitted to trading on any national securities
exchange or quoted in the over-the-counter market, then the Market Price under
clause (d) of the definition thereof on such date.
"Dividend Payment Date" shall have the meaning ascribed to it in
Section 3(a) hereof.
"Equity Percentage" means (a) with respect to each share of Series A
Preferred Stock, the number of fully paid and nonassessable shares of Common
Stock equal to the product of the number of shares of Series A Preferred Stock
being converted multiplied by the quotient of (x) $20.52 divided by (y) the
Series A Conversion Price, (b) with respect to each share of Series B Preferred
Stock, the number of fully paid and nonassessable shares of Common Stock equal
to the product of the number of shares of Series B Preferred Stock being
converted multiplied by the quotient of (x) $6.00 divided by (y) the Series B
Conversion Price; and (c) with respect to each share of Series C Preferred
Stock, the number of fully paid and nonassessable shares of Common Stock equal
to the product of the number of shares of Series C Preferred Stock being
converted multiplied by the quotient of (x) $3.00 divided by (y) the Series C
Conversion Price.
<PAGE>
20
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Excluded Transaction" means (a) any issuance of Common Stock or
Common Stock Equivalents to employees, consultants or directors of the
Corporation pursuant to a stock option plan or other employee benefit
arrangement approved by the Board of Directors that represents not greater than
11.9 % of the outstanding shares of Common Stock on a fully diluted basis
immediately prior to the Issue Date, (b) any issuance of Common Stock (i) upon
the conversion of shares of Series A Preferred Stock, Series B Preferred Stock,
or Series C Preferred Stock, (ii) as a dividend on shares of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock and/or (iii) in
connection with any Automatic Conversion Payment and (c) any issuance of Common
Stock upon the conversion or exercise of any Common Stock Equivalents.
"Initial Public Offering" shall mean the first underwritten public
offering of Common Stock pursuant to an effective registration statement under
the Securities Act.
"Issue Date" shall have the meaning ascribed to it in Section 7(d)(ii)
hereof.
"Junior Stock" shall have the meaning ascribed to it in Section 2(a)
hereof.
"Liquidation" shall mean the voluntary or involuntary liquidation
under applicable bankruptcy or reorganization legislation, or the dissolution or
winding up of the Corporation.
"Market Price" shall mean, as of the date of determination, (a) the
closing price per share of Common Stock on such date published in The Wall
--------
Street Journal or, if no such closing price on such date is published in The
- -------------- ---
Wall Street Journal, the average of the closing bid and asked prices on such
- -------------------
date, as officially reported on the principal national securities exchange
(including, without limitation, The Nasdaq Stock Market, Inc.) on which the
Common Stock is then listed or admitted to trading; or (b) if the Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the National
Association of Securities Dealers, Inc., the last trading price of the Common
Stock on such date; or (c) if there shall have been no trading on such date or
if the Common Stock is not so designated, the average of the reported closing
bid and asked prices of the Common Stock on such date as shown by the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotations System and reported by any member firm of the New York Stock Exchange
selected by the Corporation; or (d) if none of (a), (b) or (c) is applicable, a
market price per share determined at the Corporation's expense by an appraiser
chosen by the holders of a majority of the shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock (voting together as a
single class), or, if no such appraiser is so
<PAGE>
21
chosen more than ten (10) Business Days after notice of the necessity of such
calculation shall have been delivered by the Corporation to the holders of
Series B Preferred Stock, then by an appraiser chosen by the Corporation and
reasonably satisfactory to a majority of the holders of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock (voting together as
a single class). Any determination of the Market Price by an appraiser shall be
based on a valuation of the Corporation as an entirety without regard to any
discount for minority interests or disparate voting rights among classes of
Capital Stock.
"Merger" shall mean (x) the merger or consolidation of the Corporation
into or with one or more Persons or (y) the merger or consolidation of one or
more Persons into or with the Corporation, if, in the case of (x) or (y), the
stockholders of the Corporation prior to such merger or consolidation do not
retain at least a majority of the voting power of the surviving Person.
"New Issue Price" shall have the meaning ascribed to it in Section
7(d)(ii) hereof.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental body or other entity of any kind.
"Relevant Date" shall have the meaning ascribed to it in Section
7(d)(ii) hereof.
"Sale" shall mean the voluntary sale, conveyance, exchange or transfer
to another Person of (i) the voting Capital Stock of the Corporation if, after
such sale, conveyance, exchange or transfer, the stockholders of the Corporation
prior to such sale, conveyance, exchange or transfer do not retain at least a
majority of the voting power of the Corporation or (ii) all or substantially all
of the assets of the Corporation.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Series A Conversion Price" shall have the meaning ascribed to it in
Section 7(a) hereof.
"Series A Liquidation Preference" shall have the meaning ascribed to
it in Section 4(a) hereof.
"Series A Preferred Stock" shall have the meaning ascribed to it in
Article IV hereof.
"Series B Conversion Price" shall have the meaning ascribed to it in
Section 7(a) hereof.
<PAGE>
"Series B Liquidation Preference" shall have the meaning ascribed to
it in Section 4(a) hereof.
"Series B Preferred Stock" shall have the meaning ascribed to it in
Article IV hereof.
"Series C Conversion Price" shall have the meaning ascribed to it in
Section 7(a) hereof.
"Series C Liquidation Preference" shall have the meaning ascribed to
it in Section 4(a) hereof.
"Series C Preferred Stock" shall have the meaning ascribed to it in
Article IV hereof.
ARTICLE V
DIRECTORS
The authorized number of directors of the Corporation shall be no less
than three (3) and no more than (9), as determined from time to time by the
Board of Directors. Elections of directors need not be by written ballot unless
required by the By-laws of the Corporation. Subject to the rights of the holders
of any series of Preferred Stock as set forth in Article IV(B)(6)(c) of or
elsewhere in this Amended and Restated Certificate of Incorporation or provided
for in a resolution or resolutions adopted by the Board of Directors providing
for the issue thereof, any director may be removed from office either with or
without cause at any time by the affirmative vote of the holders of a majority
of the outstanding stock of the Corporation entitled to vote, given at a meeting
of the stockholders called for that purpose, or by the consent of the holders of
a majority of the outstanding stock of the Corporation entitled to vote, given
in accordance with Section 228 of the General Corporation Law.
ARTICLE VI
LIMITATION OF LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or to its stockholders for monetary damages for breach of fiduciary
duty as a director of the Corporation, except for liability (i) for any breach
of the director's duty of loyalty to the Corporation or to its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law, or (iv) for any transaction from which the director derives any
improper personal benefit. If, after approval of this Article VI by the
stockholders of the Corporation, the General Corporation Law is amended to
authorize the further elimination or limitation of the liability of directors,
then the
<PAGE>
23
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the General Corporation Law, as so amended.
Any repeal or modification of this Article VI by the stockholders of
the Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify, in the manner and to the full extent
permitted by law, any person (or the estate of any person) who was or is a party
to, or is threatened to be made a party to, any threatened, pending or
contemplated action, suit or proceeding, whether or not by or in the right of
the Corporation, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
Where required by law, the indemnification provided for herein shall be made
only as authorized in the specific case upon a determination, in the manner
provided by law, that indemnification of the director, officer, employee or
agent is proper in the circumstances. The Corporation may, to the full extent
permitted by law, purchase and maintain insurance on behalf of any such person
against any liability which may be asserted against such person. To the full
extent permitted by law, the indemnification provided herein shall include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, and, in the manner provided by law, any such expenses shall be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding. The indemnification provided herein shall not be deemed to limit
the right of the Corporation to indemnify any other person for any such expenses
to the full extent permitted by law, nor shall it be deemed exclusive of any
other rights to which any person seeking indemnification from the Corporation
may be entitled under any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. Such indemnification
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
<PAGE>
24
ARTICLE VIII
BY-LAWS
In furtherance and not in limitation of the powers conferred upon the
Board of Directors by law, the Board of Directors shall have the power to make,
adopt, alter, amend and repeal from time to time the By-laws of the Corporation
subject to the right of the stockholders entitled to vote with respect thereto
to alter, amend and repeal By-laws made by the Board of Directors.
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed by the President of the Corporation this 27th day
of September, 1999.
/s/ Peter J Boni
--------------------------------
Peter J. Boni
President
<PAGE>
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
PRIME RESPONSE GROUP INC.
Prime Response Group Inc. (hereinafter called the "Corporation"), organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
By written action in accordance with Section 141(f) of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation duly adopted a resolution, pursuant to Section 242 of the General
Corporation Law of the State of Delaware, setting forth an amendment to the
Amended and Restated Certificate of Incorporation of the Corporation and
declaring said amendment to be advisable. The stockholders of the Corporation
duly approved said proposed amendment by written consent in accordance with
Sections 228 and 242 of the General Corporation Law of the State of Delaware.
The resolution setting forth the amendment is as follows:
<PAGE>
2
RESOLVED: That Article I of the Amended and Restated Certificate of
---------
Incorporation of the Corporation be and hereby deleted in its entirety, and the
following substituted in its place:
ARTICLE I
NAME
The name of the corporation is Prime Response, Inc. (the "Corporation").
RESOLVED: That Article IV, Section B.3(a) of the Amended and Restated
---------
Certificate of Incorporation be and hereby is deleted in its entirety, and the
following substituted in its place:
" (a) Series A Preferred Stock and Series B Preferred Stock. The
-----------------------------------------------------
holders of shares of Series A Preferred Stock shall be entitled to receive,
out of funds legally available therefor, dividends at an annual rate equal
to 8% of the Series A Liquidation Preference, and the holders of shares of
Series B Preferred Stock shall be entitled to receive, out of funds legally
available therefor, dividends at an annual rate equal to 8% of the Series B
Liquidation Preference, in each case calculated on the basis of a 360-day
year, consisting of twelve 30-day months, and shall accrue on a daily basis
from the date of issuance thereof, whether or not declared. The Series A
Preferred Stock and the Series B Preferred Stock shall rank pari passu with
respect to such dividends and such dividends shall be paid to the holders
of the Series A Preferred Stock and the holders of the Series B Preferred
Stock on a pro rata basis. All accrued and unpaid dividends shall, to the
extent funds are legally available therefor, be mandatorily paid concurrent
with the earlier to occur of (i) a Liquidation, (ii) an optional conversion
of shares of Series A Preferred Stock pursuant to Section 7(a) below, (iii)
an optional conversion of shares of Series B Preferred Stock pursuant to
Section 7(a) below and (iv) an automatic conversion of shares of Series A
Preferred Stock and shares of Series B Preferred Stock pursuant to Section
7(b) below (the "Dividend Payment Date"). On the Dividend Payment Date,
all accrued dividends shall be paid, (x) in the case of a Liquidation, in
cash, (y) in the case of the Initial Public Offering, in shares of Common
Stock in the case of the Series A Preferred Stock and Series C Preferred
Stock, and cash or in shares of Common Stock in the case of the Series B
Preferred Stock, as the holder of any shares of Series B Preferred Stock
shall choose and (z) in the case of a Merger, Sale or optional conversion
of shares of Series A Preferred Stock or Series B Preferred Stock, as the
case may be, pursuant to Section 7(a) below, in shares of Common Stock or
in cash, as determined by the Board of Directors in the exercise of their
fiduciary duties. If dividends are to be paid in shares of Common Stock
pursuant to the preceding sentence, the value of such shares shall be
determined, (A) in the case of the Initial Public Offering, by the mid-
point of the anticipated price range per share of the shares of Common
<PAGE>
3
Stock to be offered in the Initial Public Offering stated in the first
Registration Statement filed with the Commission in which such mid-point is
stated, (B) in the case of the Merger (other than as set forth in clause
(C), below) or Sale, by the net per share price paid for shares of Common
Stock in such Merger or Sale or (C) in the case of a Merger in which no per
share price is paid for shares of Common Stock or in the case of an
optional conversion of shares of Series A Preferred Stock or Series B
Preferred Stock, as the case may be, pursuant to Section 7(a) below,
mutually by the Board of Directors and the holders of a majority of the
shares of Series A Preferred Stock or a majority of the shares of Series B
Preferred Stock, as the case may be, or, if the Board of Directors and the
holders of a majority of the shares of Series A Preferred Stock or a
majority of the shares of Series B Preferred Stock, as the case may be,
shall fail to agree, at the Corporation's expense by an appraiser chosen by
the Board of Directors and reasonably acceptable to the holders of a
majority of the shares of Series A Preferred Stock or a majority of the
shares of Series B Preferred Stock, as the case may be."
RESOLVED: That Article IV, Section B.7(b) of the Amended and Restated
---------
Certificate of Incorporation be and hereby is deleted in its entirety, and the
following substituted in its place:
" (b) Automatic Conversion. Concurrent with the closing of the
--------------------
Initial Public Offering, a Merger or a Sale, each outstanding share of
Series A Preferred Stock, each outstanding share of Series B Preferred
Stock and each outstanding share of Series C Preferred Stock shall be
automatically converted, with no further action required to be taken by the
Corporation or the holder thereof, into the following:
(i) The Automatic Conversion Payment; and
(ii) The Equity Percentage.
Such Automatic Conversion Payment shall be in addition to and not in
lieu of dividends payable in accordance with Section 3 above and shall be
payable, to the extent funds are legally available therefor, (x) in the
case of the Initial Public Offering, in shares of Common Stock in the case
of the Series A Preferred Stock and the Series C Preferred Stock and cash
or in shares of Common Stock in the case of the Series B Preferred Stock,
as the holder of any shares of Series B Preferred Stock shall choose or (y)
in the case of a Merger or a Sale, in cash or, at the option of the
Corporation, in securities of the Corporation or the surviving Person (in
the case of a Merger) or other consideration received by the holders of
shares of the Common Stock. If the Automatic Conversion Payment is to be
paid in shares of Common Stock, the value of such shares of Common Stock
shall be determined as provided in the last sentence of Section 3(a) above.
Any securities
<PAGE>
4
of the surviving Person or securities of the Corporation other than Common
Stock otherwise to be delivered to the holders of Series A Preferred Stock,
the holders of the Series B Preferred Stock and the holders of Series C
Preferred Stock pursuant to this Section 7(b) shall be valued as follows:
(i) With respect to securities that do not constitute "restricted
securities," as such term is defined in Rule 144(a)(3) promulgated under
the Securities Act, the value shall be deemed to be the Current Market
Price of such securities as of three days prior to the date of
distribution.
(ii) With respect to securities that constitute "restricted
securities, " as such term is defined in Rule 144(a)(3) promulgated under
the Securities Act, and that are of the same class or series as securities
that are publicly traded, the value shall be adjusted to make an
appropriate discount from the value as set forth above in clause (i) to
reflect the appropriate fair market value thereof, as mutually determined
by the Board of Directors and the holders of a majority of the shares of
Series A Preferred Stock, the holders of a majority of the shares of Series
B Preferred Stock or the holders of a majority of the shares of Series C
Preferred Stock, as the case may be, or if there is no active public market
with respect to such class or series of securities, such securities shall
be valued in accordance with clause (i) above, giving appropriate weight,
if any, to such restriction as mutually determined by the Board of
Directors and the holders of a majority of the shares of Series A Preferred
Stock, the holders of a majority of the shares of Series B Preferred Stock
or the holders of a majority of the shares of Series C Preferred Stock, as
the case may be, or if the Board of Directors and the holders of a majority
of the shares of Series A Preferred Stock, the holders of a majority of the
shares of Series B Preferred Stock or the holders of a majority of the
shares of Series C Preferred Stock, as the case may be, shall fail to
agree, at the Corporation's expense by an appraiser chosen by the Board of
Directors and reasonably acceptable to the holders of a majority of the
shares of Series A Preferred Stock, the holders of a majority of the shares
of Series B preferred Stock or the holders of a majority of the shares of
Series C Preferred Stock, as the case may be.
If the Automatic Conversion Payment is to be paid in other
consideration received by holders of shares of the Common Stock, the value
of such other consideration shall be mutually determined by the Board of
Directors and the holders of a majority of the shares of Series A Preferred
Stock, the holders of a majority of the shares of Series B Preferred Stock
or the holders of a majority of the shares of Series C Preferred Stock, as
the case may be, or, if the Board of Directors and the holders of a
majority of the shares of Series A Preferred Stock, the holders of a
majority of the shares of Series B Preferred Stock or the holders of a
majority of the shares of Series C Preferred Stock, as the case may be,
shall
<PAGE>
5
fail to agree, at the Corporation's expense by an appraiser chosen by the
Board of Directors and reasonably acceptable to the holders of a majority
of the shares of Series A Preferred Stock, the holders of a majority of the
shares of Series B Preferred Stock or the holders of a majority of the
shares of Series C Preferred Stock, as the case may be.
Immediately upon conversion as provided herein, each holder of Series
A Preferred Stock, each holder of Series B Preferred Stock and each holder
of Series C Preferred Stock shall be deemed to be the holder of record of
the Common Stock issuable upon conversion of such holder's Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as
the case may be, notwithstanding that the share register of the Corporation
shall then be closed or that certificates representing the Common Stock
shall not then actually be delivered to such Person. Upon notice from the
Corporation, each holder of Series A Preferred Stock, each holder of Series
B Preferred Stock and each holder of Series C Preferred Stock so converted
shall promptly surrender to the Corporation at its principal place of
business to be maintained by it (or at such other office or agency of the
Corporation as the Corporation may designate by such notice to the holders
of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock) certificates representing the shares so converted."
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
affixed hereto and this Certificate of Amendment to be signed by its President
this 19th day of November, 1999.
PRIME RESPONSE GROUP INC.
BY: /s/ Peter J. Boni
____________________________
Peter J. Boni
President
<PAGE>
Exhibit 3.2
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PRIME RESPONSE, INC.
PRIME RESPONSE, INC. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"General Corporation Law"),
DOES HEREBY CERTIFY:
FIRST: That the Corporation was originally incorporated in Delaware
under the name PRIME RESPONSE GROUP INC. and the date of its filing of its
original Certificate of Incorporation with the Secretary of State of the State
of Delaware was September 26, 1997.
SECOND: That the Board of Directors fully adopted resolutions
proposing to amend and restate the Certificate of Incorporation of the
Corporation, declaring said amendment and restatement to be advisable and in the
best interests of the Corporation and its stockholders, and authorizing the
appropriate officers of the Corporation to solicit the consent of the
stockholders of the issued and outstanding Common Stock, par value $.01 per
share (the "Common Stock"), Series A Convertible Participating Preferred Stock,
par value $.01 per share (the "Series A Preferred Stock"), Series B Convertible
Participating Preferred Stock, par value $.01 per share (the "Series B Preferred
Stock") and Series C Convertible Preferred Stock, par value $.01 per share (the
"Series C Preferred Stock"), in accordance with the applicable provisions of
Sections 228, 242 and 245 of the General Corporation Law;
THIRD: That the resolution setting forth the proposed amendment and
restatement is as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended and restated in its entirety as follows:
ARTICLE I
NAME
The name of the corporation is PRIME RESPONSE, INC. (the
"Corporation").
<PAGE>
ARTICLE II
REGISTERED OFFICE
The address of the Corporation's registered office is 1209 Orange
Street, in the City of Wilmington, County of New Castle, State of Delaware; and
its registered agent at such address is The Corporation Trust Company.
ARTICLE III
POWERS
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law.
ARTICLE IV
CAPITAL STOCK
The Corporation is authorized to issue two classes of stock to be
designated respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is Thirty-Five Million
Seven Hundred and Fifty Thousand (35,750,000) shares. Twenty-Seven Million
Seven Hundred and Fifty Thousand (27,750,000) shares shall be designated as
Common Stock, par value $.01 per share (the "Common Stock"), and Eight Million
(8,000,000) shares shall be designated as Preferred Stock, par value $.01 per
share (the "Preferred Stock").
The Preferred Stock shall be divided into three series. The first
series shall consist of One Million One Hundred Fifty-Five Thousand (1,155,000)
shares designated as Series A Convertible Participating Preferred Stock having
the powers, designations, preferences and rights set forth in Article IV(B)
below (the "Series A Preferred Stock"), the second series shall consist of One
Million Seven Hundred Thousand (1,700,000) shares designated as Series B
Convertible Participating Preferred Stock having the powers, designations,
preferences and rights set forth in Article IV(B) below (the "Series B
Preferred Stock"), the third series shall consist of Three Million (3,000,000)
shares designated as Series C Convertible Participating Preferred Stock having
the powers, designations, preferences and rights set forth in Article IV(B)
below (the "Series C Preferred Stock"), and the remaining Two Million One
Hundred Forty-Five Thousand (2,145,000) shares of Preferred Stock shall be
undesignated as of the date hereof (the "Undesignated Preferred Stock") and may
be designated with powers, preferences and rights in accordance with Article
IV(B) below.
Effective upon the filing of this Second Amended and Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware, every one share of Common Stock issued and outstanding on the date
thereof shall, without any action on the part of the holder thereof be changed
into 0.75 shares of Common Stock.
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All references in this Article IV to Sections hereof shall be
references to Sections of Article IV(B), unless otherwise stated or required by
the context. The designation, relative rights, preferences and limitations of
the shares of each class and series are as follows:
A. COMMON STOCK.
------------
1. Rank. The Common Stock shall, with respect to the distribution of
----
assets and rights upon a Liquidation, Merger or Sale rank junior to (a) the
Series A Preferred Stock, (b) the Series B Preferred Stock, (c) the Series C
Preferred Stock and (d) all classes or series of Capital Stock of the Company
hereafter created which rank senior to the Common Stock.
2. Dividends. The holders of Common Stock shall be entitled to
---------
receive dividends, if any, out of funds legally available therefor only at such
times and in such amounts as the Board of Directors may determine in its sole
discretion.
3. Voting Rights. The holder of each share of Common Stock shall be
-------------
entitled to one vote for each such share as determined on the record date for
the vote or consent of stockholders and shall vote together with the holders of
the Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock as a single class upon any items submitted to a vote of
stockholders, except to the extent that the Series A Preferred Stock, the Series
B Preferred Stock and/or the Series C Preferred Stock is entitled to vote as a
separate class under the General Corporation Law or as otherwise provided
herein.
B. PREFERRED STOCK.
---------------
1. Undesignated Preferred Stock. Shares of Undesignated Preferred
----------------------------
Stock may be issued from time to time in one or more series of any number of
shares, provided that the aggregate number of such shares of Preferred Stock
issued and not cancelled of any and all such series shall not exceed the total
number of such shares of Preferred Stock hereinabove authorized, and with
distinctive serial designations, all as shall hereafter be stated and expressed
in the resolution or resolutions providing for the issue of such shares of
Preferred Stock from time to time adopted by the Board of Directors pursuant to
authority so to do which is hereby vested in the Board of Directors. Each
series of shares of Preferred Stock may have such voting powers, full or
limited, or may be without voting power and may have such powers, designations
and preferences, and such relative, participating, optional or other special
rights, and such qualifications, limitations or restrictions as shall be stated
in said resolution or resolutions providing for the issuance of such shares of
Preferred Stock and as may be permitted by the General Corporation Law. Any of
the voting powers, designations, preferences, rights and qualifications,
limitations or restrictions of any such series of Preferred Stock may be made
dependent upon facts ascertainable outside of the resolution or resolutions
providing for the issue of such Preferred Stock adopted by the Board of
Directors pursuant to the authority vested in it by this Article IV(B)(1),
provided that the manner in which such facts shall operate upon the voting
powers, designations, preferences, rights and qualifications, limitations or
restrictions of such series of Preferred Stock is clearly and expressly set
forth in the resolution or resolutions providing for the issuance of such
Preferred Stock. The term "facts" as used in the next preceding sentence shall
have the meaning given to it in Section 151(a) of the General Corporation Law.
Shares of Preferred Stock of any series that have been redeemed (whether
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through the operation of a sinking fund or otherwise) or that if convertible or
exchangeable, have been converted into or exchanged for shares of any other
class or classes shall have the status of authorized and unissued shares of
Preferred Stock of the same series and may be reissued as a part of the series
of which they were originally a part or may be reclassified and reissued as part
of a new series of shares of Preferred Stock to be created by resolution or
resolutions of the Board of Directors or as part of any other series of shares
of Preferred Stock, all subject to the conditions or restrictions on issuance
set forth in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of a series of shares of Preferred Stock.
2. Rank.
----
(a) With respect to distributions of assets and rights upon the
occurrence of a Liquidation, the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock shall rank (a) pari passu with
---- -----
each other and (b) senior to (i) all classes of common stock of the Corporation
(including, without limitation, the Common Stock) and (ii) each other class or
series of Capital Stock of the Corporation hereafter created which does not
expressly rank pari passu with or senior to the Series A Preferred Stock, the
---- -----
Series B Preferred Stock and the Series C Preferred Stock (the foregoing clauses
(i) and (ii), the "Junior Stock").
(b) With respect to payment of the Automatic Conversion Payment upon
the occurrence of a Sale, a Merger or the Initial Public Offering, the Series A
Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock
shall rank pari passu with each other and senior to the Junior Stock.
---- -----
3. Dividends.
---------
(a) Series A Preferred Stock and Series B Preferred Stock. The
-----------------------------------------------------
holders of shares of Series A Preferred Stock shall be entitled to receive, out
of funds legally available therefor, dividends at an annual rate equal to 8% of
the Series A Liquidation Preference, and the holders of shares of Series B
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, dividends at an annual rate equal to 8% of the Series B Liquidation
Preference, in each case calculated on the basis of a 360-day year, consisting
of twelve 30-day months, and shall accrue on a daily basis from the date of
issuance thereof, whether or not declared. The Series A Preferred Stock and the
Series B Preferred Stock shall rank pari passu with respect to such dividends
---- -----
and such dividends shall be paid to the holders of the Series A Preferred Stock
and the holders of the Series B Preferred Stock on a pro rata basis. All
accrued and unpaid dividends shall, to the extent funds are legally available
therefor, be mandatorily paid concurrent with the earlier to occur of (i) a
Liquidation, (ii) an optional conversion of shares of Series A Preferred Stock
pursuant to Section 7(a) below, (iii) an optional conversion of shares of Series
B Preferred Stock pursuant to Section 7(a) below and (iv) an automatic
conversion of shares of Series A Preferred Stock and shares of Series B
Preferred Stock pursuant to Section 7(b) below (the "Dividend Payment Date").
On the Dividend Payment Date, all accrued dividends shall be paid, (x) in the
case of a Liquidation, in cash, (y) in the case of the Initial Public Offering,
in shares of Common Stock in the case of the Series A Preferred Stock and Series
C Preferred Stock, and cash or in shares of Common Stock in the case of the
Series B Preferred Stock, as the holder of any shares of Series B Preferred
Stock shall choose, and (z) in the case of a Merger, Sale or optional conversion
of shares of Series A Preferred Stock
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or Series B Preferred Stock, as the case may be, pursuant to Section 7(a) below,
in shares of Common Stock or in cash, as determined by the Board of Directors in
the exercise of their fiduciary duties. If dividends are to be paid in shares of
Common Stock pursuant to the preceding sentence, the value of such shares shall
be determined, (A) in the case of the Initial Public Offering, by the mid-point
of the anticipated price range per share of the shares of Common Stock to be
offered in the Initial Public Offering stated in the first Registration
Statement filed with the Commission in which such mid-point is stated, (B) in
the case of a Merger (other than as set forth in clause (C), below) or Sale, by
the net per share price paid for shares of Common Stock in such Merger or Sale
or (C) in the case of a Merger in which no per share price is paid for shares of
Common Stock or in the case of an optional conversion of shares of Series A
Preferred Stock or Series B Preferred Stock, as the case may be, pursuant to
Section 7(a) below, mutually by the Board of Directors and the holders of a
majority of the shares of Series A Preferred Stock or a majority of the shares
of Series B Preferred Stock, as the case may be, or, if the Board of Directors
and the holders of a majority of the shares of Series A Preferred Stock or a
majority of the shares of Series B Preferred Stock, as the case may be, shall
fail to agree, at the Corporation's expense by an appraiser chosen by the Board
of Directors and reasonably acceptable to the holders of a majority of the
shares of Series A Preferred Stock or a majority of the shares of Series B
Preferred Stock, as the case may be.
(b) Series C Preferred Stock. The holders of shares of Series C
------------------------
Preferred Stock shall not be entitled to receive dividends except in accordance
with this Section 3. If the Corporation declares and pays dividends or
distributions on the Common Stock, then, in that event, the holders of shares of
Series C Preferred Stock shall be entitled to share in such dividends on a pro
rata basis, as if their shares had been converted into shares of Common Stock
pursuant to Section 7(a) immediately prior to the record date for determining
the stockholders of the Corporation eligible to receive such dividends.
4. Liquidation Preference.
----------------------
(a) Priority Payment. Upon the occurrence of a Liquidation, (i) the
----------------
holders of shares of Series A Preferred Stock shall be entitled to be paid for
each share of Series A Preferred Stock held thereby out of, but only to the
extent of, the assets of the Corporation legally available for distribution to
its stockholders, an amount equal to $20.52 (the "Series A Liquidation
Preference") plus, as provided in Section 3(a) above, all accrued and unpaid
dividends, if any, with respect to each share of Series A Preferred Stock,
(ii) the holders of shares of Series B Preferred Stock shall be entitled to be
paid for each share of Series B Preferred Stock held thereby, out of, but only
to the extent of, the assets of the Corporation legally available for
distribution to its stockholders, an amount equal to $6.00 (the "Series B
Liquidation Preference") plus, as provided in Section 3(a) above, all accrued
and unpaid dividends, if any, with respect to each share of Series B Preferred
Stock, and (iii) the holders of shares of Series C Preferred Stock shall be
entitled to be paid for each share of Series C Preferred Stock held thereby out
of, but only to the extent of, the assets of the Corporation legally available
for distribution to its stockholders, an amount equal to $3.00 (the "Series C
Liquidation Preference") plus, as provided in Section 3(b) above, all accrued
and unpaid dividends, if any, with respect to each share of Series C Preferred
Stock, in each case before any payment or distribution is made to any Junior
Stock. Such payment of the Series A Liquidation Preference, the Series B
Liquidation Preference and the Series C Liquidation Preference to the holders of
the shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock, respectively, shall be made pro rata. If the assets of the
Corporation available for distribution to the holders of Series A
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<PAGE>
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall be
insufficient to permit payment in full to such holders of the sums which such
holders are entitled to receive in such case, then all of the assets available
for distribution to holders of the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock shall be distributed among and
paid to such holders ratably in proportion to the amounts that would be payable
to such holders if such assets were sufficient to permit payment in full.
(b) Participating Payment. Upon the completion of the distribution
---------------------
required by Section 4(a) above and any other distribution to any other class or
series of Capital Stock of the Corporation ranking senior to the Common Stock,
if assets remain in the Corporation, the remaining assets of the Corporation
available for distribution to stockholders shall be distributed among the
holders of the Series A Preferred Stock, the holders of the Series B Preferred
Stock, the holders of Series C Preferred Stock, the holders of any other series
of Preferred Stock entitled to this participating payment and the holders of
Common Stock pro rata based on the number of shares of Common Stock held by each
(assuming the conversion of all such Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock in accordance with Section 7(a) and
the conversion of all such other Preferred Stock).
(c) Notice. Written notice of a Liquidation stating a payment or
------
payments and the place where such payment or payments shall be payable, shall be
delivered in person, mailed by certified mail, return receipt requested, mailed
by overnight mail or sent by telecopier, not less than ten (10) days prior to
the earliest payment date stated therein, to the holders of record of each of
the Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock, such notice to be addressed to each such holder at its address
as shown by the records of the Corporation.
5. Redemption. The shares of Series A Preferred Stock, Series B
----------
Preferred Stock and Series C Preferred Stock shall not be redeemed or subject to
redemption, whether at the option of the Corporation or any holder thereof, or
otherwise.
6. Voting Rights.
-------------
(a) The holders of Series A Preferred Stock, the holders of Series B
Preferred Stock and the holders of Series C Preferred Stock, except as otherwise
required under Delaware law or as set forth in subsections (b) and (c) below,
shall not be entitled or permitted to vote on any matter required or permitted
to be voted upon by the stockholders of the Corporation.
(b) Each outstanding share of Series A Preferred Stock, each
outstanding share of Series B Preferred Stock and each outstanding share of
Series C Preferred Stock shall entitle the
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<PAGE>
holder thereof to vote, in person or by proxy, at a special or annual meeting of
stockholders, on all matters entitled to be voted on by holders of Common Stock
voting together as a single class with the Common Stock (and with other shares
entitled to vote thereon, if any). With respect to any such vote, each share of
Series A Preferred Stock, each share of Series B Preferred Stock and each share
of Series C Preferred Stock shall entitle the holder thereof to cast that number
of votes per share as is equal to the number of votes that such holder would be
entitled to cast had such holder converted its shares of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock, as the case may be,
into shares of Common Stock pursuant to Section 7(a) on the record date for
determining the stockholders of the Corporation eligible to vote on any such
matters.
(c) If General Atlantic Partners 42, L.P., GAP Coinvestment Partners,
L.P. and/or any Affiliate thereof in the aggregate own (i) both (x) at least a
majority of the outstanding shares of Series A Preferred Stock and (y) shares of
Common Stock and/or Series A Preferred Stock or other securities of the
Corporation convertible into or exchangeable for shares of Common Stock that
represent (after giving effect to any adjustments) at least 10% of the total
number of shares of Common Stock outstanding on an as converted basis, then the
holders of the Series A Preferred Stock, voting as a separate class, shall be
entitled to elect two directors of the Corporation or (ii) both (x) at least a
majority of the outstanding shares of Series A Preferred Stock and (y) shares of
Common Stock and/or Series A Preferred Stock or other securities of the
Corporation convertible into or exchangeable for shares of Common Stock that
represent (after giving effect to any adjustments) less than 10% but at least 5%
of the total number of shares of Common Stock outstanding on an as converted
basis, then the holders of the Series A Preferred Stock, voting as a separate
class, shall be entitled to elect one director of the Corporation. The Series A
Preferred Stock shall vote together as a single class with the Common Stock
(and all other classes and series of stock of the Corporation entitled to vote
thereon, if any) with respect to the election of all of the other directors of
the Corporation. If the conditions set forth in the first sentence of this
Section 6(c) necessary for the holders of the Series A Preferred Stock to vote
as a separate class for the election of directors are not satisfied, the Series
A Preferred Stock shall vote together as a single class with the Common Stock
(and all other classes and series of stock of the Corporation entitled to vote
thereon, if any) with respect to the election of all of the directors of the
Corporation elected by such holders. At any meeting held for the purpose of
electing directors at a time when the Series A Preferred Stock is entitled to
vote as a separate class for the election of directors, the presence in person
or by proxy of the holders of a majority of the shares of Series A Preferred
Stock then outstanding shall constitute a quorum of the Series A Preferred Stock
for the election of the directors to be elected solely by the holders of the
Series A Preferred Stock; the holders of Series A Preferred Stock shall be
entitled to cast one vote per share of Series A Preferred Stock in any such
election; and the directors to be elected exclusively by the holders of Series A
Preferred Stock shall be elected by the affirmative vote of the holders of a
majority of the outstanding shares of Series A Preferred Stock. A vacancy in a
directorship filled by the holders of the Series A Preferred Stock voting as a
separate class pursuant to this Section 6(c) shall be filled only by vote or
written consent of the holders of the Series A Preferred Stock.
7. Conversion.
----------
(a) Optional Conversion. Any holder of Series A Preferred Stock, any
-------------------
holder of Series B Preferred Stock and any holder of Series C Preferred Stock
shall have the right, at its option, at any time and from time to time, to
convert, subject to the terms and provisions of this Section 7, (i) any or all
of such holder's shares of Series A Preferred Stock into such number of fully
paid and non-assessable shares of Common Stock as is equal to the product of the
number of shares of Series A Preferred Stock being so converted multiplied by
the
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<PAGE>
quotient of (x) $20.52 divided by (y) the conversion price of $6.559699136 per
share, subject to adjustment as provided in Section 7(d) (such price, the
"Series A Conversion Price"), (ii) any or all of such holder's shares of Series
B Preferred Stock into such number of fully paid and non-assessable shares of
Common Stock as is equal to the product of the number of shares of Series B
Preferred Stock being so converted multiplied by the quotient of (x) $6.00
divided by (y) the conversion price of $7.63505214266 per share, subject to
adjustment as provided in Section 7(d) (such price, the "Series B Conversion
Price") and (iii) any or all of such holder's shares of Series C Preferred Stock
into such number of fully paid and non-assessable shares of Common Stock as is
equal to the product of the number of shares of Series C Preferred Stock being
so converted multiplied by the quotient of (x) $3.00 divided by (y) the
conversion price of $4.00 per share, subject to adjustment as provided in
Section 7(d) (such price, the "Series C Conversion Price"). Such conversion
right shall be exercised by the surrender of certificate(s) representing the
shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, as the case may be, to be converted to the Corporation at any
time during usual business hours at its principal place of business to be
maintained by it (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock),
accompanied by written notice that the holder elects to convert such shares of
Series A Preferred Stock, such shares of Series B Preferred Stock or such shares
of Series C Preferred Stock, as the case may be, and specifying the name or
names (with address) in which a certificate or certificates for shares of Common
Stock are to be issued and (if so required by the Corporation) by a written
instrument or instruments of transfer in form reasonably satisfactory to the
Corporation duly executed by the holder or its duly authorized legal
representative and transfer tax stamps or funds therefor, if required pursuant
to Section 7(j). All certificates representing shares of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock, as the case may be,
surrendered for conversion shall be delivered to the Corporation for
cancellation and canceled by it. As promptly as practicable after the surrender
of any shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, as the case may be, the Corporation shall (subject to
compliance with the applicable provisions of federal and state securities laws)
deliver to the holder of such shares so surrendered certificate(s) representing
the number of fully paid and nonassessable shares of Common Stock into which
such shares are entitled to be converted and, to the extent funds are legally
available therefor, an amount equal to the accrued and unpaid dividends payable
with respect to such shares in accordance with Section 3(a) or Section 3(b)
above, as the case may be. At the time of the surrender of such certificate(s),
the Person in whose name any certificate(s) for shares of Common Stock shall be
issuable upon such conversion shall be deemed to be the holder of record of such
shares of Common Stock on such date, notwithstanding that the share register of
the Corporation shall then be closed or that the certificates representing such
Common Stock shall not then be actually delivered to such Person.
(b) Automatic Conversion. Concurrent with the closing of the Initial
--------------------
Public Offering, a Merger or a Sale, each outstanding share of Series A
Preferred Stock, each outstanding share of Series B Preferred Stock and each
outstanding share of Series C Preferred Stock shall be automatically converted,
with no further action required to be taken by the Corporation or the holder
thereof, into the following:
(i) The Automatic Conversion Payment; and
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<PAGE>
(ii) The Equity Percentage.
Such Automatic Conversion Payment shall be in addition to and not in lieu of
dividends payable in accordance with Section 3 above and shall be payable, to
the extent funds are legally available therefor, (x) in the case of the Initial
Public Offering, in shares of Common Stock in the case of the Series A Preferred
Stock and the Series C Preferred Stock and cash or in shares of Common Stock in
the case of the Series B Preferred Stock, as the holder of any shares of Series
B Preferred Stock shall choose or (y) in the case of a Merger or a Sale, in cash
or, at the option of the Corporation, in securities of the Corporation or the
surviving Person (in the case of a Merger) or other consideration received by
the holders of shares of the Common Stock. If the Automatic Conversion Payment
is to be paid in shares of Common Stock, the value of such shares of Common
Stock shall be determined as provided in the last sentence of Section 3(a)
above. Any securities of the surviving Person or securities of the Corporation
other than Common Stock otherwise to be delivered to the holders of Series A
Preferred Stock, the holders of the Series B Preferred Stock and the holders of
Series C Preferred Stock pursuant to this Section 7(b) shall be valued as
follows:
(i) With respect to securities that do not constitute "restricted
securities," as such term is defined in Rule 144(a)(3) promulgated under the
Securities Act, the value shall be deemed to be the Current Market Price of such
securities as of three days prior to the date of distribution.
(ii) With respect to securities that constitute "restricted
securities, " as such term is defined in Rule 144(a)(3) promulgated under the
Securities Act, and that are of the same class or series as securities that are
publicly traded, the value shall be adjusted to make an appropriate discount
from the value as set forth above in clause (i) to reflect the appropriate fair
market value thereof, as mutually determined by the Board of Directors and the
holders of a majority of the shares of Series A Preferred Stock, the holders of
a majority of the shares of Series B Preferred Stock or the holders of a
majority of the shares of Series C Preferred Stock, as the case may be, or if
there is no active public market with respect to such class or series of
securities, such securities shall be valued in accordance with clause (i) above,
giving appropriate weight, if any, to such restriction as mutually determined by
the Board of Directors and the holders of a majority of the shares of Series A
Preferred Stock, the holders of a majority of the shares of Series B Preferred
Stock or the holders of a majority of the shares of Series C Preferred Stock, as
the case may be, or if the Board of Directors and the holders of a majority of
the shares of Series A Preferred Stock, the holders of a majority of the shares
of Series B Preferred Stock or the holders of a majority of the shares of Series
C Preferred Stock, as the case may be, shall fail to agree, at the Corporation's
expense by an appraiser chosen by the Board of Directors and reasonably
acceptable to the holders of a majority of the shares of Series A Preferred
Stock, the holders of a majority of the shares of Series B preferred Stock or
the holders of a majority of the shares of Series C Preferred Stock, as the case
may be.
If the Automatic Conversion Payment is to be paid in other consideration
received by holders of shares of the Common Stock, the value of such other
consideration shall be mutually determined by the Board of Directors and the
holders of a majority of the shares of Series A Preferred Stock, the holders of
a majority of the shares of Series B Preferred Stock or the holders of a
majority of the shares of Series C Preferred Stock, as the case may be, or, if
the Board of Directors and the
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<PAGE>
holders of a majority of the shares of Series A Preferred Stock, the holders of
a majority of the shares of Series B Preferred Stock or the holders of a
majority of the shares of Series C Preferred Stock, as the case may be, shall
fail to agree, at the Corporation's expense by an appraiser chosen by the Board
of Directors and reasonably acceptable to the holders of a majority of the
shares of Series A Preferred Stock, the holders of a majority of the shares of
Series B Preferred Stock or the holders of a majority of the shares of Series C
Preferred Stock, as the case may be.
Immediately upon conversion as provided herein, each holder of Series A
Preferred Stock, each holder of Series B Preferred Stock and each holder of
Series C Preferred Stock shall be deemed to be the holder of record of the
Common Stock issuable upon conversion of such holder's Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, as the case may be,
notwithstanding that the share register of the Corporation shall then be closed
or that certificates representing the Common Stock shall not then actually be
delivered to such Person. Upon notice from the Corporation, each holder of
Series A Preferred Stock, each holder of Series B Preferred Stock and each
holder of Series C Preferred Stock so converted shall promptly surrender to the
Corporation at its principal place of business to be maintained by it (or at
such other office or agency of the Corporation as the Corporation may designate
by such notice to the holders of Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock) certificates representing the shares so
converted.
(c) Termination of Rights. On the date of such optional conversion
---------------------
pursuant to Section 7(a) above or of such automatic conversion pursuant to
Section 7(b) above, all rights with respect to the shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock so converted,
including the rights, if any, to receive notices and vote, shall terminate,
except only the rights of holders thereof to (i) receive certificates for the
number of shares of Common Stock into which such shares of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock, as the case may be,
have been converted, (ii) receive the Automatic Conversion Payment in the case
of an automatic conversion pursuant to Section 7(b) above, (iii) the payment of
dividends pursuant to Section 3 above and (iv) exercise the rights to which they
are entitled as holders of Common Stock.
(d) Anti-dilution Adjustments. The Series A Conversion Price, the
-------------------------
Series B Conversion Price and the Series C Conversion Price and the number and
type of securities to be received upon conversion of the Series A Preferred
Stock, the Series B Preferred Stock and the Series C Preferred Stock, shall be
subject to adjustment as follows:
(i) Dividend, Subdivision, Combination or Reclassification of Common
----------------------------------------------------------------
Stock. In the event that the Corporation shall at any time or from time to
- -----
time, prior to conversion of the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock, as the case may be, (w) pay a
dividend or make a distribution (other than a dividend or distribution paid or
made to holders of shares of Series A Preferred Stock, the holders of shares of
Series B Preferred Stock and the holders of shares of Series C Preferred Stock,
or in which holders of such shares participate, in the manner provided in
Section 3 hereof) on the outstanding shares of Common Stock payable in Capital
Stock, (x) subdivide the outstanding shares of Common Stock into a larger number
of shares, (y) combine the outstanding shares of Common Stock into a smaller
number of shares or (z) issue any shares of its Capital Stock in a
reclassification of the Common Stock (other than any such event for which an
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adjustment is made pursuant to another clause of this Section 7(d)), then, and
in each such case, the Series A Conversion Price, the Series B Conversion Price
and the Series C Conversion Price in effect immediately prior to such event
shall be adjusted (and any other appropriate actions shall be taken by the
Corporation) so that the holder of any share of Series A Preferred Stock, the
holder of any share of Series B Preferred Stock and the holder of any share of
Series C Preferred Stock, respectively, thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock or other
securities of the Corporation that such holder would have owned or would have
been entitled to receive upon or by reason of any of the events described above,
had such share of Series A Preferred Stock, such share of Series B Preferred
Stock and such share of Series C Preferred Stock been converted immediately
prior to the occurrence of such event. An adjustment made pursuant to this
Section 7(d)(i) shall become effective retroactively (x) in the case of any such
dividend or distribution, to a date immediately following the close of business
on the record date for the determination of holders of Common Stock entitled to
receive such dividend or distribution or (y) in the case of any such
subdivision, combination or reclassification, to the close of business on the
day upon which such corporate action becomes effective.
(ii) Issuance of Rights to Purchase Common Stock below Conversion
------------------------------------------------------------
Price. If the Corporation shall at any time or from time to time prior to
- -----
conversion of the Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock, issue or sell any shares of Common Stock or Common
Stock Equivalents at a price per share (the "New Issue Price") of Common Stock
that is less than the Series A Conversion Price, the Series B Conversion Price
or the Series C Conversion Price then in effect as of the record date or Issue
Date referred to in the following sentence, as the case may be (the "Relevant
Date") (treating the price per share of Common Stock, in the case of the
issuance of any Common Stock Equivalent, as equal to (x) the sum of the price
for such Common Stock Equivalent plus any additional consideration payable
(without regard to any anti-dilution adjustments) upon the conversion, exchange
or exercise of such Common Stock Equivalent divided by (y) the number of shares
of Common Stock initially underlying such Common Stock Equivalent), other than
(A) issuances or sales for which an adjustment is made pursuant to another
paragraph of this Section 7(d) and (B) issuances of Common Stock in connection
with an Excluded Transaction, then, and in each such case, to the extent that
----
such Series A Conversion Price, Series B Conversion Price or Series C Conversion
Price is less than the New Issue Price, such Series A Conversion Price, Series B
Conversion Price and/or Series C Conversion Price, as the case may be, then in
effect shall be adjusted by multiplying such Series A Conversion Price, Series B
-----------
Conversion Price or Series C Conversion Price, as the case may be, in effect on
the day immediately prior to the Relevant Date by a fraction (I) the numerator
of which shall be the sum of the number of shares of Common Stock outstanding on
the Relevant Date plus the number of shares of Common Stock which the aggregate
----
consideration received by the Corporation for the total number of such
additional shares of Common Stock so issued would purchase at such Series A
Conversion Price, Series B Conversion Price or Series C Conversion Price, as the
case may be, on the Relevant Date (or, in the case of Common Stock Equivalents,
the number of shares of Common Stock into which such Common Stock Equivalents
may convert, exchange or be exercised plus the number of shares of Common Stock
which the aggregate amount of any additional consideration initially payable
upon conversion, exchange or exercise of such Common Stock Equivalents would
purchase at such Series A Conversion Price, Series B Conversion Price or Series
C Conversion Price, as the case may be, on the Relevant Date) and (II) the
denominator of which shall be the sum of the
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<PAGE>
number of shares of Common Stock outstanding on the Relevant Date plus the
number of additional shares of Common Stock issued or to be issued (or, in the
case of Common Stock Equivalents, the maximum number of shares of Common Stock
into which such Common Stock Equivalents initially may convert, exchange or be
exercised). Such adjustment shall be made whenever such shares of Common Stock
or Common Stock Equivalents are issued, and shall become effective retroactively
(x) in the case of an issuance to the stockholders of the Corporation, as such,
to a date immediately following the close of business on the record date for the
determination of stockholders entitled to receive such shares of Common Stock or
Common Stock Equivalents and (y) in all other cases, on the date (the "Issue
Date") of such issuance; provided, however, that if any Common Stock Equivalents
-------- -------
(or any portions thereof) which shall have given rise to an adjustment pursuant
to this Section 7(d)(ii) shall have expired or terminated without the exercise
thereof and/or if by reason of the terms of such Common Stock Equivalents there
shall have been an increase or increases, with the passage of time or otherwise,
in the price payable upon the exercise or conversion thereof, then such Series A
Conversion Price, Series B Conversion Price or Series C Conversion Price, as the
case may be, hereunder shall be readjusted (but to no greater extent than
originally adjusted) in order to (A) eliminate from the computation any
additional shares of Common Stock corresponding to such Common Stock Equivalents
as shall have expired or terminated, (B) treat the additional shares of Common
Stock, if any, actually issued or issuable pursuant to the previous exercise of
such Common Stock Equivalents as having been issued for the consideration
actually received and receivable therefor and (C) treat any of such Common Stock
Equivalents which remain outstanding as being subject to exercise or conversion
on the basis of such exercise or conversion price as shall be in effect at the
time.
(iii) Certain Distributions. In case the Corporation shall at any
---------------------
time or from time to time, prior to conversion of the Series A Preferred Stock,
the Series B Preferred Stock and the Series C Preferred Stock, distribute to all
holders of shares of the Common Stock (including any such distribution made in
connection with a merger or consolidation in which the Corporation is the
resulting or surviving Person and the Common Stock is not changed or exchanged)
cash, evidences of indebtedness of the Corporation or another issuer, securities
of the Corporation or another issuer or other assets (excluding dividends or
distributions paid or made to holders of shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock, or in which holders of
such shares participate, in the manner provided in Section 3 hereof, dividends
payable in shares of Common Stock for which adjustment is made under another
paragraph of this Section 7(d) and any distribution in connection with an
Excluded Transaction) or rights or warrants to subscribe for or purchase
securities of the Corporation (excluding those distributions in respect of which
an adjustment in such Series A Conversion Price, Series B Conversion Price and
Series C Conversion Price is made pursuant to another paragraph of this Section
7(d) and any distribution in connection with an Excluded Transaction), then, and
in each such case, the Series A Conversion Price, the Series B Conversion Price
and the Series C Conversion Price then in effect shall be adjusted (and any
other appropriate actions shall be taken by the Corporation) by multiplying such
Series A Conversion Price, Series B Conversion Price and Series C Conversion
Price in effect immediately prior to the date of such distribution by a fraction
(x) the numerator of which shall be the Current Market Price of the Common Stock
immediately prior to the date of distribution less the then fair market value
(as determined by the Board of Directors in the exercise of their fiduciary
duties) of the portion of the cash, evidences of indebtedness, securities or
other assets
-12-
<PAGE>
so distributed or of such rights or warrants applicable to one share of Common
Stock and (y) the denominator of which shall be the Current Market Price of the
Common Stock immediately prior to the date of distribution (but such fraction
shall not be greater than one); provided, however, that no adjustment shall be
-------- -------
made with respect to any distribution of rights or warrants to subscribe for or
purchase securities of the Corporation if the holder of shares of Series A
Preferred Stock, the holder of shares of Series B Preferred Stock and the holder
of shares of Series C Preferred Stock, as the case may be, would otherwise be
entitled to receive such rights or warrants upon conversion at any time of such
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock into Common Stock. Such adjustment shall be made whenever any
such distribution is made and shall become effective retroactively to a date
immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iv) Other Changes. In case the Corporation at any time or from time
-------------
to time, prior to the conversion of the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock, shall take any action
affecting its Common Stock similar to or having an effect similar to any of the
actions described in any of Sections 7(d)(i) through (iii) or Section 7(g) (but
not including any action described in any such Section) and the Board of
Directors in good faith determines that it would be equitable in the
circumstances to adjust the Series A Conversion Price, Series B Conversion Price
and/or the Series C Conversion Price as a result of such action, then, and in
each such case, the Series A Conversion Price, Series B Conversion Price and/or
the Series C Conversion Price shall be adjusted in such manner and at such time
as the Board of Directors in good faith determines would be equitable in the
circumstances (such determination to be evidenced in a resolution, a certified
copy of which shall be mailed to the holders of the shares of Series A Preferred
Stock, the holders of shares of Series B Preferred Stock and the holders of
shares of Series C Preferred Stock).
(v) De Minimis Adjustments. Notwithstanding anything herein to the
----------------------
contrary, no adjustment under this Section 7(d) need be made to the Series A
Conversion Price, the Series B Conversion Price or the Series C Conversion
Price, as the case may be, (A) if the Corporation receives written notice from
holders of all of the outstanding shares of Series A Preferred Stock, all of the
outstanding shares of Series B Preferred Stock or all of the outstanding shares
of Series C Preferred Stock, as the case may be, that no such adjustment is
required or (B) unless such adjustment would require an increase or decrease of
at least 1% of the Series A Conversion Price, the Series B Conversion Price, or
the Series C Conversion Price, as the case may be, then in effect. Any lesser
adjustment shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any adjustment
or adjustments so carried forward, shall amount to an increase or decrease of at
least 1% of such Series A Conversion Price, such Series B Conversion Price or
such Series C Conversion Price, as the case may be. Any adjustment to the
Series A Conversion Price, the Series B Conversion Price or the Series C
Conversion Price, as the case may be, carried forward and not theretofore made
shall be made immediately prior to the conversion of any shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as the
case may be, pursuant hereto.
(e) Abandonment. If the Corporation shall take a record of the
-----------
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to
-13-
<PAGE>
pay or deliver such dividend or distribution, then no adjustment in the Series A
Conversion Price, the Series B Conversion Price or the Series C Conversion Price
shall be required by reason of the taking of such record.
(f) Certificate as to Adjustments. Upon any increase or decrease in
-----------------------------
the Series A Conversion Price, the Series B Conversion Price or the Series C
Conversion Price, the Corporation shall within a reasonable period (not to
exceed 45 days) following any of the foregoing transactions deliver to each
registered holder of Series A Preferred Stock, each registered holder of Series
B Preferred Stock and each registered holder of Series C Preferred Stock a
certificate, signed by (i) the President or a Vice President of the Corporation
and (ii) the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Series A Conversion Price,
Series B Conversion Price and/or Series C Conversion Price then in effect
following such adjustment.
(g) Reorganization, Reclassification. In case of any capital
--------------------------------
reorganization or reclassification or other change of outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value), the Corporation shall execute and
deliver to each holder of Series A Preferred Stock, each holder of Series B
Preferred Stock and each holder of Series C Preferred Stock at least ten (10)
Business Days prior to effecting such reorganization or reclassification a
certificate stating that the holder of each share of Series A Preferred Stock,
the holder of each share of Series B Preferred Stock and the holder of each
share of Series C Preferred Stock shall have the right thereafter to convert
such share of Series A Preferred Stock, Series B Preferred Stock, and Series C
Preferred Stock into the kind and amount of shares of stock or other securities,
property or cash receivable upon such reorganization or reclassification by a
holder of the number of shares of Common Stock into which such share of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock could
have been converted immediately prior to such reorganization or
reclassification, and provision shall be made therefor in the agreement, if any,
relating to such reorganization or reclassification. Such certificate shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 7. The provisions
of this Section 7(g) and any equivalent thereof in any such certificate
similarly shall apply to successive transactions.
(h) Notices. In case at any time or from time to time:
-------
(w) the Corporation shall declare a dividend (or any other
distribution) on its shares of Common Stock;
(x) the Corporation shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe for or purchase
any shares of stock of any class or of any other rights or warrants;
(y) there shall be any reorganization or reclassification
of the Common Stock; or
-14-
<PAGE>
(z) there shall occur the Initial Public Offering, a Merger
or a Sale;
then the Corporation shall mail to each holder of shares of Series A Preferred
Stock, each holder of shares of Series B Preferred Stock and each holder of
shares of Series C Preferred Stock at such holder's address as it appears on the
transfer books of the Corporation, as promptly as possible but in any event at
least ten (10) days prior to the applicable date hereinafter specified, a notice
stating (A) the date on which a record is to be taken for the purpose of such
dividend, distribution or granting of rights or warrants or, if a record is not
to be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution or granting of rights or warrants are to
be determined, or (B) the date on which such reorganization, reclassification,
Initial Public Offering, Merger or Sale is expected to become effective and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for shares of stock or other securities
or property or cash deliverable upon such reorganization, reclassification,
Initial Public Offering, Merger or Sale. Notwithstanding the foregoing, in the
case of any event to which Section 7(g) is applicable, the Corporation shall
also deliver the certificate described in such Section 7(g) to each holder of
Series A Preferred Stock, each holder of Series B Preferred Stock and each
holder of Series C Preferred Stock at least 10 Business Days' prior to effecting
such reorganization or reclassification as aforesaid.
(i) Reservation of Common Stock. The Corporation shall at all times
---------------------------
reserve and keep available for issuance upon the conversion of the Series A
Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock,
such number of its authorized but unissued shares of Common Stock as will from
time to time be sufficient to permit the conversion of all outstanding shares of
Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock and shall take all action to increase the authorized number of
shares of Common Stock if at any time there shall be insufficient authorized but
unissued shares of Common Stock to permit such reservation or to permit the
conversion of all outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock; provided that (i) the holders of
--------
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock vote such shares in favor of any such action that requires a
vote of stockholders and (ii) such holders cause any directors elected by them
pursuant to Section 6(c) to vote in favor of any such action that requires a
vote of the Board of Directors.
(j) No Conversion Tax or Charge. The issuance or delivery of
---------------------------
certificates for Common Stock upon the conversion of shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall be
made without charge to the converting holder of shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock for such
certificates or for any tax in respect of the issuance or delivery of such
certificates or the securities represented thereby, and such certificates shall
be issued or delivered in the respective names of, or (subject to compliance
with the applicable provisions of federal and state securities laws) in such
names as may be directed by, the holders of the shares of Series A Preferred
Stock, the holders of shares of Series B Preferred Stock or the holders of
shares of Series C Preferred Stock converted; provided, however, that the
-------- -------
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate in
a name other than that of the holder of the shares of Series A Preferred Stock,
the holders of shares of Series B Preferred Stock or the holders of shares of
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<PAGE>
Series C Preferred Stock converted, and the Corporation shall not be required to
issue or deliver such certificate unless or until the Person or Persons
requesting the issuance or delivery thereof shall have paid to the Corporation
the amount of such tax or shall have established to the reasonable satisfaction
of the Corporation that such tax has been paid.
8. Certain Remedies. Any registered holder of Series A Preferred
----------------
Stock, any registered holder of Series B Preferred Stock and any registered
holder of Series C Preferred Stock shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Amended and Restated
Certificate of Incorporation and to enforce specifically the terms and
provisions of this Amended and Restated Certificate of Incorporation in any
court of the United States or any state thereof having jurisdiction, this being
in addition to any other remedy to which such holder may be entitled at law or
in equity.
9. Business Day. If any payment shall be required by the terms
------------
hereof to be made on a day that is not a Business Day, such payment shall be
made on the immediately succeeding Business Day.
10. Definitions. As used in this Amended and Restated Certificate of
-----------
Incorporation, the following terms shall have the following meanings (with terms
defined in the singular having comparable meanings when used in the plural and
vice versa), and references to Sections hereof shall be references to Sections
- ---- -----
of Article IV(B) hereof, unless otherwise stated or required by the context:
"Affiliate" shall mean any Person who is an "affiliate" as defined in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act. In
addition, the following shall be deemed to be Affiliates of General Atlantic
Partners 42, L.P.: (a) General Atlantic Partners, LLC, the members of General
Atlantic Partners, LLC and the limited partners of General Atlantic Partners 42,
L.P., General Atlantic Partners 52, L.P. and General Atlantic Partners 57, L.P.;
(b) any Affiliate of General Atlantic Partners, LLC, the members of General
Atlantic Partners, LLC and the limited partners of General Atlantic Partners 42,
L.P., General Atlantic Partners 52, L.P. and General Atlantic Partners 57, L.P.;
(c) any limited liability company or partnership a majority of whose members or
partners, as the case may be, are members of General Atlantic Partners, LLC. In
addition, General Atlantic Partners 42, L.P., General Atlantic Partners 52,
L.P., General Atlantic Partners 57, L.P., GAP Coinvestment Partners, L.P. and
GAP Coinvestment Partners II, L.P. shall be deemed to be Affiliates of one
another.
"Amended and Restated Certificate of Incorporation" shall mean this
Amended and Restated Certificate of Incorporation, as amended from time to time.
"Automatic Conversion Payment" means (a) with respect to each share of
Series A Preferred Stock, a payment equal to the Series A Liquidation
Preference, (b) with respect to each share of Series B Preferred Stock, a
payment equal to the Series B Liquidation Preference and (c) with respect to
each share of Series C Preferred Stock, a payment equal to the Series C
Liquidation Preference.
"Board of Directors" means the Board of Directors of the Corporation.
-16-
<PAGE>
"Business Day" means any day except a Saturday, a Sunday, or other day
on which commercial banks in the State of New York are authorized or required by
law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock (but excluding any debt security whether or not it is exchangeable
for or convertible into such capital stock).
"Commission" means the United States Securities and Exchange
Commission or any similar agency then having jurisdiction to enforce the
Securities Act.
"Common Stock" shall have the meaning ascribed to it in Article IV
hereof.
"Common Stock Equivalent" shall mean any security or obligation which
is by its terms convertible into shares of Common Stock or another Common Stock
Equivalent, and any option, warrant or other subscription or purchase right with
respect to Common Stock.
"Corporation" shall have the meaning ascribed to it in Article I
hereof.
"Current Market Price" per share shall mean, as of the date of
determination, (a) the average of the daily Market Price under clause (a), (b)
or (c) of the definition thereof of the Common Stock during the immediately
preceding thirty (30) trading days ending on such date, and (b) if the Common
Stock is not then listed or admitted to trading on any national securities
exchange or quoted in the over-the-counter market, then the Market Price under
clause (d) of the definition thereof on such date.
"Dividend Payment Date" shall have the meaning ascribed to it in
Section 3(a) hereof.
"Equity Percentage" means (a) with respect to each share of Series A
Preferred Stock, the number of fully paid and nonassessable shares of Common
Stock equal to the product of the number of shares of Series A Preferred Stock
being converted multiplied by the quotient of (x) $20.52 divided by (y) the
Series A Conversion Price, (b) with respect to each share of Series B Preferred
Stock, the number of fully paid and nonassessable shares of Common Stock equal
to the product of the number of shares of Series B Preferred Stock being
converted multiplied by the quotient of (x) $6.00 divided by (y) the Series B
Conversion Price; and (c) with respect to each share of Series C Preferred
Stock, the number of fully paid and nonassessable shares of Common Stock equal
to the product of the number of shares of Series C Preferred Stock being
converted multiplied by the quotient of (x) $3.00 divided by (y) the Series C
Conversion Price.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Excluded Transaction" means (a) any issuance of Common Stock or
Common Stock Equivalents to employees, consultants or directors of the
Corporation pursuant to a stock
-17-
<PAGE>
option plan or other employee benefit arrangement approved by the Board of
Directors that represents not greater than 11.9% of the outstanding shares of
Common Stock on a fully diluted basis immediately prior to the Issue Date,
(b) any issuance of Common Stock (i) upon the conversion of shares of Series A
Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock, (ii) as
a dividend on shares of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock and/or (iii) in connection with any Automatic
Conversion Payment and (c) any issuance of Common Stock upon the conversion or
exercise of any Common Stock Equivalents.
"Initial Public Offering" shall mean the first underwritten public
offering of Common Stock pursuant to an effective registration statement under
the Securities Act.
"Issue Date" shall have the meaning ascribed to it in Section 7(d)(ii)
hereof.
"Junior Stock" shall have the meaning ascribed to it in Section 2(a)
hereof.
"Liquidation" shall mean the voluntary or involuntary liquidation
under applicable bankruptcy or reorganization legislation, or the dissolution or
winding up of the Corporation.
"Market Price" shall mean, as of the date of determination, (a) the
closing price per share of Common Stock on such date published in The Wall
--------
Street Journal or, if no such closing price on such date is published in The
- --------------
Wall Street Journal, the average of the closing bid and asked prices on such
- -------------------
date, as officially reported on the principal national securities exchange
(including, without limitation, The Nasdaq Stock Market, Inc.) on which the
Common Stock is then listed or admitted to trading; or (b) if the Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the National
Association of Securities Dealers, Inc., the last trading price of the Common
Stock on such date; or (c) if there shall have been no trading on such date or
if the Common Stock is not so designated, the average of the reported closing
bid and asked prices of the Common Stock on such date as shown by the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotations System and reported by any member firm of the New York Stock Exchange
selected by the Corporation; or (d) if none of (a), (b) or (c) is applicable, a
market price per share determined at the Corporation's expense by an appraiser
chosen by the holders of a majority of the shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock (voting together as a
single class), or, if no such appraiser is so chosen more than ten (10) Business
Days after notice of the necessity of such calculation shall have been delivered
by the Corporation to the holders of Series B Preferred Stock, then by an
appraiser chosen by the Corporation and reasonably satisfactory to a majority of
the holders of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock (voting together as a single class). Any determination of the
Market Price by an appraiser shall be based on a valuation of the Corporation as
an entirety without regard to any discount for minority interests or disparate
voting rights among classes of Capital Stock.
"Merger" shall mean (x) the merger or consolidation of the Corporation
into or with one or more Persons or (y) the merger or consolidation of one or
more Persons into or with the Corporation, if, in the case of (x) or (y), the
stockholders of the Corporation prior to such
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<PAGE>
merger or consolidation do not retain at least a majority of the voting power of
the surviving Person.
"New Issue Price" shall have the meaning ascribed to it in
Section 7(d)(ii) hereof.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental body or other entity of any kind.
"Relevant Date" shall have the meaning ascribed to it in Section
7(d)(ii) hereof.
"Sale" shall mean the voluntary sale, conveyance, exchange or transfer
to another Person of (i) the voting Capital Stock of the Corporation if, after
such sale, conveyance, exchange or transfer, the stockholders of the Corporation
prior to such sale, conveyance, exchange or transfer do not retain at least a
majority of the voting power of the Corporation or (ii) all or substantially all
of the assets of the Corporation.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Series A Conversion Price" shall have the meaning ascribed to it in
Section 7(a) hereof.
"Series A Liquidation Preference" shall have the meaning ascribed to
it in Section 4(a) hereof.
"Series A Preferred Stock" shall have the meaning ascribed to it in
Article IV hereof.
"Series B Conversion Price" shall have the meaning ascribed to it in
Section 7(a) hereof.
"Series B Liquidation Preference" shall have the meaning ascribed to
it in Section 4(a) hereof.
"Series B Preferred Stock" shall have the meaning ascribed to it in
Article IV hereof.
"Series C Conversion Price" shall have the meaning ascribed to it in
Section 7(a) hereof.
"Series C Liquidation Preference" shall have the meaning ascribed to
it in Section 4(a) hereof.
"Series C Preferred Stock" shall have the meaning ascribed to it in
Article IV hereof.
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<PAGE>
ARTICLE V
DIRECTORS
The authorized number of directors of the Corporation shall be no less
than three (3) and no more than (9), as determined from time to time by the
Board of Directors. Elections of directors need not be by written ballot unless
required by the By-laws of the Corporation. Subject to the rights of the
holders of any series of Preferred Stock as set forth in Article IV(B)(6)(c) of
or elsewhere in this Amended and Restated Certificate of Incorporation or
provided for in a resolution or resolutions adopted by the Board of Directors
providing for the issue thereof, any director may be removed from office either
with or without cause at any time by the affirmative vote of the holders of a
majority of the outstanding stock of the Corporation entitled to vote, given at
a meeting of the stockholders called for that purpose, or by the consent of the
holders of a majority of the outstanding stock of the Corporation entitled to
vote, given in accordance with Section 228 of the General Corporation Law.
ARTICLE VI
LIMITATION OF LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or to its stockholders for monetary damages for breach of fiduciary
duty as a director of the Corporation, except for liability (i) for any breach
of the director's duty of loyalty to the Corporation or to its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law, or (iv) for any transaction from which the director derives any
improper personal benefit. If, after approval of this Article VI by the
stockholders of the Corporation, the General Corporation Law is amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the General Corporation Law, as so
amended.
Any repeal or modification of this Article VI by the stockholders of
the Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify, in the manner and to the full extent
permitted by law, any person (or the estate of any person) who was or is a party
to, or is threatened to be made a party to, any threatened, pending or
contemplated action, suit or proceeding, whether or not by or in the right of
the Corporation, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
Where required by law, the indemnification provided for herein shall be made
only as authorized in the specific case upon a determination, in the manner
provided by
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<PAGE>
law, that indemnification of the director, officer, employee or agent is proper
in the circumstances. The Corporation may, to the full extent permitted by law,
purchase and maintain insurance on behalf of any such person against any
liability which may be asserted against such person. To the full extent
permitted by law, the indemnification provided herein shall include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement,
and, in the manner provided by law, any such expenses shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding. The indemnification provided herein shall not be deemed to limit the
right of the Corporation to indemnify any other person for any such expenses to
the full extent permitted by law, nor shall it be deemed exclusive of any other
rights to which any person seeking indemnification from the Corporation may be
entitled under any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office. Such indemnification shall continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such
person.
ARTICLE VIII
BY-LAWS
In furtherance and not in limitation of the powers conferred upon the
Board of Directors by law, the Board of Directors shall have the power to make,
adopt, alter, amend and repeal from time to time the By-laws of the Corporation
subject to the right of the stockholders entitled to vote with respect thereto
to alter, amend and repeal By-laws made by the Board of Directors.
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<PAGE>
IN WITNESS WHEREOF, this Second Amended and Restated Certificate of
Incorporation has been signed by the President of the Corporation this ______
day of January, 2000.
_____________________________
Peter J. Boni
President
-22-
<PAGE>
Exhibit 3.3
To be effective upon closing
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PRIME RESPONSE, INC.
Prime Response, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify as follows:
1. The Corporation filed its original Certificate of Incorporation with the
Secretary of the State of Delaware on September 26, 1997, which was subsequently
amended on October 23, 1997, December 18, 1997, September 18, 1998, February 25,
1999, July 1, 1999, July 13, 1999, July 15, 1999, amended and restated on
October 1, 1999, further amended on November 19, 1999 and amended and restated
on 1999.
---------
2. The Board of Directors of the Corporation duly adopted a resolution,
pursuant to Sections 141, 242 and 245 of the General Corporation Law of the
State of Delaware, setting forth this Third Amended and Restated Certificate of
Incorporation of the Corporation and declaring said Third Amended and Restated
Certificate of Incorporation advisable. The stockholders of the Corporation
duly approved said proposed Third Amended and Restated Certificate of
Incorporation by written consent in accordance with Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware, and written notice of such
consent is being promptly given to all stockholders who have not consented in
writing to said Third Amended and Restated Certificate of Incorporation. The
resolution setting forth the Third Amended and Restated Certificate of
Incorporation is as follows:
RESOLVED: That the Certificate of Incorporation of the Corporation, be and
- -------- hereby is amended and restated in its entirety so that the same
shall read as follows:
FIRST. The name of the Corporation is:
Prime Response, Inc.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 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.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 61,000,000 shares, consisting of
(i) 60,000,000 shares of Common
<PAGE>
Stock, $.01 par value per share ("Common Stock"), and (ii) 1,000,000 shares of
Preferred Stock, $.01 par value per share ("Preferred Stock").
The following is a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation (and
written actions in lieu of meetings).
A. COMMON STOCK.
------------
1. General. The voting, dividend and liquidation rights of the holders of
-------
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for
------
each share held at all meetings of stockholders. There shall be no cumulative
voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock from
---------
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
-----------
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
---------------
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such
-2-
<PAGE>
resolutions, all to the full extent now or hereafter permitted by the General
Corporation Law of Delaware. Without limiting the generality of the foregoing,
the resolutions providing for issuance of any series of Preferred Stock may
provide that such series shall be superior or rank equally or be junior to the
Preferred Stock of any other series to the extent permitted by law. Except as
otherwise provided in this Certificate of Incorporation, no vote of the holders
of the Preferred Stock or Common Stock shall be a prerequisite to the
designation or issuance of any shares of any series of the Preferred Stock
authorized by and complying with the conditions of this Certificate of
Incorporation, the right to have such vote being expressly waived by all present
and future holders of the capital stock of the Corporation.
FIFTH. The Corporation shall have a perpetual existence.
SIXTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
1. Election of directors need not be by written ballot, except as and
to the extent provided in the By-Laws of the Corporation.
2. The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation, except as and to the extent provided in
the By-Laws of the Corporation.
SEVENTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH. Except to the extent that the General Corporation Law of Delaware
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
-3-
<PAGE>
NINTH. 1. Actions, Suits and Proceedings Other than by or in the Right of
--------------------------------------------------------------
the Corporation. The Corporation shall indemnify each 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 he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his 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 he
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 his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 7
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation. Notwithstanding anything to the contrary in this Article, the
Corporation shall not indemnify an Indemnitee to the extent such Indemnitee is
reimbursed from the proceeds of insurance, and in the event the Corporation
makes any indemnification payments to an Indemnitee and such Indemnitee is
subsequently reimbursed from the proceeds of insurance, such Indemnitee shall
promptly refund such indemnification payments to the Corporation to the extent
of such insurance reimbursement.
2. Actions or Suits by or in the Right of the Corporation. The
------------------------------------------------------
Corporation shall indemnify any Indemnitee 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 he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent permitted by law,
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the 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 of Delaware shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
-4-
<PAGE>
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding the
------------------------------------------------
other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
---------------
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
4. Notification and Defense of Claim. As a condition precedent to his
---------------------------------
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6 below, in
-------------------
the event that the Corporation does not assume the defense pursuant to Section 4
of this Article of any action, suit, proceeding or investigation of which the
Corporation receives notice under this Article, any expenses (including
attorneys' fees) incurred by an Indemnitee in defending a civil or criminal
action, suit, proceeding or investigation or any appeal therefrom shall be paid
by the Corporation in advance of the final disposition of such matter; provided,
--------
however, that the
- -------
-5-
<PAGE>
payment of such expenses incurred by an Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such undertaking shall be accepted without reference to the financial ability of
the Indemnitee to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification or
-----------------------------
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines within such 60-day period that the Indemnitee did not
meet the applicable standard of conduct set forth in Section 1 or 2, as the case
may be. Such determination shall be made in each instance by (a) a majority
vote of the directors of the Corporation consisting of persons who are not at
that time parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) a majority vote of a committee of
disinterested directors designated by majority vote of disinterested directors,
whether or not a quorum, (c) a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the action, suit or proceeding in question, (d) independent
legal counsel (who may, to the extent permitted by law, be regular legal counsel
to the Corporation), or (e) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by this
--------
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the
Corporation to have made a determination prior to the commencement of such
action that indemnification is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Corporation pursuant to Section 6 that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of
conduct. The Indemnitee's expenses (including attorneys' fees) incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
--------------------
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of
-6-
<PAGE>
or relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses provided
------------
by this Article shall not be deemed exclusive of any other rights to which an
Indemnitee seeking indemnification or advancement of expenses may be entitled
under any law (common or statutory), agreement or vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in any other capacity while holding office for the Corporation,
and shall continue as to an Indemnitee who has ceased to be a director or
officer, and shall inure to the benefit of the estate, heirs, executors and
administrators of the Indemnitee. Nothing contained in this Article shall be
deemed to prohibit, and the Corporation is specifically authorized to enter
into, agreements with officers and directors providing indemnification rights
and procedures different from those set forth in this Article. In addition, the
Corporation may, to the extent authorized from time to time by its Board of
Directors, grant indemnification rights to other employees or agents of the
Corporation or other persons serving the Corporation and such rights may be
equivalent to, or greater or less than, those set forth in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
-----------------------
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance, at
---------
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
-----------------------
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
-7-
<PAGE>
14. Definitions. Terms used herein and defined in Section 145(h) and
-----------
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of Delaware is
----------------------
amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
TENTH. Except as otherwise provided herein, the Corporation reserves the
right to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute and this Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ELEVENTH. This Article is inserted for the management of the business and
for the conduct of the affairs of the Corporation.
1. Number of Directors. The number of directors of the Corporation shall
-------------------
not be less than three. The exact number of directors within the limitations
specified in the preceding sentence shall be fixed from time to time by, or in
the manner provided in, the Corporation's By-laws.
2. Classes of Directors. The Board of Directors shall be and is divided
--------------------
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class. If a fraction is contained in
the quotient arrived at by dividing the designated number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class I, and if such fraction is two-thirds, one of the extra directors shall be
a member of Class I and one of the extra directors shall be a member of Class
II, unless otherwise provided from time to time by resolution adopted by the
Board of Directors.
3. Election of Directors. Elections of directors need not be by written
---------------------
ballot except as and to the extent provided in the By-laws of the Corporation.
4. Terms of Office. Each director shall serve for a term ending on the
---------------
date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting in 2001; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting in 2002; and each initial director in Class III shall serve for a term
ending on the date of the annual meeting in the year 2003; and provided further,
that the term of each director shall be subject to the election and
qualification of his successor and to his earlier death, resignation or removal.
5. Allocation of Directors Among Classes in the Event of Increases or
------------------------------------------------------------------
Decreases in the Number of Directors. In the event of any increase or decrease
- ------------------------------------
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he is a member
and (ii) the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to ensure that no one class has more than one
director more than any
-8-
<PAGE>
other class. To the extent possible, consistent with the foregoing rule, any
newly created directorships shall be added to those classes whose terms of
office are to expire at the latest dates following such allocation, and any
newly eliminated directorships shall be subtracted from those classes whose
terms of offices are to expire at the earliest dates following such allocation,
unless otherwise provided from time to time by resolution adopted by the Board
of Directors.
6. Quorum; Action at Meeting. A majority of the directors at any time in
-------------------------
office shall constitute a quorum for the transaction of business. In the event
one or more of the directors shall be disqualified to vote at any meeting, then
the required quorum shall be reduced by one for each director so disqualified,
provided that in no case shall less than one-third of the number of directors
fixed pursuant to Section 1 above constitute a quorum. If at any meeting of the
Board of Directors there shall be less than such a quorum, a majority of those
present may adjourn the meeting from time to time. Every act or decision done
or made by a majority of the directors present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board of Directors unless
a greater number is required by law, by the By-laws of the Corporation or by
this Certificate of Incorporation.
7. Removal. Directors of the Corporation may be removed only for cause by
-------
the affirmative vote of the holders of at least two-thirds of the shares of the
capital stock of the Corporation issued and outstanding and entitled to vote.
8. Vacancies. Any vacancy in the Board of Directors, however occurring,
---------
including a vacancy resulting from an enlargement of the size of the Board of
Directors, shall be filled only by a vote of a majority of the directors then in
office, although less than a quorum, or by a sole remaining director. A
director elected to fill a vacancy shall be elected to hold office until the
next election of the class for which such director shall have been chosen,
subject to the election and qualification of his successor and to his earlier
death, resignation or removal.
9. Stockholder Nominations and Introduction of Business, Etc. Advance
---------------------------------------------------------
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided by the By-laws of the Corporation.
10. Amendments to Article. Notwithstanding any other provisions of law,
---------------------
this Certificate of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article ELEVENTH.
TWELFTH. Stockholders of the Corporation may not take any action by
written consent in lieu of a meeting. Notwithstanding any other provisions of
law, the Certificate of Incorporation or the By-Laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article TWELFTH.
-9-
<PAGE>
THIRTEENTH. Special meetings of stockholders may be called at any time by
only the Chairman of the Board of Directors, the Chief Executive Officer,
President or the Board of Directors. Business transacted at any special meeting
of stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting. Notwithstanding any other provision of law,
this Certificate of Incorporation or the By-Laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast in any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article THIRTEENTH.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Third Amended and Restated Certificate of Incorporation
to be signed by its President this day of 1999.
----- --------,
PRIME RESPONSE, INC.
By:
-------------------
Peter J. Boni
President
-10-
<PAGE>
Exhibit 3.4
______________________________
BY-LAWS
OF
PRIME RESPONSE GROUP INC.
______________________________
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Section Page
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<S> <C>
ARTICLE I OFFICES........................................................................................................... 1
SECTION 1.01 Registered Office....................................................................................... 1
SECTION 1.02 Other Offices........................................................................................... 1
ARTICLE II MEETINGS OF STOCKHOLDERS......................................................................................... 1
SECTION 2.01 Annual Meetings......................................................................................... 1
SECTION 2.02 Special Meetings........................................................................................ 1
SECTION 2.03 Notice of Meetings...................................................................................... 1
SECTION 2.04 Waiver of Notice........................................................................................ 2
SECTION 2.05 Adjournments............................................................................................ 2
SECTION 2.06 Quorum.................................................................................................. 2
SECTION 2.07 Voting.................................................................................................. 3
SECTION 2.08 Proxies................................................................................................. 3
SECTION 2.09 Stockholders' Consent in Lieu of Meeting................................................................ 3
ARTICLE III BOARD OF DIRECTORS.............................................................................................. 3
SECTION 3.01 General Powers.......................................................................................... 3
SECTION 3.02 Number and Term of Office............................................................................... 3
SECTION 3.03 Resignation............................................................................................. 4
SECTION 3.04 Removal................................................................................................. 4
SECTION 3.05 Vacancies............................................................................................... 4
SECTION 3.06 Meetings................................................................................................ 4
SECTION 3.07 Committees of the Board................................................................................. 5
SECTION 3.08 Directors' Consent in Lieu of Meeting................................................................... 6
SECTION 3.09 Action by Means of Telephone or Similar Communications Equipment........................................ 6
SECTION 3.10 Compensation............................................................................................ 6
ARTICLE IV OFFICERS......................................................................................................... 6
SECTION 4.01 Officers................................................................................................ 6
SECTION 4.02 Authority and Duties.................................................................................... 7
SECTION 4.03 Term of Office, Resignation and Removal................................................................. 7
SECTION 4.04 Vacancies............................................................................................... 7
SECTION 4.05 The Chairman............................................................................................ 7
SECTION 4.06 The President........................................................................................... 7
SECTION 4.07 Vice Presidents......................................................................................... 8
SECTION 4.08 The Secretary........................................................................................... 8
SECTION 4.09 Assistant Secretaries................................................................................... 8
SECTION 4.10 The Treasurer........................................................................................... 8
SECTION 4.11 Assistant Treasurers.................................................................................... 8
SECTION 4.12 Compensation............................................................................................ 9
ARTICLE V INTERESTED PERSONS................................................................................................ 9
SECTION 5.01 Transactions with Interested Persons.................................................................... 9
SECTION 5.02 Quorum.................................................................................................. 9
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI SHARES AND TRANSFERS OF SHARES................................................................................... 9
SECTION 6.01 Certificates Evidencing Shares.......................................................................... 9
SECTION 6.02 Stock Ledger............................................................................................ 10
SECTION 6.03 Transfers of Shares..................................................................................... 10
SECTION 6.04 Addresses of Stockholders............................................................................... 10
SECTION 6.05 Lost, Destroyed and Mutilated Certificates.............................................................. 10
SECTION 6.06 Regulations............................................................................................. 10
SECTION 6.07 Fixing Date for Determination of Stockholders of Record................................................. 11
ARTICLE VII SEAL 11
SECTION 7.01 Seal.................................................................................................... 11
ARTICLE VIII FISCAL YEAR.................................................................................................... 11
SECTION 8.01 Fiscal Year............................................................................................. 11
ARTICLE IX VOTING OF SHARES IN OTHER CORPORATIONS........................................................................... 11
SECTION 9.01 Voting of Shares in Other Corporations.................................................................. 11
ARTICLE X INDEMNIFICATION................................................................................................... 11
SECTION 10.01 Indemnification......................................................................................... 11
ARTICLE XI AMENDMENTS....................................................................................................... 12
SECTION 11.01 Amendments.............................................................................................. 12
</TABLE>
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<PAGE>
BY-LAWS
OF
PRIME RESPONSE GROUP INC.
ARTICLE I
OFFICES
SECTION 1.01 Registered Office. Unless and until otherwise determined by
-----------------
Prime Response Group Inc. (the "Corporation"), the registered office of the
-----------
Corporation in the State of Delaware shall be at the office of The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801 and the registered
agent in charge thereof shall be The Corporation Trust Company.
SECTION 1.02 Other Offices. The Corporation may also have an office or
-------------
offices at any other place or places within or without the State of Delaware as
the Board of Directors of the Corporation (the "Board") may from time to time
-----
determine or the business of the Corporation may from time to time require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01 Annual Meetings. The annual meeting of stockholders of the
---------------
Corporation for the election of directors of the Corporation ("Directors") and
---------
for the transaction of such other business as may properly come before such
meeting, shall be held at such place, date and time as shall be fixed by the
Board and designated in the notice or waiver of notice of such annual meeting;
provided, however, that no annual meeting of stockholders need be held if all
- -------- -------
actions, including the election of Directors, required by the General
Corporation Law of the State of Delaware (the "General Corporation Law") to be
-----------------------
taken at such annual meeting are taken by written consent in lieu of meeting
pursuant to Section 2.09 hereof.
SECTION 2.02 Special Meetings. Special meetings of stockholders for any
----------------
purpose or purposes may be called by the Board or the Chairman of the
Corporation (the "Chairman"), the President of the Corporation (the "President")
-------- ---------
or the Secretary of the Corporation (the "Secretary") or by the recordholders of
---------
at least ten percent of the shares of common stock of the Corporation issued and
outstanding and entitled to vote thereat, to be held at such place, date and
time as shall be designated in the notice or waiver of notice thereof.
SECTION 2.03 Notice of Meetings. (a) Except as otherwise provided by law,
------------------
written notice of each annual or special meeting of stockholders stating the
place, date and time of such meeting and, in the case of a special meeting, the
purpose or
<PAGE>
purposes for which such meeting is to be held, shall be given personally or by
first-class mail (airmail in the case of international communications) to each
stockholder of record (a "Stockholder") entitled to vote thereat, not
-----------
less than 10 nor more than 60 days before the date of such meeting. If mailed,
such notice shall be deemed to be given when deposited in the United States
mail, postage prepaid, directed to the Stockholder at such Stockholder's address
as it appears on the records of the Corporation. If, prior to the time of
mailing, the Secretary shall have received from any Stockholder a written
request that notices intended for such Stockholder are to be mailed to some
address other than the address that appears on the records of the Corporation,
notices intended for such Stockholder shall be mailed to the address designated
in such request.
(b) Notice of a special meeting of Stockholders may be given by the
person or persons calling the meeting, or, upon the written request of such
person or persons, such notice shall be given by the Secretary on behalf of such
person or persons. If the person or persons calling a special meeting of
Stockholders give notice thereof, such person or persons shall deliver a copy of
such notice to the Secretary. Each request to the Secretary for the giving of
notice of a special meeting of Stockholders shall state the purpose or purposes
of such meeting.
SECTION 2.04 Waiver of Notice. Notice of any annual or special meeting of
----------------
Stockholders need not be given to any Stockholder who files a written waiver of
notice with the Secretary, signed by the person entitled to notice, whether
before or after such meeting. Neither the business to be transacted at, nor the
purpose of, any meeting of Stockholders need be specified in any written waiver
of notice thereof. Attendance of a Stockholder at a meeting, in person or by
proxy, shall constitute a waiver of notice of such meeting, except when such
Stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the grounds that
the notice of such meeting was inadequate or improperly given.
SECTION 2.05 Adjournments. Whenever a meeting of Stockholders, annual or
------------
special, is adjourned to another date, time or place, notice need not be given
of the adjourned meeting if the date, time and place thereof are announced at
the meeting at which the adjournment is taken. If the adjournment is for more
than 30 days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
Stockholder entitled to vote thereat. At the adjourned meeting, any business may
be transacted which might have been transacted at the original meeting.
SECTION 2.06 Quorum. Except as otherwise provided by law or the
------
Certificate of Incorporation of the Corporation, as amended from time to time
(the "Certificate of Incorporation"), the recordholders of a majority of the
----------------------------
shares of capital stock (the "Shares") entitled to vote thereat, present in
------
person or by proxy, shall constitute a quorum for the transaction of business at
all meetings of Stockholders, whether annual or special. If, however, such
quorum shall not be present in person or by proxy at any meeting of
Stockholders, the Stockholders entitled to vote thereat may
2
<PAGE>
adjourn the meeting from time to time in accordance with Section 2.05 hereof
until a quorum shall be present in person or by proxy.
SECTION 2.07 Voting. Except as otherwise provided in the Certificate of
------
Incorporation, each Stockholder shall be entitled to one vote for each Share
held of record by such Stockholder. Except as otherwise provided by law or the
Certificate of Incorporation, when a quorum is present at any meeting of
Stockholders, the vote of the recordholders of a majority of the Shares
constituting such quorum shall decide any question brought before such meeting.
SECTION 2.08 Proxies. Each Stockholder entitled to vote at a meeting of
-------
Stockholders or to express, in writing, consent to or dissent from any action of
Stockholders without a meeting may authorize another person or persons to act
for such Stockholder by proxy. Such proxy shall be filed with the Secretary
before such meeting of Stockholders or such action of Stockholders without a
meeting, at such time as the Board may require. No proxy shall be voted or acted
upon more than three years from its date, unless the proxy provides for a longer
period.
SECTION 2.09 Stockholders' Consent in Lieu of Meeting. Except as may
----------------------------------------
otherwise be provided by law or in the Certificate of Incorporation, any action
required by the General Corporation Law to be taken at any annual or special
meeting of Stockholders, and any action which may be taken at any annual or
special meeting of Stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the recordholders of Shares having not less than the
minimum number of votes necessary to authorize or take such action at a meeting
at which the recordholders of all Shares entitled to vote thereon were present
and voted.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01 General Powers. Except as may otherwise be provided by law
--------------
or in the Certificate of Incorporation, the business and affairs of the
Corporation shall be managed by the Board, which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by law, the
Certificate of Incorporation or these By-laws directed or required to be
exercised or done by Stockholders.
SECTION 3.02 Number and Term of Office. The number of Directors shall be
-------------------------
five. Directors need not be Stockholders. Directors shall be elected at the
annual meeting of Stockholders or, if, in accordance with Section 2.01 hereof,
no such annual meeting is held, by written consent in lieu of meeting pursuant
to Section 2.09 hereof, and each Director shall hold office until his successor
is elected and qualified, or until his earlier death or resignation or removal
in the manner hereinafter provided.
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<PAGE>
SECTION 3.03 Resignation. Any Director may resign at any time by giving
-----------
written notice to the Board, the Chairman or the Secretary. Such resignation
shall take effect at the time specified in such notice or, if the time be not
specified, upon receipt thereof by the Board, the Chairman or the Secretary, as
the case may be. Unless otherwise specified therein, acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.04 Removal. Except as otherwise provided in the Certificate of
-------
Incorporation, any or all of the Directors may be removed, with or without
cause, at any time by vote of the recordholders of a majority of the Shares then
entitled to vote at an election of Directors, or by written consent of the
recordholders of such Shares pursuant to Section 2.09 hereof.
SECTION 3.05 Vacancies. Except as otherwise provided in the Certificate
---------
of Incorporation, vacancies occurring on the Board as a result of the removal of
Directors without cause may be filled only by vote of the recordholders of a
majority of the Shares then entitled to vote at an election of Directors, or by
written consent of such recordholders pursuant to Section 2.09 hereof. Vacancies
occurring on the Board for any other reason, including, without limitation,
vacancies occurring as a result of the creation of new directorships that
increase the number of Directors, may be filled by such vote or written consent
or by vote of the Board or by written consent of the Directors pursuant to
Section 3.08 hereof. If the number of Directors then in office is less than a
quorum, such other vacancies may be filled by vote of a majority of the
Directors then in office or by written consent of all such Directors pursuant to
Section 3.08 hereof. Unless earlier removed pursuant to Section 3.04 hereof,
each Director chosen in accordance with this Section 3.05 shall hold office
until the next annual election of Directors by the Stockholders and until his
successor shall be elected and qualified.
SECTION 3.06 Meetings. As soon as practicable after each annual election
--------
of Directors by the Stockholders, the Board shall meet for the purpose of
organization and the transaction of other business, unless it shall have
transacted all such business by written consent pursuant to Section 3.08 hereof.
(a) Other Meetings. Other meetings of the Board shall be held at such
-------------
times as the Chairman, the President, the Secretary or a majority of the Board
shall from time to time determine.
(b) Notice of Meetings. The Secretary shall give written notice to
------------------
each Director of each meeting of the Board, which notice shall state the place,
date, time and purpose of such meeting. Notice of each such meeting shall be
given to each Director, if by mail, addressed to him at his residence or usual
place of business, at least five days before the day on which such meeting is to
be held, or shall be sent to him at such place by telecopy, telegraph, cable, or
other form of recorded communication, or be delivered personally or by telephone
not later than the day before the day on which such meeting is to be held. A
written waiver of notice, signed by the Director entitled to notice, whether
before or after the time of the meeting referred to in such waiver, shall be
deemed equivalent to notice. Neither the business to be transacted at, nor the
purpose of any
4
<PAGE>
meeting of the Board need be specified in any written waiver of notice thereof.
Attendance of a Director at a meeting of the Board shall constitute a waiver of
notice of such meeting, except as provided by law.
(c) Place of Meetings. The Board may hold its meetings at such place
-----------------
or places within or without the State of Delaware as the Board may from time to
time determine, or as shall be designated in the respective notices or waivers
of notice of such meetings.
(d) Quorum and Manner of Acting. One-third of the total number of
---------------------------
Directors then in office (but in no event less than two if the total number of
directorships, including vacancies, is greater than one and in no event a number
less than one-third of the total number of directorships, including vacancies)
shall be present in person at any meeting of the Board in order to constitute a
quorum for the transaction of business at such meeting, and the vote of a
majority of those Directors present at any such meeting at which a quorum is
present shall be necessary for the passage of any resolution or act of the
Board, except as otherwise expressly required by law, the Certificate of
Incorporation or these By-laws. In the absence of a quorum for any such meeting,
a majority of the Directors present thereat may adjourn such meeting from time
to time until a quorum shall be present.
(e) Organization. At each meeting of the Board, one of the
------------
following shall act as chairman of the meeting and preside, in the following
order of precedence:
(i) the Chairman, if any;
(ii) the President;
(iii) any Director chosen by a majority of the Directors
present.
The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary of the Corporation (an "Assistant Secretary"), if an
-------------------
Assistant Secretary is present) whom the chairman of the meeting shall appoint
shall act as secretary of such meeting and keep the minutes thereof.
SECTION 3.07 Committees of the Board. The Board may, by resolution passed
-----------------------
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more Directors. The Board may designate one or
more Directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of such committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another Director to act at the
meeting in the place of any such absent or disqualified member. Any committee of
the Board, to the extent provided in the resolution of the Board designating
such committee, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to
5
<PAGE>
all papers which may require it, provided, however, that no such committee shall
-------- -------
have such power of authority in reference to amending the Certificate of
Incorporation (except that such a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board as provided in Section 151(a) of the General Corporation Law, fix
the designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes of stock of the Corporation or fix the number of
shares of any series of stock or authorize the increase or decrease of the
number of shares of any series), adopting an agreement of merger or
consolidation under Section 251 or 252 of the General Corporation Law,
recommending to the Stockholders the sale, lease or exchange of all or
substantially all the Corporation's property and assets, recommending to the
Stockholders a dissolution of the Corporation or the revocation of a
dissolution, or amending these By-laws; provided further, however, that, unless
-------- ------- -------
expressly so provided in the resolution of the Board designating such committee,
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. Each committee of
the Board shall keep regular minutes of its proceedings and report the same to
the Board when so requested by the Board.
SECTION 3.08 Directors' Consent in Lieu of Meeting. Any action required
-------------------------------------
or permitted to be taken at any meeting of the Board or of any committee thereof
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by all
the members of the Board or such committee and such consent is filed with the
minutes of the proceedings of the Board or such committee.
SECTION 3.09 Action by Means of Telephone or Similar Communications
------------------------------------------------------
Equipment. Any one or more members of the Board, or of any committee thereof,
- ---------
may participate in a meeting of the Board or such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting by such means shall constitute presence in person at such meeting.
SECTION 3.10 Compensation. Directors shall not receive any stated salary
------------
for their services as directors or as members of committees, except as
authorized by the Stockholders. No such compensation or reimbursement shall
preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor.
ARTICLE IV
OFFICERS
SECTION 4.01 Officers. The officers of the Corporation (the "Officers")
-------- --------
shall be the President, the Secretary and a Treasurer and may include a
Chairman, one or more Vice Presidents of the Corporation ("Vice Presidents")
---------------
6
<PAGE>
(including, one or more Executive and/or Senior Vice Presidents), one or more
Assistant Secretaries, one or more Assistant Treasurers of the Corporation
("Assistant Treasurers") and such other Officers as the Board may determine. Any
--------------------
two or more offices may be held by the same person.
SECTION 4.02 Authority and Duties. All Officers shall have such authority
--------------------
and perform such duties in the management of the Corporation as may be provided
in these By-laws or, to the extent not so provided, by resolution of the Board.
SECTION 4.03 Term of Office, Resignation and Removal. (a) Each Officer
---------------------------------------
shall be appointed by the Board and shall hold office for such term as may be
determined by the Board. Each Officer shall hold office until his successor has
been appointed and qualified or his earlier death or resignation or removal in
the manner hereinafter provided. The Board may require any Officer to give
security for the faithful performance of his duties.
(b) Any Officer may resign at any time by giving written notice to the
Board, the Chairman, the President or the Secretary. Such resignation shall take
effect at the time specified in such notice or, if the time be not specified,
upon receipt thereof by the Board, the Chairman, the President or the Secretary,
as the case may be. Unless otherwise specified therein, acceptance of such
resignation shall not be necessary to make it effective.
(c) All Officers and agents appointed by the Board shall be subject to
removal, with or without cause, at any time by the Board.
SECTION 4.04 Vacancies. Any vacancy occurring in any office of the
---------
Corporation, for any reason, shall be filled by action of the Board. Unless
earlier removed pursuant to Section 4.03 hereof, any Officer appointed by the
Board to fill any such vacancy shall serve only until such time as the unexpired
term of his predecessor expires unless reappointed by the Board.
SECTION 4.05 The Chairman. The Chairman, if one shall be appointed, shall
------------
have the power to call special meetings of Stockholders, to call special
meetings of the Board and, if present, to preside at all meetings of
Stockholders and all meetings of the Board. The Chairman shall perform all
duties incident to the office of Chairman of the Board and all such other duties
as may from time to time be assigned to him by the Board or these By-laws.
SECTION 4.06 The President. The President shall have general and active
-------------
management and control of the business and affairs of the Corporation, subject
to the control of the Board, and shall see that all orders and resolutions of
the Board are carried into effect. The President shall perform all duties
incident to the office of President and all such other duties as may from time
to time be assigned to him by the Board or these By-laws.
7
<PAGE>
SECTION 4.07 Vice Presidents. Vice Presidents, if any, in order of their
---------------
seniority or in any other order determined by the Board, shall generally assist
the President and perform such other duties as the Board or the President shall
prescribe, and in the absence or disability of the President, shall perform the
duties and exercise the powers of the President.
SECTION 4.08 The Secretary. The Secretary shall, to the extent
-------------
practicable, attend all meetings of the Board and all meetings of Stockholders
and shall record all votes and the minutes of all proceedings in a book to be
kept for that purpose, and shall perform the same duties for any committee of
the Board when so requested by such committee. He shall give or cause to be
given notice of all meetings of Stockholders and of the Board, shall perform
such other duties as may be prescribed by the Board, the Chairman or the
President and shall act under the supervision of the President. He shall keep in
safe custody the seal of the Corporation and affix the same to any instrument
that requires that the seal be affixed to it and which shall have been duly
authorized for signature in the name of the Corporation and, when so affixed,
the seal shall be attested by his signature or by the signature of the Treasurer
of the Corporation (the "Treasurer") or an Assistant Secretary or Assistant
---------
Treasurer of the Corporation. He shall keep in safe custody the certificate
books and stockholder records and such other books and records of the
Corporation as the Board, the Chairman or the President may direct and shall
perform all other duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Board, the Chairman or
the President.
SECTION 4.09 Assistant Secretaries. Assistant Secretaries of the
---------------------
Corporation, if any, in order of their seniority or in any other order
determined by the Board, shall generally assist the Secretary and perform such
other duties as the Board or the Secretary shall prescribe, and, in the absence
or disability of the Secretary, shall perform the duties and exercise the powers
of the Secretary.
SECTION 4. 10 The Treasurer. The Treasurer shall have the care and custody
-------------
of all the funds of the Corporation and shall deposit such funds in such banks
or other depositories as the Board, or any Officer or Officers, or any Officer
and agent jointly, duly authorized by the Board, shall, from time to time,
direct or approve. He shall disburse the funds of the Corporation under the
direction of the Board and the President. He shall keep a full and accurate
account of all moneys received and paid on account of the Corporation and shall
render a statement of his accounts whenever the Board, the Chairman or the
President shall so request. He shall perform all other necessary actions and
duties in connection with the administration of the financial affairs of the
Corporation and shall generally perform all the duties usually appertaining to
the office of treasurer of a corporation. When required by the Board, he shall
give bonds for the faithful discharge of his duties in such sums and with such
sureties as the Board shall approve.
SECTION 4.11 Assistant Treasurers. Assistant Treasurers of the
--------------------
Corporation, if any, in order of their seniority or in any other order
determined by the
8
<PAGE>
Board, shall generally assist the Treasurer and perform such other duties as the
Board or the Treasurer shall prescribe, and, in the absence or disability of the
Treasurer, shall perform the duties and exercise the powers of the Treasurer.
SECTION 4.12 Compensation. The compensation of the Officers of the
------------
Corporation shall be fixed by the Board.
ARTICLE V
INTERESTED PERSONS
SECTION 5.01 Transactions with Interested Persons. 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 or committee thereof
which authorizes the contract or transaction, or solely because the votes of one
or more of such Directors or Officers are counted for such purpose, if:
(a) The material facts as to that person's relationship or interest
and as to the contract or transaction are disclosed or are known to the Board
or the committee, and the Board 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
(b) The material facts as to that person'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
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board, a committee
thereof, or the Stockholders.
SECTION 5.02 Quorum. Common or interested Directors may be counted in
------
determining the presence of a quorum at a meeting of the Board or of a committee
which authorizes the contract or transaction.
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
SECTION 6.01 Certificates Evidencing Shares. Shares shall be evidenced by
------------------------------
certificates in such form or forms as shall be approved by the Board.
Certificates shall be issued in consecutive order and shall be numbered in the
order of their issue, and shall be signed by the Chairman, the President or any
Vice President and
9
<PAGE>
by the Secretary, any Assistant Secretary, the Treasurer or any Assistant
Treasurer. Any or all of the signatures on a certificate may be a facsimile. In
the event any such Officer who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to hold such office or to be
employed by the Corporation before such certificate is issued, such certificate
may be issued by the Corporation with the same effect as if such Officer had
held such office on the date of issue.
SECTION 6.02 Stock Ledger. A stock ledger in one or more counterparts
------------
shall be kept by the Secretary, in which shall be recorded the name and address
of each person, firm or corporation owning the Shares evidenced by each
certificate evidencing Shares issued by the Corporation, the number of Shares
evidenced by each such certificate, the date of issuance thereof and, in the
case of cancellation, the date of cancellation. Except as otherwise expressly
required by law, the person in whose name Shares stand on the stock ledger of
the Corporation shall be deemed the owner and recordholder thereof for all
purposes.
SECTION 6.03 Transfers of Shares. Registration of transfers of Shares
-------------------
shall be made only in the stock ledger of the Corporation upon request of the
registered holder of such Shares, or of his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary, and upon the
surrender of the certificate or certificates evidencing such Shares properly
endorsed or accompanied by a stock power duly executed, together with such proof
of the authenticity of signatures as the Corporation may reasonably require.
SECTION 6.04 Addresses of Stockholders. Each Stockholder shall designate
-------------------------
to the Secretary an address at which notices of meetings and all other corporate
notices may be served or mailed to such Stockholder, and, if any Stockholder
shall fail to so designate such an address, corporate notices may be served upon
such Stockholder by mail directed to the mailing address, if any, as the same
appears in the stock ledger of the Corporation or at the last known mailing
address of such Stockholder.
SECTION 6.05 Lost, Destroyed and Mutilated Certificates. Each
------------------------------------------
recordholder of Shares shall promptly notify the Corporation of any loss,
destruction or mutilation of any certificate or certificates evidencing any
Share or Shares of which he is the recordholder. The Board may, in its
discretion, cause the Corporation to issue a new certificate in place of any
certificate theretofore issued by it and alleged to have been mutilated, lost,
stolen or destroyed, upon the surrender of the mutilated certificate or, in the
case of loss, theft or destruction of the certificate, upon satisfactory proof
of such loss, theft or destruction, and the Board may, in its discretion,
require the recordholder of the Shares evidenced by the lost, stolen or
destroyed certificate or his legal representative to give the Corporation a bond
sufficient to indemnify the Corporation against any claim made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
SECTION 6.06 Regulations. The Board may make such other rules and
-----------
regulations as it may deem expedient, not inconsistent with these By-laws,
concerning the issue, transfer and registration of certificates evidencing
Shares.
10
<PAGE>
SECTION 6.07 Fixing Date for Determination of Stockholders of Record. In
-------------------------------------------------------
order that the Corporation may determine the Stockholders entitled to notice of
or to vote at any meeting of Stockholders or any adjournment thereof, or to
express consent to, or to dissent from, corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than 60 nor less than 10 days before the date of such meeting, nor more than 60
days prior to any other such action. A determination of the Stockholders
entitled to notice of or to vote at a meeting of Stockholders shall apply to any
adjournment of such meeting; provided, however, that the Board may fix a new
-------- -------
record date for the adjourned meeting.
ARTICLE VII
SEAL
SECTION 7.01 Seal. The Board may approve and adopt a corporate seal,
----
which shall be in the form of a circle and shall bear the full name of the
Corporation, the year of its incorporation and the words "Corporate Seal
Delaware".
ARTICLE VIII
FISCAL YEAR
SECTION 8.01 Fiscal Year. The fiscal year of the Corporation shall end on
-----------
the thirty-first day of December of each year unless changed by resolution of
the Board.
ARTICLE IX
VOTING OF SHARES IN OTHER CORPORATIONS
SECTION 9.01 Voting of Shares in Other Corporations. Shares in other
--------------------------------------
corporations which are held by the Corporation may be represented and voted by
the Chairman, President or a Vice President of the Corporation or by proxy or
proxies appointed by one of them. The Board may, however, appoint some other
person to vote the shares.
ARTICLE X
INDEMNIFICATION
SECTION 10.01 Indemnification. The Corporation shall indemnify, in the
---------------
manner and to the full extent permitted by law, any person (or the estate of any
person) who was or is a party to, or is threatened to be made a party to, any
threatened, pending or completed action, suit or proceeding, whether or not by
or in the right of the
11
<PAGE>
Corporation, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
Where required by law, the indemnification provided for herein shall be made
only as authorized in the specific case upon a determination in the manner
provided by law, that indemnification of the director, officer,employee or agent
is proper in the circumstances. The Corporation may, to the full extent
permitted by law, purchase and maintain insurance on behalf of any such person
against any liability which may be asserted against such person. To the full
extent permitted by law, the indemnification provided herein shall include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, and, in the manner provided by law, any such expenses shall be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding. The indemnification provided herein shall not be deemed to limit the
right of the Corporation to indemnify any other person for any such expenses to
the full extent permitted by law, nor shall it be deemed exclusive of any other
rights to which any person seeking indemnification from the Corporation may be
entitled under any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office. Such indemnification shall continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such
person.
ARTICLE XI
AMENDMENTS
SECTION 11.01 Amendments. Any By-law (including these By-laws) may be
----------
adopted, amended or repealed by the vote of the recordholders of a majority of
the Shares then entitled to vote at an election of Directors or by written
consent of Stockholders pursuant to Section 2.09 hereof, or by vote of the Board
or by a written consent of Directors pursuant to Section 3.08 hereof.
12
<PAGE>
AMENDMENT TO BY-LAWS OF PRIME RESPONSE GROUP INC.
The following sentence shall be added to the end of Section 3.02:
"The number of Directors may be changed from time to time by action of the
Stockholders or action of the Board."
Approved and adopted by the Board of Directors
On November 1, 1997
<PAGE>
Exhibit 3.5
AMENDED AND RESTATED BY-LAWS
OF
PRIME RESPONSE, INC.
ARTICLE 1 - Stockholders
------------------------
1.1 Place of Meetings. All meetings of stockholders shall be held at such
-----------------
place within or without the State of Delaware as may be designated from time to
time by the Board of Directors or the President or, if not so designated, at the
registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the election
--------------
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Board of
Directors or the President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed by the Board
of Directors or the President and stated in the notice of the meeting. If no
annual meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
If no annual meeting is held in accordance with the foregoing provisions, a
special meeting may be held in lieu of the annual meeting, and any action taken
at that special meeting shall have the same effect as if it had been taken at
the annual meeting, and in such case all references in these By-laws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may be called at
----------------
any time by the Chairman of the Board of Directors, the President or the Board
of Directors. Business transacted at any special meeting of stockholders shall
be limited to matters relating to the purpose or purposes stated in the notice
of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
------------------
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
<PAGE>
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at the stockholder's address as it
appears on the records of the corporation.
1.5 Voting List. The officer who has charge of the stock ledger of the
-----------
corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, at a place within the city 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 of the meeting, and may be inspected by any
stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
------
Incorporation or these By-laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any
------------
other time and to any other place at which a meeting of stockholders may be held
under these By-laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each
------------------
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
by the General Corporation Law of the State of Delaware, the Certificate of
Incorporation or these By-laws. Each stockholder of record entitled to vote at
a meeting of stockholders, or to express consent or dissent to corporate action
in writing without a meeting, may vote or express such consent or dissent in
person or may authorize another person or persons to vote or act for him by
written proxy executed by the stockholder or his authorized agent and delivered
to the Secretary of the corporation. No such
-2-
<PAGE>
proxy shall be voted or acted upon after three years from the date of its
execution, unless the proxy expressly provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
-----------------
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these By-laws. Any election by stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at the election.
1.10 Nomination of Directors. Only persons who are nominated in
------------------------
accordance with the following procedures shall be eligible for election as
directors. Nomination for election to the Board of Directors of the corporation
at a meeting of stockholders may be made by the Board of Directors or by any
stockholder of the corporation entitled to vote for the election of directors at
such meeting who complies with the notice procedures set forth in this Section
1.10. Such nominations, other than those made by or on behalf of the Board of
Directors, shall be made by notice in writing delivered or mailed by first class
United States mail, postage prepaid, to the Secretary, and received not less
than 60 days nor more than 90 days prior to such meeting; provided, however,
that if less than 70 days' notice or prior public disclosure of the date of the
meeting is given to stockholders, such nomination shall have been mailed or
delivered to the Secretary not later than the close of business on the 10th day
following the date on which the notice of the meeting was mailed or such public
disclosure was made, whichever occurs first. Such notice shall set forth (a) as
to each proposed nominee (i) the name, age, business address and, if known,
residence address of each such nominee, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares of stock of the
corporation which are beneficially owned by each such nominee, and (iv) any
other information concerning the nominee that must be disclosed as to nominees
in proxy solicitations pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to be named as
a nominee and to serve as a director if elected); and (b) as to the stockholder
giving the notice (i) the name and address, as they appear on the corporation's
books, of such stockholder and (ii) the class and number of shares of the
corporation which are beneficially owned by such stockholder. The corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as a director of the corporation.
-3-
<PAGE>
The chairman of the meeting may, if the facts warrant, determine and declare to
the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
1.11 Notice of Business at Annual Meetings. At an annual meeting of the
-------------------------------------
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before an annual meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, if such business relates to the election of directors of the
corporation, the procedures in Section 1.10 must be complied with. If such
business relates to any other matter, the stockholder must have given timely
notice thereof in writing to the Secretary. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the corporation not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the date on which
such notice of the date of the meeting was mailed or such public disclosure was
made, whichever occurs first. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting (a) 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, (b) the name and address, as they appear on the corporation's books, of
the stockholder proposing such business, (c) the class and number of shares of
the corporation which are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. Notwithstanding anything
in these By-laws to the contrary, no business shall be conducted at any annual
meeting except in accordance with the procedures set forth in this Section 1.11
and except that any stockholder proposal which complies with Rule 14a-8 of the
proxy rules (or any successor provision) promulgated under the Securities
Exchange Act of 1934, as amended, and is to be included in the corporation's
proxy statement for an annual meeting of stockholders shall be deemed to comply
with the requirements of this Section 1.11.
The chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that business was not properly brought before the meeting in
accordance with the provisions of this
-4-
<PAGE>
Section 1.11, and if he should so determine, the chairman shall so declare to
the meeting that any such business not properly brought before the meeting shall
not be transacted.
1.12 Action without Meeting. Stockholders may not take any action by
----------------------
written consent in lieu of a meeting.
1.13 Organization. The Chairman of the Board, or in his absence the Vice
-------------
Chairman of the Board designated by the Chairman of the Board, or the President,
in the order named, shall call meetings of the stockholders to order, and shall
act as chairman of such meeting; provided, however, that the Board of Directors
may appoint any stockholder to act as chairman of any meeting in the absence of
the Chairman of the Board. The Secretary of the corporation shall act as
secretary at all meetings of the stockholders; but in the absence of the
Secretary at any meeting of the stockholders, the presiding officer may appoint
any person to act as secretary of the meeting.
ARTICLE 2 - Directors
---------------------
2.1 General Powers. The business and affairs of the corporation shall be
--------------
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law, the
Certificate of Incorporation or these By-laws. In the event of a vacancy in the
Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.
2.2 Number; Election and Qualification. The number of directors which
----------------------------------
shall constitute the whole Board of Directors shall be determined by resolution
of the Board of Directors, but in no event shall be less than three. The number
of directors may be decreased at any time and from time to time by a majority of
the directors then in office, but only to eliminate vacancies existing by reason
of the death, resignation, removal or expiration of the term of one or more
directors. The directors shall be elected at the annual meeting of stockholders
by such stockholders as have the right to vote on such election. Directors need
not be stockholders of the corporation.
2.3 Classes of Directors. The Board of Directors shall be and is divided
--------------------
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class. If a fraction is contained in
the quotient arrived at by dividing the designated
-5-
<PAGE>
number of directors by three, then, if such fraction is one-third, the extra
director shall be a member of Class I, and if such fraction is two-thirds, one
of the extra directors shall be a member of Class I and one of the extra
directors shall be a member of Class II, unless otherwise provided from time to
time by resolution adopted by the Board of Directors.
2.4 Terms of Office. Each director shall serve for a term ending on the
---------------
date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting of stockholders in
2000; each initial director in Class II shall serve for a term ending on the
date of the annual meeting of stockholders in 2001; and each initial director in
Class III shall serve for a term ending on the date of the annual meeting of
stockholders in 2002; and provided further, that the term of each director shall
be subject to the election and qualification of his successor and to his earlier
death, resignation or removal.
2.5 Allocation of Directors Among Classes in the Event of Increases or
------------------------------------------------------------------
Decreases in the Number of Directors. In the event of any increase or decrease
- ------------------------------------
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he is a member
and (ii) the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to ensure that no one class has more than one
director more than any other class. To the extent possible, consistent with the
foregoing rule, any newly created directorships shall be added to those classes
whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
2.6 Vacancies. Any vacancy in the Board of Directors, however occurring,
---------
including a vacancy resulting from an enlargement of the size of the Board,
shall be filled only by vote of a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office, and a director chosen to fill a position resulting from
an increase in the number of directors shall hold office until the next election
of the class for which such director shall have been chosen, subject to the
election and qualification of his successor and to his earlier death,
resignation or removal.
2.7 Resignation. Any director may resign by delivering his written
-----------
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be
-6-
<PAGE>
effective upon receipt unless it is specified to be effective at some other time
or upon the happening of some other event.
2.8 Regular Meetings. Regular meetings of the Board of Directors may be
----------------
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
2.9 Special Meetings. Special meetings of the Board of Directors may be
----------------
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, President, two or more directors, or by
one director in the event that there is only a single director in office.
2.10 Notice of Special Meetings. Notice of any special meeting of
---------------------------
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 24 hours in advance of the meeting, (ii) by sending a telegram, telecopy,
telex or electronic mail message, or delivering written notice by hand, to his
last known business or home address at least 24 hours in advance of the meeting,
or (iii) by mailing written notice to his last known business or home address at
least 72 hours in advance of the meeting. A notice or waiver of notice of a
meeting of the Board of Directors need not specify the purposes of the meeting.
2.11 Meetings by Telephone Conference Calls. Directors or any members of
---------------------------------------
any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.12 Quorum. A majority of the total number of the whole Board of
-------
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any
-7-
<PAGE>
such meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
2.13 Action at Meeting. At any meeting of the Board of Directors at which
------------------
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these By-laws.
2.14 Action by Consent. Any action required or permitted to be taken at
------------------
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
2.15 Removal. Directors of the corporation may be removed only for cause
--------
by the affirmative vote of the holders of two-thirds of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote.
2.16 Committees. The Board of Directors may designate one or more
-----------
committees, each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, 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. Each such committee shall keep minutes and make such reports as
the Board of Directors may from time to time request. Except as the Board of
Directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the directors or in such
rules, its business shall be conducted as nearly as possible in the same manner
as is provided in these By-laws for the Board of Directors.
2.17 Compensation of Directors. Directors may be paid such compensation
--------------------------
for their services and such reimbursement for expenses of attendance at meetings
as the Board of
-8-
<PAGE>
Directors may from time to time determine. No such payment shall preclude any
director from serving the corporation or any of its parent or subsidiary
corporations in any other capacity and receiving compensation for such service.
ARTICLE 3 - Officers
--------------------
3.1 Enumeration. The officers of the corporation shall consist of a
-----------
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
--------
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or more
-------------
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
------
Incorporation or by these By-laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by delivering his
-----------------------
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who resigns
or is removed shall have any right to any compensation as an officer for any
period following his resignation or removal, or any right to damages on account
of such removal, whether his compensation be by
-9-
<PAGE>
the month or by the year or otherwise, unless such compensation is expressly
provided in a duly authorized written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring in
---------
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice Chairman of the Board. The Board of
----------------------------------------------------
Directors may appoint a Chairman of the Board. If the Board of Directors
appoints a Chairman of the Board, he shall perform such duties and possess such
powers as are assigned to him by the Board of Directors. If the Board of
Directors appoints a Vice Chairman of the Board, he shall, in the absence or
disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties and
possess such other powers as may from time to time be vested in him by the Board
of Directors.
3.8 President. The President shall, subject to the direction of the Board
---------
of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders, if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors has
designated the Chairman of the Board or another officer as Chief Executive
Officer, the President shall be the Chief Executive Officer of the corporation.
The President shall perform such other duties and shall have such other powers
as the Board of Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties and
---------------
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall perform
------------------------------------
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are
-10-
<PAGE>
incident to the office of the secretary, including without limitation the duty
and power to give notices of all meetings of stockholders and special meetings
of the Board of Directors, to attend all meetings of stockholders and the Board
of Directors and keep a record of the proceedings, to maintain a stock ledger
and prepare lists of stockholders and their addresses as required, to be
custodian of corporate records and the corporate seal and to affix and attest to
the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers as the
Board of Directors, the President or the Secretary may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting of
stockholders or directors, the person presiding at the meeting shall designate a
temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such
----------------------------------
duties and shall have such powers as may from time to time be assigned to him by
the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such powers as
the Board of Directors, the President or the Treasurer may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled to such
---------
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
-11-
<PAGE>
ARTICLE 4 - Capital Stock
-------------------------
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
-----------------
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the corporation shall
---------------------
be entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
him in the corporation. Each such certificate shall be signed by, or in the
name of the corporation by, the Chairman or Vice Chairman, if any, of the Board
of Directors, or the President or a Vice President, and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any restriction on
transfer pursuant to the Certificate of Incorporation, the By-laws, applicable
securities laws or any agreement among any number of stockholders or among such
holders and the corporation shall have conspicuously noted on the face or back
of the certificate either the full text of the restriction or a statement of the
existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and regulations
---------
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these By-laws, the corporation shall be entitled to treat the record
holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
to such stock, regardless of any transfer, pledge or other disposition of such
stock until the shares have been transferred on the books of the corporation in
accordance with the requirements of these By-laws.
-12-
<PAGE>
4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a
--------------------------------------
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a
-----------
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE 5 - General Provisions
------------------------------
5.1 Fiscal Year. Except as from time to time otherwise designated by the
-----------
Board of Directors, the fiscal year of the corporation shall begin on the first
day of January in each year and end on the last day of December in each year.
5.2 Corporate Seal. The corporate seal shall be in such form as shall be
--------------
approved by the Board of Directors.
-13-
<PAGE>
5.3 Waiver of Notice. Whenever any notice whatsoever is required to be
----------------
given by law, by the Certificate of Incorporation or by these By-laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
5.4 Voting of Securities. Except as the directors may otherwise
--------------------
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
5.5 Evidence of Authority. A certificate by the Secretary, or an
---------------------
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
5.6 Certificate of Incorporation. All references in these By-laws to the
----------------------------
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
5.7 Transactions with Interested Parties. No contract or transaction
------------------------------------
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association or other
organization in which one or more of the 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 a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his 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 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;
-14-
<PAGE>
(2) The material facts as to his 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
(3) 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 of the Board of Directors, 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.
5.8 Severability. Any determination that any provision of these By-laws
------------
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-laws.
5.9 Pronouns. All pronouns used in these By-laws shall be deemed to refer
--------
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
ARTICLE 6 - Amendments
----------------------
6.1 By the Board of Directors. These By-laws may be altered, amended or
-------------------------
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
6.2 By the Stockholders. Except as otherwise provided in Section 6.3,
-------------------
these By-laws may be altered, amended or repealed or new by-laws may be adopted
by the affirmative vote of the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
any regular or special meeting of stockholders, provided notice of such
alteration, amendment, repeal or adoption of new by-laws shall have been stated
in the notice of such regular or special meeting.
6.3 Certain Provisions. Notwithstanding any other provision of law, the
------------------
Certificate of Incorporation or these By-laws, and notwithstanding the fact that
a lesser percentage may be
-15-
<PAGE>
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote shall be required to amend or repeal, or to
adopt any provision inconsistent with Section 1.3, Section 1.10, Section 1.11,
Section 1.12, Section 1.13, Article 2 or Article 6 of these By-laws.
-16-
<PAGE>
EXHIBIT 4.1
[Prime Response Logo]
[ ] Number Prime Response, Inc. [ ] Shares
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR CERTAIN DEFINITIONS
================================================================================
CUSIP 74158B 10 0
THIS CERTIFIES THAT
is the owner of
================================================================================
fully-paid and non-assessable shares of the COMMON STOCK, $.01 par value, of
===============================PRIME RESPONSE, INC.=============================
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this certificate properly
endorsed.
This certificate and the shares of Common Stock represented hereby are received
and held subject to the laws of the State of Delaware and to the Certificate of
Incorporation and the By-laws of the Corporation, all as from time to time
amended, and the owner of this certificate by accepting the same expressly
assents thereto. This certificate is not valid unless countersigned by the
Transfer Agent and registered by the Registrar.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed
by the facsimile signatures of its duly authorized officers and a facsimile of
its corporate seal to be hereunto affixed.
Dated:
/s/ Frederick H. Phillips /s/ Peter J. Boni
Senior Vice President President
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
BY:
------------------------------
Authorized Signature
[PRIME RESPONSE, INC., 1997, DELAWARE]
<PAGE>
PRIME RESPONSE, INC.
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OR SERIES OF
STOCK. THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL, OR OTHER SPECIAL RIGHTS OF EACH CLASS OR SERIES THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _________Custodian_________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act ________________________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value received, ____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
_______________________________________________________________________Attorney
to transfer the said shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated________________
_______________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
Signature(s) Guaranteed:________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
________________________________________________________________________________
AMERICAN BANK NOTE COMPANY
55TH STREET AND SANSOM STREET
PHILADELPHIA, PA 19139
(215) 764-8600
________________________________________________________________________________
SALES: D. BURNS: 617-786-7600
________________________________________________________________________________
/NET/BANKNOTE/HOME 15/PRIME/H64836
________________________________________________________________________________
PRODUCTION COORDINATOR: LISA MARTIN: 215-764-8625
PROOF OF JANUARY 13, 2000
PRIME
H 64836 BACK
________________________________________________________________________________
OPERATOR: eg
________________________________________________________________________________
NEW
________________________________________________________________________________
<PAGE>
Exhibit 5.1
[HALE AND DORR LLP LETTERHEAD]
February 3, 2000
Prime Response, Inc.
150 CambridgePark Drive
Cambridge, Massachusetts 02140
Re: Registration Statement on Form S-1
----------------------------------
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration
Statement on Form S-1 (File No. 333-92461) (the "Registration Statement") filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), for the registration
of 3,500,000 shares of Common Stock, $0.01 par value per share (the "Shares"),
of Prime Response, Inc., a Delaware corporation (the "Company"), including
525,000 Shares issuable upon exercise of an over-allotment option granted by the
Company.
The Shares are to be sold by the Company pursuant to an underwriting
agreement (the "Underwriting Agreement") to be entered into by and among the
Company and FleetBoston Robertson Stephens Inc., Dain Rauscher Incorporated and
SG Cowen Securities Corporation, as representatives of the several underwriters
named in the Underwriting Agreement, the form of which has been filed as
Exhibit 1 to the Registration Statement.
We are acting as counsel for the Company in connection with the issue and
sale by the Company of the Shares. We have examined signed copies of the
Registration Statement as filed with the Commission. We have also examined and
relied upon the Underwriting Agreement, minutes of meetings of the stockholders
and the Board of Directors of the Company as provided to us by the Company,
stock record books of the Company as provided to us by the Company, the
Certificate of Incorporation and By-Laws of the Company, each as restated and/or
amended to date, and such other documents as we have deemed necessary for
purposes of rendering the opinions hereinafter set forth.
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as copies, the authenticity of the originals of such latter documents and the
legal competence of all signatories to such documents.
We assume that the appropriate action will be taken, prior to the offer and
sale of the Shares in accordance with the Underwriting Agreement, to register
and qualify the Shares for sale under all applicable state securities or "blue
sky" laws.
We express no opinion herein as to the laws of any state or jurisdiction
other than the state laws of the Commonwealth of Massachusetts, the General
Corporation Law of the State of Delaware and the federal laws of the United
States of America.
<PAGE>
EXHIBIT 10.1
PRIME RESPONSE GROUP, INC.
1998 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1998 Stock Option/Stock Issuance Plan is intended to promote the
interests of Prime Response Group, Inc., a Delaware corporation, by providing
eligible persons in the Corporation's employ or service with the opportunity to
acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Corporation as an incentive for them to continue in such employ
or service.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two (2) separate equity programs:
(i) the Option Grant Program under which eligible persons may, at
the discretion of the Plan Administrator, be granted options to purchase
shares of Common Stock, and
(ii) the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common
Stock directly, either through the immediate purchase of such shares or as
a bonus for services rendered the Corporation (or any Parent or
Subsidiary).
B. The provisions of Articles One and Four shall apply to both equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee. Members of the Committee shall serve for such period of time as
the Board may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.
B. The Plan Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such
<PAGE>
interpretations of, the Plan and any outstanding options thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator shall be final
and binding on all parties who have an interest in the Plan or any option
thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are as follows:
(i) Employees,
(ii) non-employee members of the Board or the non-employee members
of the board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to determine,
(i) with respect to the grants under the Option Grant Program, which eligible
persons are to receive the option grants, the time or times when those grants
are to be made, the number of shares to be covered by each such grant, the
status of the granted option as either an Incentive Option or a Non-Statutory
Option, the time or times when each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term for which
the option is to remain outstanding, and (ii) with respect to stock issuances
under the Stock Issuance Program, which eligible persons are to receive such
stock issuances, the time or times when such issuances are to be made, the
number of shares to be issued to each Participant, the vesting schedule (if any)
applicable to the issued shares and the consideration to be paid by the
Participant for such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed 1,666,000
shares.
B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the option exercise price or direct issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan.
2
<PAGE>
C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan and (ii) the number and/or class of securities and the exercise
price per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive. In no event shall
any such adjustments be made in connection with the conversion of one or more
outstanding shares of the Corporation's preferred stock into shares of Common
Stock.
3
<PAGE>
ARTICLE TWO
OPTION GRANT PROGRAM
--------------------
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
--------
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The exercise price per share shall not be less than
eighty-five percent (85%) of the Fair Market Value per share of Common
Stock on the option grant date.
(ii) If the person to whom the option is granted is a 10%
Stockholder, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section I of Article Four
and the documents evidencing the option, be payable in cash or check made
payable to the Corporation. Should the Common Stock be registered under Section
12 of the 1934 Act at the time the option is exercised, then the exercise price
may also be paid as follows:
(i) in shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or
(ii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable instructions (A) to a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (B) to the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
4
<PAGE>
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
----------------------------
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option grant. However, no option shall have a term in excess of ten (10)
years measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
--------------------------------
(i) The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(ii) Should the Optionee cease to remain in Service for any reason
other than death, Disability or Misconduct, then the Optionee shall have a
period of three (3) months following the date of such cessation of Service
during which to exercise each outstanding option held by such Optionee.
(iii) Should Optionee's Service terminate by reason of
Disability, then the Optionee shall have a period of twelve (12) months
following the date of such cessation of Service during which to exercise
each outstanding option held by such Optionee.
(iv) If the Optionee dies while holding an outstanding option,
then the personal representative of his or her estate or the person or
persons to whom the option is transferred pursuant to the Optionee's will
or the laws of inheritance shall have a twelve (12)-month period following
the date of the Optionee's death to exercise such option.
(v) Under no circumstances, however, shall any such option be
exercisable after the specified expiration of the option term.
(vi) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding with respect to any and all option shares for which the
option is not otherwise at the time exercisable or in which the Optionee is
not otherwise at that time vested.
(vii) Should Optionee's Service be terminated for Misconduct,
then all outstanding options held by the Optionee shall terminate
immediately and cease to remain outstanding.
5
<PAGE>
2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following Optionee's cessation of Service or death from
the limited period otherwise in effect for that option to such greater
period of time as the Plan Administrator shall deem appropriate, but in no
event beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
shares of Common Stock for which such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
additional installments in which the Optionee would have vested under the
option had the Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
------------------
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become the
recordholder of the purchased shares.
E. UNVESTED SHARES. The Plan Administrator shall have the discretion
---------------
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right. The Plan Administrator may not impose a vesting schedule upon
any option grant or the shares of Common Stock subject to that option which is
more restrictive than twenty percent (20%) per year vesting, with the initial
vesting to occur not later than one (1) year after the option grant date.
However, such limitation shall not be applicable to any option grants made to
individuals who are officers of the Corporation, non-employee Board members or
independent consultants.
F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is
--------------------
first registered under Section 12 of the 1934 Act, the Corporation shall have
the right of first refusal with respect to any proposed disposition by the
Optionee (or any successor in interest) of any shares of Common Stock issued
under the Plan. Such right of first refusal shall be exercisable in accordance
with the terms established by the Plan Administrator and set forth in the
document evidencing such right.
G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
----------------------------------
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death.
H. WITHHOLDING. The Corporation's obligation to deliver shares of
-----------
Common Stock upon the exercise of any options granted under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
6
<PAGE>
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of the Plan shall be applicable to Incentive Options. Options which
are specifically designated as Non-Statutory Options shall not be subject to the
terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
-----------
B. EXERCISE PRICE. The exercise price per share shall not be less
--------------
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
-----------------
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1) calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the option term shall not exceed five (5)
years measured from the option grant date.
III. CORPORATE TRANSACTION
A. The shares subject to each option outstanding under the Plan at
the time of a Corporate Transaction shall automatically vest in full so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock at
the time subject to that option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, the shares subject to an
outstanding option shall NOT vest on such an accelerated basis if and to the
extent: (i) such option is assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and the Corporation's repurchase rights
with respect to the unvested option shares are concurrently assigned to such
successor corporation (or parent thereof) or (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to those unvested option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) in connection with such Corporate
7
<PAGE>
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction, had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same.
E. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration (in whole or in part) of
one or more outstanding options (and the immediate termination of the
Corporation's repurchase rights with respect to the shares subject to those
options) upon the occurrence of a Corporate Transaction, whether or not those
options are to be assumed in the Corporate Transaction.
F. The Plan Administrator shall also have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to structure such option so that the shares subject
to that option will automatically vest on an accelerated basis should the
Optionee's Service terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which the option is assumed and the
repurchase rights applicable to those shares do not otherwise terminate. Any
option so accelerated shall remain exercisable for the fully-vested option
shares until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (1)-year period measured from the effective date of the
Involuntary Termination. In addition, the Plan Administrator may provide that
one or more of the outstanding repurchase rights with respect to shares held by
the Optionee at the time of such Involuntary Termination shall immediately
terminate on an accelerated basis, and the shares subject to those terminated
rights shall accordingly vest at that time.
G. The portion of any Incentive Option accelerated in connection with
a Corporate Transaction shall remain exercisable as an Incentive Option only to
the extent the applicable One Hundred Thousand Dollar limitation is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under the
Federal tax laws.
H. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
8
<PAGE>
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new option grant date.
9
<PAGE>
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. PURCHASE PRICE.
--------------
1. The purchase price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the issue date. However, the purchase
price per share of Common Stock issued to a 10% Stockholder shall not be less
than one hundred and ten percent (110%) of such Fair Market Value.
2. Subject to the provisions of Section I of Article Four, shares
of Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent
or Subsidiary).
B. VESTING PROVISIONS.
------------------
1. Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified performance
objectives. However, the Plan Administrator may not impose a vesting schedule
upon any stock issuance effected under the Stock Issuance Program which is more
restrictive than twenty percent (20%) per year vesting, with initial vesting to
occur not later than one (1) year after the issuance date. Such limitation shall
not apply to any Common Stock issuances made to the officers of the Corporation,
non-employee Board members or independent consultants.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to
10
<PAGE>
the Participant's unvested shares of Common Stock and (ii) such escrow
arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to such surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the non-
completion of the vesting schedule applicable to such shares. Such waiver shall
result in the immediate vesting of the Participant's interest in the shares of
Common Stock as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
C. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is
--------------------
first registered under Section 12 of the 1934 Act, the Corporation shall have
the right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest) of any shares of Common Stock issued
under the Stock Issuance Program. Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan Administrator
and set forth in the document evidencing such right.
II. CORPORATE TRANSACTION
A. Upon the occurrence of a Corporate Transaction, all outstanding
repurchase rights under the Stock Issuance Program shall terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, except to the extent: (i) those repurchase
rights are assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights with respect to those shares remain
outstanding, to provide that those rights shall
11
<PAGE>
automatically terminate on an accelerated basis, and the shares of Common Stock
subject to those terminated rights shall immediately vest, in the event the
Participant's Service should subsequently terminate by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of any Corporate Transaction in which those
repurchase rights are assigned to the successor corporation (or parent thereof).
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
12
<PAGE>
ARTICLE FOUR
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value of
those shares) plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
II. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the Board, but no
option granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's stockholders. If
such stockholder approval is not obtained within twelve (12) months after the
date of the Board's adoption of the Plan, then all options previously granted
under the Plan shall terminate and cease to be outstanding, and no further
options shall be granted and no shares shall be issued under the Plan. Subject
to such limitation, the Plan Administrator may grant options and issue shares
under the Plan at any time after the effective date of the Plan and before the
date fixed herein for termination of the Plan.
B. The Plan shall terminate upon the earliest of (i) the expiration
of the ten (10)-year period measured from the date the Plan is adopted by the
Board, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. All options and
unvested stock issuances outstanding at the time of a clause (i) termination
event shall continue to have full force and effect in accordance with the
provisions of the documents evidencing such options or issuances.
III. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws and regulations.
B. Options may be granted under the Option Grant Program and shares
may be issued under the Stock Issuance Program which are in each instance in
excess of the number
13
<PAGE>
of shares of Common Stock then available for issuance under the Plan, provided
any excess shares actually issued under those programs shall be held in escrow
until there is obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance under the
Plan. If such stockholder approval is not obtained within twelve (12) months
after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall terminate
and cease to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees and the Participants the exercise or purchase price paid for any
excess shares issued under the Plan and held in escrow, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and cease
to be outstanding.
IV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
V. WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon
the exercise of any options or upon the vesting of any shares issued under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under the
Plan and the issuance of any shares of Common Stock (i) upon the exercise of any
option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it and
the shares of Common Stock issued pursuant to it.
VII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
VIII. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income statement
at least annually to each individual holding an outstanding option under the
Plan, unless such individual is a key Employee whose duties in connection with
the Corporation (or any Parent or Subsidiary) assure such individual access to
equivalent information.
14
<PAGE>
APPENDIX
--------
A. The following definitions shall be in effect under the Plan:
B. BOARD shall mean the Corporation's Board of Directors.
-----
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
D. COMMITTEE shall mean a committee of two (2) or more Board members
---------
appointed by the Board to exercise one or more administrative functions under
the Plan.
E. COMMON STOCK shall mean the Corporation's common stock.
------------
F. CORPORATE TRANSACTION shall mean either of the following stockholder-
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
G. CORPORATION shall mean Prime Response Group, Inc., a Delaware
-----------
corporation.
H. DISABILITY shall mean the inability of the Optionee or the Participant
----------
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment and shall be determined by the Plan
Administrator on the basis of such medical evidence as the Plan Administrator
deems warranted under the circumstances.
I. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. EXERCISE DATE shall mean the date on which the Corporation shall have
-------------
received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question, as such price is reported by
the
A-1.
<PAGE>
National Association of Securities Dealers on the Nasdaq National Market.
If there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by
the Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on any Stock
Exchange nor traded on the Nasdaq National Market, then the Fair Market
Value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
L. INCENTIVE OPTION shall mean an option which satisfies the requirements
----------------
of Code Section 422.
M. INVOLUNTARY TERMINATION shall mean the termination of the Service of
-----------------------
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change in
his or her position with the Corporation which materially reduces his or
her duties and responsibilities or the level of management to which he or
she reports, (B) a reduction in his or her level of compensation (including
base salary, fringe benefits and target bonuses under any corporate
performance-based bonus or incentive programs) by more than fifteen percent
(15%) or (C) a relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change, reduction or
relocation is effected without the individual's consent.
N. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
O. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
--------
A-2.
<PAGE>
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
Q. OPTION GRANT PROGRAM shall mean the option grant program in effect
--------------------
under the Plan.
R. OPTIONEE shall mean any person to whom an option is granted under the
--------
Plan.
S. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
T. PARTICIPANT shall mean any person who is issued shares of Common Stock
-----------
under the Stock Issuance Program.
U. PLAN shall mean the Corporation's 1998 Stock Option/Stock Issuance
----
Plan, as set forth in this document.
V. PLAN ADMINISTRATOR shall mean either the Board or the Committee acting
------------------
in its capacity as administrator of the Plan.
W. SERVICE shall mean the provision of services to the Corporation (or any
-------
Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant or independent advisor, except
to the extent otherwise specifically provided in the documents evidencing the
option grant.
X. STOCK EXCHANGE shall mean either the American Stock Exchange or the New
--------------
York Stock Exchange.
Y. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
------------------------
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
Z. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
----------------------
under the Plan.
AA. SUBSIDIARY shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
BB. 10% STOCKHOLDER shall mean the owner of stock (as determined under Code
---------------
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).
A-3.
<PAGE>
PRIME RESPONSE GROUP, INC.
ADDENDUM TO 1998 STOCK OPTION/STOCK ISSUANCE PLAN
1. The Purpose of the Addendum. The purpose of this Addendum is to
---------------------------
amend the Prime Response Group, Inc. 1998 Stock Option/Stock Issuance Plan (the
"Plan") in such respects as are necessary to enable it to be treated for the
purposes of taxation in the United Kingdom and in particular the Income and
Corporation Taxes Act 1988, Sections 185 - 187 and Schedule 9 as an Approved
Share Option Scheme in relation to the grant of any Option under the Plan or the
exercise of any Option under the Plan by a person who is an subject to taxation
in the United Kingdom.
2. Definitions.
-----------
2.1 Except where the context requires otherwise or as provided
herein terms defined in the Plan shall bear the same meanings in the Addendum.
2.2 Addendum shall mean this Addendum to the 1998 Stock
--------
Option/Stock Issuance Plan.
Associated Company shall have the meaning as assigned to such
------------------
term in Section 416 of ICTA 1988.
Eligible U.K. Employee shall mean any director of the
----------------------
Corporation who is required to devote to his duties not less than 25 hours per
week (excluding meal breaks) or any employee (other than one who is a director)
of the Corporation who is required under the terms of his employment to provide
no less than an aggregate of 20 hours per week of service (excluding meal
breaks), provided that the director or employee is not precluded by paragraph 8
of Schedule 9 from participating in the Plan as amended by the Addendum.
ICTA 1988 shall mean The Income And Corporation Taxes Act
---------
1988 (of the United Kingdom).
Inland Revenue shall mean the Inland Revenue of the United
--------------
Kingdom.
Market Value per share of Common Stock as of any date shall
------------
be determined as follows:
(i) on any day when the Common Stock is not quoted on the New
York Stock Exchange or the American Stock Exchange its market
value as determined in accordance with Part VIII of the
Taxation of Chargeable Gains Act 1992 (of the U.K.) and
agreed for the purposes of the Plan with the Inland Revenue
Shares Valuation Division on or before that day; on any day
when the Common Stock is quoted on the New York Stock
Exchange or the American Stock Exchange, its Market Value
shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as
A-4.
<PAGE>
quoted on such Exchange or by the National Association of
Securities Dealers for the last market trading day prior to
that day as reported in The Wall Street Journal.
Schedule 9 shall mean Schedule 9 ICTA 1988.
----------
Subsisting Option shall mean a U.K. Option which has neither
-----------------
lapsed nor been exercised.
U.K. Option shall mean an Option granted to an Employee or
-----------
Consultant which is an Option to acquire Common Stock which satisfies the
conditions specified in paragraphs 10-14 inclusive of Schedule 9.
2.3 Where the context admits the singular shall include the
plural and vice versa and the masculine shall include the feminine.
2.4 Any references in the Addendum to any enactment includes a
reference to that enactment as from time to time modified, extended or re-
enacted.
3. General Limitations on Grants to Employees.
------------------------------------------
3.1 In relation to all Employees and the grant of any U.K. Option
to, or the exercise of any U.K. Option by, such a person, the provisions of the
Plan shall be read and take effect subject to the terms of this Addendum.
3.2 A U.K. Option shall only be capable of exercise in conformity
with the provisions of this Addendum.
4. Administration of the Plan.
--------------------------
4.1 The powers conferred on the Plan Administrator by Section IV
of Article Two of the Plan shall not apply in relation to a U.K. Option.
4.2 None of the other powers conferred on the Plan Administrator
by the Plan shall be exercisable so as to prejudice Inland Revenue approval of
the Addendum under Schedule 9.
5. Eligibility.
-----------
5.1 Any U.K. Option granted to an Eligible U.K. Employee shall be
limited and take effect so that the aggregate Market Value of the shares of
Common Stock subject to that U.K. Option when aggregated with the Market Value
of the shares of Common Stock subject to Subsisting Options shall not exceed
(Pounds)30,000 sterling.
5.2 For the purposes of Clause 5.1 above:
5.2.1 U.K. Options shall include all U.K. Options granted
pursuant to this Addendum and all options granted under any other scheme,
approved under
A-5.
<PAGE>
Schedule 9, and established by the Corporation or any Associated Company, not
being a savings related share option scheme.
5.2.2 The Market Value of the shares of Common Stock shall
be calculated as of the Grant Date or such earlier time as may have been agreed
with the Inland Revenue.
5.2.3 The Market Value of the shares of Common Stock at any
time if quoted or determined in a currency other than Pounds Sterling shall be
converted to sterling at the exchange rate in force at that time.
6. Term of Plan. The provisions of Section II of Article Four
------------
of the Plan shall apply save that no U.K. Option shall be granted prior to the
date on which the Addendum is approved by the Board of Inland Revenue under
Schedule 9.
7. Option Exercise Price.
---------------------
7.1 Notwithstanding the provisions of Section I.A of
Article Two of the Plan, the per share exercise price for the shares of Common
Stock subject to a U.K. Option shall not be less than the Market Value of the
shares on the date of grant.
7.2 Notwithstanding clause (i) Section I.A.2 of Article Two
and Section I of Article Four of the Plan, the exercise price of an option may
not be paid in shares of Common Stock or through a promissory note.
8. Exercise of U.K. Options.
------------------------
8.1 Subject to Section I.C of Article Two of the Plan any
U.K. Option which has not lapsed may not be exercised before the third
anniversary of the Grant Date.
8.2 Any performance criteria to which exercise of any U.K.
Option may be subject shall be of no effect until it is accepted by the Inland
Revenue.
8.3 No U.K. Option may be exercised by an individual at any
time when he is precluded by paragraph 8 of Schedule 9 from participating in the
Plan as amended by the Addendum.
8.4 No U.K. Option may be exercised at any time when the
shares of Common Stock which may be thereby acquired do not satisfy the
conditions specified in paragraphs 10-14 of Schedule 9.
8.5 Shares of Common Stock shall be allotted and issued
pursuant to a notice of exercise within 30 days of the date of exercise and a
definitive stock certificate issued to the Optionee in respect thereof.
A-6.
<PAGE>
9. Adjustments Upon Changes in Capitalization or Corporate
-------------------------------------------------------
Transaction.
-----------
9.1 No adjustment to a U.K. Option made pursuant to Section
V.C.C of Article One of the Plan shall:
9.1.1 be made until it has prior approval of the Board
of Inland Revenue;
9.1.2 cause the aggregate amount payable on exercise of
a U.K. Option in full to increase;
9.1.3 cause the subscription price for a share of Common
Stock to fall below its nominal value;
9.1.4 result in the shares of Common Stock, which are
the subject of a U.K. Option, ceasing to satisfy the conditions specified in
paragraphs 10-14 inclusive of Schedule 9.
9.2 The provisions of Section III of Article Two of the Plan
shall not apply for the benefit of the Optionee of a U.K. Option so as to confer
any new rights (within the meaning of paragraph 15 of Schedule 9) on the
Optionee unless those new rights satisfy the conditions contained in the said
paragraph 15 and are obtained by the Optionee within the appropriate period as
also defined in the said paragraph 15.
10. Amendment and Termination of the Plan.
-------------------------------------
10.1 No amendment to the Plan as amended by the Addendum
which in any way affects the grant or exercise of any U.K. Option or the rights
of any Optionee in relation to a U.K. Option shall take effect until approved by
the Board of Inland Revenue.
11. Exchange of Options. The exchange of an option granted under
-------------------
the Addendum under the provisions of Section III of Article Two of the Plan
shall only take place in accordance with the provisions of Paragraph 15 of
Schedule 9 to the Act.
12. Stock Issuance Program. Not stock shall be issued under this
----------------------
Addendum pursuant to Article Three of the Plan.
13. Effective Date. No U.K. options may be granted until such
--------------
time as the Plan (including the Addendum) has been approved by the Board of
Inland Revenue as an Approved Share Option Scheme.
A-7.
<PAGE>
Exhibit 10.2
PRIME RESPONSE GROUP INC.
AMENDMENT NO. 1 TO 1998 STOCK OPTION/STOCK ISSUANCE PLAN
dated July 15, 1999
1. Purpose. The purpose of this Amendment is to amend the Prime Response
-------
Group Inc. 1998 Stock Option/Stock Issuance Plan (the "Plan") in such
respects as are necessary to account for options presently issued and to be
issued in excess of allowances under the Plan as currently written.
2. Stock Subject to the Plan
-------------------------
Section V.A. of the Plan is hereby amended by deleting that subsection in its
entirety and replacing it with the following:
The stock issuable under the Plan shall be shares of authorized but unissued
or reacquired Common Stock. The maximum number of shares of Common Stock
which may be issued or made available over the term of the Plan shall not
exceed 2,514,300 shares, it being understood that (a) options to purchase (i)
848,300 shares were granted to and exercised by Peter Boni, (ii) 1,299,658
shares have been granted to certain employees of the Corporation and (iii)
366,342 shares remain available for future grant and (b) options to purchase,
or grants of, the aggregate 1,666,000 shares referred to in the foregoing
clauses (ii) and (iii) will be satisfied by the exercise by the Corporation
of its option to purchase 1,666,000 shares from Nevin Prakash.
<PAGE>
Exhibit 10.3
AMENDMENT NO. 2 TO 1998 STOCK OPTION/STOCK ISSUANCE PLAN
OF PRIME RESPONSE, INC.
(FORMERLY KNOWN AS PRIME RESPONSE GROUP INC.)
(to be effective after the .75-for-one reverse stock split declared
by the Board of Directors on November 15, 1999)
Article One Section V.A., as amended, of the 1998 Stock Option/Stock Issuance
Plan (the "Plan") of Prime Response Group Inc. is hereby amended and restated in
its entirety to provide as follows (all share numbers below reflect the reverse
split described above):
"The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock. The maximum number of shares of
Common Stock which may be issued or made available over the term of the
Plan shall not exceed 3,273,225 shares."
Article One Section V of the Plan is further amended, such that a new section
shall be added thereto, which shall read as follows:
" D. Subject to adjustment as provided above, the maximum number of
shares of Common Stock with respect to which (i) option grants made under
the Option Grant Program, and (ii) stock issuances made under the Stock
Issuance Program, may be granted to any person eligible to participate in
the Plan shall be 1,000,000 per calendar year. The per-participant limit
described in this Section V.D. shall be construed and applied consistently
with 162(m) of the Code."
Adopted by the Board of Directors
as of January 19, 2000
<PAGE>
Exhibit 10.4
U.K. OPTIONEE
PRIME RESPONSE GROUP, INC.
NOTICE OF GRANT OF STOCK OPTION
-------------------------------
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Prime Response Group, Inc. (the
"Corporation"):
Optionee:
-------- ------------------------------------------------------------
Grant Date:
---------- ----------------------------------------------------------
Vesting Commencement Date:
-------------------------
Exercise Price: $ per share
-------------- --------------
Number of Option Shares: shares of Common Stock
----------------------- ------------------
Expiration Date:
--------------- -----------------------------------------------------
Type of Option: Non-Statutory Stock Option
Exercise Schedule: The Option shall become exercisable for twenty-
-----------------
five percent (25%) of the Option Shares upon Optionee's completion of
one (1) year of Service measured from the Vesting Commencement Date
and shall become exercisable for the balance of the Option Shares in a
series of thirty-six (36) successive equal monthly installments upon
Optionee's completion of each additional month of Service over the
thirty-six (36)-month period measured from the first anniversary of
the Vesting Commencement Date. In no event shall the Option become
exercisable for any additional Option Shares following Optionee's
cessation of Service.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Prime Response Group, Inc. 1998 Stock
Option/Stock Issuance Plan (the "Plan"). Optionee further agrees to be bound by
the terms of the Plan and the terms of the Option as set forth in the Stock
Option Agreement attached hereto as EXHIBIT A.
Optionee understands that any Option Shares purchased under the Option
will be subject to the terms set forth in the Stock Purchase Agreement attached
hereto as EXHIBIT B. Optionee hereby acknowledges receipt of a copy of the Plan
in the form attached hereto as EXHIBIT C.
RIGHTS OF FIRST REFUSAL. OPTIONEE HEREBY AGREES THAT ALL OPTION
-----------------------
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN
RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS. THE
TERMS OF SUCH RIGHTS ARE SPECIFIED IN THE ATTACHED STOCK PURCHASE AGREEMENT.
<PAGE>
No Employment or Service Contract. Nothing in this Notice or in the
---------------------------------
attached Stock Option Agreement or Plan shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED: , 199
--------------------- ---
PRIME RESPONSE GROUP, INC.
By:
--------------------------------
Title:
-----------------------------
------------------------------------
OPTIONEE
Address:
---------------------------
---------------------------
ATTACHMENTS:
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - STOCK PURCHASE AGREEMENT
EXHIBIT C - 1998 STOCK OPTION/STOCK ISSUANCE PLAN
2
<PAGE>
Exhibit 10.5
U.K. OPTIONEE
PRIME RESPONSE GROUP, INC.
STOCK OPTION AGREEMENT
----------------------
RECITALS
- --------
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the board
of directors of any Parent or Subsidiary and consultants and other independent
advisors in the service of the Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of
---------------
the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. Option Term. This option shall have a term of ten (10) years
-----------
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. Limited Transferability. During Optionee's lifetime, this option
-----------------------
shall be exercisable only by Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following Optionee's death.
4. Dates of Exercise. This option shall become exercisable for the
-----------------
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. Cessation of Service. The option term specified in Paragraph 2 shall
--------------------
terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason (other
than death, Disability or Misconduct) while this option is outstanding, then
Optionee shall have a
<PAGE>
period of three (3) months (commencing with the date of such cessation of
Service) during which to exercise this option, but in no event shall this option
be exercisable at any time after the Expiration Date.
(b) Should Optionee die while this option is outstanding, then the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance with the
laws of inheritance shall have the right to exercise this option. Such right
shall lapse, and this option shall cease to be outstanding, upon the earlier of
(i) the expiration of the twelve (12)-month period measured from the date of
Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Disability while this
option is outstanding, then Optionee shall have a period of twelve (12) months
(commencing with the date of such cessation of Service) during which to exercise
this option. In no event shall this option be exercisable at any time after the
Expiration Date.
(d) During the limited period of post-Service exercisability, this
option may not be exercised in the aggregate for more than the number of vested
Option Shares for which the option is exercisable at the time of Optionee's
cessation of Service. Upon the expiration of such limited exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to be
outstanding for any vested Option Shares for which the option has not been
exercised. To the extent Optionee is not vested in the Option Shares at the time
of Optionee's cessation of Service, this option shall immediately terminate and
cease to be outstanding with respect to those shares.
(e) Should Optionee's Service be terminated for Misconduct, then
this option shall terminate immediately and cease to remain outstanding.
6. Accelerated Vesting.
-- -------------------
(a) In the event of any Corporate Transaction, the Option Shares at
the time subject to this option but not otherwise fully exercisable, shall
automatically accelerate so that this option shall, immediately prior to the
effective date of the Corporate Transaction, become exercisable for any or all
of the Option Shares at the time subject to this option as fully-vested shares
of Common Stock. However, no such acceleration of this option shall occur if and
to the extent: (i) this option is assumed by the successor corporation (or
parent thereof) in the Corporate Transaction (or parent thereof) or (ii) this
option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the Option Shares for which
this option is not otherwise at that time exercisable (the excess of the Fair
Market Value of those Option Shares over the aggregate Exercise Price payable
for such shares) and provides for subsequent payout in accordance with the same
exercise schedule in effect for the option pursuant to the exercise schedule set
forth in the Grant Notice.
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
2
<PAGE>
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
(d) The exercisability of this option may also accelerate in
accordance with the terms and conditions of any special addendum attached to
this Agreement.
(e) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. Adjustment in Option Shares. Should any change be made to the
---------------------------
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. Stockholder Rights. The holder of this option shall not have any
------------------
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become the record holder
of the purchased shares.
9. Manner of Exercising Option.
-- ---------------------------
(a) In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or any other person or persons exercising the option) must take the following
actions:
(i) Execute and deliver to the Corporation a Purchase Agreement
for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased shares
in one or more of the following forms:
(A) cash or check made payable to the Corporation; or
(B) a promissory note payable to the Corporation, but only
to the extent authorized by the Plan Administrator in accordance with
Paragraph 14.
Should the Common Stock be registered under Section 12 of the
1934 Act at the time the option is exercised, then the Exercise Price may
also be paid as follows:
3
<PAGE>
(C) in shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date; or
(D) to the extent the option is exercised for vested Option
Shares, through a special sale and remittance procedure pursuant to which
Optionee (or any other person or persons exercising the option) shall
concurrently provide irrevocable instructions (a) to a Corporation-
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate Exercise Price
payable for the purchased shares plus all applicable Federal, state and
local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (b) to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent the sale and remittance procedure is utilized in
connection with the option exercise, payment of the Exercise Price must
accompany the Purchase Agreement delivered to the Corporation in connection
with the option exercise.
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option (if other than Optionee) have the
right to exercise this option.
(iv) Execute and deliver to the Corporation such written
representations as may be requested by the Corporation in order for it to comply
with the applicable requirements of Federal and state securities laws.
(v) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction of
all Federal, state and local income and employment tax withholding requirements
applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any
fractional shares.
10. Compliance with Laws and Regulations.
--- ------------------------------------
(a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
4
<PAGE>
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
11. Successors and Assigns. Except to the extent otherwise provided
----------------------
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
12. Notices. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
13. Financing. The Plan Administrator may, in its absolute
---------
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse,
interest-bearing promissory note secured by those Option Shares. The payment
schedule in effect for any such promissory note shall be established by the Plan
Administrator in its sole discretion.
14. Construction. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
15. Governing Law. The interpretation, performance and enforcement
-------------
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
16. Stockholder Approval. If the Option Shares covered by this
--------------------
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may be issued under the Plan as last approved by the stockholders, then
this option shall be void with respect to such excess shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.
5
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
---------
B. Board shall mean the Corporation's Board of Directors.
-----
C. Code shall mean the Internal Revenue Code of 1986, as amended.
----
D. Common Stock shall mean the Corporation's common stock.
------------
E. Corporate Transaction shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. Corporation shall mean Prime Response Group, Inc., a Delaware
-----------
corporation.
G. Disability shall mean the inability of Optionee to engage in any
----------
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute Permanent Disability in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.
H. Employee shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
I. Exercise Date shall mean the date on which the option shall have
-------------
been exercised in accordance with Paragraph 9 of the Agreement.
J. Exercise Price shall mean the exercise price payable per Option
--------------
Share as specified in the Grant Notice.
K. Expiration Date shall mean the date on which the option expires
---------------
as specified in the Grant Notice.
<PAGE>
L. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which
such quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem
appropriate.
M. Grant Date shall mean the date of grant of the option as
----------
specified in the Grant Notice.
N. Grant Notice shall mean the Notice of Grant of Stock Option
------------
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
O. Misconduct shall mean the commission of any act of fraud,
----------
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).
P. 1934 Act shall mean the Securities Exchange Act of 1934, as
--------
amended.
Q. Non-statutory option shall mean an option not intended to satisfy
--------------------
the requirements of Code Section 422.
R. Option Shares shall mean the number of shares of Common Stock
-------------
subject to the option.
2
<PAGE>
S. Optionee shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
T. Parent shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. Plan shall mean the Corporation's 1998 Stock Option/Stock
----
Issuance Plan.
V. Plan Administrator shall mean either the Board or a committee of
------------------
the Board acting in its capacity as administrator of the Plan.
W. Purchase Agreement shall mean the stock purchase agreement in
------------------
substantially the form of Exhibit B to the Grant Notice.
X. Service shall mean the Optionee's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or an independent consultant.
Y. Stock Exchange shall mean the American Stock Exchange or the
--------------
New York Stock Exchange.
Z. Subsidiary shall mean any corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
3
<PAGE>
U.K. OPTIONEE
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Option Agreement dated , 199___ (the
"Option Agreement") by and between Prime Response Group, Inc. (the
"Corporation") and ________________________ ("Optionee") evidencing the
stock option (the "Option") granted on such date to Optionee under the terms of
the Corporation's 1998 Stock Option/Stock Issuance Plan, and such provisions
shall be effective immediately. All capitalized terms in this Addendum, to the
extent not otherwise defined herein, shall have the meanings assigned to them in
the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed in accordance with Paragraph 6 of the Option
Agreement, the exercisability of the Option shall not accelerate upon the
occurrence of that Corporate Transaction, and the Option shall, over Optionee's
continued period of Service following the Corporate Transaction, continue to
become exercisable for the Option Shares in accordance with the provisions of
the Option Agreement. However, upon an Involuntary Termination of Optionee's
Service within eighteen (18) months following such Corporate Transaction, the
exercisability of this Option, to the extent the Option is at the time
outstanding but not otherwise fully exercisable, shall automatically accelerate
so that the Option shall immediately become fully exercisable for all the Option
Shares at the time subject to the Option and may be exercised for any or all of
those shares as fully vested shares of Common Stock at any time prior to the
earlier of (i) the Expiration Date or (ii) the expiration of the one (1)-year
period measured from the date of the Involuntary Termination.
2. For purposes of this Addendum, an INVOLUNTARY TERMINATION shall mean
the termination of Optionee's Service by reason of:
(i) Optionee's involuntary dismissal or discharge by the Corporation
for reasons other than for Misconduct, or
(ii) Optionee's voluntary resignation following (A) a change in
Optionee's position with the Corporation (or Parent or Subsidiary employing
Optionee) which materially reduces Optionee's duties and responsibilities
or the level of management to which he or she reports, (B) a reduction in
Optionee's level of compensation (including base salary, fringe benefits
and target bonuses under any corporate-performance based incentive
programs) by more than fifteen percent (15%) or (C) a relocation of
Optionee's place of employment by more than fifty (50) miles, provided and
only if such change, reduction or relocation is effected by the Corporation
without Optionee's consent.
<PAGE>
3. The provisions of Paragraph 1 of this Addendum shall govern the period
for which the Option is to remain exercisable following the Involuntary
Termination of Optionee's Service within eighteen (18) months after the
Corporate Transaction and shall supersede any provisions to the contrary in
Paragraph 5 of the Option Agreement. The provisions of this Addendum shall also
supersede any provisions to the contrary in Paragraph 18 of the Option Agreement
concerning the deferred exercisability of the Option.
IN WITNESS WHEREOF, Prime Response Group, Inc. has caused this
Addendum to be executed by its duly-authorized officer as of the Effective Date
specified below.
PRIME RESPONSE GROUP, INC.
By:
--------------------------------
Title:
-----------------------------
EFFECTIVE DATE: _________________, 199__
<PAGE>
EXHIBIT 10.6
U.K. OPTIONEE
PRIME RESPONSE GROUP, INC.
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT made this ______ day of ________________________ 199___, by
---------
and between Prime Response Group, Inc., a Delaware corporation, and
_________________________, Optionee under the Corporation's 1998 Stock
Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. EXERCISE OF OPTION
------------------
1. EXERCISE. Optionee hereby purchases _____________ shares of
Common Stock (the "Purchased Shares") pursuant to that certain option (the
"Option") granted Optionee on ____________________, 199__ (the "Grant Date") to
purchase up to _______________ shares of Common Stock (the "Option Shares")
under the Plan at the exercise price of $___________ per share (the "Exercise
Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
Corporation, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise with respect to the Purchased Shares.
3. STOCKHOLDER RIGHTS. Until such time as the Corporation exercises
the First Refusal Right, Optionee (or any successor in interest) shall have all
the rights of a stockholder (including voting, dividend and liquidation rights)
with respect to the Purchased Shares, subject, however, to the transfer
restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
-------------------------
1. RESTRICTED SECURITIES. The Purchased Shares have not been
registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Optionee hereby
confirms that Optionee has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Optionee hereby acknowledges that Optionee is prepared to hold the Purchased
Shares for an indefinite period and that Optionee is aware that SEC Rule 144
issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
<PAGE>
2. RESTRICTIONS ON DISPOSITION OF PURCHASED SHARES. Optionee shall
make no disposition of the Purchased Shares (other than a Permitted Transfer)
unless and until there is compliance with all of the following requirements:
(i) Optionee shall have provided the Corporation with a written
summary of the terms and conditions of the proposed disposition.
(ii) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(iii) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that
(a) the proposed disposition does not require registration of the Purchased
Shares under the 1933 Act or (b) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or any
exemption from registration available under the 1933 Act (including
Rule 144) has been taken.
The Corporation shall not be required (i) to transfer on its books any
---
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased
Shares shall be endorsed with one or more of the following restrictive legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be
sold or offered for sale in the absence of (a) an effective
registration statement for the shares under such Act, (b) a "no
action" letter of the Securities and Exchange Commission with respect
to such sale or offer or (c) satisfactory assurances to the
Corporation that registration under such Act is not required with
respect to such sale or offer."
"The shares represented by this certificate are subject to
certain rights of first refusal granted to the Corporation and
accordingly may not be sold, assigned, transferred, encumbered, or in
any manner disposed of except in conformity with the terms of a
written agreement dated __________________, 199____ between the
Corporation and the registered holder of the shares (or the
predecessor in interest to the shares). A copy of such agreement is
maintained at the Corporation's principal corporate offices."
C. TRANSFER RESTRICTIONS
---------------------
1. RESTRICTION ON TRANSFER. Purchased Shares shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Right or the Market Stand-Off.
<PAGE>
2. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the First Refusal
Right and (ii) the Market Stand-Off, to the same extent such shares would be so
subject if retained by Optionee.
3. MARKET STAND-OFF.
(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial
public offering, Owner shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise
dispose or transfer for value or otherwise agree to engage in any of the
foregoing transactions with respect to, any Purchased Shares without the
prior written consent of the Corporation or its underwriters. Such
restriction (the "Market Stand-Off") shall be in effect for such period of
time from and after the effective date of the final prospectus for the
offering as may be requested by the Corporation or such underwriters. In no
event, however, shall such period exceed one hundred eighty (180) days and
the Market Stand-Off shall in all events terminate two (2) years after the
effective date of the Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off provided and
only if the officers and directors of the Corporation are also subject to
similar restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect
to the Purchased Shares shall be immediately subject to the Market Stand-
Off, to the same extent the Purchased Shares are at such time covered by
such provisions.
(d) In order to enforce the Market Stand-Off, the Corporation may
impose stop-transfer instructions with respect to the Purchased Shares
until the end of the applicable stand-off period.
D. RIGHT OF FIRST REFUSAL
----------------------
1. GRANT. The Corporation is hereby granted the right of first
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares. For purposes of this Article D, the term
"transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition of the Purchased Shares intended to be made by Owner, but shall not
include any Permitted Transfer.
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of
Purchased Shares in which Optionee has vested desires to accept a bona fide
third-party offer for the transfer of any or all of such shares (the Purchased
Shares subject to such offer to be hereinafter referred to as the "Target
Shares"), Owner shall promptly (i) deliver to the Corporation written notice
(the "Disposition Notice") of the terms of the offer, including the purchase
price and the identity of the third-party offeror, and (ii) provide satisfactory
proof that the disposition of the
<PAGE>
Target Shares to such third-party offeror would not be in contravention of the
provisions set forth in Articles B and C.
3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall, for a
period of twenty-five (25) days following receipt of the Disposition Notice,
have the right to repurchase any or all of the Target Shares subject to the
Disposition Notice upon the same terms as those specified therein or upon such
other terms (not materially different from those specified in the Disposition
Notice) to which Owner consents. Such right shall be exercisable by delivery of
written notice (the "Exercise Notice") to Owner prior to the expiration of the
twenty-five (25)-day exercise period. If such right is exercised with respect to
all the Target Shares, then the Corporation shall effect the repurchase of such
shares, including payment of the purchase price, not more than five (5) business
days after delivery of the Exercise Notice; and at such time the certificates
representing the Target Shares shall be delivered to the Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If Owner and the Corporation
cannot agree on such cash value within ten (10) days after the Corporation's
receipt of the Disposition Notice, the valuation shall be made by an appraiser
of recognized standing selected by Owner and the Corporation or, if they cannot
agree on an appraiser within twenty (20) days after the Corporation's receipt of
the Disposition Notice, each shall select an appraiser of recognized standing
and the two (2) appraisers shall designate a third appraiser of recognized
standing, whose appraisal shall be determinative of such value. The cost of
such appraisal shall be shared equally by Owner and the Corporation. The
closing shall then be held on the later of (i) the fifth (5th) business day
following delivery of the Exercise Notice or (ii) the fifth (5th) business day
after such valuation shall have been made.
4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Exercise Notice is not given to Owner prior to the expiration of the twenty-five
(25)-day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; provided, however, that any such sale or
disposition must not be effected in contravention of the provisions of Articles
B and C. The third-party offeror shall acquire the Target Shares free and clear
of the First Refusal Right, but the acquired shares shall remain subject to the
provisions of Article B and Paragraph C.3. In the event Owner does not effect
such sale or disposition of the Target Shares within the specified thirty
(30)-day period, the First Refusal Right shall continue to be applicable to any
subsequent disposition of the Target Shares by Owner until such right lapses.
5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Corporation makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within five (5) business days after Owner's receipt of the Exercise
Notice, to effect the sale of the Target Shares pursuant to either of the
following alternatives:
<PAGE>
(i) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full
compliance with the requirements of Paragraph D.4, as if the Corporation
did not exercise the First Refusal Right; or
(ii) sale to the Corporation of the portion of the Target Shares
which the Corporation has elected to purchase, such sale to be effected in
substantial conformity with the provisions of Paragraph D.3. The First
Refusal Right shall continue to be applicable to any subsequent disposition
of the remaining Target Shares until such right lapses.
Owner's failure to deliver timely notification to the Corporation
shall be deemed to be an election by Owner to sell the Target Shares pursuant to
alternative (i) above.
6. RECAPITALIZATION/REORGANIZATION.
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with
respect to the Purchased Shares shall be immediately subject to the First
Refusal Right, but only to the extent the Purchased Shares are at the time
covered by such right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital
stock or other property received in exchange for the Purchased Shares in
consummation of the Reorganization, but only to the extent the Purchased
Shares are at the time covered by such right.
7. LAPSE. The First Refusal Right shall lapse upon the earliest to
occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination is made by
the Board that a public market exists for the outstanding shares of Common Stock
or (iii) a firm commitment underwritten public offering, pursuant to an
effective registration statement under the 1933 Act, covering the offer and sale
of the Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
E. GENERAL PROVISIONS
------------------
1. ASSIGNMENT. The Corporation may assign the First Refusal Right to
any person or entity selected by the Board, including (without limitation) one
or more stockholders of the Corporation.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
in the Plan shall confer upon Optionee any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Optionee) or of Optionee, which rights are hereby expressly reserved
by each, to terminate Optionee's Service at any time for any reason, with or
without cause.
<PAGE>
3. NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation in any instance to
exercise the First Refusal Right shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement or any other agreement between the
Corporation and Optionee. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other or subsequent breach or condition,
whether of like or different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make available,
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
F. MISCELLANEOUS PROVISIONS
------------------------
1. OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Purchased Shares
pursuant to the provisions of this Agreement.
2. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
3. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California without resort to that
State's conflict-of-laws rules.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Optionee, Optionee's permitted assigns and the legal
representatives, heirs and legatees of
<PAGE>
Optionee's estate, whether or not any such person shall have become a party to
this Agreement and have agreed in writing to join herein and be bound by the
terms hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
PRIME RESPONSE GROUP, INC.
By:
---------------------------------
Title:
------------------------------
Address:
----------------------------
----------------------------
-------------------------------------
OPTIONEE
Address:
----------------------------
----------------------------
<PAGE>
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting Optionee the right to acquire the Purchased Shares in accordance with
the terms of such Agreement, the undersigned hereby agrees to be irrevocably
bound by all the terms of such Agreement.
-------------------------------------
OPTIONEE'S SPOUSE
Address:
----------------------------
----------------------------
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Purchase Agreement.
---------
B. BOARD shall mean the Corporation's Board of Directors.
-----
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATION shall mean Prime Response Group, Inc., a Delaware
-----------
corporation.
F. DISPOSITION NOTICE shall have the meaning assigned to such term in
------------------
Paragraph D.2.
G. EXERCISE NOTICE shall have the meaning assigned to such term in
---------------
Paragraph D.3.
H. EXERCISE PRICE shall have the meaning assigned to such term in
--------------
Paragraph A.1.
I. FAIR MARKET VALUE of a share of Common Stock on any relevant date,
-----------------
prior to the initial public offering of the Common Stock, shall be determined by
the Plan Administrator after taking into account such factors as it shall deem
appropriate.
J. FIRST REFUSAL RIGHT shall mean the right granted to the Corporation in
-------------------
accordance with Article D.
K. GRANT DATE shall have the meaning assigned to such term in Paragraph
----------
A.1.
L. GRANT NOTICE shall mean the Notice of Grant of Stock Option pursuant
------------
to which Optionee has been informed of the basic terms of the Option.
M. MARKET STAND-OFF shall mean the market stand-off restriction specified
----------------
in Paragraph C.3.
N. 1933 ACT shall mean the Securities Act of 1933, as amended.
--------
O. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
--------
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
Q. OPTION shall have the meaning assigned to such term in Paragraph A.1.
------
R. OPTION AGREEMENT shall mean all agreements and other documents
----------------
evidencing the Option.
A-1
<PAGE>
S. OPTIONEE shall mean the person to whom the Option is granted under the
--------
Plan.
T. OWNER shall mean Optionee and all subsequent holders of the Purchased
-----
Shares who derive their chain of ownership through a Permitted Transfer from
Optionee.
U. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
------------------
Purchased Shares, provided and only if Optionee obtains the Corporation's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Optionee's will or the laws of intestate succession
following Optionee's death or (iii) a transfer to the Corporation in pledge as
security for any purchase-money indebtedness incurred by Optionee in connection
with the acquisition of the Purchased Shares.
W. PLAN shall mean the Corporation's 1998 Stock Option/Stock Issuance
----
Plan.
X. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
------------------
Board acting in its capacity as administrator of the Plan.
Y. PURCHASED SHARES shall have the meaning assigned to such term in
----------------
Paragraph A.1.
Z. RECAPITALIZATION shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
AA. REORGANIZATION shall mean any of the following transactions:
--------------
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially all
of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving entity
but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons different from the
persons holding those securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in which
the Corporation is incorporated or to create a holding company structure.
BB. SEC shall mean the Securities and Exchange Commission.
---
A-2
<PAGE>
CC. SERVICE shall mean the Optionee's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or an independent consultant.
DD. SUBSIDIARY shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
EE. TARGET SHARES shall have the meaning assigned to such term in Paragraph
-------------
D.2.
A-3
<PAGE>
Exhibit 10.7
PRIME RESPONSE GROUP, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Prime Response Group, Inc. (the
"Corporation"):
Optionee:
-------- -------------------------------------------------------------
Grant Date:
---------- -----------------------------------------------------------
Vesting Commencement Date:
------------------------- --------------------------------------------
Exercise Price: $ per share
-------------- --------------
Number of Option Shares: shares of Common Stock
----------------------- ---------------
Expiration Date:
--------------- -----------------------------------------------------
Type of Option: Incentive Stock Option
-------------- -----
Non-Statutory Stock Option
-----
Date Exercisable: Immediately Exercisable
----------------
Vesting Schedule: The Option Shares shall initially be unvested and
----------------
subject to repurchase by the Corporation at the Exercise Price paid
per share. Optionee shall acquire a vested interest in, and the
Corporation's repurchase right shall accordingly lapse with respect
to, (i) twenty-five percent (25%) of the Option Shares upon Optionee's
completion of one (1) year of Service measured from the Vesting
Commencement Date and (ii) the balance of the Option Shares in a
series of thirty-six (36) successive equal monthly installments upon
Optionee's completion of each additional month of Service over the
thirty-six (36)-month period measured from the first anniversary of
the Vesting Commencement Date. In no event shall any additional
Option Shares vest after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Prime Response Group, Inc. 1998 Stock
Option/Stock Issuance Plan (the "Plan"). Optionee further agrees to be bound by
the terms of the Plan and the terms of the Option as set forth in the Stock
Option Agreement attached hereto as Exhibit A.
Optionee understands that any Option Shares purchased under the Option
will be subject to the terms set forth in the Stock Purchase Agreement attached
hereto as Exhibit B. Optionee hereby acknowledges receipt of a copy of the Plan
in the form attached hereto as Exhibit C.
1
<PAGE>
REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
-----------------
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN REPURCHASE
RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS
ASSIGNS. THE TERMS OF SUCH RIGHTS ARE SPECIFIED IN THE ATTACHED STOCK PURCHASE
AGREEMENT.
No Employment or Service Contract. Nothing in this Notice or in the
---------------------------------
attached Stock Option Agreement or Plan shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the
-----------
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED: _____________________, 199__
PRIME RESPONSE GROUP, INC.
By:
----------------------------------------
Title:
--------------------------------------
--------------------------------------------
OPTIONEE
Address:
------------------------------------
--------------------------------------------
ATTACHMENTS:
- -----------
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - STOCK PURCHASE AGREEMENT
EXHIBIT C - 1998 STOCK OPTION/STOCK ISSUANCE PLAN
2
<PAGE>
EXHIBIT 10.4
PRIME RESPONSE GROUP, INC.
STOCK OPTION AGREEMENT
----------------------
RECITALS
--------
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the board
of directors of any Parent or Subsidiary and consultants and other independent
advisors in the service of the Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
---------------
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
-----------
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. During Optionee's lifetime, this option
-----------------------
shall be exercisable only by Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following Optionee's death .
4. DATES OF EXERCISE. This option shall become exercisable for the
-----------------
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
--------------------
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason
(other than death, Disability or Misconduct) while this option is outstanding,
then Optionee shall have a period of three (3) months (commencing with the date
of such cessation of Service) during which
<PAGE>
to exercise this option, but in no event shall this option be exercisable at any
time after the Expiration Date.
(b) Should Optionee die while this option is outstanding, then
the personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or in accordance with
the laws of inheritance shall have the right to exercise this option. Such right
shall lapse, and this option shall cease to be outstanding, upon the earlier of
-------
(i) the expiration of the twelve (12)-month period measured from the date of
Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Disability while
this option is outstanding, then Optionee shall have a period of twelve (12)
months (commencing with the date of such cessation of Service) during which to
exercise this option. In no event shall this option be exercisable at any time
after the Expiration Date.
Note: Exercise of this option on a date later than three (3) months
----
following cessation of Service due to Disability will result in loss
of favorable Incentive Option treatment, unless such Disability
constitutes Permanent Disability. In the event that Incentive Option
treatment is not available, this option will be taxed as a Non-
Statutory Option upon exercise.
(d) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
Option Shares in which Optionee is, at the time of Optionee's cessation of
Service, vested pursuant to the Vesting Schedule specified in the Grant Notice
or the special vesting acceleration provisions of Paragraph 6. Upon the
expiration of such limited exercise period or (if earlier) upon the Expiration
Date, this option shall terminate and cease to be outstanding for any vested
Option Shares for which the option has not been exercised. To the extent
Optionee is not vested in the Option Shares at the time of Optionee's cessation
of Service, this option shall immediately terminate and cease to be outstanding
with respect to those shares.
(e) Should Optionee's Service be terminated for Misconduct, then
this option shall terminate immediately and cease to remain outstanding.
6. ACCELERATED VESTING.
-------------------
(a) In the event of any Corporate Transaction, the Option Shares
at the time subject to this option but not otherwise vested shall automatically
vest in full so that this option shall, immediately prior to the effective date
of the Corporate Transaction, become fully exercisable for all of the Option
Shares as fully-vested shares and may be exercised for any or all of those
vested shares. However, the Option Shares shall NOT vest on such an accelerated
basis if and to the extent: (i) this option is assumed by the successor
corporation (or parent thereof) in the Corporate Transaction and the
Corporation's repurchase rights with respect to the unvested Option Shares are
assigned to such successor corporation (or parent thereof) or (ii) this option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested Option Shares at the time of
the Corporate Transaction (the
2
<PAGE>
excess of the Fair Market Value of those Option Shares over the Exercise Price
payable for such shares) and provides for subsequent payout in accordance with
the same Vesting Schedule applicable to those unvested Option Shares as set
forth in the Grant Notice.
(b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
--------
(d) The Option Shares may also vest upon an accelerated basis in
accordance with the terms and conditions of any special addendum attached to
this Agreement.
(e) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
---------------------------
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have
------------------
any stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become the record holder
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
---------------------------
(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Purchase
Agreement for the Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
3
<PAGE>
(A) cash or check made payable to the Corporation; or
(B) a promissory note payable to the Corporation, but
only to the extent authorized by the Plan Administrator in
accordance with Paragraph 14.
Should the Common Stock be registered under Section 12 of the 1934
Act at the time the option is exercised, then the Exercise Price
may also be paid as follows:
(C) in shares of Common Stock held by Optionee (or any
other person or persons exercising the option) for the requisite
period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value
on the Exercise Date; or
(D) to the extent the option is exercised for vested
Option Shares, through a special sale and remittance procedure
pursuant to which Optionee (or any other person or persons
exercising the option) shall concurrently provide irrevocable
instructions (a) to a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Exercise Price
payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) to
the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the
sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the Exercise Price
must accompany the Purchase Agreement delivered to the Corporation in connection
with the option exercise.
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option (if other than Optionee) have the
right to exercise this option.
(iv) Execute and deliver to the Corporation such written
representations as may be requested by the Corporation in order for it to comply
with the applicable requirements of Federal and state securities laws.
(v) Make appropriate arrangements with the Corporation (or Parent
or Subsidiary employing or retaining Optionee) for the satisfaction of all
Federal, state and local income and employment tax withholding requirements
applicable to the option exercise.
4
<PAGE>
(b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE OF
-----------------
THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS
ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE
PURCHASE AGREEMENT.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
------------------------------------
(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
----------------------
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to the
-------
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
14. FINANCING. The Plan Administrator may, in its absolute discretion
---------
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased Option Shares by delivering a full-recourse, interest-bearing
promissory note secured by those Option Shares. The payment schedule in effect
for any such promissory note shall be established by the Plan Administrator in
its sole discretion.
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
------------
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under
5
<PAGE>
the Plan or this Agreement shall be conclusive and binding on all persons having
an interest in this option.
16. GOVERNING LAW. The interpretation, performance and enforcement of
-------------
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
17. STOCKHOLDER APPROVAL. If the Option Shares covered by this
--------------------
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may be issued under the Plan as last approved by the stockholders, then
this option shall be void with respect to such excess shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
--------------------------------------------------
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax treatment
as an Incentive Option if (and to the extent) this option is exercised for one
or more Option Shares: (i) more than three (3) months after the date Optionee
ceases to be an Employee for any reason other than death or Permanent Disability
or (ii) more than twelve (12) months after the date Optionee ceases to be an
Employee by reason of Permanent Disability.
(b) This option shall not become exercisable in the calendar year
in which granted if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which this option would
otherwise first become exercisable in such calendar year would, when added to
the aggregate value (determined as of the respective date or dates of grant) of
the Common Stock and any other securities for which one or more other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. To the extent the exercisability of this
option is deferred by reason of the foregoing limitation, the deferred portion
shall become exercisable in the first calendar year or years thereafter in which
the One Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18(b)
would not be contravened, but such deferral shall in all events end immediately
prior to the effective date of a Corporate Transaction in which this option is
not to be assumed, whereupon the option shall become immediately exercisable as
a Non-Statutory Option for the deferred portion of the Option Shares.
(c) Should Optionee hold, in addition to this option, one or more
other options to purchase Common Stock which become exercisable for the first
time in the same calendar year as this option, then the foregoing limitations on
the exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
6
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
---------
B. BOARD shall mean the Corporation's Board of Directors.
-----
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATE TRANSACTION shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean Prime Response Group, Inc., a Delaware
-----------
corporation.
G. DISABILITY shall mean the inability of Optionee to engage in any
----------
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute PERMANENT DISABILITY in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.
H. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
I. EXERCISE DATE shall mean the date on which the option shall have
-------------
been exercised in accordance with Paragraph 9 of the Agreement.
J. EXERCISE PRICE shall mean the exercise price payable per Option
--------------
Share as specified in the Grant Notice.
A-1
<PAGE>
K. EXPIRATION DATE shall mean the date on which the option expires as
---------------
specified in the Grant Notice.
L. FAIR MARKET VALUE per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
the price is reported by the National Association of Securities
Dealers on the Nasdaq National Market. If there is no closing selling
price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding
date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on
any Stock Exchange nor traded on the Nasdaq National Market, then the
Fair Market Value shall be determined by the Plan Administrator after
taking into account such factors as the Plan Administrator shall deem
appropriate.
M. GRANT DATE shall mean the date of grant of the option as specified
----------
in the Grant Notice.
N. GRANT NOTICE shall mean the Notice of Grant of Stock Option
------------
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
O. INCENTIVE OPTION shall mean an option which satisfies the
----------------
requirements of Code Section 422.
P. MISCONDUCT shall mean the commission of any act of fraud,
----------
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).
A-2
<PAGE>
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as
--------
amended.
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy
--------------------
the requirements of Code Section 422.
S. OPTION SHARES shall mean the number of shares of Common Stock
-------------
subject to the option.
T. OPTIONEE shall mean the person to whom the option is granted as
--------
specified in the Grant Notice.
U. PARENT shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. PLAN shall mean the Corporation's 1998 Stock Option/Stock Issuance
----
Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of
------------------
the Board acting in its capacity as administrator of the Plan.
X. PURCHASE AGREEMENT shall mean the stock purchase agreement in
------------------
substantially the form of Exhibit B to the Grant Notice.
Y. SERVICE shall mean the Optionee's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or an independent consultant.
Z. STOCK EXCHANGE shall mean the American Stock Exchange or the New
--------------
York Stock Exchange.
AA. SUBSIDIARY shall mean any corporation (other than the Corporation)
----------
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
BB. VESTING SCHEDULE shall mean the vesting schedule specified in the
----------------
Grant Notice pursuant to which the Optionee is to vest in the Option Shares in a
series of installments over his or her period of Service.
A-3
<PAGE>
ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are hereby made
a part of, that certain Stock Option Agreement dated 199
(the "Option Agreement") by and between Prime Response Group, Inc. (the
"Corporation") and
("Optionee") evidencing the stock option (the "Option") granted on such date to
Optionee under the terms of the Corporation's 1998 Stock Option/Stock Issuance
Plan, and such provisions shall be effective immediately. All capitalized terms
in this Addendum, to the extent not otherwise defined herein, shall have the
meanings assigned to them in the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Option is, in connection with a Corporate
Transaction, to be assumed in accordance with Paragraph 6 of the Option
Agreement, none of the Option Shares shall vest on an accelerated basis upon the
occurrence of that Corporate Transaction, and Optionee shall accordingly
continue, over his or her period of Service following the Corporate Transaction,
to vest in the Option Shares in one or more installments in accordance with the
provisions of the Option Agreement. However, upon an Involuntary Termination of
Optionee's Service within eighteen (18) months following such Corporate
Transaction, all the Option Shares at the time subject to the Option shall
automatically vest in full on an accelerated basis so that the Option shall
immediately become exercisable for all the Option Shares as fully-vested shares
and may be exercised for any or all of those Option Shares as vested shares.
The Option shall remain so exercisable until the earlier of (i) the Expiration
Date or (ii) the expiration of the one (1)-year period measured from the date of
the Involuntary Termination.
2. For purposes of this Addendum, an Involuntary Termination shall mean
the termination of Optionee's Service by reason of:
(i) Optionee's involuntary dismissal or discharge by the Corporation
for reasons other than for Misconduct, or
(ii) Optionee's voluntary resignation following (A) a change in
Optionee's position with the Corporation (or Parent or Subsidiary employing
Optionee) which materially reduces Optionee's duties and responsibilities
or the level of management to which he or she reports, (B) a reduction in
Optionee's level of compensation (including base salary, fringe benefits
and target bonuses under any corporate-performance based incentive
programs) by more than fifteen percent (15%) or (C) a relocation of
Optionee's place of employment by more than fifty (50) miles, provided and
only if such change, reduction or relocation is effected by the Corporation
without Optionee's consent.
<PAGE>
3. The provisions of Paragraph 1 of this Addendum shall govern the period
for which the Option is to remain exercisable following the Involuntary
Termination of Optionee's Service within eighteen (18) months after the
Corporate Transaction and shall supersede any provisions to the contrary in
Paragraph 5 of the Option Agreement. The provisions of this Addendum shall also
supersede any provisions to the contrary in Paragraph 18 of the Option Agreement
concerning the deferred exercisability of the Option.
IN WITNESS WHEREOF, Prime Response Group, Inc. has caused this Addendum to
be executed by its duly-authorized officer as of the Effective Date specified
below.
PRIME RESPONSE GROUP, INC.
By:
-------------------------------------
Title:
----------------------------------
EFFECTIVE DATE: , 199
----------- --
2
<PAGE>
Exhibit 10.9
PRIME RESPONSE GROUP, INC.
STOCK PURCHASE AGREEMENT
AGREEMENT made this _______ day of ___________________ 199__, by and
between Prime Response Group, Inc., a Delaware corporation, and
___________________________, Optionee under the Corporation's 1998 Stock
Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. EXERCISE OF OPTION
------------------
1. EXERCISE. Optionee hereby purchases _________________ shares of
--------
Common Stock (the "Purchased Shares") pursuant to that certain option (the
"Option") granted Optionee on __________________, 199__ (the "Grant Date") to
purchase up to ___________________ shares of Common Stock (the "Option Shares")
under the Plan at the exercise price of $__________________ per share (the
"Exercise Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
-------
Corporation, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise, together with a duly-executed blank Assignment Separate
from Certificate (in the form attached hereto as Exhibit I) with respect to the
Purchased Shares.
3. STOCKHOLDER RIGHTS. Until such time as the Corporation exercises
------------------
the Repurchase Right or the First Refusal Right, Optionee (or any successor in
interest) shall have all the rights of a stockholder (including voting, dividend
and liquidation rights) with respect to the Purchased Shares, subject, however,
to the transfer restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
-------------------------
1. RESTRICTED SECURITIES. The Purchased Shares have not been
---------------------
registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Optionee hereby
confirms that Optionee has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Optionee hereby acknowledges that Optionee is prepared to hold the Purchased
Shares for an indefinite period and that Optionee is aware that SEC Rule 144
issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
<PAGE>
2. RESTRICTIONS ON DISPOSITION OF PURCHASED SHARES. Optionee shall
-----------------------------------------------
make no disposition of the Purchased Shares (other than a Permitted Transfer)
unless and until there is compliance with all of the following requirements:
(i) Optionee shall have provided the Corporation with a written
summary of the terms and conditions of the proposed disposition.
(ii) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(iii) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (a)
the proposed disposition does not require registration of the Purchased
Shares under the 1933 Act or (b) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or any
exemption from registration available under the 1933 Act (including Rule
144) has been taken.
The Corporation shall not be required (i) to transfer on its books any
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased Shares
-------------------
shall be endorsed with one or more of the following restrictive legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement
for the shares under such Act, (b) a "no action" letter of the Securities
and Exchange Commission with respect to such sale or offer or (c)
satisfactory assurances to the Corporation that registration under such Act
is not required with respect to such sale or offer."
"The shares represented by this certificate are subject to
certain repurchase rights and rights of first refusal granted to the
Corporation and accordingly may not be sold, assigned, transferred,
encumbered, or in any manner disposed of except in conformity with the
terms of a written agreement dated ____________, 199__ between the
Corporation and the registered holder of the shares (or the predecessor in
interest to the shares). A copy of such agreement is maintained at the
Corporation's principal corporate offices."
C. TRANSFER RESTRICTIONS
---------------------
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer, Optionee
-----------------------
shall not transfer, assign, encumber or otherwise dispose of any of the
Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Right or the Market Stand-Off.
2
<PAGE>
2. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation) to whom
----------------------
the Purchased Shares are transferred by means of a Permitted Transfer must, as a
condition precedent to the validity of such transfer, acknowledge in writing to
the Corporation that such person is bound by the provisions of this Agreement
and that the transferred shares are subject to (i) the Repurchase Right, (ii)
the First Refusal Right and (iii) the Market Stand-Off, to the same extent such
shares would be so subject if retained by Optionee.
3. MARKET STAND-OFF.
----------------
(a) In connection with any underwritten public offering by the Corporation
of its equity securities pursuant to an effective registration statement filed
under the 1933 Act, including the Corporation's initial public offering, Owner
shall not sell, make any short sale of, loan, hypothecate, pledge, grant any
option for the purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to,
any Purchased Shares without the prior written consent of the Corporation or its
underwriters. Such restriction (the "Market Stand- Off") shall be in effect for
such period of time from and after the effective date of the final prospectus
for the offering as may be requested by the Corporation or such underwriters. In
no event, however, shall such period exceed one hundred eighty (180) days and
the Market Stand-Off shall in all events terminate two (2) years after the
effective date of the Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off provided and only if the
officers and directors of the Corporation are also subject to similar
restrictions.
(c) Any new, substituted or additional securities which are by reason of
any Recapitalization or Reorganization distributed with respect to the Purchased
Shares shall be immediately subject to the Market Stand-Off, to the same extent
the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Corporation may impose
stop- transfer instructions with respect to the Purchased Shares until the end
of the applicable stand-off period.
D. REPURCHASE RIGHT
----------------
1. GRANT. The Corporation is hereby granted the right (the "Repurchase
-----
Right"), exercisable at any time during the sixty (60)-day period following the
date Optionee ceases for any reason to remain in Service or (if later) during
the sixty (60)-day period following the execution date of this Agreement, to
repurchase at the Exercise Price any or all of the Purchased Shares in which
Optionee is not, at the time of his or her cessation of Service, vested in
accordance with the Vesting Schedule applicable to those shares or the special
vesting acceleration provisions of Paragraph D.6 of this Agreement (such shares
to be hereinafter referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
--------------------------------
exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the sixty (60)- day exercise period. The notice shall
indicate the number of Unvested Shares to be repurchased and the date on which
the repurchase is to be effected, such
3
<PAGE>
date to be not more than thirty (30) days after the date of such notice. The
certificates representing the Unvested Shares to be repurchased shall be
delivered to the Corporation on or before the close of business on the date
specified for the repurchase. Concurrently with the receipt of such stock
certificates, the Corporation shall pay to Owner, in cash or cash equivalents
(including the cancellation of any purchase-money indebtedness), an amount equal
to the Exercise Price previously paid for the Unvested Shares which are to be
repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
--------------------------------
terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall terminate
and cease to be exercisable with respect to any and all Purchased Shares in
which Optionee vests in accordance with the Vesting Schedule. All Purchased
Shares as to which the Repurchase Right lapses shall, however, remain subject to
(i) the First Refusal Right and (ii) the Market Stand-Off.
4. AGGREGATE VESTING LIMITATION. If the Option is exercised in more than
----------------------------
one increment so that Optionee is a party to one or more other Stock Purchase
Agreements (the "Prior Purchase Agreements") which are executed prior to the
date of this Agreement, then the total number of Purchased Shares as to which
Optionee shall be deemed to have a fully-vested interest under this Agreement
and all Prior Purchase Agreements shall not exceed in the aggregate the number
of Purchased Shares in which Optionee would otherwise at the time be vested, in
accordance with the Vesting Schedule, had all the Purchased Shares (including
those acquired under the Prior Purchase Agreements) been acquired exclusively
under this Agreement.
5. RECAPITALIZATION. Any new, substituted or additional securities or other
----------------
property (including cash paid other than as a regular cash dividend) which is by
reason of any Recapitalization distributed with respect to the Purchased Shares
shall be immediately subject to the Repurchase Right and any escrow requirements
hereunder, but only to the extent the Purchased Shares are at the time covered
by such right or escrow requirements. Appropriate adjustments to reflect such
distribution shall be made to the number and/or class of Purchased Shares
subject to this Agreement and to the price per share to be paid upon the
exercise of the Repurchase Right in order to reflect the effect of any such
Recapitalization upon the Corporation's capital structure; provided, however,
that the aggregate purchase price shall remain the same.
6. CORPORATE TRANSACTION.
---------------------
(a) The Repurchase Right shall automatically terminate in its entirety,
and all the Purchased Shares shall vest in full, immediately prior to the
consummation of any Corporate Transaction, except to the extent the Repurchase
Right is to be assigned to the successor entity in such Corporate Transaction.
(b) To the extent the Repurchase Right remains in effect following a
Corporate Transaction, such right shall apply to any new securities or other
property (including any cash payments) received in exchange for the Purchased
Shares in consummation of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
shall be made to the price per share payable upon exercise of the Repurchase
Right to reflect the effect of the Corporate Transaction upon the Corporation's
4
<PAGE>
capital structure; provided, however, that the aggregate purchase price shall
remain the same. The new securities or other property (including any cash
payments) issued or distributed with respect to the Purchased Shares in
consummation of the Corporate Transaction shall be immediately deposited in
escrow with the Corporation (or the successor entity) and shall not be released
from escrow until Optionee vests in such securities or other property in
accordance with the same Vesting Schedule in effect for the Purchased Shares.
(c) The Repurchase Right may also terminate on an accelerated basis, and
the Purchased Shares shall immediately vest in full, in accordance with the
terms and conditions of any special addendum attached to this Agreement.
E. RIGHT OF FIRST REFUSAL
----------------------
1. GRANT. The Corporation is hereby granted the right of first refusal (the
-----
"First Refusal Right"), exercisable in connection with any proposed transfer of
the Purchased Shares in which Optionee has vested in accordance with the
provisions of Article D. For purposes of this Article E, the term "transfer"
shall include any sale, assignment, pledge, encumbrance or other disposition of
the Purchased Shares intended to be made by Owner, but shall not include any
Permitted Transfer.
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of Purchased
------------------------------
Shares in which Optionee has vested desires to accept a bona fide third-party
offer for the transfer of any or all of such shares (the Purchased Shares
subject to such offer to be hereinafter referred to as the "Target Shares"),
Owner shall promptly (i) deliver to the Corporation written notice (the
"Disposition Notice") of the terms of the offer, including the purchase price
and the identity of the third- party offeror, and (ii) provide satisfactory
proof that the disposition of the Target Shares to such third-party offeror
would not be in contravention of the provisions set forth in Articles B and C.
3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall, for a period
-----------------------------------
of twenty-five (25) days following receipt of the Disposition Notice, have the
right to repurchase any or all of the Target Shares subject to the Disposition
Notice upon the same terms as those specified therein or upon such other terms
(not materially different from those specified in the Disposition Notice) to
which Owner consents. Such right shall be exercisable by delivery of written
notice (the "Exercise Notice") to Owner prior to the expiration of the
twenty-five (25)-day exercise period. If such right is exercised with respect to
all the Target Shares, then the Corporation shall effect the repurchase of such
shares, including payment of the purchase price, not more than five (5) business
days after delivery of the Exercise Notice; and at such time the certificates
representing the Target Shares shall be delivered to the Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If Owner and the Corporation
cannot agree on such cash value within ten (10) days after the Corporation's
receipt of the Disposition Notice, the valuation shall be made by an appraiser
of recognized standing selected by Owner and the Corporation or, if they cannot
agree on an appraiser within twenty (20) days after the Corporation's receipt of
the Disposition Notice, each shall select an
5
<PAGE>
appraiser of recognized standing and the two (2) appraisers shall designate a
third appraiser of recognized standing, whose appraisal shall be determinative
of such value. The cost of such appraisal shall be shared equally by Owner and
the Corporation. The closing shall then be held on the later of (i) the fifth
(5th) business day following delivery of the Exercise Notice or (ii) the fifth
(5th) business day after such valuation shall have been made.
4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the Exercise
---------------------------------------
Notice is not given to Owner prior to the expiration of the twenty-five (25)-day
exercise period, Owner shall have a period of thirty (30) days thereafter in
which to sell or otherwise dispose of the Target Shares to the third-party
offeror identified in the Disposition Notice upon terms (including the purchase
price) no more favorable to such third-party offeror than those specified in the
Disposition Notice; provided, however, that any such sale or disposition must
not be effected in contravention of the provisions of Articles B and C. The
third-party offeror shall acquire the Target Shares free and clear of the First
Refusal Right, but the acquired shares shall remain subject to the provisions of
Article B and Paragraph C.3. In the event Owner does not effect such sale or
disposition of the Target Shares within the specified thirty (30)-day period,
the First Refusal Right shall continue to be applicable to any subsequent
disposition of the Target Shares by Owner until such right lapses.
5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
-------------------------------------------
Corporation makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within five (5) business days after Owner's receipt of the Exercise
Notice, to effect the sale of the Target Shares pursuant to either of the
following alternatives:
(i) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full
compliance with the requirements of Paragraph E.4, as if the Corporation
did not exercise the First Refusal Right; or
(ii) sale to the Corporation of the portion of the Target Shares which
the Corporation has elected to purchase, such sale to be effected in
substantial conformity with the provisions of Paragraph E.3. The First
Refusal Right shall continue to be applicable to any subsequent disposition
of the remaining Target Shares until such right lapses.
Owner's failure to deliver timely notification to the Corporation
shall be deemed to be an election by Owner to sell the Target Shares pursuant to
alternative (i) above.
6. RECAPITALIZATION/REORGANIZATION.
-------------------------------
(a) Any new, substituted or additional securities or other property
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the First Refusal Right, but
only to the extent the Purchased Shares are at the time covered by such right.
(b) In the event of a Reorganization, the First Refusal Right shall
remain in full force and effect and shall apply to the new capital stock or
other property received
6
<PAGE>
in exchange for the Purchased Shares in consummation of the Reorganization, but
only to the extent the Purchased Shares are at the time covered by such right.
7. LAPSE. The First Refusal Right shall lapse upon the earliest to occur of
-----
(i) the first date on which shares of the Common Stock are held of record by
more than five hundred (500) persons, (ii) a determination is made by the Board
that a public market exists for the outstanding shares of Common Stock or (iii)
a firm commitment underwritten public offering, pursuant to an effective
registration statement under the 1933 Act, covering the offer and sale of the
Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
F. SPECIAL TAX ELECTION
--------------------
The acquisition of the Purchased Shares may result in adverse tax
consequences which may be avoided or mitigated by filing an election under Code
Section 83(b). Such election must be filed within thirty (30) days after the
date of this Agreement. A description of the tax consequences applicable to the
acquisition of the Purchased Shares and the form for making the Code Section
83(b) election are set forth in Exhibit II. OPTIONEE SHOULD CONSULT WITH HIS OR
HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED
SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(B)
ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY, AND
NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(B), EVEN
IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING
ON HIS OR HER BEHALF.
G. GENERAL PROVISIONS
------------------
1. ASSIGNMENT. The Corporation may assign the Repurchase Right and/or the
----------
First Refusal Right to any person or entity selected by the Board, including
(without limitation) one or more stockholders of the Corporation.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or in the
---------------------------------
Plan shall confer upon Optionee any right to continue in Service for any period
of specific duration or interfere with or otherwise restrict in any way the
rights of the Corporation (or any Parent or Subsidiary employing or retaining
Optionee) or of Optionee, which rights are hereby expressly reserved by each, to
terminate Optionee's Service at any time for any reason, with or without cause.
3. NOTICES. Any notice required to be given under this Agreement shall be
-------
in writing and shall be deemed effective upon personal delivery or upon deposit
in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
7
<PAGE>
4. NO WAIVER. The failure of the Corporation in any instance to exercise
-------
the Repurchase Right or the First Refusal Right shall not constitute a waiver of
any other repurchase rights and/or rights of first refusal that may subsequently
arise under the provisions of this Agreement or any other agreement between the
Corporation and Optionee. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other or subsequent breach or condition,
whether of like or different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make available, at the
----------------------
time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
H. MISCELLANEOUS PROVISIONS
------------------------
1. OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever additional
--------------------
action and execute whatever additional documents the Corporation may deem
necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Purchased Shares
pursuant to the provisions of this Agreement.
2. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the entire
----------------------------
contract between the parties hereto with regard to the subject matter hereof.
This Agreement is made pursuant to the provisions of the Plan and shall in all
respects be construed in conformity with the terms of the Plan.
3. GOVERNING LAW. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of California without resort to that
State's conflict-of- laws rules.
4. COUNTERPARTS. This Agreement may be executed in counterparts, each of
------------
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure to
----------------------
the benefit of, and be binding upon, the Corporation and its successors and
assigns and upon Optionee, Optionee's permitted assigns and the legal
representatives, heirs and legatees of Optionee's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
PRIME RESPONSE GROUP, INC.
By:
--------------------------------
Title:
-----------------------------
Address:
---------------------------
---------------------------
--------------------------------
OPTIONEE
Address:
---------------------------
---------------------------
9
<PAGE>
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting Optionee the right to acquire the Purchased Shares in accordance with
the terms of such Agreement, the undersigned hereby agrees to be irrevocably
bound by all the terms of such Agreement, including (without limitation) the
right of the Corporation (or its assigns) to purchase any Purchased Shares in
which Optionee is not vested at time of his or her cessation of Service.
--------------------------------
OPTIONEE'S SPOUSE
Address:
---------------------------
---------------------------
10
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ____________________________ hereby sell(s),
assign(s) and transfer(s) unto Prime Response Group, Inc. (the "Corporation"),
_____________________ (____________) shares of the Common Stock of the
Corporation standing in his or her name on the books of the Corporation
represented by Certificate No. __________________________ herewith and do(es)
hereby irrevocably constitute and appoint ____________________________ Attorney
to transfer the said stock on the books of the Corporation with full power of
substitution in the premises.
Dated: ________________________
Signature_____________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Optionee.
<PAGE>
EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(B) TAX ELECTION
I. FEDERAL INCOME TAX CONSEQUENCES AND SECTION 83(b) ELECTION FOR EXERCISE OF
--------------------------------------------------------------------------
NON-STATUTORY OPTION. If the Purchased Shares are acquired pursuant to the
- --------------------
exercise of a Non-Statutory Option, as specified in the Grant Notice, then under
Code Section 83, the excess of the Fair Market Value of the Purchased Shares on
the date any forfeiture restrictions applicable to such shares lapse over the
Exercise Price paid for such shares will be reportable as ordinary income on the
lapse date. For this purpose, the term "forfeiture restrictions" includes the
right of the Corporation to repurchase the Purchased Shares pursuant to the
Repurchase Right. However, Optionee may elect under Code Section 83(b) to be
taxed at the time the Purchased Shares are acquired, rather than when and as
such Purchased Shares cease to be subject to such forfeiture restrictions. Such
election must be filed with the Internal Revenue Service within thirty (30) days
after the date of the Agreement. Even if the Fair Market Value of the Purchased
Shares on the date of the Agreement equals the Exercise Price paid (and thus no
tax is payable), the election must be made to avoid adverse tax consequences in
the future. The form for making this election is attached as part of this
exhibit. FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY
PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME BY OPTIONEE AS THE
FORFEITURE RESTRICTIONS LAPSE.
II. FEDERAL INCOME TAX CONSEQUENCES AND CONDITIONAL SECTION 83(B) ELECTION FOR
--------------------------------------------------------------------------
EXERCISE OF INCENTIVE OPTION. If the Purchased Shares are acquired pursuant to
- ----------------------------
the exercise of an Incentive Option, as specified in the Grant Notice, then the
following tax principles shall be applicable to the Purchased Shares:
(i) For regular tax purposes, no taxable income will be recognized at
the time the Option is exercised.
(ii) The excess of (a) the Fair Market Value of the Purchased Shares
on the date the Option is exercised or (if later) on the date any
forfeiture restrictions applicable to the Purchased Shares lapse over (b)
the Exercise Price paid for the Purchased Shares will be includible in
Optionee's taxable income for alternative minimum tax purposes.
(iii) If Optionee makes a disqualifying disposition of the Purchased
Shares, then Optionee will recognize ordinary income in the year of such
disposition equal in amount to the excess of (a) the Fair Market Value of
the Purchased Shares on the date the Option is exercised or (if later) on
the date any forfeiture restrictions applicable to the Purchased Shares
lapse over (b) the Exercise Price paid for the Purchased Shares. Any
additional gain recognized upon the disqualifying disposition will be
either short-term or long-term capital gain depending upon the period for
which the Purchased Shares are held prior to the disposition.
1
<PAGE>
(iv) For purposes of the foregoing, the term "forfeiture restrictions"
will include the right of the Corporation to repurchase the Purchased
Shares pursuant to the Repurchase Right. The term "disqualifying
disposition" means any sale or other disposition of the Purchased Shares
within two (2) years after the Grant Date or within one (1) year after the
exercise date of the Option.
(v) In the absence of final Treasury Regulations relating to Incentive
Options, it is not certain whether Optionee may, in connection with the
exercise of the Option for any Purchased Shares at the time subject to
forfeiture restrictions, file a protective election under Code Section
83(b) which would limit (a) Optionee's alternative minimum taxable income
upon exercise and (b) Optionee's ordinary income upon a disqualifying
disposition to the excess of the Fair Market Value of the Purchased Shares
on the date the Option is exercised over the Exercise Price paid for the
Purchased Shares. Accordingly, such election if properly filed will only be
allowed to the extent the final Treasury Regulations permit such a
protective election. Page 2 of the attached form for making the election
should be filed with any election made in connection with the exercise of
an Incentive Option.
2
<PAGE>
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the Internal
Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
___________ shares of the common stock of Prime Response Group, Inc.
(3) The property was issued on __________, 199__.
(4) The taxable year in which the election is being made is the calendar year
199__.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's service with the issuer terminates. The issuer's
repurchase right lapses in a series of annual and monthly installments over
a four (4)-year period ending on __________, 200__.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $________ per share.
(7) The amount paid for such property is $_______ per share.
(8) A copy of this statement was furnished to Prime Response Group, Inc. for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on ____________, 199__.
________________________________ _______________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Purchase Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Optionee must retain two (2) copies of the completed form for filing with his or
her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE>
The property described in the above Section 83(b) election is
comprised of shares of common stock acquired pursuant to the exercise of an
incentive stock option under Section 422 of the Internal Revenue Code (the
"Code"). Accordingly, it is the intent of the Taxpayer to utilize this election
to achieve the following tax results:
1. The purpose of this election is to have the alternative minimum taxable
income attributable to the purchased shares measured by the amount by which the
fair market value of such shares at the time of their transfer to the Taxpayer
exceeds the purchase price paid for the shares. In the absence of this election,
such alternative minimum taxable income would be measured by the spread between
the fair market value of the purchased shares and the purchase price which
exists on the various lapse dates in effect for the forfeiture restrictions
applicable to such shares. The election is to be effective to the full extent
permitted under the Code.
2. Section 421(a)(1) of the Code expressly excludes from income any excess
of the fair market value of the purchased shares over the amount paid for such
shares. Accordingly, this election is also intended to be effective in the event
there is a "disqualifying disposition" of the shares, within the meaning of
Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.
THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(B) ELECTION FILED IN CONNECTION
WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEDERAL TAX LAWS.
2
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Purchase Agreement.
---------
B. BOARD shall mean the Corporation's Board of Directors.
-----
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATE TRANSACTION shall mean either of the following
---------
stockholder-approved transactions:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean Prime Response Group, Inc., a Delaware
-----------
corporation.
G. DISPOSITION NOTICE shall have the meaning assigned to such term in
------------------
Paragraph E.2.
H. EXERCISE NOTICE shall have the meaning assigned to such term in
---------------
Paragraph E.3.
I. EXERCISE PRICE shall have the meaning assigned to such term in Paragraph
---------------
A.1.
J. FAIR MARKET VALUE of a share of Common Stock on any relevant date, prior
-----------------
to the initial public offering of the Common Stock, shall be determined by
the Plan Administrator after taking into account such factors as it shall
deem appropriate.
K. FIRST REFUSAL RIGHT shall mean the right granted to the Corporation in
-------------------
accordance with Article E.
L. GRANT DATE shall have the meaning assigned to such term in Paragraph
----------
A.1.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option pursuant to
------------
which Optionee has been informed of the basic terms of the Option.
N. INCENTIVE OPTION mean an option which satisfies the requirements of Code
----------------
Section 422.
A-1
<PAGE>
O. MARKET STAND-OFF shall mean the market stand-off restriction specified
----------------
in Paragraph C.3.
P. 1933 ACT shall mean the Securities Act of 1933, as amended.
--------
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
--------
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.
S. OPTION shall have the meaning assigned to such term in Paragraph A.1.
------
T. OPTION AGREEMENT shall mean all agreements and other documents
----------------
evidencing the Option.
U. OPTIONEE shall mean the person to whom the Option is granted under the
--------
Plan.
V. OWNER shall mean Optionee and all subsequent holders of the Purchased
-----
Shares who derive their chain of ownership through a Permitted Transfer
from Optionee.
W. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
X. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the Purchased
--------- --------
Shares, provided and only if Optionee obtains the Corporation's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Optionee's will or the laws of intestate
succession following Optionee's death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness
incurred by Optionee in connection with the acquisition of the Purchased
Shares.
Y. PLAN shall mean the Corporation's 1998 Stock Option/Stock Issuance Plan.
----
Z. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
---- -------------
Board acting in its capacity as administrator of the Plan.
AA. PRIOR PURCHASE AGREEMENT shall have the meaning assigned to such term
-------------------------
in Paragraph D.4.
BB. PURCHASED SHARES shall have the meaning assigned to such term in
----------------
Paragraph A.1.
CC. RECAPITALIZATION shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
A-2
<PAGE>
DD. REORGANIZATION shall mean any of the following transactions:
--------------
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities
are transferred in whole or in part to a person or persons different
from the persons holding those securities immediately prior to the
merger, or
(iv) any transaction effected primarily to change the state in
which the Corporation is incorporated or to create a holding company
structure.
EE. REPURCHASE RIGHT shall mean the right granted to the Corporation in
-----------------
accordance with Article D.
FF. SEC shall mean the Securities and Exchange Commission.
---
GG. SERVICE shall mean the Optionee's performance of services for the
-------
Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the
work to be performed and the manner and method of performance, a
non-employee member of the board of directors or an independent consultant.
HH. SUBSIDIARY shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
II. TARGET SHARES shall have the meaning assigned to such term in Paragraph
-------------
E.2.
JJ. VESTING SCHEDULE shall mean the vesting schedule specified in the Grant
----------------
Notice pursuant to which the Optionee is to vest in the Option Shares in a
series of installments over his or her period of Service.
KK. UNVESTED SHARES shall have the meaning assigned to such term in
---------------
Paragraph D.1.
A-3
<PAGE>
ADDENDUM
TO
STOCK PURCHASE AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Purchase Agreement dated_________________
(the "Purchase Agreement") by and between Prime Response Group, Inc. (the
"Corporation") and ___________________________ ("Optionee") evidencing the
shares of Common Stock purchased on such date by Optionee pursuant to the option
granted to him or her under the Corporation's 1998 Stock Option/Stock Issuance
Plan, and such provisions shall be effective immediately. All capitalized terms
in this Addendum, to the extent not otherwise defined herein, shall have the
meanings assigned to such terms in the Purchase Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Repurchase Right is assigned to the successor
corporation (or parent thereof) in connection with a Corporate Transaction, no
accelerated vesting of the Purchased Shares shall occur upon such Corporate
Transaction, and the Repurchase Right shall continue to remain in full force and
effect in accordance with the provisions of the Purchase Agreement. Optionee
shall, over his or her period of Service following the Corporate Transaction,
continue to vest in the Purchased Shares in one or more installments in
accordance with the provisions of the Purchase Agreement. However, upon an
Involuntary Termination of Optionee's Service within eighteen (18) months
following the Corporate Transaction, the Repurchase Right shall terminate
automatically, and all the Purchased Shares shall immediately vest in full at
that time.
2. For purposes of this Addendum, the following definitions shall be in
effect:
An INVOLUNTARY TERMINATION shall mean the termination of Optionee's
Service by reason of:
(i) Optionee's involuntary dismissal or discharge by the Corporation
for reasons other than for Misconduct, or
(ii) Optionee's voluntary resignation following (A) a change in his
or her position with the Corporation (or Parent or Subsidiary employing
Optionee) which materially reduces his or her duties and responsibilities or the
level of management to which he or she reports, (B) a reduction in Optionee's
level of compensation (including base salary, fringe benefits and target bonuses
under any corporate-performance based incentive programs) by more than fifteen
percent (15%) or (C) a relocation of Optionee's place of employment by more than
fifty (50) miles, provided and only if such change, reduction or relocation is
effected by the Corporation without Optionee's consent.
<PAGE>
MISCONDUCT shall mean the termination of Optionee's Service by reason
of Optionee's commission of any act of fraud, embezzlement or dishonesty, any
unauthorized use or disclosure by Optionee of confidential information or trade
secrets of the Corporation (or any Parent or Subsidiary), or any other
intentional misconduct by Optionee adversely affecting the business or affairs
of the Corporation (or any Parent or Subsidiary) in a material manner. The
foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Corporation (or any Parent or Subsidiary) may consider as
grounds for the dismissal or discharge of Optionee or any other individual in
the Service of the Corporation (or any Parent or Subsidiary).
IN WITNESS WHEREOF, Prime Response Group, Inc. has caused this
Addendum to be executed by its duly-authorized officer as of the Effective Date
specified below.
PRIME RESPONSE GROUP, INC.
By:
Title:
EFFECTIVE DATE: _________________________, 199__
2.
<PAGE>
EXHIBIT 10.10
PRIME RESPONSE GROUP, INC.
STOCK ISSUANCE AGREEMENT
------------------------
AGREEMENT made as of this _____ day of ______________ 199___, by and
between Prime Response Group, Inc., a Delaware corporation, and
___________________________________________, Participant in the Corporation's
1998 Stock Option/Stock Issuance Plan.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
I. PURCHASE OF SHARES
------------------
1. PURCHASE. Participant hereby purchases _____________ shares of
--------
Common Stock (the "Purchased Shares") pursuant to the provisions of the Stock
Issuance Program at the purchase price of $____________ per share (the "Purchase
Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
-------
Corporation, Participant shall pay the Purchase Price for the Purchased Shares
in cash or cash equivalent and shall deliver a duly-executed blank Assignment
Separate from Certificate (in the form attached hereto as Exhibit I) with
respect to the Purchased Shares.
3. STOCKHOLDER RIGHTS. Until such time as the Corporation exercises
------------------
the Repurchase Right or the First Refusal Right, Participant (or any successor
in interest) shall have all stockholder rights (including voting, dividend and
liquidation rights) with respect to the Purchased Shares, subject, however, to
the transfer restrictions of Articles B and C.
A. SECURITIES LAW COMPLIANCE
-------------------------
1. RESTRICTED SECURITIES. The Purchased Shares have not been
---------------------
registered under the 1933 Act and are being issued to Participant in reliance
upon the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Participant hereby
confirms that Participant has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Participant hereby acknowledges that Participant is prepared to hold the
Purchased Shares for an indefinite period and that Participant is aware that SEC
Rule 144 issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
2. DISPOSITION OF PURCHASED SHARES. Participant shall make no
-------------------------------
disposition of the Purchased Shares (other than a Permitted Transfer) unless and
until there is compliance with all of the following requirements:
(i) Participant shall have provided the Corporation with a written
summary of the terms and conditions of the proposed disposition.
1
<PAGE>
(ii) Participant shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(iii) Participant shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (a)
the proposed disposition does not require registration of the Purchased
Shares under the 1933 Act or (b) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or any
exemption from registration available under the 1933 Act (including Rule
144) has been taken.
The Corporation shall not be required (i) to transfer on its books any
Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased
-------------------
Shares shall be endorsed with one or more of the following restrictive legends:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be
sold or offered for sale in the absence of (a) an effective
registration statement for the shares under such Act, (b) a "no
action" letter of the Securities and Exchange Commission with respect
to such sale or offer or (c) satisfactory assurances to the
Corporation that registration under such Act is not required with
respect to such sale or offer."
"The shares represented by this certificate are subject to
certain repurchase rights and rights of first refusal granted to the
Corporation and accordingly may not be sold, assigned, transferred,
encumbered, or in any manner disposed of except in conformity with
the terms of a written agreement dated ______, 199___ between the
Corporation and the registered holder of the shares (or the
predecessor in interest to the shares). A copy of such agreement is
maintained at the Corporation's principal corporate offices."
B. TRANSFER RESTRICTIONS
---------------------
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
-----------------------
Participant shall not transfer, assign, encumber or otherwise dispose of any of
the Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Right or the Market Stand-Off.
2. TRANSFEREE OBLIGATIONS. Each person (other than the
----------------------
Corporation) to whom the Purchased Shares are transferred by means of a
Permitted Transfer must, as a condition precedent to the validity of such
transfer, acknowledge in writing to the Corporation that such person is bound by
the provisions of this Agreement and that the transferred shares are subject to
(i) the Repurchase Right, (ii) the First Refusal Right and (iii) the Market
Stand-Off, to the same extent such shares would be so subject if retained by
Participant.
2
<PAGE>
3. MARKET STAND-OFF.
----------------
(a) In connection with any underwritten public offering by
the Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such restriction (the "Market Stand-Off") shall
be in effect for such period of time from and after the effective date of the
final prospectus for the offering as may be requested by the Corporation or such
underwriters. In no event, however, shall such period exceed one hundred eighty
(180) days and the Market Stand-Off shall in all events terminate two (2) years
after the effective date of the Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off provided
and only if the officers and directors of the Corporation are also subject to
similar restrictions.
(c) Any new, substituted or additional securities which are
by reason of any Recapitalization or Reorganization distributed with respect to
the Purchased Shares shall be immediately subject to the Market Stand-Off, to
the same extent the Purchased Shares are at such time covered by such
provisions.
(d) In order to enforce the Market Stand-Off, the Corporation
may impose stop-transfer instructions with respect to the Purchased Shares until
the end of the applicable stand-off period.
C. REPURCHASE RIGHT
----------------
1. GRANT. The Corporation is hereby granted the right (the
-----
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date Participant ceases for any reason to remain in Service, to
repurchase at the Purchase Price any or all of the Purchased Shares in which
Participant is not, at the time of his or her cessation of Service, vested in
accordance with the provisions of the Vesting Schedule set forth in Paragraph
D.3 or the special vesting acceleration provisions of Paragraph D.5 (such shares
to be hereinafter referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall
--------------------------------
be exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the sixty (60)-day exercise period. The notice shall
indicate the number of Unvested Shares to be repurchased and the date on which
the repurchase is to be effected, such date to be not more than thirty (30) days
after the date of such notice. The certificates representing the Unvested Shares
to be repurchased shall be delivered to the Corporation on or before the close
of business on the date specified for the repurchase. Concurrently with the
receipt of such stock certificates, the Corporation shall pay to Owner, in cash
or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Purchase Price previously paid for the
Unvested Shares which are to be repurchased from Owner.
3
<PAGE>
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right
-----------------------------------
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall terminate
and cease to be exercisable with respect to any and all Purchased Shares in
which Participant vests in accordance with the following Vesting Schedule:
Participant shall vest in twenty-five percent (25%) of the
Purchased Shares, and the Repurchase Right shall concurrently lapse
with respect to those Purchased Shares, upon Participant's completion
of one (1) year of Service measured from ________________________,
199____.
Participant shall vest in the remaining seventy-five percent
(75%) of the Purchased Shares, and the Repurchase Right shall
concurrently lapse with respect to those Purchased Shares, in a
series of thirty-six (36) successive equal monthly installments upon
Participant's completion of each additional month of Service over the
thirty-six (36)-month period measured from the date on which the
first twenty-five percent (25%) of the Purchased Shares vests
hereunder.
All Purchased Shares as to which the Repurchase Right lapses
shall, however, remain subject to (i) the First Refusal Right and
(ii) the Market Stand-Off.
4. RECAPITALIZATION. Any new, substituted or additional securities
----------------
or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right and any
escrow requirements hereunder, but only to the extent the Purchased Shares are
at the time covered by such right or escrow requirements. Appropriate
adjustments to reflect such distribution shall be made to the number and/or
class of Purchased Shares subject to this Agreement and to the price per share
to be paid upon the exercise of the Repurchase Right in order to reflect the
effect of any such Recapitalization upon the Corporation's capital structure;
provided, however, that the aggregate purchase price shall remain the same.
5. CORPORATE TRANSACTION.
---------------------
(a) The Repurchase Right shall automatically terminate in its
entirety, and all the Purchased Shares shall vest in full, immediately prior to
the consummation of any Corporate Transaction, except to the extent the
Repurchase Right is to be assigned to the successor entity in such Corporate
Transaction.
(b) To the extent the Repurchase Right remains in effect following
a Corporate Transaction, such right shall apply to any new securities or other
property (including any cash payments) received in exchange for the Purchased
Shares in consummation of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
shall be made to the price per share payable upon exercise of the Repurchase
Right to reflect the effect of the Corporate Transaction upon the Corporation's
capital structure; provided, however, that the aggregate purchase price shall
remain the same. The new securities or other property (including any cash
payments) issued or distributed with
4
<PAGE>
respect to the Purchased Shares in consummation of the Corporate Transaction
shall be immediately deposited in escrow with the Corporation (or the successor
entity) and shall not be released from escrow until Participant vests in such
securities or other property in accordance with the same Vesting Schedule in
effect for the Purchased Shares.
(c) The Repurchase Right may also terminate on an accelerated
basis, and the Purchased Shares shall immediately vest in full, in accordance
with the terms and conditions of any special addendum attached to this
Agreement.
D. RIGHT OF FIRST REFUSAL
----------------------
1. GRANT. The Corporation is hereby granted the right of first
-----
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which Participant has vested in accordance
with the provisions of Article D. For purposes of this Article E, the term
"transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition of the Purchased Shares intended to be made by Owner, but shall not
include any Permitted Transfer.
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of
------------------------------
Purchased Shares in which Participant has vested desires to accept a bona fide
third-party offer for the transfer of any or all of such shares (the Purchased
Shares subject to such offer to be hereinafter referred to as the "Target
Shares"), Owner shall promptly (i) deliver to the Corporation written notice
(the "Disposition Notice") of the terms of the offer, including the purchase
price and the identity of the third-party offeror, and (ii) provide satisfactory
proof that the disposition of the Target Shares to such third-party offeror
would not be in contravention of the provisions set forth in Articles B and C.
3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall, for
-----------------------------------
a period of twenty-five (25) days following receipt of the Disposition Notice,
have the right to repurchase any or all of the Target Shares subject to the
Disposition Notice upon the same terms as those specified therein or upon such
other terms (not materially different from those specified in the Disposition
Notice) to which Owner consents. Such right shall be exercisable by delivery of
written notice (the "Exercise Notice") to Owner prior to the expiration of the
twenty-five (25)-day exercise period. If such right is exercised with respect to
all the Target Shares, then the Corporation shall effect the repurchase of such
shares, including payment of the purchase price, not more than five (5) business
days after delivery of the Exercise Notice; and at such time the certificates
representing the Target Shares shall be delivered to the Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If Owner and the Corporation
cannot agree on such cash value within ten (10) days after the Corporation's
receipt of the Disposition Notice, the valuation shall be made by an appraiser
of recognized standing selected by Owner and the Corporation or, if they cannot
agree on an appraiser within twenty (20) days after the Corporation's receipt of
the Disposition Notice, each shall select an appraiser of recognized standing
and the two (2) appraisers shall designate a third appraiser of recognized
standing, whose appraisal shall be determinative of such value. The cost of
such
5
<PAGE>
appraisal shall be shared equally by Owner and the Corporation. The closing
shall then be held on the later of (i) the fifth (5th) business day following
delivery of the Exercise Notice or (ii) the fifth (5th) business day after such
valuation shall have been made.
4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
---------------------------------------
Exercise Notice is not given to Owner prior to the expiration of the twenty-five
(25)-day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; provided, however, that any such sale or
disposition must not be effected in contravention of the provisions of Articles
B and C. The third-party offeror shall acquire the Target Shares free and clear
of the First Refusal Right, but the acquired shares shall remain subject to the
provisions of Article B and Paragraph C.3. In the event Owner does not effect
such sale or disposition of the Target Shares within the specified thirty
(30)-day period, the First Refusal Right shall continue to be applicable to any
subsequent disposition of the Target Shares by Owner until such right lapses.
5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
-------------------------------------------
Corporation makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within five (5) business days after Owner's receipt of the Exercise
Notice, to effect the sale of the Target Shares pursuant to either of the
following alternatives:
(i) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full
compliance with the requirements of Paragraph E.4, as if the Corporation
did not exercise the First Refusal Right; or
(ii) sale to the Corporation of the portion of the Target Shares
which the Corporation has elected to purchase, such sale to be effected in
substantial conformity with the provisions of Paragraph E.3. The First
Refusal Right shall continue to be applicable to any subsequent disposition
of the remaining Target Shares until such right lapses.
Owner's failure to deliver timely notification to the Corporation
shall be deemed to be an election by Owner to sell the Target Shares pursuant to
alternative (i) above.
6. RECAPITALIZATION/REORGANIZATION.
-------------------------------
Any new, substituted or additional securities or other property which is by
reason of any Recapitalization distributed with respect to the Purchased Shares
shall be immediately subject to the First Refusal Right, but only to the extent
the Purchased Shares are at the time covered by such right.
(a) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital stock
or other property received in exchange for the Purchased Shares in consummation
of the Reorganization, but only to the extent the Purchased Shares are at the
time covered by such right.
6
<PAGE>
7. LAPSE. The First Refusal Right shall lapse upon the earliest to
-----
occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination is made by
the Board that a public market exists for the outstanding shares of Common Stock
or (iii) a firm commitment underwritten public offering, pursuant to an
effective registration statement under the 1933 Act, covering the offer and sale
of the Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
E. SPECIAL TAX ELECTION
--------------------
1. SECTION 83(b) ELECTION. Under Code Section 83, the excess of
----------------------
the Fair Market Value of the Purchased Shares on the date any forfeiture
restrictions applicable to such shares lapse over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the
Corporation to repurchase the Purchased Shares pursuant to the Repurchase Right.
Participant may elect under Code Section 83(b) to be taxed at the time the
Purchased Shares are acquired, rather than when and as such Purchased Shares
cease to be subject to such forfeiture restrictions. Such election must be filed
with the Internal Revenue Service within thirty (30) days after the date of this
Agreement. Even if the Fair Market Value of the Purchased Shares on the date of
this Agreement equals the Purchase Price paid (and thus no tax is payable), the
election must be made to avoid adverse tax consequences in the future. THE FORM
FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II HERETO. PARTICIPANT
UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY
(30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE
FORFEITURE RESTRICTIONS LAPSE.
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS
---------------------
PARTICIPANT'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY
ELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE CORPORATION
OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
F. GENERAL PROVISIONS
------------------
1. ASSIGNMENT. The Corporation may assign the Repurchase Right
----------
and/or the First Refusal Right to any person or entity selected by the Board,
including (without limitation) one or more stockholders of the Corporation.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
---------------------------------
in the Plan shall confer upon Participant any right to continue in Service for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Participant) or of Participant, which rights are hereby expressly
reserved by each, to terminate Participant's Service at any time for any reason,
with or without cause.
7
<PAGE>
3. NOTICES. Any notice required to be given under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation in any instance to
---------
exercise the Repurchase Right or the First Refusal Right shall not constitute a
waiver of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other agreement
between the Corporation and Participant. No waiver of any breach or condition of
this Agreement shall be deemed to be a waiver of any other or subsequent breach
or condition, whether of like or different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make available,
----------------------
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
G. MISCELLANEOUS PROVISIONS
------------------------
1. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of California without resort
to that State's conflict-of-laws rules.
2. PARTICIPANT UNDERTAKING. Participant hereby agrees to take
-----------------------
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either Participant or the
Purchased Shares pursuant to the provisions of this Agreement.
3. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
----------------------------
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Participant, Participant's assigns and the legal
representatives, heirs and legatees of Participant's
8
<PAGE>
estate, whether or not any such person shall have become a party to this
Agreement and have agreed in writing to join herein and be bound by the terms
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
PRIME RESPONSE GROUP, INC.
Title:
------------------------------
Address:
----------------------------
----------------------------
-------------------------------------
PARTICIPANT
Address:
----------------------------
----------------------------
9
<PAGE>
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Participant has read and hereby approves the
foregoing Stock Issuance Agreement. In consideration of the Corporation's
granting Participant the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms of such Agreement, including (without
limitation) the right of the Corporation (or its assigns) to purchase any
Purchased Shares in which Participant is not vested at the time of his or her
cessation of Service.
------------------------------
PARTICIPANT'S SPOUSE
10
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________________________________________
hereby sell(s), assign(s) and transfer(s) unto Prime Response Group, Inc. (the
"Corporation"), ______________________ (_______) shares of the Common Stock of
the Corporation standing in his or her name on the books of the Corporation
represented by Certificate No. ___________________ herewith and do(es) hereby
irrevocably constitute and appoint _______________________________ Attorney to
transfer the said stock on the books of the Corporation with full power of
substitution in the premises.
Dated: ________________
Signature
---------------------------------------------
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.
<PAGE>
EXHIBIT II
SECTION 83(b) TAX ELECTION
<PAGE>
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
shares of the common stock of Prime Response Group, Inc.
(3) The property was issued on _____________________, 199____.
(4) The taxable year in which the election is being made is the calendar year
1998.
(5) The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's service with the issuer terminates. The issuer's
repurchase right lapses in a series of annual and monthly installments over
a four (4)-year period ending on _____________________, 200_____.
(6) The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $______ per share.
(7) The amount paid for such property is $ ________ per share.
(8) A copy of this statement was furnished to Prime Response Group, Inc. for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on _____________________, 199____.
- --------------------------------------------------------------------------------
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Issuance Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Participant must retain two (2) copies of the completed form for filing with his
or her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE>
EXHIBIT III
1998 STOCK OPTION/STOCK ISSUANCE PLAN
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Issuance Agreement.
---------
B. BOARD shall mean the Corporation's Board of Directors.
-----
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATE TRANSACTION shall mean either of the following
---------------------
stockholder-approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
F. CORPORATION shall mean Prime Response Group, Inc., a Delaware
-----------
corporation.
G. DISPOSITION NOTICE shall have the meaning assigned to such term
------------------
in Paragraph E.2.
H. EXERCISE NOTICE shall have the meaning assigned to such term in
---------------
Paragraph E.3.
I. FAIR MARKET VALUE of a share of Common Stock on any relevant
-----------------
date, prior to the initial public offering of the Common Stock, shall be
determined by the Plan Administrator after taking into account such factors as
it shall deem appropriate.
J. FIRST REFUSAL RIGHT shall mean the right granted to the
-------------------
Corporation in accordance with Article E.
K. MARKET STAND-OFF shall mean the market stand-off restriction
----------------
specified in Paragraph C.3.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
--------
A-1
<PAGE>
M. OWNER shall mean Participant and all subsequent holders of the
-----
Purchased Shares who derive their chain of ownership through a Permitted
Transfer from Participant.
N. PARENT shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
O. PARTICIPANT shall mean the person to whom shares are issued under
-----------
the Stock Issuance Program.
P. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
------------------
Purchased Shares, provided and only if Participant obtains the Corporation's
prior written consent to such transfer, (ii) a transfer of title to the
Purchased Shares effected pursuant to Participant's will or the laws of
intestate succession following Participant's death or (iii) a transfer to the
Corporation in pledge as security for any purchase-money indebtedness incurred
by Participant in connection with the acquisition of the Purchased Shares.
Q. PLAN shall mean the Corporation's 1998 Stock Option/Stock
----
Issuance Plan attached hereto as Exhibit III.
R. PLAN ADMINISTRATOR shall mean either the Board or a committee of
------------------
the Board acting in its capacity as administrator of the Plan.
S. PURCHASE PRICE shall have the meaning assigned to such term in
--------------
Paragraph A.1.
T. PURCHASED SHARES shall have the meaning assigned to such term in
----------------
Paragraph A.1.
U. RECAPITALIZATION shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
V. REORGANIZATION shall mean any of the following transactions:
--------------
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
A-2
<PAGE>
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons different from the
persons holding those securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in
which the Corporation is incorporated or to create a holding company
structure.
W. REPURCHASE RIGHT shall mean the right granted to the Corporation
----------------
in accordance with Article D.
X. SEC shall mean the Securities and Exchange Commission.
---
Y. SERVICE shall mean the Participant's performance of services for
-------
the Corporation (or any Parent or Subsidiary) in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors or an independent consultant.
Z. STOCK ISSUANCE PROGRAM shall mean the Stock Issuance Program
----------------------
under the Plan.
AA. SUBSIDIARY shall mean any corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
BB. TARGET SHARES shall have the meaning assigned to such term in
-------------
Paragraph E.2.
CC. VESTING SCHEDULE shall mean the vesting schedule specified in
----------------
Paragraph D.3 pursuant to which Participant is to vest in the Purchased Shares
in a series of installments over the Participant's period of Service.
DD. UNVESTED SHARES shall have the meaning assigned to such term in
---------------
Paragraph D.1.
A-3
<PAGE>
ADDENDUM
TO
STOCK ISSUANCE AGREEMENT
The following provisions are hereby incorporated into, and are hereby
made a part of, that certain Stock Issuance Agreement dated , 199
(the "Issuance Agreement") by and between Prime Response Group, Inc. (the
"Corporation") and ("Participant") evidencing the shares of
Common Stock purchased on such date by Participant pursuant to the shares
granted to him or her under the Corporation's 1998 Stock Option/Stock Issuance
Plan, and such provisions shall be effective immediately. All capitalized terms
in this Addendum, to the extent not otherwise defined herein, shall have the
meanings assigned to such terms in the Issuance Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. To the extent the Repurchase Right is assigned to the successor
corporation (or parent thereof) in connection with a Corporate Transaction, no
accelerated vesting of the Purchased Shares shall occur upon such Corporate
Transaction, and the Repurchase Right shall continue to remain in full force and
effect in accordance with the provisions of the Issuance Agreement. Participant
shall, over his or her period of Service following the Corporate Transaction,
continue to vest in the Purchased Shares in one or more installments in
accordance with the provisions of the Issuance Agreement. However, upon an
Involuntary Termination of Participant's Service within eighteen (18) months
following the Corporate Transaction, the Repurchase Right shall terminate
automatically and all the Purchased Shares shall immediately vest in full.
2. For purposes of this Addendum, the following definitions shall be
in effect:
An INVOLUNTARY TERMINATION shall mean the termination of
Participant's Service by reason of:
a. Participant's involuntary dismissal or discharge by the Corporation
for reasons other than for Misconduct, or
b. Participant's voluntary resignation following (A) a change in his
or her position with the Corporation (or Parent or Subsidiary employing
Participant) which materially reduces his or her duties and
responsibilities or the level of management to which he or she reports,
(B) a reduction in Participant's level of compensation (including base
salary, fringe benefits and target bonuses under any corporate-performance
based incentive programs) by more than fifteen percent (15%) or (C) a
relocation of Participant's place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is
effected by the Corporation without Participant's consent.
<PAGE>
MISCONDUCT shall include the termination of Participant's Service by
reason or Participant's commission of any act of fraud, embezzlement or
dishonesty, any unauthorized use or disclosure by Participant of confidential
information or trade secrets of the Corporation (or any Parent or Subsidiary),
or any other intentional misconduct by Participant adversely affecting the
business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of the Participant or any
other individual in the Service of the Corporation (or any Parent or
Subsidiary).
IN WITNESS WHEREOF, Prime Response Group, Inc. has caused this
Addendum to be executed by its duly-authorized officer as of the Effective Date
specified below.
PRIME RESPONSE GROUP, INC.
By:
------------------------------
Title:
------------------------------
EFFECTIVE DATE: , 199
----------------------- ----
2
<PAGE>
Exhibit 10.11
PRIME RESPONSE, INC.
1999 OUTSIDE DIRECTOR STOCK OPTION PLAN
1. Purpose
-------
The purpose of this 1999 Outside Director Stock Option Plan (the "Plan") of
Prime Response, Inc. a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate outside directors of the Company by providing such
directors with equity ownership opportunities and performance-based incentives
and thereby better aligning the interests of such persons with those of the
Company's stockholders.
2. Eligibility
-----------
Each director of the Company who is not an employee of the Company (an "Eligible
Director") is eligible to be granted options (an "Option") under the Plan. Any
person who has been granted an Option under the Plan shall be deemed a
"Participant."
3. Administration, Delegation
--------------------------
The Plan will be administered by the Board of Directors of the Company
(the "Board"). The Board shall have authority to adopt, amend and repeal such
administrative rules, guidelines and practices relating to the Plan as it shall
deem advisable. The Board may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. All decisions by the Board shall be
made in the Board's sole discretion and shall be final and binding on all
persons having or claiming any interest in the Plan or in any Option. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.
4. Stock Available for Options
---------------------------
a. Number of Shares. Subject to adjustment under Section 4(b), Options
----------------
may be made under the Plan for up to 200,000 shares of common stock, $.01 par
value per share, of the Company (the "Common Stock"), after giving effect to the
0.75 to one reverse stock split authorized by the Board of Directors on November
15, 1999, subject to stockholder approval (the "Reverse Split"). If any Option
expires or is terminated, surrendered or canceled without having been fully
exercised or is forfeited in whole or in part or results in any Common Stock not
being issued, the unused Common Stock covered by such Option shall again be
available for the grant of Options under the Plan. Shares issued under the Plan
may consist in whole or in part of authorized but unissued shares or treasury
shares.
b. Adjustment to Common Stock. In the event of any stock split, stock
--------------------------
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to
<PAGE>
holders of Common Stock other than a normal cash dividend, (i) the number and
class of securities available under this Plan, (ii) the number and class of
securities and exercise price per share subject to each outstanding Option, and
(iii) the number and class of securities available for automatic grants shall be
appropriately adjusted by the Company (or substituted Options may be made, if
applicable) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is necessary and appropriate. If this Section 4(b)
applies and Section 6(c) also applies to any event, Section 6(c) shall be
applicable to such event, and this Section 4(b) shall not be applicable.
5. Stock Options
-------------
a. Automatic Grants.
----------------
(i) Each Eligible Director who is serving on the Board on the
effective date (the "Effective Date") of the initial public
offering (the "IPO") of the Common Stock and who continues to
serve after the closing of the IPO (each, an "IPO Director")
shall be granted an Option to purchase 20,000 shares of Common
Stock, after giving effect to the Reverse Split, as of the
Effective Date.
(ii) Each Eligible Director who is not an IPO Director shall be
granted an Option to purchase 20,000 shares of Common Stock at
the close of business on the date such Eligible Director is first
elected to serve on the Board.
(iii) Each Eligible Director who is serving on the Board at the
adjournment of any annual meeting which begins after the date of
his or her election shall be granted an Option to purchase
10,0000 shares of Common Stock, after giving effect to the
Reverse Split, at the close of business on the date of each such
adjournment.
b. Option Exercise Price. The option exercise price per share for each
---------------------
Option granted under the Plan shall equal (i) the last reported sales price per
share of the Company's Common Stock as listed on a nationally recognized
securities exchange or the Nasdaq National Market, as the case may be, on the
date of grant (or, if no such price is reported on such date, such price as
reported on the nearest preceding day); or (ii) the fair market value of the
stock on the date of grant, as determined by the Board of Directors, if the
Common Stock is not publicly traded. Notwithstanding the preceding sentence,
the option exercise price per share for each Option granted on the Effective
Date shall be the price per share for which the Common Stock was offered to the
public.
c. Exercise Period. Each Option shall immediately vest and be
---------------
exercisable. In addition, no Option may be exercised more than one year after
the Participant ceases to serve as a director of the Company. No Option shall
be exercisable after the expiration of ten (10) years from the date of grant or
prior to approval of the Plan by the stockholders of the Company.
d. Payment Upon Exercise. Common Stock purchased upon the exercise of an
---------------------
Option granted under the Plan shall be paid for as follows:
-2-
<PAGE>
i. in cash or by check, payable to the order of the Company;
ii. except as the Board may otherwise provide in an Option Agreement,
by delivery of an irrevocable and unconditional undertaking by a creditworthy
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or by delivery by the Participant to the Company of a copy of irrevocable
and unconditional instructions to a creditworthy broker to deliver promptly to
the Company cash or a check sufficient to pay the exercise price;
iii. to the extent permitted by the Board and explicitly provided in
an Option Agreement (i) by delivery of shares of Common Stock owned by the
Participant valued at their fair market value as determined by the Board in good
faith ("Fair Market Value"), which Common Stock was owned by the Participant at
least six months prior to such delivery, (ii) by delivery of a promissory note
of the Participant to the Company on terms determined by the Board, or (iii) by
payment of such other lawful consideration as the Board may determine; or
iv. by any combination of the above permitted forms of payment.
6. General Provisions Applicable to Options
----------------------------------------
a. Transferability of Options. Except as the Board may otherwise
--------------------------
determine or provide in an Option, Options shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
b. Documentation. Each Option under the Plan shall be evidenced by a
-------------
written instrument in such form as the Board shall determine. Each Option may
contain terms and conditions in addition to those set forth in the Plan.
c. Acquisition Events. The Company shall give the Participant ten (10)
------------------
days notice of an Acquisition Event (as defined below), and the Option shall
expire upon the Acquisition Event. An "Acquisition Event" shall mean: (a) any
merger or consolidation which results in the voting securities of the Company
outstanding immediately prior thereto representing immediately thereafter
(either by remaining outstanding or by being converted into voting securities of
the surviving or acquiring entity) less than 50% of the combined voting power of
the voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation; (b) any sale of all
or substantially all of the assets of the Company; or (c) the complete
liquidation of the Company.
d. Conditions on Delivery of Stock. The Company will not be obligated to
-------------------------------
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Option have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company
-3-
<PAGE>
such representations or agreements as the Company may consider appropriate to
satisfy the requirements of any applicable laws, rules or regulations.
7. Miscellaneous
-------------
a. No Right To Board Membership or Other Status. Neither the Plan nor the
--------------------------------------------
granting of an Option shall be construed as giving a Participant the right to
continue as a director of the Company.
b. No Rights As Stockholder. Subject to the provisions of the applicable
------------------------
Options, no Participant or beneficiary designated by the Participant shall have
any rights as a stockholder with respect to any shares of Common Stock to be
distributed with respect to an Option until becoming the record holder of such
shares.
c. Effective Date and Term of Plan. The Plan shall become effective on
-------------------------------
the date on which it is adopted by the Board. No Options shall be granted under
the Plan after the completion of ten years from the date on which the Plan was
adopted by the Board, but Options previously granted may extend beyond that
date.
d. Amendment of Plan. The Board may amend, suspend or terminate the Plan
-----------------
or any portion thereof at any time.
e. Governing Law. The provisions of the Plan and all Options made
-------------
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
-4-
<PAGE>
PRIME RESPONSE, INC.
Nonstatutory Stock Option Agreement
Granted Under 1999 Outside Director Stock Option Plan
-----------------------------------------------------
1. Grant of Option.
---------------
This agreement evidences the grant by Prime Response, Inc., a Delaware
corporation (the "Company"), on [___________, ____] (the "Grant Date") to
[__________________], a director of the Company (the "Participant"), of an
option to purchase, in whole or in part, on the terms provided herein and in the
Company's 1999 Outside Director Stock Option Plan (the "Plan"), a total of
[___________] shares of common stock, $.01 par value per share, of the Company
("Common Stock") (the "Shares") at $[__________] per Share. Unless earlier
terminated, this option shall expire on the tenth anniversary of the Grant Date
(the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall not be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant," as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. Vesting Schedule.
----------------
This option will become exercisable ("vest") as to 100% of the original number
of Shares on the Grant Date. This option shall expire upon, and will not be
exercisable after, the Final Exercise Date.
The right of exercise shall be cumulative so that to the extent the option is
not exercised in any period to the maximum extent permissible it shall continue
to be exercisable, in whole or in part, with respect to all shares for which it
is vested until the earlier of the Final Exercise Date or the termination of
this option under Section 3 hereof or the Plan.
3. Exercise of Option.
------------------
a. Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share.
b. Exercise Period. Each Option shall immediately vest and be
---------------
exercisable. In addition, no Option may be exercised more than one year after
the Participant ceases to serve as a director of the Company. No Option shall
be exercisable after the expiration of ten (10) years from the date of grant or
prior to approval of the Plan by the stockholders of the Company.
-5-
<PAGE>
4. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
5. Provisions of the Plan.
----------------------
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
IN WITNESS WHEREOF, the Company has caused this option to be executed under its
corporate seal by its duly authorized officer. This option shall take effect as
a sealed instrument.
PRIME RESPONSE, INC.
Dated: ______________________ By: ___________________________________________
Name: _________________________________________
Title: ________________________________________
-6-
<PAGE>
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms and
conditions thereof. The undersigned hereby acknowledges receipt of a copy of
the Prime Response, Inc. 1999 Outside Director Stock Option Plan.
PARTICIPANT:
__________________________________________________
Name: _________________________________________
Address: _________________________________________
_________________________________________
_________________________________________
-7-
<PAGE>
Exhibit 10.12
Prime Response, Inc.
1999 EMPLOYEE STOCK PURCHASE PLAN
The purpose of this Plan is to provide eligible employees of Prime
Response, Inc. (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $0.01 par value
(the "Common Stock"), commencing on September 1, 2000. Three hundred thousand
(300,000) shares of Common Stock in the aggregate have been approved for this
purpose, after giving effect to the 0.75 to one reverse stock split authorized
by the Board of Directors on November 15, 1999, subject to stockholder approval.
This Plan is intended to qualify as an "employee stock purchase plan" as defined
in Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"),
and the regulations promulgated thereunder, and shall be interpreted consistent
therewith.
1. Administration. The Plan will be administered by the Company's Board
--------------
of Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. Eligibility. All employees of the Company, including Directors who are
-----------
employees, and all employees of any subsidiary of the Company (as defined in
Section 424(f) of the Code) designated by the Board or the Committee from time
to time (a "Designated Subsidiary"), are eligible to participate in any one or
more of the offerings of Options (as defined in Section 9) to purchase Common
Stock under the Plan provided that:
(a) they are customarily employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in a
calendar year; and
(b) they have been employed by the Company or a Designated Subsidiary
for at least months prior to enrolling in the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee, immediately
after the option is granted, owns 5% or more of the total combined voting power
or value of the stock of the Company or any subsidiary. For purposes of the
preceding sentence, the attribution rules of Section 424(d) of the Code shall
apply in determining the stock ownership of an employee, and all stock which the
employee has a contractual right to purchase shall be treated as stock owned by
the employee.
3. Offerings. The Company will make one or more offerings ("Offerings")
---------
to employees to purchase stock under this Plan. Offerings will begin each
September 1 and March 1, or the first business day thereafter (the "Offering
Commencement Dates"). Each Offering Commencement Date will begin a six month
period (a "Plan Period") during which payroll deductions will be made and held
for the purchase of Common Stock at the end of the Plan Period.
<PAGE>
The Board or the Committee may, at its discretion, choose a different Plan
Period of twelve (12) months or less for subsequent Offerings.
4. Participation. An employee eligible on the Offering Commencement Date
-------------
of any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office at least 10 days prior to the applicable Offering Commencement Date.
The form will authorize a regular payroll deduction from the Compensation
received by the employee during the Plan Period. Unless an employee files a new
form or withdraws from the Plan, his deductions and purchases will continue at
the same rate for future Offerings under the Plan as long as the Plan remains in
effect. The term "Compensation" means the amount of money reportable on the
employee's Federal Income Tax Withholding Statement, excluding overtime, shift
premium, incentive or bonus awards, allowances and reimbursements for expenses
such as relocation allowances for travel expenses, income or gains on the
exercise of Company stock options or stock appreciation rights, and similar
items, whether or not shown on the employee's Federal Income Tax Withholding
Statement, but including, in the case of salespersons, sales commissions to the
extent determined by the Board or the Committee.
5. Deductions. The Company will maintain payroll deduction accounts for
----------
all participating employees. With respect to any Offering made under this Plan,
an employee may authorize a payroll deduction in any dollar amount up to a
maximum of 10% of the Compensation he or she receives during the Plan Period or
such shorter period during which deductions from payroll are made.
No employee may be granted an Option (as defined in Section 9) which permits
his rights to purchase Common Stock under this Plan and any other employee stock
purchase plan (as defined in Section 423(b) of the Code) of the Company and its
subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value
of such Common Stock (determined at the Offering Commencement Date of the Plan
Period) for each calendar year in which the Option is outstanding at any time.
6. Deduction Changes. An employee may decrease or discontinue his payroll
-----------------
deduction once during any Plan Period, by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. Interest. Interest will not be paid on any employee accounts, except
--------
to the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.
8. Withdrawal of Funds. An employee may at any time prior to the close of
-------------------
business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during
-2-
<PAGE>
the remainder of the Plan Period. The employee may participate in any subsequent
Offering in accordance with terms and conditions established by the Board or the
Committee.
9. Purchase of Shares. On the Offering Commencement Date of each Plan
------------------
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, the largest number of whole shares of Common Stock of the Company
as does not exceed the number of shares determined by multiplying $2,083 by the
number of full months in the Offering Period and dividing the result by the
closing price (as defined below) on the Offering Commencement Date of such Plan
Period.
The purchase price for each share purchased will be 85% of the closing
price of the Common Stock on (i) the first business day of such Plan Period or
(ii) the Exercise Date, whichever closing price shall be less. Such closing
price shall be (a) the closing price on any national securities exchange on
which the Common Stock is listed, (b) the closing price of the Common Stock on
the Nasdaq National Market or (c) the average of the closing bid and asked
prices in the over-the-counter-market, whichever is applicable, as published in
The Wall Street Journal. If no sales of Common Stock were made on such a day,
- -----------------------
the price of the Common Stock for purposes of clauses (a) and (b) above shall be
the reported price for the next preceding day on which sales were made.
Each employee who continues to be a participant in the Plan on the Exercise
Date shall be deemed to have exercised his Option at the Option Price on such
date and shall be deemed to have purchased from the Company the number of full
shares of Common Stock reserved for the purpose of the Plan that his accumulated
payroll deductions on such date will pay for, but not in excess of the maximum
number determined in the manner set forth above.
Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of Common
------------------------
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the name
of a brokerage firm, bank or other nominee holder designated by the employee.
The Company may, in its sole discretion and in compliance with applicable laws,
authorize the use of book entry registration of shares in lieu of issuing stock
certificates.
11. Rights on Retirement, Death or Termination of Employment. In the
--------------------------------------------------------
event of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the
-3-
<PAGE>
employee (with any spousal consent required under state law) or (b) in the
absence of such a designated beneficiary, to the executor or administrator of
the employee's estate or (c) if no such executor or administrator has been
appointed to the knowledge of the Company, to such other person(s) as the
Company may, in its discretion, designate. If, prior to the last business day of
the Plan Period, the Designated Subsidiary by which an employee is employed
shall cease to be a subsidiary of the Company, or if the employee is transferred
to a subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.
12. Optionees Not Stockholders. Neither the granting of an Option to an
--------------------------
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
13. Rights Not Transferable. Rights under this Plan are not transferable
-----------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. Application of Funds. All funds received or held by the Company under
--------------------
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In the event of
----------------------------------------------------
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan, and the
share limitation set forth in Section 9, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock,
such adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. Merger. If the Company shall at any time merge or consolidate with
------
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger or consolidation, and the Board or the Committee
shall take such steps in connection with such merger or consolidation as the
Board or the Committee shall deem necessary to assure that the provisions of
Section 15 shall thereafter be applicable, as nearly as reasonably may be, in
relation to the said securities or property as to which such holder of such
Option might thereafter be entitled to receive thereunder.
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive
-4-
<PAGE>
in lieu of shares of Common Stock, shares of such stock or other securities as
the holders of shares of Common Stock received pursuant to the terms of such
transaction; or (b) all outstanding Options may be cancelled by the Board or the
Committee as of a date prior to the effective date of any such transaction and
all payroll deductions shall be paid out to the participating employees; or
(c) all outstanding Options may be cancelled by the Board or the Committee as of
the effective date of any such transaction, provided that notice of such
cancellation shall be given to each holder of an Option, and each holder of an
Option shall have the right to exercise such Option in full based on payroll
deductions then credited to his account as of a date determined by the Board or
the Committee, which date shall not be less than ten (10) days preceding the
effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time to
---------------------
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the shareholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and (b) in
no event may any amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.
18. Insufficient Shares. In the event that the total number of shares of
-------------------
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time by
-----------------------
the Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and
------------------------
deliver Common Stock under this Plan is subject to listing on a national stock
exchange or quotation on the Nasdaq National Market (to the extent the Common
Stock is then so listed or quoted) and the approval of all governmental
authorities required in connection with the authorization, issuance or sale of
such stock.
21. Governing Law. The Plan shall be governed by Delaware law except to
-------------
the extent that such law is preempted by federal law.
22. Issuance of Shares. Shares may be issued upon exercise of an Option
------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. Notification upon Sale of Shares. Each employee agrees, by entering
--------------------------------
the Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
24. Effective Date and Approval of Shareholders. The Plan shall take
-------------------------------------------
effect on September 1, 2000 subject to approval by the shareholders of the
Company as required by Section 423 of the Code, which approval must occur within
twelve months of the adoption of the Plan by the Board.
-5-
<PAGE>
Adopted by the Board of Directors
on November 15, 1999
Approved by the stockholders on
__________________, 2000
-6-
<PAGE>
EXHIBIT 10.13
Execution Copy
================================================================================
STOCK PURCHASE AGREEMENT
by and among
PRIME RESPONSE GROUP INC.,
GENERAL ATLANTIC PARTNERS 42, L.P.
and
GAP COINVESTMENT PARTNERS, L.P.
______________________________
Dated as of October 1, 1997
______________________________
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE 1 DEFINITIONS............................................................................1
1.1 Definitions............................................................................1
1.2 Accounting Terms; Financial Statements.................................................8
1.3 Knowledge of the Company...............................................................8
ARTICLE 2 PURCHASE AND SALE OF PREFERRED STOCK...................................................8
2.1 Purchase and Sale of Preferred Stock...................................................8
2.2 Certificate of Designation.............................................................8
2.3 Closing................................................................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................9
3.1 Corporate Existence and Power..........................................................9
3.2 Authorization; No Contravention........................................................9
3.3 Governmental Authorization; Third Party Consents......................................10
3.4 Binding Effect........................................................................10
3.5 Litigation............................................................................10
3.6 Compliance with Laws..................................................................10
3.7 Capitalization........................................................................11
3.8 No Default or Breach; Contractual Obligations.........................................12
3.9 Title to Properties...................................................................12
3.10 FIRPTA................................................................................12
3.11 Financial Statements..................................................................12
3.12 Taxes.................................................................................13
3.13 No Material Adverse Change; Ordinary Course of Business...............................13
3.14 Investment Company....................................................................14
3.15 Private Offering......................................................................14
3.16 Labor Relations.......................................................................14
3.17 Employee Benefit Plans................................................................14
3.18 Title to Assets.......................................................................15
3.19 Liabilities...........................................................................15
3.20 Intellectual Property.................................................................15
3.21 Year 2000 Compliance..................................................................17
3.22 Potential Conflicts of Interest.......................................................18
3.23 Trade Relations.......................................................................18
3.24 Outstanding Borrowing.................................................................18
3.25 Insurance.............................................................................18
3.26 Environmental Matters.................................................................19
3.27 Broker's, Finder's or Similar Fees....................................................19
3.28 Disclosure............................................................................19
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS.....................................................................19
4.1 Existence and Power...................................................................19
4.2 Authorization; No Contravention.......................................................19
4.3 Governmental Authorization; Third Party Consents......................................20
4.4 Binding Effect........................................................................20
4.5 Litigation............................................................................20
4.6 Purchase for Own Account..............................................................20
4.7 Restricted Securities.................................................................22
4.8 Investment Experience.................................................................22
4.9 Broker's, Finder's or Similar Fees....................................................22
ARTICLE 5 CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE...............................22
5.1 Representations and Warranties........................................................22
5.2 Compliance with this Agreement........................................................22
5.3 Secretary's Certificate...............................................................23
5.4 Officer's Certificate.................................................................23
5.5 Filing of Certificate of Designation..................................................23
5.6 Stockholders Agreement................................................................23
5.7 Registration Rights Agreement.........................................................23
5.8 Opinion of Counsel....................................................................23
5.9 Purchased Shares......................................................................23
5.10 No Material Adverse Change............................................................24
5.11 Consents and Approvals................................................................24
5.12 No Material Judgment or Order.........................................................24
5.13 No Litigation.........................................................................24
5.14 Exchange Agreement....................................................................24
5.15 Stock Option Plan and Option Agreement................................................24
ARTICLE 6 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE ...............................25
6.1 Representation and Warranties.........................................................25
6.2 Compliance with this Agreement........................................................25
6.3 General Partners' Certificates........................................................25
6.4 Stockholders Agreement................................................................25
6.5 Registration Rights Agreement.........................................................25
6.6 Opinion of Counsel....................................................................26
6.7 No Material Judgment or Order.........................................................26
6.8 Payment by the Purchasers.............................................................26
6.9 Consents, Approvals...................................................................26
6.10 Exchange Agreement....................................................................26
6.11 Option Agreement......................................................................26
6.12 Certificate of Designation............................................................26
</TABLE>
ii
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
ARTICLE 7 INDEMNIFICATION.......................................................................27
7.1 Indemnification.......................................................................27
7.2 Notification..........................................................................28
ARTICLE 8 AFFIRMATIVE COVENANTS.................................................................29
8.1 Preservation of Existence.............................................................29
8.2 Fiscal Year End.......................................................................30
8.3 Financial Statements and Other Information............................................30
8.4 Reservation of Common Stock...........................................................31
8.5 Insurance.............................................................................31
8.6 Books and Records.....................................................................31
8.7 Back-Ups of Computer Software.........................................................31
8.8 Inspection............................................................................31
ARTICLE 9 TERMINATION OF AGREEMENT..............................................................32
9.1 Termination...........................................................................32
9.2 Survival..............................................................................32
ARTICLE 10 MISCELLANEOUS.........................................................................33
10.1 Survival of Representations and Warranties............................................33
10.2 Notices...............................................................................33
10.3 Successors and Assigns; Third Party Beneficiaries.....................................34
10.4 Amendment and Waiver..................................................................34
10.5 Counterparts..........................................................................35
10.6 Headings..............................................................................35
10.7 GOVERNING LAW.........................................................................35
10.8 Severability..........................................................................35
10.9 Entire Agreement......................................................................35
10.10 Fees..................................................................................35
10.11 Publicity.............................................................................36
10.12 Further Assurances....................................................................36
</TABLE>
iii
<PAGE>
EXHIBITS
A-1 Certificate of Incorporation
A-2 By-laws
B Form of Stockholders Agreement
C Form of Registration Rights Agreement
SCHEDULES
2.1 Purchased Shares and Purchase Price
3.3 Governmental Authorizations; Third Party Consents
3.5 Litigation
3.7(a) List of Stockholders and Capital Stock and Stock Equivalents.
3.7(b) Options, Warrants and Other Rights
3.8(i) Defaults or Breaches of Contractual Obligations
3.8(ii) Contractual Obligations
3.12 Taxes
3.17 Employee Benefit Plans
3.18 Title to Assets of the Company
3.20(a)(ii) Intellectual Property Owned by the Company or the Subsidiary and
Applications therefor
3.20(a)(iii) Intellectual Property Licenses under which the Company or the
Subsidiary is a Licensor or Licensee
3.20(a)(iv) Infringements of the Company or the Subsidiary
3.20(a)(v) Intellectual Property Litigation
3.20(b) Infringement or Violations of Intellectual Property Rights
3.20(d) License Agreements which require a Material Royalty Payment
3.21 Year 2000 Compliance
3.22(i) Ownership Interests
3.22(ii) Loans to and from the Company
3.24 Outstanding Borrowing
3.25 Insurance
iv
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of October 1, 1997 (this
"Agreement"), among Prime Response Group Inc., a Delaware corporation (the
"Company"), General Atlantic Partners 42, L.P., a Delaware limited partnership
("GAP LP"), and GAP Coinvestment Partners, L.P., a New York limited partnership
("GAP Coinvestment" and, together with GAP LP, the "Purchasers").
WHEREAS, the Company, in connection with the transactions contemplated
hereby, intends to enter into a Stock Exchange Agreement (the "Exchange
Agreement"), with James Carling and Nevin Prakash (together, the
"Stockholders"), pursuant to which the Stockholders will transfer to the Company
all of the issued and outstanding shares of Prime Response Limited, a company
registered in England and Wales under number 2155722 (the "Subsidiary"), in
exchange for newly issued common stock, par value $.01 per share (the "Common
Stock"), of the Company and a promissory note of the Company; and
WHEREAS, upon the terms and conditions set forth in this Agreement,
the Company proposes to issue and sell to (a) GAP LP, for an aggregate purchase
price of $18,779,308.29, an aggregate of 915,310 shares of Series A Convertible
Participating Preferred Stock, par value $.01 per share, of the Company (the
"Preferred Stock") and (b) GAP Coinvestment, for an aggregate purchase price of
$4,917,691.71, an aggregate of 239,690 shares of Preferred Stock.
WHEREAS, each share of Preferred Stock is convertible (subject to
adjustment) into one share of Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 Definitions. As used in this Agreement, and unless the context
-----------
requires a different meaning, the following terms have the meanings indicated:
"Affiliate" shall mean any Person who is an "affiliate" as defined in
---------
Rule 12b-2 of the General Rules and Regulations under the Exchange Act. The
following shall be deemed to be Affiliates of GAP LP: (a) GAP LLC, the members
<PAGE>
2
of GAP LLC and the limited partners of GAP LP; (b) any Affiliate of GAP LLC, the
members of GAP LLC and the limited partners of GAP LP; and (c) any limited
liability company or partnership a majority of whose members or partners, as the
case may be, are members of GAP LLC. GAP LP and GAP Coinvestment shall be deemed
to be Affiliates of one another.
"Agreement" means this Agreement as the same may be amended
---------
supplemented or modified in accordance with the terms hereof.
"Assets" has the meaning set forth in Section 3.18 of this Agreement.
------
"Audited Financial Statements" has the meaning set forth in
----------------------------
Section 3.11 of this Agreement.
"Board of Directors" means the Board of Directors of the Company.
------------------
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"By-laws" means the by-laws of the Company in effect on the Closing
-------
Date substantially in the form attached hereto as Exhibit A-2, as the same may
-----------
be amended from time to time.
"Capital Lease Obligations" of any Person shall mean, as of the date
-------------------------
of determination, the obligations of such Person to pay rent or other amounts
under any lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are required to
be classified and accounted for as capital leases on a balance sheet of such
Person under GAAP and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof at such time
determined in accordance with GAAP consistently applied.
"Certificate of Designation" means the Certificate of Designation with
--------------------------
respect to the Preferred Stock adopted by the Board of Directors and filed with
the Secretary of State of the State of Delaware on or before the Closing Date.
"Certificate of Incorporation" means the Certificate of Incorporation
----------------------------
of the Company substantially in the form attached hereto as Exhibit A-1, as the
-----------
same may be amended from time to time.
"Claims" has the meaning set forth in Section 3.5 of this Agreement.
------
"Closing" has the meaning set forth in Section 2.3 of this Agreement.
-------
<PAGE>
3
"Closing Date" has the meaning set forth in Section 2.3 of this
------------
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
----
successor statute thereto.
"Commission" means the Securities and Exchange Commission or any
----------
similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" has the meaning set forth in the recitals to this
------------
Agreement.
"Company" has the meaning set forth in the recitals to this Agreement.
-------
"Condition of the Company" means the assets, business, properties,
------------------------
prospects, operations or financial condition of the Company and the Subsidiary,
taken as a whole.
"Contingent Obligation" means, as applied to any Person, any direct or
---------------------
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of another Person (the "primary obligor"),
------------------ ---------------
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligation or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, or (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss or failure or inability to perform in respect
thereof. The amount of any Contingent Obligation shall, unless stated to be
otherwise in the instrument constituting the Contingent Obligation, be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by the Board of Directors.
"Contractual Obligations" means as to any Person, any provision of any
-----------------------
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
<PAGE>
4
"Copyrights" means any foreign or United States copyright
----------
registrations and applications for registration thereof, and any non-registered
copyrights.
"Defined Benefit Plan" means a defined benefit plan within the meaning
--------------------
of Section 3(35) of ERISA or Section 414(j) of the Code, whether funded or
unfunded, qualified or nonqualified (whether or not subject to ERISA or the
Code).
"Environmental Laws" means U.S. federal, state, local and foreign
------------------
laws, principles of common law, civil law, regulations and codes, as well as
orders, decrees, judgments or injunctions issued, promulgated, approved or
entered thereunder relating to pollution, protection of the environment or
public health and safety.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"ERISA Affiliate" means any Person that is treated as a single
---------------
employer with the Company or its Subsidiary under Section 414(b), (c), (m) or
(o) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the Commission thereunder.
"Exchange Agreement" has the meaning set forth in the recitals to this
------------------
Agreement.
"Financial Statements" has the meaning set forth in Section 3.11.
--------------------
"GAAP" means generally accepted accounting principles in effect from
----
time to time in the United States or the United Kingdom, as the case may be.
"GAP Coinvestment" has the meaning set forth in the recitals to this
----------------
Agreement.
"GAP LLC" means General Atlantic Partners, LLC, a Delaware limited
-------
liability company and the general partner of GAP LP, and any successor to such
entity.
"GAP LP" has the meaning set forth in the recitals to this Agreement.
------
"Governmental Authority" means the government of any nation, state,
----------------------
city, locality or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to
<PAGE>
5
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Indebtedness" means, as to any Person, (a) all obligations of such
------------
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured), (b) all obligations of such Person
evidenced by notes, bonds, debentures or similar instruments, (c) all
obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable and accrued commercial or trade
liabilities arising in the ordinary course of business, (d) all interest rate
and currency swaps, caps, collars and similar agreements or hedging devices
under which payments are obligated to be made by such Person, whether
periodically or upon the happening of a contingency, (e) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (f) all Capital Lease
Obligations of such Person, (g) all indebtedness secured by any Lien (other than
Liens in favor of lessors under leases other than leases included in clause (f))
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is non-
recourse to the credit of that Person, and (h) any Contingent Obligation of such
Person.
"Indemnified Party" has the meaning set forth in Section 7.1 of this
-----------------
Agreement.
"Indemnifying Party" has the meaning set forth in Section 7.1 of this
------------------
Agreement.
"Intellectual Property" has the meaning set forth in Section 3.20 of
---------------------
this Agreement.
"Internet Assets" means any internet domain names and other computer
---------------
user identifiers and any rights in and to sites on the worldwide web, including
rights in and to any text, graphics, audio and video files and html or other
code incorporated in such sites.
"Liabilities" has the meaning set forth in Section 3.19 of this
-----------
Agreement.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences),
including, without
<PAGE>
6
limitation, those created by, arising under or evidenced by any conditional sale
or other title retention agreement, the interest of a lessor under a Capital
Lease Obligation, or any financing lease having substantially the same economic
effect as any of the foregoing.
"Mask Works" means any mask works and registrations and applications
----------
for registrations thereof.
"Material Intellectual Property" has the meaning set forth in Section
------------------------------
3.20(a)(i) of this Agreement.
"Option Agreement" means the Option Agreement to be entered into by
----------------
the Company and Nevin Prakash.
"Orders" has the meaning set forth in Section 3.2 of this Agreement.
------
"Patents" means any foreign or United States patents and patent
-------
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
"Permits" has the meaning set forth in Section 3.6(b)(i) of this
-------
Agreement.
"Person" means any individual, firm, corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, Governmental Authority or other entity of any kind,
and shall include any successor (by merger or otherwise) of such entity.
"Plans" has the meaning set forth in Section 3.17 of this Agreement.
-----
"Preferred Stock" has the meaning set forth in the recitals to this
---------------
Agreement.
"Promissory Note" means the promissory note to be issued by the
---------------
Company to Nevin Prakash in connection with the transactions contemplated by the
Exchange Agreement.
"Purchased Shares" has the meaning set forth in Section 2.1 of this
----------------
Agreement.
"Purchasers" has the meaning set forth in the recitals to this
----------
Agreement.
<PAGE>
7
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement substantially in the form attached hereto as Exhibit C.
---------
"Regulations" means the Treasury Regulations promulgated under the
-----------
Code.
"Requirements of Law" means, as to any Person, any law, statute,
-------------------
treaty, rule, regulation, right, privilege, qualification, license or franchise
or determination of an arbitrator or a court or other Governmental Authority or
stock exchange, in each case applicable or binding upon such Person or any of
its property or to which such Person or any of its property is subject or
pertaining to any or all of the transactions contemplated or referred to herein.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the Commission thereunder.
"Stock Equivalents" means any security or obligation which is by its
-----------------
terms convertible into or exchangeable for shares of common stock or other
capital stock or equity securities of the Company, and any option, warrant or
other subscription or purchase right with respect to common stock or such other
capital stock or equity securities.
"Stockholders Agreement" means the Stockholders Agreement
----------------------
substantially in the form attached hereto as Exhibit B.
---------
"Software" means any computer software programs, source code, object
--------
code, data and documentation.
"Stockholders" has the meaning set forth in the recitals to this
------------
Agreement.
"Subsidiary" has the meaning set forth in the recitals to this
----------
Agreement.
"Taxes" has the meaning set forth in Section 3.12 of this Agreement.
-----
"Trade Secrets" means any trade secrets, research records, processes,
-------------
procedures, manufacturing formulae, technical know-how, technology, blue prints,
designs, plans, inventions (whether patentable and whether reduced to practice),
invention disclosures and improvements thereto.
"Trademarks" means any foreign or United States trademarks, service
----------
marks, trade dress, trade names, brand names, designs and logos, corporate
names,
<PAGE>
8
product or service identifiers, whether registered or unregistered, and all
registrations and applications for registration thereof.
"Transaction Documents" means collectively, this Agreement, the
---------------------
Stockholders Agreement, the Registration Rights Agreement and the Exchange
Agreement, the Option Agreement and the Promissory Note.
"Unaudited Financial Statements" has the meaning set forth in
------------------------------
Section 3.11 of this Agreement.
1.2 Accounting Terms; Financial Statements . All accounting terms
--------------------------------------
used herein not expressly defined in this Agreement shall have the respective
meanings given to them in accordance with sound accounting practice. The term
"sound accounting practice" shall mean such accounting practice as, in the
opinion of the independent certified public accountants regularly retained by
the Company, conforms at the time to GAAP applied on a consistent basis except
for changes with which such accountants concur.
1.3 Knowledge of the Company . All references to the knowledge of
------------------------
the Company shall mean the knowledge of the Stockholders and Shushil Chohan,
Finance Manager of the Subsidiary.
ARTICLE 2
PURCHASE AND SALE OF PREFERRED STOCK
------------------------------------
2.1 Purchase and Sale of Preferred Stock. Subject to the terms and
------------------------------------
conditions herein set forth, the Company agrees to issue and sell to each of the
Purchasers, and each of the Purchasers agrees that it will purchase from the
Company, on the Closing Date, the aggregate number of shares of Preferred Stock
set forth opposite such Purchaser's name on Schedule 2.1 hereto, for the
------------
aggregate purchase price set forth opposite such Purchaser's name on Schedule
--------
2.1 hereto (all of the shares of Preferred Stock being purchased hereunder being
- ---
referred to herein as the "Purchased Shares").
2.2 Certificate of Designation. The Purchased Shares shall be
---------------------------
shares of preferred stock of the Company issued pursuant to the Certificate of
Designation.
2.3 Closing. Unless this Agreement shall have terminated pursuant
-------
to Article 9 and subject to the satisfaction or waiver of the conditions set
forth in Articles 5 and 6, the closing of the sale and purchase of the Purchased
Shares (the "Closing") shall take place at the offices of Paul, Weiss, Rifkind,
Wharton & Garrison, no later than 4:00 p.m., New York time, on the second
Business Day
<PAGE>
9
following the date upon which the conditions set forth in Articles 5 and 6 shall
be satisfied or waived in accordance with this Agreement, or at such other time,
place and date that the Company and the Purchasers may agree in writing (the
"Closing Date"). On the Closing Date, the Company shall deliver to each
Purchaser a certificate representing the Purchased Shares being purchased by
such Purchaser against delivery by such Purchaser to the Company of the
aggregate purchase price therefor (as set forth opposite such Purchaser's name
on Schedule 2.1 hereto) by wire transfer of immediately available funds.
------------
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
(For the purposes of these representations and warranties, the
transactions contemplated by the Exchange Agreement shall be deemed to have
occurred as of the date hereof.) The Company represents and warrants to the
Purchasers as follows:
3.1 Corporate Existence and Power. Each of the Company and the
-----------------------------
Subsidiary (a) is, in the case of the Company, a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and is, in the case of the Subsidiary, a company registered in
England and Wales under number 2155722; (b) has all requisite power and
authority to own and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently, or is proposed to
be, engaged; (c) is, in the case of the Company, duly qualified as a foreign
corporation, licensed and in good standing, and is, in the case of the
Subsidiary, duly registered and remains subsisting under the laws of each
jurisdiction in which its ownership, lease or operation of property or the
conduct of its business requires such qualification, except to the extent that
the failure to do so would not have a material adverse effect on the Condition
of the Company; and (d) has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement and each of the other
Transaction Documents to which it is a party. No jurisdiction, other than those
referred to in clause (c) above, has claimed, in writing or otherwise, that the
Company or the Subsidiary is required to qualify as a foreign corporation
therein, and neither the Company nor the Subsidiary files any franchise, income
or other tax returns in any other jurisdiction based upon the ownership or use
of property therein or the derivation of income therefrom.
3.2 Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by the Company of this Agreement and each of the other Transaction
Documents and the transactions contemplated hereby and thereby (a) have been
duly authorized by all necessary corporate action of the Company; (b) do not
contravene
<PAGE>
10
the terms of the Certificate of Incorporation or the By-laws, or any certificate
of incorporation or by-laws or other organizational documents of the Subsidiary;
(c) do not violate, conflict with or result in any breach or contravention of,
or the creation of any Lien under, any Contractual Obligation of the Company or
the Subsidiary, or any Requirement of Law applicable to the Company or the
Subsidiary; and (d) do not violate any judgment, injunction, writ, award, decree
or order of any nature (collectively, "Orders") of any Governmental Authority
against, or binding upon, the Company or the Subsidiary.
3.3 Governmental Authorization; Third Party Consents. Except as
------------------------------------------------
set forth in Schedule 3.3, no approval, consent, compliance, exemption,
------------
authorization or other action by, or notice to, or filing with, any Governmental
Authority or any other Person, and no lapse of a waiting period under a
Requirement of Law, is necessary or required in connection with the execution,
delivery or performance (including, without limitation, the sale, issuance and
delivery of the Purchased Shares) by, or enforcement against, the Company of
this Agreement and the other Transaction Documents or the transactions
contemplated hereby and thereby.
3.4 Binding Effect. This Agreement has been, and as of the Closing
--------------
Date each of the other Transaction Documents will have been, duly executed and
delivered by the Company, and this Agreement constitutes, and as of the Closing
Date each of the other Transaction Documents will constitute, the legal, valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).
3.5 Litigation. Except as set forth on Schedule 3.5, there are no
---------- ------------
actions, suits, proceedings, claims, complaints, disputes, arbitrations or
investigations (collectively, "Claims") pending or, to the Company's knowledge,
threatened, at law, in equity, in arbitration or before any Governmental
Authority against the Company or the Subsidiary. No Order has been issued by
any court or other Governmental Authority against the Company or the Subsidiary
purporting to enjoin or restrain the execution, delivery or performance of this
Agreement or any of the other Transaction Documents.
3.6 Compliance with Laws.
--------------------
(a) The Company and the Subsidiary are in compliance with all
Requirements of Law and all Orders issued by any court or Governmental Authority
against the Company or the Subsidiary in all respects, except to the extent
<PAGE>
11
that the failure to comply with such Requirements of Law or Orders would not
have a material adverse effect on the Condition of the Company.
(b) (i) The Company and the Subsidiary have all licenses, permits and
approvals of any Governmental Authority (collectively, "Permits") that are
necessary for the conduct of the business of the Company and the Subsidiary,
except to the extent that the failure to have such Permits would not have a
material adverse effect on the Condition of the Company; (ii) such Permits are
in full force and effect; and (iii) to the Company's knowledge, no violations
are or have been recorded in respect of any such Permit.
(c) No material expenditure is presently required by the Company or
the Subsidiary to comply with any existing Requirement of Law or Order.
3.7 Capitalization.
--------------
(a) On the Closing Date, after giving effect to the transactions
contemplated by this Agreement and the Exchange Agreement, the authorized
capital stock of the Company shall consist of (i) 7,500,000 shares of Common
Stock, of which 2,345,000 shares will be issued and outstanding and (ii)
2,500,000 shares of Preferred Stock, of which 1,155,000 shares will be
outstanding and issued to the Purchasers. Schedule 3.7(a) sets forth, at and on
---------------
the Closing Date, a true and complete list of (x) the stockholders of the
Company (including any trust or escrow agent arrangement created in connection
with any employee stock option plan) and, opposite the name of each stockholder,
the amount of all outstanding capital stock and Stock Equivalents owned by such
stockholder and (y) the holders of Stock Equivalents (other than the
stockholders set forth in clause (x) above) and, opposite the name of each such
holder, the amount of all Stock Equivalents owned by such holder. As of the
Closing Date, the Company will have reserved an aggregate of 1,155,000 shares of
Common Stock for issuance upon conversion of the Purchased Shares. Except as
set forth on Schedule 3.7(b), there are no options, warrants, conversion
---------------
privileges, subscription or purchase rights or other rights presently
outstanding to purchase or otherwise acquire (i) any authorized but unissued,
unauthorized or treasury shares of the Company's capital stock, (ii) any Stock
Equivalents or (iii) other securities of the Company. As of the Closing Date,
the Purchased Shares will be duly authorized, and when issued and sold to the
Purchasers after payment therefor in accordance herewith, will be validly
issued, fully paid and nonassessable and will be issued in compliance with the
registration and qualification requirements of all applicable U.S. federal,
state and foreign securities laws (or pursuant to exemptions therefrom). The
shares of Common Stock issuable upon conversion of the Purchased Shares are duly
authorized and, when issued in compliance with the provisions of the Certificate
of Incorporation, will be validly issued, fully paid and nonassessable. As of
the Closing Date, all of the issued and outstanding shares of Common Stock will
be duly
<PAGE>
12
authorized, validly issued, fully paid and nonassessable. As of the Closing
Date, all of the the issued and outstanding shares of Common Stock will be duly
authorized, validly issued, fully paid and nonassessable, and will have been
issued in compliance with the registration and qualification requirements of all
applicable U.S. federal, state and foreign securities laws (or pursuant to
exemptions therefrom).
(b) Except as set forth in Schedule 3.7(b), neither the Company nor
the Subsidiary directly or indirectly owns or has made any investment in any of
the capital stock of, or any other proprietary interest in, any Person other
than the Subsidiary. The Company owns all of the issued and outstanding capital
stock of the Subsidiary, free and clear of all Liens. All of such shares of
capital stock are duly authorized, validly issued and fully paid, and all of
such shares were issued in compliance with the requirements of all applicable
English laws. Except as set forth on Schedule 3.7(b), there are no options,
warrants, conversion privileges, subscription or purchase rights or other rights
to purchase or otherwise acquire any authorized but unissued shares or other
securities of, or any proprietary interest in, the Subsidiary, and there is no
outstanding security of any kind convertible into or exchangeable for such
shares or proprietary interest.
3.8 No Default or Breach; Contractual Obligations. Except as set
---------------------------------------------
forth in Schedule 3.8(i), neither the Company nor the Subsidiary has received
---------------
notice of, or is in default under, or with respect to, any Contractual
Obligation set forth on Schedule 3.8(ii). Schedule 3.8(ii) lists all of the
----------------
Contractual Obligations to which the Company or the Subsidiary is a party,
whether written or oral, which involve an amount in excess of $50,000 or which
are otherwise material to the Condition of the Company. All of such Contractual
Obligations are valid, subsisting, in full force and effect and binding upon the
Company or the Subsidiary and the other parties thereto, and the Company or the
Subsidiary, as the case may be, has paid in full or accrued all amounts due
thereunder and has satisfied in full or provided for all of its liabilities and
obligations thereunder. To the Company's knowledge, no other party to any such
Contractual Obligation is in default thereunder, nor does any condition exist
that with notice or lapse of time or both would constitute a default thereunder.
3.9 Title to Properties. Each of the Company and the Subsidiary
--------------------
has good record and marketable title in fee simple to, or holds interests as
lessee under leases in full force and effect in, all real property used in
connection with its business or otherwise owned or leased by it, except for such
defects in title as would not, individually or in the aggregate, have a material
adverse effect on the Condition of the Company, or a material adverse effect on
the ability of the Company to perform its obligations under this Agreement or
the other Transaction Documents.
3.10 FIRPTA. The Company is not a "foreign person" within the
------
meaning of Section 1445 of the Code.
3.11 Financial Statements. The Company has delivered to the
--------------------
Purchasers the audited financial statements of the Subsidiary (balance sheet and
<PAGE>
13
statements of operation, cash flow and stockholders' equity, together with the
notes thereto) for the fiscal year ended August 31, 1996 (the "Audited Financial
Statements"), and the unaudited financial statements of the Subsidiary (balance
sheet and statement of operations) for the fiscal period ended May 31, 1997 and
for the fiscal period ended August 31, 1997 (the "Unaudited Financial
Statements" and, together with the Audited Financial Statements, the "Financial
Statements"). The Audited Financial Statements have been prepared in accordance
with United Kingdom GAAP applied on a consistent basis throughout the periods
indicated and with each other. The Unaudited Financial Statements have been
prepared in good faith and with reasonable care and skill but do not contain
footnotes or year-end adjustments. The Audited Financial Statements fairly
present the financial condition, operating results and cash flows of the
Subsidiary as of the respective dates and for the respective periods indicated
in accordance with United Kingdom GAAP.
3.12 Taxes. (a) Except for VAT which the Subsidiary pays in the
-----
normal course of business and except as set forth on Schedule 3.12, each of the
Company and the Subsidiary, as appropriate, has paid all federal, state, county,
local, foreign (including the United Kingdom) and other taxes, including,
without limitation, income taxes, estimated taxes, excise taxes, sales taxes,
use taxes, gross receipts taxes, franchise taxes, employment and payroll related
taxes, property taxes and import duties, whether or not measured in whole or in
part by net income (hereinafter, "Taxes" or, individually, a "Tax") which have
come due and are required to be paid by it through the date hereof, and all
deficiencies or other additions to Tax, interest and penalties owed by it in
connection with any such Taxes; (b) each of the Company and the Subsidiary has
timely filed or caused to be filed all returns for Taxes that it is required to
file on and through the date hereof (including all applicable extensions), and
all such Tax returns are accurate and complete; (c) with respect to all Tax
returns of the Company and the Subsidiary, (i) to the Company's knowledge, there
is no deficiency proposed or threatened against the Company or the Subsidiary
and (ii) except as set forth in Schedule 3.12, no audit is in progress with
respect to any return for Taxes, no extension of time is in force with respect
to any date on which any return for Taxes was or is to be filed and no waiver or
agreement is in force for the extension of time for the assessment or payment of
any Tax; (d) all liabilities for Taxes of the Subsidiary attributable to periods
prior to or ending on the Closing Date (or, with respect to VAT, ending on the
period up to which they are drawn) have been adequately provided for on the
Financial Statements; and (e) there are no Liens for Taxes on the assets of the
Company or the Subsidiary except for Liens for current Taxes not yet due. The
consummation of the transactions contemplated by the Exchange Agreement and
Option Agreement shall not cause any Taxes to be imposed on the Company or the
Subsidiary other than stamp taxes.
3.13 No Material Adverse Change; Ordinary Course of Business.
-------------------------------------------------------
Since January 1, 1997, (a) there has not been any material adverse change, nor
to the knowledge of the Company is any such change threatened, in the Condition
of the
<PAGE>
14
Company, (b) neither the Company nor the Subsidiary has participated in any
transaction or otherwise acted outside the ordinary course of business,
including, without limitation, declaring or paying any dividend or declaring or
making any distribution to its stockholders except out of the earnings of the
Company or the Subsidiary other than the transactions contemplated by the
Exchange Agreement and Option Agreement and (c) neither the Company nor the
Subsidiary has increased the compensation of any of its officers or the rate of
pay of any of its employees, except as part of regular compensation increases in
the ordinary course of business. The Company is a newly formed corporation and
except for activities incident to its formation, and in connection with the
transactions contemplated by this Agreement and the other Transaction Documents,
has not engaged in any business activities.
3.14 Investment Company. Neither the Company nor the Subsidiary is
------------------
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
3.15 Private Offering. No form of general solicitation or general
----------------
advertising was used by the Company or its representatives in connection with
the offer or sale of the Purchased Shares. No registration of the Purchased
Shares, pursuant to the provisions of the Securities Act or any state securities
or "blue sky" laws, will be required by the offer, sale or issuance of the
Purchased Shares. The Company agrees that neither it, nor anyone acting on its
behalf, shall offer to sell the Purchased Shares or any other securities of the
Company so as to require the registration of the Purchased Shares pursuant to
the provisions of the Securities Act or any state securities or "blue sky" laws,
unless such Purchased Shares or other securities are so registered.
3.16 Labor Relations. (a) Neither the Company nor the Subsidiary
---------------
is engaged in any unfair labor practice; (b) there is (i) no grievance or
arbitration proceeding arising out of or under collective bargaining agreements
pending or, to the knowledge of the Company, threatened against the Company or
the Subsidiary, and (ii) no strike, labor dispute, slowdown or stoppage is
pending or, to the knowledge of the Company, threatened against the Company or
the Subsidiary; (c) neither the Company nor the Subsidiary is a party to any
collective bargaining agreement or contract; (d) there is no union
representation question existing with respect to the employees of the Company or
the Subsidiary; and (e) to the Company's knowledge, no union organizing
activities are taking place.
3.17 Employee Benefit Plans. Neither the Company, the Subsidiary,
----------------------
nor any of their ERISA Affiliates has any actual or contingent, direct or
indirect, liability in respect of any employee benefit plan or arrangement,
including any plan subject to ERISA, other than to make contributions under or
pay benefits pursuant to the plans listed on Schedule 3.17 (collectively, the
-------------
"Plans"). All of the Plans are in compliance with all applicable Requirements
of Law. The Company, the Subsidiary
<PAGE>
15
and all of their ERISA Affiliates have made all payments due from them to date
with respect to each Plan. All amounts properly accrued as liabilities to or
expenses of any Plan which have not been paid have been properly reflected on
the Audited Financial Statements. There are no actions, liens, suits or claims
pending or threatened (other than routine claims for benefits) with respect to
any Plan. Each Plan which is intended to qualify under Section 401(a) of the
Code so qualifies. The Company does not have any liability with respect to a
Plan which (a) is subject to Title IV of ERISA, Section 412 of the Code or is
otherwise a Defined Benefit Plan, or is a multiple employer plan (within the
meaning of Section 413(c) of the Code) or multiemployer plan (within the meaning
of Section 3(37) of ERISA); or (b) provides for post-retirement welfare benefits
or a "parachute payment" (within the meaning of Section 280G(b) of the Code).
The execution and delivery of this Agreement and each of the other Transaction
Documents, the purchase and sale of the Purchased Shares and the consummation of
the transactions contemplated hereby and thereby will not entitle any current or
former employee to severance pay or unemployment compensation or accelerate the
compensation due to any current or former employee.
3.18 Title to Assets. Except as set forth on Schedule 3.18, each
--------------- -------------
of the Company and the Subsidiary owns and has good, valid, and marketable title
to all of its properties and assets used in its business and reflected as owned
on the Financial Statements or so described in any Schedule hereto
(collectively, the "Assets"), in each case free and clear of all Liens, except
for Liens specifically described on the notes to the Financial Statements,
except for Liens for current taxes not yet due and payable and minor
imperfections of title, if any, not material in nature or amount and not
materially detracting from the value or impairing the use of the property
subject thereto or impairing the operations or proposed operations of the
Company or the Subsidiary.
3.19 Liabilities. Neither the Company nor the Subsidiary has any
-----------
direct or indirect material obligation or liability (the "Liabilities") other
than (a) Liabilities fully and adequately reflected or reserved against on the
Audited Financial Statements and (b) Liabilities incurred since January 1, 1997
in the ordinary course of business. The Company has no knowledge of any
circumstance, condition, event or arrangement that may hereafter give rise to
any Liabilities of the Company or the Subsidiary except in the ordinary course
of business.
3.20 Intellectual Property.
---------------------
(a) (i) Each of the Company and the Subsidiary is the owner of all,
or has the license or right to use, sell and license, free and clear of all
Liens, all of the Copyrights, Patents, Trade Secrets, Trademarks, Internet
Assets, Mask Works, Software and other proprietary rights (collectively,
"Intellectual Property") that are used in connection with its business as
presently conducted other than (i) such Intellectual Property the absence of
which, individually or in the aggregate, would not
<PAGE>
16
have a material adverse effect on the Condition of the Company (the "Material
Intellectual Property") and (ii) source code for Software licensed to the
Company. Any Trademark listed in Schedule 3.20(a)(ii) and the following
Software, Prime Vantage, Distributed Campaign Manager, Distributed Customer View
and Database Builder, shall be deemed to be Material Intellectual Property.
(a) (ii) Schedule 3.20(a)(ii) sets forth all of the Material
--------------------
Intellectual Property owned by, and filings and applications for any of the
above filed by, the Company or the Subsidiary other than unregistered Copyrights
and Trade Secrets. None of the Intellectual Property listed on Schedule
--------
3.20(a)(ii) is subject to any outstanding Order, and no action, suit,
- -----------
proceeding, hearing, investigation, charge, complaint, claim or demand is
pending or, to the knowledge of the Company, threatened, which challenges the
validity, enforceability, use or ownership of the item.
(a) (iii) Schedule 3.20(a)(iii) sets forth a list of all Intellectual
---------------------
Property licenses, sublicenses, distributor agreements and other agreements
under which the Company or the Subsidiary is either a licensor, licensee or
distributor, except such licenses, sublicenses and other agreements relating to
off-the-shelf software, which is commercially available on a retail basis and
used solely on the computers of the Company or the Subsidiary. Each of the
Company and the Subsidiary has substantially performed all obligations imposed
upon it thereunder, and neither the Company nor the Subsidiary is, nor to the
knowledge of the Company is any other party thereto, in breach of or default of
any material provision thereof in any respect, nor is there any event which with
notice or lapse of time or both would constitute a default thereunder. To the
Company's knowledge, all of the Intellectual Property licenses listed on
Schedule 3.20(a)(iii) are valid, enforceable and in full force and effect, and
- ---------------------
will continue to be so on identical terms immediately following the Closing
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).
(a) (iv) To the knowledge of the Company, other than as set forth on
Schedule 3.20(a)(iv), none of the Material Intellectual Property currently sold
- --------------------
or licensed by the Company or the Subsidiary to any Person or used by or
licensed to the Company or the Subsidiary infringes upon or otherwise violates
any Intellectual Property rights of others.
(a) (v) Except as set forth on Schedule 3.20(a)(v), no litigation is
-------------------
pending and no Claim has been made against the Company or the Subsidiary or, to
the knowledge of the Company, is threatened, contesting the right of the Company
or
<PAGE>
17
the Subsidiary to sell or license to any Person or use the Material Intellectual
Property presently sold or licensed to such Person or used by the Company or the
Subsidiary.
(b) Except as set forth on Schedule 3.20(b), to the knowledge of the
----------------
Company, no Person is infringing upon or otherwise violating the Material
Intellectual Property rights of the Company or the Subsidiary.
(c) To the knowledge of the Company, no former employer of any
employee of the Company or the Subsidiary, and no current or former client of
any consultant of the Company or the Subsidiary, has made a claim against the
Company or the Subsidiary that such employee or such consultant is utilizing
Intellectual Property of such former employer or client.
(d) Except as set forth on Schedule 3.20(d), neither the Company nor
----------------
the Subsidiary is a party to or bound by, any license or other agreement as
licensee requiring the payment of any material royalty payment, excluding such
agreements relating to software licensed for use solely on the computers of the
Company or the Subsidiary.
(e) To the knowledge of the Company, no employee of the Company or the
Subsidiary (other than Robert Fetter) is in violation of any term of any
employment agreement, patent or invention disclosure agreement or other contract
or agreement relating to the relationship of such employee with the Company or
the Subsidiary.
(f) To the knowledge of the Company, none of the material Trade
Secrets of the Company or the Subsidiary, wherever located, the value of which
is contingent upon maintenance of confidentiality thereof, has been disclosed to
any Person other than employees, representatives and agents of the Company or
the Subsidiary, except as required pursuant to the filing of a patent
application by the Company or the Subsidiary.
3.21 Year 2000 Compliance. Except as to functions where the
--------------------
failure to accomplish the following will not have a material adverse effect on
the Condition of the Company and except as set forth in Schedule 3.21, the
-------------
Software used by the Company and the Subsidiary will (a) accurately process date
information before, during and after January 1, 2000, including, but not limited
to, accepting date input, providing date output and performing calculations on
dates or portions of dates; (b) function accurately and without interruption
before, during and after January 1, 2000 without any change in operations
associated with the advent of the new century; and (c) store and provide output
of date information in ways that are unambiguous as to century.
<PAGE>
18
3.22 Potential Conflicts of Interest. No officer, director or
-------------------------------
stockholder of the Company or the Subsidiary, no spouse of any such officer,
director or stockholder, and, to the Company's knowledge, no relative of such
spouse or of any such officer, director or stockholder and no Affiliate of any
of the foregoing (a) except as set forth in Schedule 3.22(i), owns, directly or
indirectly, any interest in (excepting less than 2% stock holdings for
investment purposes in securities of publicly held and traded companies), or is
an officer, director, employee or consultant of, any Person which is, or is
engaged in business as, a competitor, lessor, lessee, supplier, distributor,
sales agent or customer of, or lender to or borrower from, the Company or the
Subsidiary; (b) owns, directly or indirectly, in whole or in part, any tangible
or intangible property that the Company or the Subsidiary has used, or that the
Company or the Subsidiary is intending to use, in the conduct of business; or
(c) except as set forth in Schedule 3.22 (ii), has any cause of action or other
claim whatsoever against, or owes or has advanced any amount to, the Company or
the Subsidiary, except for claims in the ordinary course of business such as for
accrued vacation pay, accrued benefits under employee benefit plans, and similar
matters and agreements existing on the date hereof.
3.23 Trade Relations. There exists no actual or, to the knowledge
---------------
of the Company, threatened termination, cancellation or limitation of, or any
adverse modification or change in, the business relationship of the Company or
the Subsidiary, or the business of the Company or the Subsidiary, with any
customer or distributor or any group of customers or distributors whose
purchases are individually or in the aggregate material to the Condition of the
Company, or with any material supplier of the Company or the Subsidiary, and, to
the Company's knowledge, there exists no present condition or state of fact or
circumstances that would materially adversely affect the Condition of the
Company or prevent the Company or the Subsidiary from conducting such business
relationships or such business with any such customer, such group of customers
or distributors or such material supplier in the same manner as heretofore
conducted by the Subsidiary.
3.24 Outstanding Borrowing. Schedule 3.24 sets forth (a) the
--------------------- -------------
amount of all Indebtedness of the Company and the Subsidiary as of the date
hereof, (b) the Liens that relate to such Indebtedness and that encumber the
Assets and (c) the name of each lender thereof.
3.25 Insurance. Schedule 3.25 lists all of the insurance policies
--------- -------------
held by or on behalf of the Company or the Subsidiary, with the expiration date
and coverage amounts indicated thereon. Such policies and binders are valid and
enforceable in accordance with their terms and are in full force and effect.
None of such policies will be adversely affected by, or terminate or lapse by
reason of, any transaction contemplated by this Agreement or any of the other
Transaction Documents.
<PAGE>
19
3.26 Environmental Matters. To the Company's knowledge, each of
---------------------
the Company and the Subsidiary is in compliance with all applicable
Environmental Laws. There is no civil, criminal or administrative judgment,
action, suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter pending or, to the knowledge of the Company,
threatened against the Company or the Subsidiary pursuant to Environmental Laws
which would reasonably be expected to result in a fine, penalty or other
obligation, cost or expense that would have a material adverse affect on the
Condition of the Company; and, to the knowledge of the Company, there are no
past or present events, conditions, circumstances, activities, practices,
incidents, agreements, actions or plans which may prevent compliance with, or
which have given rise to or will give rise to liability under, Environmental
Laws that would have a material adverse affect on the Condition of the Company.
3.27 Broker's, Finder's or Similar Fees. There are no brokerage
----------------------------------
commissions, finder's fees or similar fees or commissions payable by the Company
or the Subsidiary in connection with the transactions contemplated hereby based
on any agreement, arrangement or understanding with the Company or the
Subsidiary or any action taken by any such Person.
3.28 Disclosure. This Agreement and the documents and certificates
----------
furnished to the Purchasers by the Company and the Subsidiary, taken as a whole,
do not contain any untrue statement of a material fact or to the Company's
knowledge omit to state a material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
Each of the Purchasers hereby represents and warrants (severally as to
itself and not jointly) to the Company as follows:
4.1 Existence and Power. Such Purchaser (a) is a partnership duly
-------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation, (b) has all requisite power and authority to
conduct the business in which it is currently, or is proposed to be, engaged,
and (c) has the requisite partnership power and authority to execute, deliver
and perform its obligations under this Agreement and each of the other
Transaction Documents to which it is a party.
4.2 Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by such Purchaser of this Agreement and each of the other
Transaction Documents to which it is a party and the transactions contemplated
hereby and
<PAGE>
20
thereby, including, without limitation, the purchase of the Purchased Shares,
(a) have been duly authorized by all necessary partnership action, (b) do not
contravene the terms of such Purchaser's organizational documents, or any
amendment thereof, (c) do not violate, conflict with or result in any breach or
contravention of or the creation of any Lien under, any Contractual Obligation
of such Purchaser, or any Requirement of Law applicable to such Purchaser and
(d) do not violate any Orders of any Governmental Authority against, or binding
upon, such Purchaser.
4.3 Governmental Authorization; Third Party Consents. No approval,
------------------------------------------------
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, and no lapse of
a waiting period under any Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the purchase of the Purchased Shares) by, or enforcement against,
such Purchaser of this Agreement and each of the other Transaction Documents to
which such Purchaser is a party or the transactions contemplated hereby and
thereby.
4.4 Binding Effect. This Agreement has been, and as of the Closing
--------------
Date each of the other Transaction Documents to which such Purchaser is a party
will have been, duly executed and delivered by such Purchaser, and this
Agreement constitutes, and as of the Closing Date each of the other Transaction
Documents to which such Purchaser is a party will constitute, the legal, valid
and binding obligations of such Purchaser, enforceable against it in accordance
with their terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability (regardless of
whether considered in a proceeding at law or in equity).
4.5 Litigation. No Order has been issued by any court or other
----------
Governmental Authority against such Purchaser purporting to enjoin or restrain
the execution, delivery or performance of this Agreement or any of the other
Transaction Documents to which such Purchaser is a party.
4.6 Purchase for Own Account. The Purchased Shares to be acquired
------------------------
by such Purchaser pursuant to this Agreement and the shares of Common Stock
issuable upon conversion of the Purchased Shares are being or will be acquired
for investment for its own account and with no intention of distributing or
reselling, or granting any participation in, such Purchased Shares, such shares
of Common Stock or any part thereof in any transaction that would be in
violation of the securities laws of the United States of America, or any state
or foreign jurisdiction, without prejudice, however, to the rights of such
Purchaser at all times to sell or otherwise dispose of all or any part of such
Purchased Shares or such shares of Common Stock under an effective registration
statement under the Securities Act and under the applicable state securities
laws, or under an exemption from such registration
<PAGE>
21
available under such laws, and subject, nevertheless, to the disposition of such
Purchaser's property being at all times within its control. If such Purchaser
should in the future decide to dispose of any of such Purchased Shares or such
shares of Common Stock, such Purchaser understands and agrees that it may do so
only in compliance with the Securities Act and applicable state and foreign
securities laws, as then in effect. Such Purchaser agrees to the imprinting, so
long as required by law, of legends on certificates representing all of its
Purchased Shares and shares of Common Stock issuable upon conversion of its
Purchased Shares as required by any applicable state securities laws and to the
following effect (and acknowledges that the Company will make a notation on its
transfer books to such effect):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
LAWS OF ANY JURISDICTION OF THE UNITED STATES. THE SECURITIES MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT AND UNDER THE APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY, IF REQUESTED BY THE COMPANY, THAT THERE IS AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
DISPOSITION (EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE
STOCKHOLDERS AGREEMENT AMONG PRIME RESPONSE GROUP INC., GENERAL ATLANTIC
PARTNERS 42, L.P., GAP COINVESTMENT PARTNERS, L.P. AND THE STOCKHOLDERS
NAMED THEREIN. THE COMPANY WILL NOT REGISTER THE TRANSFER OF SUCH
SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER HAS
BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE STOCKHOLDERS AGREEMENT. THE
COMPANY WILL MAIL A COPY OF SUCH AGREEMENT, TOGETHER WITH A COPY OF THE
EXPRESS TERMS OF THE SECURITIES AND THE OTHER CLASS OR CLASSES AND SERIES
OF SHARES, IF ANY, WHICH THE COMPANY IS AUTHORIZED TO ISSUE, TO THE RECORD
HOLDER OF THIS CERTIFICATE, WITHOUT CHARGE, WITHIN FIVE DAYS AFTER RECEIPT
OF A WRITTEN REQUEST THEREFOR.
<PAGE>
22
4.7 Restricted Securities. Such Purchaser understands that the
---------------------
Purchased Shares will not be registered under the Securities Act at the time of
their issuance for the reason that the sale provided for in this Agreement is
exempt pursuant to Rule 506 of Regulation D promulgated under the Securities Act
and that the reliance of the Company on such exemption is predicated in part on
such Purchaser's representations set forth herein. Such Purchaser also
represents that it is experienced in evaluating companies such as the Company,
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment and has the ability
to suffer the total loss of its investment. Such Purchaser further represents
that it has had the opportunity to ask questions of and receive answers from the
Company concerning the terms and conditions of the offering and the Company's
business, management and financial affairs and to obtain additional information
to such Purchaser's satisfaction.
4.8 Investment Experience. Each Purchaser is an investor in
---------------------
securities of companies in the development stage and acknowledges that it has,
by reason of its business and financial experience, the capacity to protect its
own interest in connection with the transaction and that it is able to bear the
economic risk of its investment in the transaction. GAP Coinvestment and each
of the partners of GAP LP is an "Accredited Investor" as defined in Rule 501(a)
under the Securities Act.
4.9 Broker's, Finder's or Similar Fees. There are no brokerage
----------------------------------
commissions, finder's fees or similar fees or commissions payable by such
Purchaser, in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with such Purchaser or any action taken
by such Purchaser.
ARTICLE 5
CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE
--------------------------
The obligation of the Purchasers to purchase the Purchased Shares, to
pay the purchase price therefor at the Closing and to perform their other
obligations hereunder shall be subject to the satisfaction as determined by, or
waiver by, the Purchasers of the following conditions on or before the Closing
Date.
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Article 3 hereof shall be true and
correct in all material respects at and on the Closing Date as if made at and on
such date.
5.2 Compliance with this Agreement. The Company shall have
------------------------------
performed and complied in all material respects with all of its agreements and
<PAGE>
23
conditions set forth herein that are required to be performed or complied with
by the Company on or before the Closing Date.
5.3 Secretary's Certificate. The Purchasers shall have received a
-----------------------
certificate from the Company, in form and substance reasonably satisfactory to
the Purchasers, dated the Closing Date and signed by the Secretary or an
Assistant Secretary of the Company, certifying that the attached copies of the
Certificate of Incorporation, the By-laws, the Certificate of Designation and
resolutions of the Board of Directors approving this Agreement and each of the
other Transaction Documents to which the Company is a party and the transactions
contemplated hereby and thereby, are all true, complete and correct and remain
unamended and in full force and effect.
5.4 Officer's Certificate. The Purchasers shall have received a
---------------------
certificate from the Company, in form and substance reasonably satisfactory to
the Purchasers, dated the Closing Date and signed by the President of the
Company, certifying that (a) the representations and warranties of the Company
contained in Article 3 hereof are true and correct in all material respects on
the Closing Date and (b) the Company has performed and complied in all material
respects with all of the agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Company on or
before the Closing Date.
5.5 Filing of Certificate of Designation. The Certificate of
------------------------------------
Designation shall be in a form reasonably satisfactory to the Purchasers, and
shall have been duly filed by or on behalf of the Company with the Secretary of
State of the State of Delaware in accordance with the General Corporation Law of
the State of Delaware.
5.6 Stockholders Agreement. The Company and the Stockholders shall
----------------------
have duly executed and delivered the Stockholders Agreement, substantially in
the form attached hereto as Exhibit B.
---------
5.7 Registration Rights Agreement. The Company and the
-----------------------------
Stockholders shall have duly executed and delivered the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit C.
---------
5.8 Opinion of Counsel. The Purchasers shall have received
------------------
opinions of Dewey Ballantine and Rowe & Maw, counsel to the Company and the
Subsidiary, dated the Closing Date, relating to the transactions contemplated by
or referred to herein, in a form reasonably satisfactory to the Purchasers.
5.9 Purchased Shares. The Company shall be prepared to deliver to
----------------
the Purchasers certificates in definitive form representing the number of
Purchased
<PAGE>
24
Shares set forth opposite such Purchaser's name on Schedule 2.1 hereto,
------------
registered in the name of such Purchaser.
5.10 No Material Adverse Change. Since the date hereof, there
--------------------------
shall have been no material adverse change in the Condition of the Company.
5.11 Consents and Approvals. The approval of Inland Revenue of the
----------------------
transactions contemplated by the Exchange Agreement, and all consents,
exemptions, authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons in respect of all Requirements of Law
and with respect to those Contractual Obligations of the Company or the
Subsidiary which are necessary or required in connection with the execution,
delivery or performance by, or enforcement against, the Company of this
Agreement and each of the other Transaction Documents shall have been obtained
and be in full force and effect, and the Purchasers shall have been furnished
with appropriate evidence thereof and all applicable waiting periods shall have
expired without any action being taken or threatened which would have a material
adverse effect on the Condition of the Company.
5.12 No Material Judgment or Order. There shall not be on the
-----------------------------
Closing Date any Order of a court of competent jurisdiction or any ruling of any
Governmental Authority or any condition imposed under any Requirement of Law
which would, in the reasonable judgment of the Purchasers, (a) prohibit or
restrict (i) the purchase of the Purchased Shares or (ii) the consummation of
the transactions contemplated by this Agreement, (b) subject the Purchasers to
any material penalty or onerous condition under or pursuant to any Requirement
of Law if the Purchased Shares were to be purchased hereunder or (c) restrict
the operation of the business of the Company or the Subsidiary as conducted on
the date hereof in a manner that would have a material adverse effect on the
Condition of the Company.
5.13 No Litigation. No action, suit, proceeding, claim or dispute
-------------
shall have been brought or otherwise arisen at law, in equity, in arbitration or
before any Governmental Authority against the Company which would, if adversely
determined, (a) have a material adverse effect on the Condition of the Company
or (b) have a material adverse effect on the ability of the Company to perform
its obligations under this Agreement or each of the other Transaction Documents.
5.14 Exchange Agreement. Each of the Exchange Agreement and the
------------------
Promissory Note shall be in a form reasonably satisfactory to the Purchasers,
and the closing of the transactions contemplated by the Exchange Agreement shall
have occurred to the reasonable satisfaction of the Purchasers.
5.15 Stock Option Plan and Option Agreement. Each of the Company's
--------------------------------------
1997 Stock Option Plan and the Option Agreement shall be in a form
<PAGE>
25
reasonably satisfactory to the Purchasers, and the Option Agreement shall have
been duly executed and delivered by the Company and Nevin Prakash.
ARTICLE 6
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
------------------------------
The obligation of the Company to issue and sell the Purchased Shares
and the obligation of the Company to perform its other obligations hereunder,
shall be subject to the satisfaction as determined by, or waiver by, the Company
of the following conditions on or before the Closing Date:
6.1 Representation and Warranties. The representations and
-----------------------------
warranties of each Purchaser contained in Article 4 hereof shall be true and
correct in all material respects at and on the Closing Date as if made at and on
such date.
6.2 Compliance with this Agreement. Each of the Purchasers shall
------------------------------
have performed and complied in all material respects with all of its agreements
and conditions set forth herein that are required to be performed or complied
with by such Purchaser on or before the Closing Date, including, without
limitation, payment by the Purchasers of the purchase price for the Purchased
Shares.
6.3 General Partners' Certificates. The Company shall have
------------------------------
received a certificate from a general partner of each of GAP LP and GAP
Coinvestment, in form and substance satisfactory to the Company, dated the
Closing Date and signed by such general partner, certifying that (a) the
representations and warranties of GAP LP or GAP Coinvestment, as the case may
be, contained in Article 4 hereof are true and correct in all material respects
on the Closing Date and (b) GAP LP or GAP Coinvestment, as the case may be, has
performed and complied with all of its agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by GAP LP
or GAP Coinvestment, as the case may be, on or before the Closing Date.
6.4 Stockholders Agreement. The Purchasers shall have duly
----------------------
executed and delivered the Stockholders Agreement, substantially in the form
attached hereto as Exhibit B.
---------
6.5 Registration Rights Agreement. The Purchasers shall have duly
-----------------------------
executed and delivered the Registration Rights Agreement, substantially in the
form attached hereto as Exhibit C.
---------
<PAGE>
26
6.6 Opinion of Counsel. The Company shall have received an opinion
------------------
of Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the Purchasers, dated
the Closing Date, relating to the transactions contemplated by or referred to
herein, in a form reasonably satisfactory to the Company.
6.7 No Material Judgment or Order. There shall not be on the
-----------------------------
Closing Date any Order of a court of competent jurisdiction or any ruling of any
Governmental Authority or any condition imposed under any Requirement of Law
which would, in the judgment of the Company, (a) prohibit or restrict (i) the
sale of the Purchased Shares or (ii) the consummation of the transactions
contemplated by this Agreement, (b) subject the Company to any penalty or
onerous condition under or pursuant to any Requirement of Law if the Purchased
Shares were to be sold hereunder or (c) restrict the operation of the business
of the Company or its Subsidiary as conducted on the date hereof in a manner
that would have a material adverse effect on the Condition of the Company.
6.8 Payment by the Purchasers. Each Purchaser shall have purchased
-------------------------
and paid for the Purchased Shares to be purchased by such Purchaser, and the
aggregate purchase price paid by the Purchasers for the Purchased Shares being
purchased at the Closing shall be $23,697,000.
6.9 Consents, Approvals. The approval of Inland Revenue of the
-------------------
transactions contemplated by the Exchange Agreement shall have been obtained and
be in full force and effect, and the Company shall have been furnished with
appropriate evidence thereof.
6.10 Exchange Agreement. Each of the Exchange Agreement and the
------------------
Promissory Note shall be in a form reasonably satisfactory to the Company, and
the closing of the transactions contemplated by the Exchange Agreement shall
have occurred.
6.11 Option Agreement. Each of the Company's 1997 Stock Option
----------------
Plan and the Option Agreement shall be in a form reasonably satisfactory to the
Company, and the Option Agreement shall have been duly executed and delivered by
Nevin Prakash.
6.12 Certificate of Designation. The Certificate of Designation
--------------------------
shall be in a form reasonably satisfactory to the Company.
<PAGE>
27
ARTICLE 7
INDEMNIFICATION
---------------
7.1 Indemnification. Except as otherwise provided in this Article
---------------
7, the Company and each of the Purchasers, as applicable (the "Indemnifying
Party"), agrees to indemnify, defend and hold harmless the Purchasers, in the
case of indemnity by the Company, or the Company, in the case of indemnity by
the Purchasers, as applicable, and their Affiliates and their respective
officers, directors, agents, employees, subsidiaries, partners, members and
controlling persons (each, an "Indemnified Party") to the fullest extent
permitted by law from and against any and all losses, Claims (including any
Claim by a third party), damages, expenses (including reasonable fees,
disbursements and other charges of counsel incurred by the Indemnified Party in
any action between the Indemnifying Party and the Indemnified Party or between
the Indemnified Party and any third party or otherwise) or other liabilities
(collectively, "Losses") resulting from, arising out of or relating to any
breach of any representation or warranty, covenant or agreement by the
Indemnifying Party in this Agreement or the other Transaction Documents,
including, without limitation, any legal, administrative or other actions
(including actions brought by the Purchasers or the Company or any equity
holders or partners of such Persons or derivative actions brought by any Person
claiming through or in the Company's name or in the name of either of the
Purchasers), proceedings or investigations (whether formal or informal), or
written threats thereof, based upon, relating to or arising out of this
Agreement or the other Transaction Documents, the transactions contemplated
hereby and thereby, or any Indemnified Party's role therein or in transactions
contemplated thereby; provided, that the Indemnifying Party shall not be liable
--------
under this Section 7.1 to an Indemnified Party to the extent that it is finally
judicially determined that such Losses resulted primarily from the material
breach by such Indemnified Party of any representation, warranty, covenant or
other agreement of such Indemnified Party contained in this Agreement; and
provided, further, that if and to the extent that such indemnification is
- -------- -------
unenforceable for any reason, the Indemnifying Party shall make the maximum
contribution to the payment and satisfaction of such Losses which shall be
permissible under applicable laws. The amount of any payment by any
Indemnifying Party to any Indemnified Party herewith in respect of any Loss
shall be of sufficient amount to make such Indemnified Party whole, and, in the
case of indemnity by the Company, shall consist of an amount sufficient to make
up any diminution in the value of the Purchased Shares held by such Indemnified
Party resulting from the payment by the Company of such indemnification payment.
In connection with the obligation of the Indemnifying Party to indemnify for
expenses as set forth above, the Indemnifying Party shall, upon presentation of
appropriate invoices containing reasonable detail, reimburse each Indemnified
Party for all such expenses (including reasonable fees, disbursements and other
charges of counsel incurred by the Indemnified Party in any action between the
Indemnifying Party and the Indemnified Party or between the Indemnified Party
and
<PAGE>
28
any third party or otherwise) as they are incurred by such Indemnified Party;
provided, however, that if an Indemnified Party is reimbursed hereunder for any
- -------- -------
expenses, such reimbursement of expenses shall be refunded to the extent it is
finally judicially determined that the Losses in question resulted primarily
from the willful misconduct or gross negligence of such Indemnified Party.
Notwithstanding the foregoing, indemnification with respect to this Section 7.1
by the Company shall be limited to the aggregate consideration paid by the
Purchasers for the Purchased Shares, and indemnification by the Purchasers shall
be limited to $2 million in the aggregate, except in the case of any
indemnification by the Purchasers for any breach of Section 4.6, 4.7 or 4.8, in
which such case indemnification by the Purchasers shall be limited to the
aggregate consideration paid by the Purchasers for the Purchased Shares.
7.2 Notification. Each Indemnified Party under this Article 7
------------
shall, promptly after the receipt of notice of the commencement of any action,
investigation, claim or other proceeding against such Indemnified Party in
respect of which indemnity may be sought from the Indemnifying Party under this
Article 7, notify the Indemnifying Party in writing of the commencement thereof.
The omission of any Indemnified Party to so notify the Indemnifying Party of any
such action shall not relieve the Indemnifying Party from any liability which it
may have to such Indemnified Party (a) other than pursuant to this Article 7 or
(b) under this Article 7 unless, and only to the extent that, such omission
results in the Indemnifying Party's forfeiture of substantive rights or
defenses. In case any such action, claim or other proceeding shall be brought
against any Indemnified Party, and it shall notify the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled to assume the
defense thereof at its own expense, with counsel satisfactory to such
Indemnified Party in its reasonable judgment; provided, however, that any
-------- -------
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense at its own expense. Notwithstanding the foregoing,
in any action, claim or proceeding in which both the Indemnifying Party, on the
one hand, and an Indemnified Party, on the other hand, are, or are reasonably
likely to become, a party, such Indemnified Party shall have the right to employ
separate counsel at the expense of the Indemnifying Party and to control its own
defense of such action, claim or proceeding if, in the reasonable opinion of
counsel to such Indemnified Party, a conflict or potential conflict exists
between the Indemnifying Party, on the one hand, and such Indemnified Party, on
the other hand, that would make such separate representation advisable;
provided, however, that the Indemnifying Party shall not be liable for the fees
- -------- -------
and expenses of more than one counsel to all Indemnified Parties. The
Indemnifying Party agrees that it will not, without the prior written consent of
the Indemnified Party, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the matters contemplated hereby (if any Indemnified Party is a party thereto or
has been actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of each Indemnified
Party
<PAGE>
29
from all liability arising or that may arise out of such claim, action or
proceeding. The Indemnifying Party shall not be liable for any settlement of any
claim, action or proceeding effected against an Indemnified Party without the
Indemnifying Party's written consent, which consent shall not be unreasonably
withheld. The rights accorded to an Indemnified Party hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise; provided, however, that notwithstanding the
-------- -------
foregoing or anything to the contrary contained in this Agreement, nothing in
this Article 7 should restrict or limit any rights that any Indemnified Party
may have to seek equitable relief.
ARTICLE 8
AFFIRMATIVE COVENANTS
---------------------
The Company hereby covenants and agrees with the Purchasers as
follows:
8.1 Preservation of Existence. From the date hereof until the
-------------------------
Closing Date, the Company shall preserve and maintain in full force and effect
its existence and good standing under the laws of its jurisdiction of formation
or organization, and shall cause the Subsidiary to preserve and maintain in full
force and effect, by taking all actions and doing all acts as are necessary, its
existence by maintaining its validly registered status which will be evidenced
by its registration at the Registrar of Companies in England. In addition,
except for the transactions contemplated by the Exchange Agreement and Option
Agreement, from the date hereof until the Closing Date, the Company shall, and
shall cause the Subsidiary to:
(a) preserve and maintain in full force and effect all material
rights, privileges, qualifications, applications, licenses and franchises
necessary in the normal conduct of its business;
(b) conduct its business in the ordinary course in accordance with
sound business practices, keep its properties in good working order and
condition (normal wear and tear excepted), and from time to time make all needed
repairs to, renewals of or replacements of its properties so that the efficiency
of its business operation shall be fully maintained and preserved;
(c) comply in all material respects with all Requirements of Law and
with the directions of any Governmental Authority having jurisdiction over the
Company or the Subsidiary or their respective business or property;
(d) file or cause to be filed in a timely manner all reports,
applications, estimates and licenses that shall be required by a Governmental
<PAGE>
30
Authority and that, if not timely filed, would have a material adverse effect on
the Condition of the Company;
(e) except in the ordinary course of business, refrain from making any
change in the rate or form of compensation or remuneration payable or to become
payable to any of its stockholders, directors, officers, employees or agents;
and
(f) refrain from (i) reserving, declaring, making or paying any
dividend on the issued and outstanding shares of capital stock of the Company,
or making any other distributions of profits or capital or (ii) redeeming,
retiring, repurchasing or otherwise acquiring shares of capital stock of the
Company or the Subsidiary.
8.2 Fiscal Year End. Not later than 30 days after the Closing
---------------
Date, the Company shall, and shall cause the Subsidiary to, have a fiscal year
that ends on December 31.
8.3 Financial Statements and Other Information. For so long as the
------------------------------------------
Purchasers collectively own shares of Common Stock and/or Preferred Stock or
other securities of the Company convertible into or exchangeable for Common
Stock that represent at least 5% of the total number of shares of Common Stock
outstanding on an as converted basis, the Company shall deliver to each
Purchaser, in form and substance reasonably satisfactory to such Purchaser:
(a) as soon as available, but not later than ninety (90) days after
the end of each fiscal year of the Company, a copy of the audited consolidated
balance sheet of the Company and the Subsidiary as of the end of such fiscal
year and the related statements of operations and cash flows for such fiscal
year, setting forth in each case in comparative form the figures for the
previous year, all in conformity with United States GAAP, in reasonable detail
and accompanied by a management summary and analysis of the operations of the
Company and the Subsidiary for such fiscal year and by the opinion of a
nationally recognized independent certified public accounting firm reasonably
satisfactory to the Purchasers;
(b) commencing with the fiscal period ending on March 31, 1998, as
soon as available, but in any event not later than forty-five (45) days after
the end of each of the first three fiscal quarters of each fiscal year, the
consolidated unaudited balance sheet of the Company and the Subsidiary, and the
related statements of operations and cash flows for such quarter and for the
period commencing on the first day of the fiscal year and ending on the last day
of such quarter, all certified by an appropriate officer of the Company as
presenting fairly the consolidated financial condition as of such date and
results of operations and cash flows for the periods indicated in conformity
with United States and United Kingdom
<PAGE>
31
GAAP applied on a consistent basis, subject to normal year-end adjustments and
reserves and the absence of footnotes required by United States and United
Kingdom GAAP;
(c) as promptly as practicable, if requested by either of the
Purchasers, a certificate signed by the President of the Company that the
Company is not a "foreign person" within the meaning of Section 1445 of the
Code; and
(d) annual budgets and such other financial and operating data which
are customarily prepared by the Company, as the Purchasers reasonably may
request.
8.4 Reservation of Common Stock. From and after the Closing Date,
---------------------------
the Company shall at all times reserve and keep available out of its authorized
shares of Common Stock, solely for the purpose of issue or delivery upon
conversion of the Preferred Stock as provided in the Certificate of
Incorporation, the maximum number of shares of Common Stock that may be issuable
or deliverable upon such conversion or exchange. Such shares of Common Stock
are or will be duly authorized and, when issued or delivered in accordance with
the Certificate of Incorporation and against payment therefor, shall be validly
issued, fully paid and non-assessable. The Company shall issue such shares of
Common Stock in accordance with the terms of the Certificate of Incorporation
and otherwise comply with the terms hereof and thereof.
8.5 Insurance. The Company shall maintain, and shall cause the
---------
Subsidiary to maintain, insurance with insurance companies or associations with
a rating of "A" or better as established by Best's Rating Guide or Standard &
Poor's Ratings Group (or an equivalent rating with such other publication of a
similar nature as shall be in current use) in such amounts and covering such
risks as are usually and customarily carried with respect to similar businesses
according to their respective locations.
8.6 Books and Records. The Company shall keep, and shall cause the
-----------------
Subsidiary to keep, proper books of record and account, in accordance with
United States or United Kingdom GAAP, as applicable, consistently applied.
8.7 Back-Ups of Computer Software. The Company shall, and shall
-----------------------------
cause the Subsidiary to, make back-ups of all material computer software
programs and databases and shall maintain such back-up software programs and
databases at a secure off-site location.
8.8 Inspection. The Company shall, and shall cause the Subsidiary
----------
to, permit representatives of the Purchasers, at their expense, to visit and
inspect any of its properties, to examine its corporate, financial and operating
records and make
<PAGE>
32
copies thereof or abstracts therefrom, and to discuss its affairs, finances and
accounts with its directors, officers and independent public accountants, all at
such reasonable times during normal business hours and as often as may be
reasonably requested upon reasonable advance notice to the Company.
ARTICLE 9
TERMINATION OF AGREEMENT
------------------------
9.1 Termination. This Agreement may be terminated prior to the
-----------
Closing as follows:
(a) at any time on or prior to the Closing Date, by mutual
written consent of the Company and the Purchasers;
(b) at the election of the Company or the Purchasers by written notice
to the other parties hereto after 5:00 p.m., New York time, on November 30,
1997, if the Closing shall not have occurred, unless such date is extended by
the mutual written consent of the Company and the Purchasers; provided, however,
-------- -------
that the right to terminate this Agreement under this Section 9.1(b) shall not
be available (i) to any party whose breach of any representation, warranty,
covenant or agreement under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date or (ii) if the
Closing has not occurred solely because any party hereto has not yet obtained a
necessary approval from any Governmental Authority or because approval of Inland
Revenue has not yet been obtained;
(c) at the election of the Company, if there has been a material
breach of any representation, warranty, covenant or agreement on the part of
either of the Purchasers contained in this Agreement, which breach has not been
cured within fifteen (15) Business Days of notice to the Purchasers of such
breach; or
(d) at the election of the Purchasers, if there has been a material
breach of any representation, warranty, covenant or agreement on the part of the
Company contained in this Agreement, which breach has not been cured within
fifteen (15) Business Days notice to the Company of such breach.
If this Agreement so terminates, it shall become null and void and have no
further force or effect, except as provided in Section 9.2.
9.2 Survival. If this Agreement is terminated and the transactions
--------
contemplated hereby are not consummated as described above, this Agreement shall
become void and of no further force and effect; except for the provisions of
Article 1,
<PAGE>
33
Section 10.10 and this Section 9.2; provided that (a) none of the parties hereto
--------
shall have any liability in respect of a termination of this Agreement pursuant
to Section 9.1(a) or Section 9.1(b) and (b) nothing shall relieve any of the
parties from liability for actual damages resulting from a termination of this
Agreement pursuant to Section 9.1(c) or 9.1(d); and provided, further, that none
-------- -------
of the parties hereto shall have any liability for speculative, indirect,
unforeseeable or consequential damages resulting from any legal action relating
to this Agreement or any termination of this Agreement.
ARTICLE 10
MISCELLANEOUS
-------------
10.1 Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of the Company or
the Purchasers, or acceptance of the Purchased Shares or termination of this
Agreement until the third anniversary of the Closing Date.
10.2 Notices. All notices, demands and other communications
-------
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
(a) if to the Company:
Prime Response Group Inc.
885 Third Avenue
Suite 2930
New York, New York 10022
Telecopy: (212) 303-5532
Attention: James A. Carling
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019-6092
Telecopy: (212) 259-6333
Attention: Stanton J. Lovenworth, Esq.
<PAGE>
34
(b) if to GAP LP or GAP Coinvestment:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-8818
Attention: Mr. Stephen P. Reynolds
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Matthew Nimetz, Esq.
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial courier service; five (5) Business Days
after being deposited in the mail, postage prepaid, if mailed; and when receipt
is mechanically acknowledged, if properly telecopied.
10.3 Successors and Assigns; Third Party Beneficiaries. This
-------------------------------------------------
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto. Subject to applicable securities laws,
each of the Purchasers may assign any of its rights under any of the Transaction
Documents to any of its Affiliates. The Company may not assign any of its
rights under this Agreement without the written consent of the Purchasers.
Except as provided in Article 7, no Person other than the parties hereto and
their successors and permitted assigns is intended to be a beneficiary of this
Agreement.
10.4 Amendment and Waiver.
--------------------
(a) No failure or delay on the part of the Company or the Purchasers
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
the Purchasers at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any provision
of this Agreement, any waiver of any provision of this Agreement, and any
consent to any departure by the Company or the Purchasers from the terms of any
<PAGE>
35
provision of this Agreement, shall be effective only if it is made or given in
writing and signed by the Company and the Purchasers. Except where notice is
specifically required by this Agreement, no notice to or demand on the Company
in any case shall entitle the Company to any other or further notice or demand
in similar or other circumstances.
10.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
10.6 Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not limit or otherwise affect the meaning hereof.
10.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION.
10.8 Severability. If any one or more of the provisions contained
------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
10.9 Entire Agreement. This Agreement, together with the exhibits
----------------
and schedules hereto and the other Transaction Documents, is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement, together with the exhibits
hereto, and the other Transaction Documents supersede all prior agreements and
understandings between the parties with respect to such subject matter.
10.10 Fees. Upon the Closing the Company shall reimburse the
----
Purchasers, in an aggregate amount not to exceed $55,000, for their reasonable
fees, disbursements and other charges of counsel incurred in connection with the
transactions contemplated by this Agreement. Except as provided in the
preceding sentence, each party hereto shall bear their own costs and expenses in
connection with the preparation, execution and delivery of this Agreement and
other Transaction Documents, and the transactions contemplated hereby and
thereby. If this Agreement
<PAGE>
36
is terminated before the Closing occurs or if the Closing does not occur for any
reason, each party hereto shall bear their own costs and expenses (including
fees, disbursements and other charges of counsel) in connection with the
preparation, execution and delivery of this Agreement and the other Transaction
Documents, and the transactions contemplated hereby and thereby.
10.11 Publicity. Except as may be required by any applicable
---------
Requirement of Law, none of the parties hereto shall issue a publicity release
or public announcement or otherwise make any disclosure concerning this
Agreement or the transactions contemplated hereby, without prior approval by the
other parties hereto (which approval shall not be unreasonably withheld);
provided, however, that nothing in this Agreement shall restrict any Purchaser
- -------- -------
from disclosing information (a) that is already publicly available; (b) to the
prospective transferee in connection with any contemplated transfer of any of
the Purchased Shares; and (c) to its attorneys, accountants, consultants and
other advisors to the extent necessary to obtain their services in connection
with such Purchaser's investment in the Company. If any announcement is
required by any applicable Requirement of Law to be made by any party hereto,
prior to making such announcement such party will deliver a draft of such
announcement to the other parties and shall give the other parties an
opportunity to comment thereon.
10.12 Further Assurances. Each of the parties shall execute such
------------------
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person, and otherwise fulfilling, or causing the fulfillment of, the
conditions to Closing set forth in Articles 5 and 6) as may be reasonably
required or desirable to carry out or to perform the provisions of this
Agreement and to consummate and make effective as promptly as possible the
transactions contemplated by this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be executed and delivered by their respective officers hereunto
duly authorized on the date first above written.
PRIME RESPONSE GROUP INC.
By: /s/ James Carling
---------------------------------------
Name: James Carling
Title: President
GENERAL ATLANTIC PARTNERS 42, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC,
its General Partner
By: /s/ Stephen P. Reynolds
----------------------------------
Name: Stephen P. Reynolds
Title: A Managing Member
GAP COINVESTMENT PARTNERS, L.P.
By: /s/ Stephen P. Reynolds
---------------------------------------
Name: Stephen P. Reynolds
Title: A General Partner
<PAGE>
Schedule 2.1
------------
Purchased Shares and Purchase Price
-----------------------------------
Purchaser Purchased Shares Purchase Price
--------- ---------------- --------------
GAP LP 915,310 $18,779,308.29
GAP Coinvestment 239,690 $ 4,917,691.71
Total: 1,155,000 $23,697,000.00
<PAGE>
Exhibit 10.14
AMENDMENT NO. 1 TO
STOCK PURCHASE AGREEMENT
Amendment No. 1 (the "Amendment"), dated as of October 23, 1997, to
the Stock Purchase Agreement (the "Agreement") dated as of October 1, 1997 by
and among Prime Response Group Inc. (the "Company"), General Atlantic Partners
42, L.P. ("GAP LP") and GAP Coinvestment Partners, L.P. ("GAP Coinvestment").
WHEREAS, the Company, GAP LP and GAP Coinvestment are parties to the
Agreement pursuant to which the Company is selling to GAP LP and GAP
Coinvestment 1,155,000 shares of Series A Convertible Participating Preferred
Stock, par value $.01 per share, of the Company (the "Purchased Shares"); and
WHEREAS, GAP LP and GAP Coinvestment desire to change the number of
Purchased Shares being purchased by each of them without changing the total
number of Purchased Shares being purchased by them.
NOW, THEREFORE, the parties hereto agree as follows:
1. Recitals. The second recital of the Agreement is hereby amended
--------
and restated in its entirety as follows:
WHEREAS, upon the terms and conditions set forth in this Agreement,
the Company proposes to issue and sell to (a) GAP LP, for an aggregate purchase
price of $18,667,450.24, an aggregate of 909,858 shares of Series A Convertible
Participating Preferred Stock, par value $.01 per share, of the Company (the
"Preferred Stock") and (b) GAP Coinvestment, for an aggregate purchase price of
$5,029,549.76, an aggregate of 245,142 shares of Preferred Stock.
2. Schedule 2.1. Schedule 2.1 to the Agreement is hereby amended as
------------
follows:
(a) the numbers set forth in the columns next to GAP LP are deleted
and replaced with "909,858" and "$18,667,450.24," respectively; and
(b) the numbers set forth in the columns next to GAP Coinvestment are
deleted and replaced with "245,142" and "$5,029,549.76," respectively.
3. Schedule 3.7(a). Schedule 3.7(a) to the Agreement is hereby
---------------
amended as follows:
(a) the number set forth in the column next to GAP LP is deleted
and replaced with "909,858;" and
<PAGE>
2
(b) the number set forth in the column next to GAP Coinvestment
is deleted and replaced with "245,142."
4. Miscellaneous.
-------------
(a) Counterparts. This Amendment may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(b) Governing Law. This Amendment shall be governed by and construed
-------------
in accordance with the laws of the State of New York, without regard to the
principles of conflicts of laws of any jurisdiction.
[Remainder of page intentionally left blank.]
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered by their respective officers hereunto duly authorized
on the first day above written.
PRIME RESPONSE GROUP INC.
By: /s/ N.Prakash
-----------------------------
Name: N. Prakash
Title: Treasurer
GENERAL ATLANTIC PARTNERS 42, L.P.
By: General Atlantic Partners, LLC
its general partner
/s/ Stephen P. Reynolds
By: _____________________________
Name:Stephen P. Reynolds
Title:A Managing Member
GAP COINVESTMENT PARTNERS, L.P.
/s/ Stephen P. Reynolds
By: _____________________________
Name:Stephen P. Reynolds
Title: A General Partner
<PAGE>
Exhibit 10.15
Execution Copy
===============================================================================
STOCK PURCHASE AGREEMENT
by and among
PRIME RESPONSE GROUP INC.,
GENERAL ATLANTIC PARTNERS 48, L.P.,
GAP COINVESTMENT PARTNERS, L.P.
and
THE STOCKHOLDERS NAMED HEREIN
______________________________
Dated as of September 21, 1998
______________________________
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
ARTICLE 1
DEFINITIONS.....................................................................................1
1.1 Definitions............................................................................1
1.2 Accounting Terms; Financial Statements.................................................6
ARTICLE 2
PURCHASE AND SALE OF PREFERRED STOCK............................................................6
2.1 Purchase and Sale of Preferred Stock...................................................6
2.2 Certificate of Designation.............................................................6
2.3 First Closing..........................................................................6
2.4 Second Closing.........................................................................7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................7
3.1 Corporate Existence and Power..........................................................7
3.2 Authorization; No Contravention........................................................8
3.3 Governmental Authorization; Third Party Consents.......................................8
3.4 Binding Effect.........................................................................8
3.5 Capitalization.........................................................................9
3.6 Financial Statements..................................................................10
3.7 No Default or Breach; Contractual Obligations.........................................10
3.8 No Material Adverse Change; Ordinary Course of Business. .............................10
3.9 Private Offering......................................................................10
3.10 Broker's, Finder's or Similar Fees....................................................11
3.11 Disclosure............................................................................11
3.12 Revised Product Plan of Record........................................................11
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...............................................11
4.1 Existence and Power...................................................................11
4.2 Capacity..............................................................................11
4.3 Authorization; No Contravention.......................................................11
4.4 Governmental Authorization; Third Party Consents......................................12
4.5 Binding Effect........................................................................12
4.6 Purchase for Own Account..............................................................12
4.7 Restricted Securities.................................................................13
4.8 Investment Experience.................................................................14
4.9 Broker's, Finder's or Similar Fees....................................................14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 5
CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE........................................14
5.1 GAP Purchasers'Conditions.............................................................14
ARTICLE 6
CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE...........................................17
6.1 First Closing Conditions..............................................................17
6.2 Second First Closing Conditions.......................................................18
ARTICLE 7
INDEMNIFICATION................................................................................18
7.1 Indemnification.......................................................................18
7.2 Notification..........................................................................19
ARTICLE 8
AFFIRMATIVE COVENANTS..........................................................................20
8.1 Preservation of Existence.............................................................21
ARTICLE 9
TERMINATION OF AGREEMENT.......................................................................22
9.1 Termination...........................................................................22
9.2 Survival..............................................................................22
ARTICLE 10
MISCELLANEOUS..................................................................................23
10.1 Survival of Representations and Warranties............................................23
10.2 Notices...............................................................................23
10.3 Successors and Assigns; Third Party Beneficiaries.....................................24
10.4 Amendment and Waiver..................................................................24
10.5 Counterparts..........................................................................25
10.6 Headings..............................................................................25
10.7 GOVERNING LAW.........................................................................25
10.8 Severability..........................................................................25
10.9 Entire Agreement......................................................................25
10.10 Fees..................................................................................25
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
10.11 Publicity.............................................................................26
10.12 Further Assurances....................................................................26
</TABLE>
EXHIBITS
A Form of Amendment to the Stockholders Agreement
B Form of Amendment to the Registration Rights Agreement
SCHEDULES
2.1 Purchased Shares and Purchase Price
3.5(a) List of Stockholders and Capital Stock and Stock Equivalents
3.5(b) Subsidiaries and Investments
iii
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of September 21, 1998 (this
"Agreement"), among Prime Response Group Inc., a Delaware corporation (the
"Company"), General Atlantic Partners 48, L.P., a Delaware limited partnership
("GAP LP"), GAP Coinvestment Partners, L.P., a New York limited partnership
("GAP Coinvestment"), Richard S. Braddock ("Braddock") and Allen Swann ("Swann"
and, collectively with GAP LP, GAP Coinvestment and Braddock, the "Purchasers").
WHEREAS, upon the terms and conditions set forth in this Agreement,
the Company proposes to issue and sell to (a) GAP LP, for an aggregate purchase
price of $3,642,786, an aggregate of 607,131 shares of Series B Convertible
Participating Preferred Stock, par value $.01 per share, of the Company (the
"Preferred Stock"), (b) GAP Coinvestment, for an aggregate purchase price of
$873,714, an aggregate of 145,619 shares of Preferred Stock, (c) Braddock, for
an aggregate purchase price of $82,500, an aggregate of 13,750 shares of
Preferred Stock and (d) Swann, for an aggregate purchase price of $600,000, an
aggregate of 100,000 shares of Preferred Stock.
WHEREAS, each share of Preferred Stock is convertible (subject to
adjustment) into one share of common stock, par value $.01 per share of the
Company (the "Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 Definitions. As used in this Agreement, and unless the context
-----------
requires a different meaning, the following terms have the meanings indicated:
"Affiliate" shall mean any Person who is an "affiliate" as defined in
---------
Rule 12b-2 of the General Rules and Regulations under the Exchange Act. The
following shall be deemed to be Affiliates of GAP LP: (a) GAP LLC, the members
of GAP LLC and the limited partners of GAP LP; (b) any Affiliate of GAP LLC, the
members of GAP LLC and the limited partners of GAP LP; and (c) any limited
liability company or partnership a majority of whose members or partners, as the
case
<PAGE>
may be, are members of GAP LLC. GAP LP and GAP Coinvestment shall be
deemed to be Affiliates of one another.
"Agreement" means this Agreement as the same may be amended
---------
supplemented or modified in accordance with the terms hereof.
"Audited Financial Statements" has the meaning set forth in Section
----------------------------
3.6 of this Agreement.
"Board of Directors" means the Board of Directors of the Company.
------------------
"Braddock" has the meaning set forth in the recitals to this
--------
Agreement.
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"By-laws" means the by-laws of the Company in effect on the Closing
-------
Date, as the same may be amended from time to time.
"Certificate of Designation" means the Certificate of Designation with
--------------------------
respect to the Preferred Stock adopted by the Board of Directors and filed with
the Secretary of State of the State of Delaware on or before the Closing Date.
"Certificate of Incorporation" means the Certificate of Incorporation
----------------------------
of the Company, as the same may be amended from time to time.
"Claims" means any actions, suits, proceedings, claims, complaints,
------
disputes, arbitrations or investigations.
"Commission" means the Securities and Exchange Commission or any
----------
similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" has the meaning set forth in the recitals to this
------------
Agreement.
"Company" has the meaning set forth in the recitals to this Agreement.
-------
"Condition of the Company" means the assets, business, properties,
------------------------
prospects, operations or financial condition of the Company and the
Subsidiaries, taken as a whole.
"Contingent Obligation" means, as applied to any Person, any direct or
---------------------
indirect liability of that Person with respect to any Indebtedness, lease,
dividend,
<PAGE>
guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of another Person (the "primary obligor"),
------------------ ---------------
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligation or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, or (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss or failure or inability to perform in respect
thereof. The amount of any Contingent Obligation shall, unless stated to be
otherwise in the instrument constituting the Contingent Obligation, be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by the Board of Directors.
"Contractual Obligations" means as to any Person, any provision of any
-----------------------
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"Financial Statements" has the meaning set forth in Section 3.6.
--------------------
"First Closing" has the meaning set forth in Section 2.3 of the
-------------
Agreement.
"First Closing Date" has the meaning set forth in Section 2.3 of the
------------------
Agreement.
"GAAP" means generally accepted accounting principles in effect from
----
time to time in the United States or the United Kingdom, as the case may be.
"GAP Coinvestment" has the meaning set forth in the recitals to this
----------------
Agreement.
"GAP 42" means General Atlantic Partners 42, L.P., a Delaware limited
------
partnership.
"GAP LLC" means General Atlantic Partners, LLC, a Delaware limited
-------
liability company and the general partner of GAP LP, and any successor to such
entity.
<PAGE>
"GAP LP" has the meaning set forth in the recitals to this Agreement.
------
"GAP/Braddock Purchased Shares" has the meaning set forth in Section
-----------------------------
2.1 of the Agreement.
"GAP Purchasers" means GAP LP and GAP Coinvestment.
--------------
"Governmental Authority" means the government of any nation, state,
----------------------
city, locality or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Indemnified Party" has the meaning set forth in Section 7.1 of this
-----------------
Agreement.
"Indemnifying Party" has the meaning set forth in Section 7.1 of this
------------------
Agreement.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences),
including, without limitation, those created by, arising under or evidenced by
any conditional sale or other title retention agreement, the interest of a
lessor under a Capital Lease Obligation, or any financing lease having
substantially the same economic effect as any of the foregoing.
"Orders" has the meaning set forth in Section 3.2 of this Agreement.
------
"Person" means any individual, firm, corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, Governmental Authority or other entity of any kind,
and shall include any successor (by merger or otherwise) of such entity.
"Preferred Stock" has the meaning set forth in the recitals to this
---------------
Agreement.
"Purchased Shares" has the meaning set forth in Section 2.1 of this
----------------
Agreement.
"Purchasers" has the meaning set forth in the recitals to this
----------
Agreement.
<PAGE>
"Registration Rights Agreement Amendment" means Amendment No. 1 to the
---------------------------------------
Registration Rights Agreement dated as of October 24, 1997, among the Company,
GAP 42, GAP Coinvestment and the stockholders named therein, substantially in
the form attached hereto as Exhibit B.
---------
"Requirements of Law" means, as to any Person, any law, statute,
-------------------
treaty, rule, regulation, right, privilege, qualification, license or franchise
or determination of an arbitrator or a court or other Governmental Authority or
stock exchange, in each case applicable or binding upon such Person or any of
its property or to which such Person or any of its property is subject or
pertaining to any or all of the transactions contemplated or referred to herein.
"Second Closing" has the meaning set forth in Section 2.4 of the
--------------
Agreement.
"Second Closing Date" has the meaning set forth in Section 2.4 of the
-------------------
Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the Commission thereunder.
"Stock Equivalents" means any security or obligation which is by its
-----------------
terms convertible into or exchangeable for shares of common stock or other
capital stock or equity securities of the Company, and any option, warrant or
other subscription or purchase right with respect to common stock or such other
capital stock or equity securities.
"Stockholders Agreement" has the meaning set forth in Section 5.8 of
----------------------
this Agreement.
"Stockholders Agreement Amendment" means Amendment No. 1 to the
--------------------------------
Stockholders Agreement dated as of October 24, 1997, among the Company, GAP 42,
GAP Coinvestment and the stockholders named therein, substantially in the form
attached hereto as Exhibit A.
---------
"Subsidiaries" means Prime Response Limited, a company registered in
------------
England and Wales under number 2155722, and a corporation or other Person of
which 50% or more of the voting power of the outstanding voting equity
securities or 50% or more of the outstanding economic equity interest is held,
directly or indirectly, by such Person. Unless otherwise qualified, or the
contest otherwise requires, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"Swann" has the meaning set forth in the recitals to this Agreement.
-----
<PAGE>
"Swann Purchased Shares" has the meaning set forth in Section 2.1 of
----------------------
this Agreement.
"Transaction Documents" means collectively, this Agreement, the
---------------------
Stockholders Agreement Amendment and the Registration Rights Agreement
Amendment.
"Unaudited Financial Statements" has the meaning set forth in Section
------------------------------
3.6 of this Agreement.
1.2 Accounting Terms; Financial Statements. All accounting terms
--------------------------------------
used herein not expressly defined in this Agreement shall have the respective
meanings given to them in accordance with sound accounting practice. The term
"sound accounting practice" shall mean such accounting practice as, in the
opinion of the independent certified public accountants regularly retained by
the Company, conforms at the time to GAAP applied on a consistent basis except
for changes with which such accountants concur.
ARTICLE 2
PURCHASE AND SALE OF PREFERRED STOCK
------------------------------------
2.1 Purchase and Sale of Preferred Stock. Subject to the terms and
------------------------------------
conditions herein set forth, (a) the Company agrees to issue and sell to each of
the GAP Purchasers and Braddock, and each of the GAP Purchasers and Braddock
agrees that it or he will purchase from the Company, at the First Closing, and
(b) the Company agrees to issue and sell to Swann, and Swann agrees that he will
purchase from the Company, at the Second Closing, the aggregate number of shares
of Preferred Stock set forth opposite such Purchaser's name on Schedule 2.1
------------
hereto, for the aggregate purchase price set forth opposite such Purchaser's
name on Schedule 2.1 hereto (the shares of Preferred Stock being purchased
------------
hereunder by the GAP Purchasers and Braddock being referred to herein as the
"GAP/Braddock Purchased Shares" and the shares of Preferred Stock being
purchased hereunder by Swann being referred to herein as the "Swann Purchased
Shares" and, together with the GAP/Braddock Purchased Shares, the "Purchased
Shares").
2.2 Certificate of Designation. The Purchased Shares shall be
--------------------------
shares of Preferred Stock of the Company issued pursuant to the Certificate of
Designation.
2.3 First Closing. Unless this Agreement shall have terminated
-------------
pursuant to Article 9 and subject to the satisfaction or waiver of the
conditions set forth in Sections 5.1 and 6.1, the closing of the sale and
purchase of the GAP/Braddock Purchased Shares (the "First Closing") shall take
place at the offices
<PAGE>
of Paul, Weiss, Rifkind, Wharton & Garrison, no later than 4:00 p.m., New York
time, on the first Business Day following the date upon which the conditions set
forth in Sections 5.1 and 6.1 shall be satisfied or waived in accordance with
this Agreement, or at such other time, place, and date that the Company and the
Purchasers may agree in writing (the "First Closing Date"). On the First Closing
Date, the Company shall deliver to each GAP Purchaser and Braddock a certificate
representing the GAP/Braddock Purchased Shares being purchased by such GAP
Purchaser and Braddock against delivery by such GAP Purchaser and Braddock to
the Company of the aggregate purchase price therefor (as set forth opposite such
GAP Purchaser's and Braddock's name on Schedule 2.1 hereto) by wire transfer of
------------
immediately available funds.
2.4 Second Closing. Subject to the satisfaction or waiver of the
--------------
conditions set forth in Sections 5.2 and 6.2, the closing of the sale and
purchase of the Swann Purchased Shares (the "Second Closing") shall take place
at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, no later than 4:00
p.m., New York time, on the first Business Day following the date upon which the
conditions set forth in Sections 5.2 and 6.2 shall be satisfied or waived in
accordance with this Agreement, or at such other time, place and date that the
Company and Swann may agree in writing (the "Second Closing Date"), but in no
event later than October 31, 1998. On the Second Closing Date, the Company
shall deliver to Swann a certificate representing the Swann Purchased Shares
being purchased by Swann against delivery by Swann to the Company of the
aggregate purchase price therefor (as set forth opposite Swann's name on
Schedule 2.1 hereto) by wire transfer of immediately available funds.
- ------------
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to the Purchasers as follows:
3.1 Corporate Existence and Power. Each of the Company and the
-----------------------------
Subsidiaries (a) is, in the case of the Company and its Subsidiaries (other than
Prime Response Limited), a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation, and in
the case of Prime Response Limited, is a company registered in England and Wales
under number 2155722; (b) has all requisite power and authority to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is currently, or is proposed to be, engaged; (c) is, in
the case of the Company and its Subsidiaries (other than Prime Response
Limited), duly qualified as a foreign corporation, licensed and in good
standing, and in the case of Prime Response Limited, is duly registered and
remains subsisting under the laws of each
<PAGE>
jurisdiction in which its ownership, lease or operation of property or the
conduct of its business requires such qualification, except to the extent that
the failure to do so would not have a material adverse effect on the Condition
of the Company; and (d) has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement and each of the other
Transaction Documents to which it is a party. No jurisdiction, other than those
referred to in clause (c) above, has claimed, in writing or otherwise, that the
Company or any of the Subsidiaries is required to qualify as a foreign
corporation therein, and neither the Company nor the Subsidiaries files any
franchise, income or other tax returns in any other jurisdiction based upon the
ownership or use of property therein or the derivation of income therefrom.
3.2 Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by the Company of this Agreement and each of the other Transaction
Documents and the transactions contemplated hereby and thereby (a) have been
duly authorized by all necessary corporate action of the Company; (b) do not
contravene the terms of the Certificate of Incorporation or the By-laws, or any
certificate of incorporation or by-laws or other organizational documents of any
of the Subsidiaries; (c) do not violate, conflict with or result in any breach
or contravention of, or the creation of any Lien under, any Contractual
Obligation of the Company or any of the Subsidiaries, or any Requirement of Law
applicable to the Company or any of the Subsidiaries; and (d) do not violate any
judgment, injunction, writ, award, decree or order of any nature (collectively,
"Orders") of any Governmental Authority against, or binding upon, the Company or
any of the Subsidiaries.
3.3 Governmental Authorization; Third Party Consents. No approval,
------------------------------------------------
consent, compliance, exemption, authorization or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, and no lapse of
a waiting period under a Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the sale, issuance and delivery of the Purchased Shares) by, or
enforcement against, the Company of this Agreement and the other Transaction
Documents or the transactions contemplated hereby and thereby.
3.4 Binding Effect. Each of the Transaction Documents has been
--------------
duly executed and delivered by the Company, and each constitutes the legal,
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).
<PAGE>
3.5 Capitalization.
--------------
(a) On the Second Closing Date, after giving effect to the
transactions contemplated by this Agreement, the authorized capital stock of the
Company shall consist of (i) 30,000,000 shares of Common Stock, of which
9,380,000 shares are issued and outstanding, (ii) 1,155,000 shares of Series A
Convertible Participating Preferred Stock of the Company, all of which are
issued and outstanding to GAP 42 and GAP Coinvestment and (iii) 866,500 shares
of Preferred Stock, of which 866,500 shares will be issued and outstanding to
the Purchasers. Schedule 3.5(a) sets forth, at and on the Second Closing Date, a
---------------
true and complete list of (x) the stockholders of the Company (including any
trust or escrow agent arrangement created in connection with any employee stock
option plan) and, opposite the name of each stockholder, the amount of all
outstanding capital stock and Stock Equivalents owned by such stockholder and
(y) the holders of Stock Equivalents (other than the stockholders set forth in
clause (x) above) and, opposite the name of each such holder, the amount of all
Stock Equivalents owned by such holder. As of the Second Closing Date, the
Company will have reserved an aggregate of 866,500 shares of Common Stock for
issuance upon conversion of the Purchased Shares. Except as set forth on
Schedule 3.5(a), there are no options, warrants, conversion privileges,
- ---------------
subscription or purchase rights or other rights presently outstanding to
purchase or otherwise acquire (i) any authorized but unissued, unauthorized or
treasury shares of the Company's capital stock, (ii) any Stock Equivalents or
(iii) other securities of the Company. As of the First Closing Date and the
Second Closing Date, respectively, the GAP/Braddock Purchased Shares and the
Swann Purchased Shares, respectively, will be duly authorized, and when issued
and sold to the GAP Purchasers and Swann, respectively, after payment therefor
in accordance herewith, will be validly issued, fully paid and nonassessable and
will be issued in compliance with the registration and qualification
requirements of all applicable U.S. federal, state and foreign securities laws
(or pursuant to exemptions therefrom). The shares of Common Stock issuable upon
conversion of the Purchased Shares are duly authorized and, when issued in
compliance with the provisions of the Certificate of Incorporation, will be
validly issued, fully paid and nonassessable.
(b) Except as set forth in Schedule 3.5(b), neither the Company nor
any of the Subsidiaries directly or indirectly owns or has made any investment
in any of the capital stock of, or any other proprietary interest in, any Person
other than Prime Response Limited, a company registered in England and Wales
under number 2155722. The Company owns all of the issued and outstanding
capital stock of the Subsidiaries, free and clear of all Liens. All of such
shares of capital stock are duly authorized, validly issued and fully paid, and
all of such shares were issued in compliance with the requirements of all
applicable Requirements of Law. Except as set forth on Schedule 3.5(b), there
are no options, warrants, conversion privileges, subscription or purchase rights
or other rights to purchase or otherwise acquire any authorized but unissued
shares or other securities of, or any
<PAGE>
proprietary interest in, the Subsidiaries, and there is no outstanding security
of any kind convertible into or exchangeable for such shares or proprietary
interest.
3.6 Financial Statements. By the First Closing Date, the Company
--------------------
shall have delivered to the Purchasers its audited consolidated financial
statements (balance sheet and statements of operation, cash flow and
stockholders' equity, together with the notes thereto) for the fiscal years
ended December 31, 1996 and December 31, 1997 (the "Audited Financial
Statements"), and its consolidated unaudited financial statements (balance sheet
and statement of operations) for the six months ended June 30, 1998 (the
"Unaudited Financial Statements" and, together with the Audited Financial
Statements, the "Financial Statements"). The Financial Statements shall be
prepared in accordance with United States GAAP applied on a consistent basis
throughout the periods indicated and with each other, except that the Unaudited
Financial Statements shall not contain footnotes or normal year-end adjustments.
The Financial Statements, at the time of their delivery to the Purchasers and at
all other times, shall fairly present the financial condition, operating results
and cash flows of the Company as of the respective dates and for the respective
periods indicated in accordance with United States GAAP, except that the
Unaudited Financial Statements shall not contain footnotes or normal year-end
adjustments.
3.7 No Default or Breach; Contractual Obligations. Neither the
---------------------------------------------
Company nor any of its Subsidiaries has received notice of, and is not in
default under, or with respect to, any Contractual Obligation in any respect,
which, individually or together with all such defaults, could have a material
adverse effect on (i) the Condition of the Company or (ii) the ability of the
Company to perform its obligations under this Agreement or the other Transaction
Documents to which it is a party.
3.8 No Material Adverse Change; Ordinary Course of Business. Since
-------------------------------------------------------
January 1, 1998, (a) there has not been any material adverse change, nor to the
knowledge of the Company is any such change threatened, in the Condition of the
Company, (b) except for the acquisition of the "MIND" product from Admiral
Computing plc, the Company has not participated in any transaction or otherwise
acted outside the ordinary course of business, including, without limitation,
declaring or paying any dividend or declaring or making any distribution to its
stockholders except out of the earnings of the Company and (c) the Company has
not increased the compensation of any of its officers or the rate of pay of any
of its employees, except as part of regular compensation increases in the
ordinary course of business.
3.9 Private Offering. No form of general solicitation or general
----------------
advertising was used by the Company or its representatives in connection with
the offer or sale of the Purchased Shares. No registration of the Purchased
Shares, pursuant to the provisions of the Securities Act or any state securities
or "blue sky" laws, will be required by the offer, sale or issuance of the
Purchased Shares.
<PAGE>
3.10 Broker's, Finder's or Similar Fees. There are no brokerage
----------------------------------
commissions, finder's fees or similar fees or commissions payable by the Company
or any of its Subsidiaries in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with the Company or
any of its Subsidiaries or any action taken by any such Person.
3.11 Disclosure. This Agreement and the documents and certificates
----------
furnished to the Purchasers by the Company, taken as a whole, do not contain any
untrue statement of a material fact or to the Company's knowledge omit to state
a material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.
3.12 Revised Product Plan of Record. The Company has delivered to
------------------------------
each of GAP LP and GAP Coinvestment a revised Product Plan of Record.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
Each of the Purchasers hereby represents and warrants (severally as to
itself and not jointly) to the Company as follows:
4.1 Existence and Power. Each of GAP LP and GAP Coinvestment (a)
-------------------
is a partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation, (b) has all requisite power and
authority to conduct the business in which it is currently, or is proposed to
be, engaged, and (c) has the requisite partnership power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the other Transaction Documents to which it is a party.
4.2 Capacity. Each of the Purchasers (other than GAP LP and GAP
--------
Coinvestment) has the legal capacity to execute, deliver and perform his
obligations under this Agreement and each of the other Transaction Documents to
which he is a party.
4.3 Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by such Purchaser of this Agreement and each of the other
Transaction Documents to which it is a party and the transactions contemplated
hereby and thereby, including, without limitation, the purchase of the Purchased
Shares, (a) have, in the case of GAP LP and GAP Coinvestment, been duly
authorized by all necessary partnership action, (b) do not, in the case of GAP
LP and GAP Coinvestment, contravene the terms of such Purchaser's organizational
documents, or any amendment thereof, (c) do not violate, conflict with or result
in any breach or
<PAGE>
contravention of or the creation of any Lien under, any Contractual Obligation
of such Purchaser, or any Requirement of Law applicable to such Purchaser and
(d) do not violate any Orders of any Governmental Authority against, or binding
upon, such Purchaser.
4.4 Governmental Authorization; Third Party Consents. No approval,
------------------------------------------------
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, and no lapse of
a waiting period under any Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the purchase of the Purchased Shares) by, or enforcement against,
such Purchaser of this Agreement and each of the other Transaction Documents to
which such Purchaser is a party or the transactions contemplated hereby and
thereby.
4.5 Binding Effect. Each of the Transaction Documents to which
--------------
such Purchaser is a party has been duly executed and delivered by such
Purchaser, and each constitutes the legal, valid and binding obligations of such
Purchaser, enforceable against it in accordance with their terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).
4.6 Purchase for Own Account. The Purchased Shares to be acquired
------------------------
by such Purchaser pursuant to this Agreement and the shares of Common Stock
issuable upon conversion of the Purchased Shares are being or will be acquired
for investment for its own account and with no intention of distributing or
reselling, or granting any participation in, such Purchased Shares, such shares
of Common Stock or any part thereof in any transaction that would be in
violation of the securities laws of the United States of America, or any state
or foreign jurisdiction, without prejudice, however, to the rights of such
Purchaser at all times to sell or otherwise dispose of all or any part of such
Purchased Shares or such shares of Common Stock under an effective registration
statement under the Securities Act and under the applicable state or foreign
securities laws, or under an exemption from such registration available under
such laws, and subject, nevertheless, to the disposition of such Purchaser's
property being at all times within its control. If such Purchaser should in the
future decide to dispose of any of such Purchased Shares or such shares of
Common Stock, such Purchaser understands and agrees that it may do so only in
compliance with the Securities Act and applicable state and foreign securities
laws, as then in effect. Such Purchaser agrees to the imprinting, so long as
required by law, of legends on certificates representing all of its Purchased
Shares and shares of Common Stock issuable upon conversion of its Purchased
Shares as required by any applicable state securities laws and to the following
effect (and acknowledges that the Company will make a notation on its transfer
books to such effect):
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
LAWS OF ANY JURISDICTION OF THE UNITED STATES. THE SECURITIES MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT AND UNDER THE APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY, IF REQUESTED BY THE COMPANY, THAT THERE IS AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
DISPOSITION (EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE
STOCKHOLDERS AGREEMENT, DATED OCTOBER 24, 1997, AMONG PRIME RESPONSE GROUP
INC. AND THE STOCKHOLDERS NAMED THEREIN AS AMENDED BY AMENDMENT NO. 1
THERETO (THE "STOCKHOLDERS AGREEMENT"). THE COMPANY WILL NOT REGISTER THE
TRANSFER OF SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL
THE TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE STOCKHOLDERS
AGREEMENT. THE COMPANY WILL MAIL A COPY OF SUCH AGREEMENT, TOGETHER WITH A
COPY OF THE EXPRESS TERMS OF THE SECURITIES AND THE OTHER CLASS OR CLASSES
AND SERIES OF SHARES, IF ANY, WHICH THE COMPANY IS AUTHORIZED TO ISSUE, TO
THE RECORD HOLDER OF THIS CERTIFICATE, WITHOUT CHARGE, WITHIN FIVE DAYS
AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.
4.7 Restricted Securities. Such Purchaser understands that the
---------------------
Purchased Shares will not be registered under the Securities Act at the time of
their issuance for the reason that the sale provided for in this Agreement is
exempt pursuant to Rule 506 of Regulation D promulgated under the Securities Act
and that the reliance of the Company on such exemption is predicated in part on
such Purchaser's representations set forth herein. Such Purchaser also
represents that it is experienced in evaluating companies such as the Company,
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment and has the ability
to suffer the total loss of its investment. Such Purchaser further represents
that it has had the opportunity to ask questions of and receive answers from the
Company concerning the terms and conditions of the
<PAGE>
offering and the Company's business, management and financial affairs and to
obtain additional information to such Purchaser's satisfaction.
4.8 Investment Experience. Each Purchaser is an investor in
---------------------
securities of companies in the development stage and acknowledges that it has,
by reason of its business and financial experience, the capacity to protect its
own interest in connection with the transaction and that it is able to bear the
economic risk of its investment in the transaction. GAP Coinvestment and each
of the partners of GAP LP is an "Accredited Investor" as defined in Rule 501(a)
under the Securities Act.
4.9 Broker's, Finder's or Similar Fees. There are no brokerage
----------------------------------
commissions, finder's fees or similar fees or commissions payable by such
Purchaser, in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with such Purchaser or any action taken
by such Purchaser.
ARTICLE 5
CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE
--------------------------
5.1 GAP Purchasers' and Braddock's Conditions. The obligation
-----------------------------------------
of the GAP Purchasers and Braddock to purchase the GAP/Braddock Purchased
Shares, to pay the purchase price therefor at the First Closing and to perform
their other obligations hereunder shall be subject to the satisfaction as
determined by, or waiver by, the GAP Purchasers and Braddock of the following
conditions on or before the First Closing Date:
(a) Secretary's Certificate. The GAP Purchasers and Braddock shall
-----------------------
have received a certificate from the Company, in form and substance reasonably
satisfactory to the GAP Purchasers and Braddock, dated the First Closing Date
and signed by the Secretary or an Assistant Secretary of the Company, certifying
that the attached copies of the Certificate of Incorporation, the By-laws, the
Certificate of Designation and resolutions of the Board of Directors approving
this Agreement and each of the other Transaction Documents to which the Company
is a party and the transactions contemplated hereby and thereby, are all true,
complete and correct and remain unamended and in full force and effect.
<PAGE>
(b) Filing of Certificate of Designation. The Certificate of
------------------------------------
Designation shall be in a form reasonably satisfactory to the GAP Purchasers and
Braddock, and shall have been duly filed by or on behalf of the Company with the
Secretary of State of the State of Delaware in accordance with the General
Corporation Law of the State of Delaware.
(c) Stockholders Agreement Amendment. The Company, James Carling,
--------------------------------
Nevin Prakash and the other stockholders party thereto shall have duly executed
and delivered the Stockholders Agreement Amendment.
(d) Registration Rights Agreement Amendment. The Company, James
---------------------------------------
Carling and Nevin Prakash shall have duly executed and delivered the
Registration Rights Agreement Amendment.
(e) Purchased Shares. The Company shall be prepared to deliver to the
----------------
GAP Purchasers and Braddock certificates in definitive form representing the
number of Purchased Shares set forth opposite such GAP Purchaser's and
Braddock's name on Schedule 2.1 hereto, registered in the name of such GAP
------------
Purchaser and Braddock.
(f) Revised Budget. Each GAP Purchaser shall have received a
--------------
revised budget of the Company for fiscal year 1999 in form and substance
reasonably satisfactory to such Purchasers.
(g) Financials. Each GAP Purchaser shall have received the Financial
----------
Statements in form and substance reasonably satisfactory to such Purchasers.
(h) Waivers. James Carling and Nevin Prakash shall have waived any
-------
preemptive rights with respect to the Purchased Shares pursuant to Section 4 of
the Stockholders Agreement dated as of October 24, 1997, among the Company, GAP
42, GAP Coinvestment and the Stockholders named therein (the "Stockholders
Agreement").
(i) Representations and Warranties. All of the representations and
------------------------------
warranties of the Company contained in Article 3 hereof shall be true and
correct in all material respects (except for any such representations and
warranties which are qualified by their terms by a reference to materiality or
material adverse effect, which representations and warranties as so qualified
shall be true and correct in all respects) on and as of First Closing Date, as
if made by the Company on and as of such date.
(j) Compliance with this Agreement. The Company shall have performed
------------------------------
and complied in all material respects with all of the agreements and
<PAGE>
conditions set forth herein that are required to be performed or complied with
by it on or before the First Closing Date.
(k) Officer's Certificate. The GAP Purchasers and Braddock shall have
---------------------
received a certificate from the Company, in form and substance reasonably
satisfactory to the GAP Purchasers and Braddock, dated the First Closing Date
and signed by the President of the Company, certifying that (a) the
representations and warranties of the Company contained in Article 3 hereof are
true and correct in all material respects (except for any such representations
and warranties which are qualified by their terms by a reference to materiality
or material adverse effect, which representations and warranties as so qualified
are true and correct in all respects) on and as of the First Closing Date as if
made by the Company on as of such date; and (b) the Company has performed and
complied in all material respects with all of the agreements and conditions set
forth or contemplated herein that are required to be performed or complied with
by it on or before the First Closing Date.
(l) No Material Adverse Change. Since the date hereof, there shall
--------------------------
have been no material adverse change in the Condition of the Company.
(m) No Material Judgment or Order. There shall not be on the First
-----------------------------
Closing Date any Order of a court of competent jurisdiction or any ruling of any
Governmental Authority or any condition imposed under any Requirement of Law
which would, in the reasonable judgment of the GAP Purchasers and Braddock, (a)
prohibit or restrict (i) the purchase of the Purchased Shares or (ii) the
consummation of the transactions contemplated by this Agreement, (b) subject the
GAP Purchasers and Braddock to any material penalty or onerous condition under
or pursuant to any Requirement of Law if the Purchased Shares were to be
purchased hereunder or (c) restrict the operation of the business of the Company
or any of the Subsidiaries as conducted on the date hereof in a manner that
would have a material adverse effect on the Condition of the Company.
(n) No Litigation. No action, suit, proceeding, claim or dispute
-------------
shall have been brought or otherwise arisen at law, in equity, in arbitration or
before any Governmental Authority against the Company which would, if adversely
determined, (a) have a material adverse effect on the Condition of the Company
or (b) have a material adverse effect on the ability of the Company to perform
its obligations under this Agreement or each of the other Transaction Documents.
5.2 Swann's Conditions. The obligation of Swann to purchase the
------------------
Swann Purchased Shares, to pay the purchase price therefor at the Second Closing
and to perform his other obligations hereunder shall be subject to the
satisfaction as determined by, or waiver by, Swann of the following conditions
on or before the Second Closing Date:
<PAGE>
(a) Purchased Shares. The Company shall be prepared to deliver to
----------------
Swann certificates in definitive form representing the number of Swann Purchased
Shares set forth opposite Swann's name on Schedule 2.1 hereto, registered in the
name Swann.
ARTICLE 6
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
------------------------------
6.1 First Closing Conditions. The obligation of the Company to
------------------------
issue and sell the GAP/Braddock Purchased Shares and the obligation of the
Company to perform its other obligations hereunder, shall be subject to the
satisfaction as determined by, or waiver by, the Company of the following
conditions on or before the First Closing Date:
(a) Stockholders Agreement Amendment. The GAP Purchasers and Braddock
--------------------------------
shall have duly executed and delivered the Stockholders Agreement Amendment.
(b) Registration Rights Agreement Amendment. The GAP Purchasers shall
---------------------------------------
have duly executed and delivered the Registration Rights Agreement Amendment.
(c) Payment by the GAP Purchasers. Each GAP Purchaser and Braddock
-----------------------------
shall be prepared to pay the aggregate purchase price for its Purchased Shares.
(d) Certificate of Designation. The Certificate of Designation shall
--------------------------
be in a form reasonably satisfactory to the Company.
(e) Waiver. GAP 42 shall have waived any preemptive rights with
------
respect to the Purchased Shares pursuant to Section 4 of the Stockholders
Agreement.
(f) Representations and Warranties. The representations and
------------------------------
warranties of the GAP Purchasers and Braddock contained in Article 4 hereof
shall be true and correct in all material respects on and as of the First
Closing Date as if made on and as of such date.
(g) Compliance with this Agreement. Each of the GAP Purchasers and
------------------------------
Braddock shall have performed and complied in all material respects with all of
the agreements and conditions set forth herein that are required to be
<PAGE>
performed or complied with by such GAP Purchaser and Braddock on or before the
First Closing Date.
(h) No Material Judgment or Order. There shall not be on the First
-----------------------------
Closing Date any Order of a court of competent jurisdiction or any ruling of any
Governmental Authority or any condition imposed under any Requirement of Law
which would, in the judgment of the Company, (a) prohibit or restrict (i) the
sale of the Purchased Shares or (ii) the consummation of the transactions
contemplated by this Agreement, (b) subject the Company to any penalty or
onerous condition under or pursuant to any Requirement of Law if the Purchased
Shares were to be sold hereunder or (c) restrict the operation of the business
of the Company or any of the Subsidiaries as conducted on the date hereof in a
manner that would have a material adverse effect on the Condition of the
Company.
6.2 Second Closing Conditions. The obligation of the Company to
-------------------------
issue and sell the Swann Purchased Shares shall be subject to the satisfaction
as determined by, or waiver by, the Company of the following conditions on or
before the Second Closing Date:
(a) Stockholders Agreement Amendment. Swann shall have duly executed
--------------------------------
and delivered the Stockholders Agreement Amendment.
(b) Payment by Swann. Swann shall be prepared to pay the aggregate
----------------
purchase price for his Purchased Shares.
(c) Representations and Warranties. The representations and
------------------------------
warranties of Swann contained in Article 4 hereof shall be true and correct in
all material respects on and as of the Second Closing Date as if made on and as
of such date.
(d) Compliance with this Agreement. Swann shall have performed and
------------------------------
complied in all material respects with all of his agreements and conditions set
forth herein that are required to be performed or complied with by it on or
before the Second Closing Date.
ARTICLE 7
INDEMNIFICATION
---------------
7.1 Indemnification. Except as otherwise provided in this Article
---------------
7, the Company and each of the Purchasers, severally and not jointly, as
applicable (the "Indemnifying Party"), agrees to indemnify, defend and hold
harmless the Purchasers, in the case of indemnity by the Company, or the
Company, in the case of indemnity
<PAGE>
by the Purchasers, as applicable, and their Affiliates and their respective
officers, directors, agents, employees, subsidiaries, partners, members and
controlling persons (each, an "Indemnified Party") to the fullest extent
permitted by law from and against any and all losses, Claims (including any
Claim by a third party), damages, expenses (including reasonable fees,
disbursements and other charges of counsel incurred by the Indemnified Party in
any action between the Indemnifying Party and the Indemnified Party or between
the Indemnified Party and any third party or otherwise) or other liabilities
(collectively, "Losses") resulting from, arising out of or relating to any
breach of any representation or warranty, covenant or agreement by the
Indemnifying Party in this Agreement or the other Transaction Documents,
including, without limitation, any legal, administrative or other actions
(including actions brought by the Purchasers or the Company or any equity
holders or partners of such Persons or derivative actions brought by any Person
claiming through or in the Company's name or in the name of either of the
Purchasers), proceedings or investigations (whether formal or informal), or
written threats thereof, based upon, relating to or arising out of this
Agreement or the other Transaction Documents, the transactions contemplated
hereby and thereby, or any Indemnified Party's role therein or in transactions
contemplated thereby; provided, that the Indemnifying Party shall not be
--------
liable under this Section 7.1 to an Indemnified Party to the extent that it is
finally judicially determined that such Losses resulted primarily from the
material breach by such Indemnified Party of any representation, warranty,
covenant or other agreement of such Indemnified Party contained in this
Agreement; and provided, further, that if and to the extent that such
-------- -------
indemnification is unenforceable for any reason, the Indemnifying Party shall
make the maximum contribution to the payment and satisfaction of such Losses
which shall be permissible under applicable laws. The amount of any payment by
any Indemnifying Party to any Indemnified Party herewith in respect of any Loss
shall be of sufficient amount to make such Indemnified Party whole, and, in the
case of indemnity by the Company, shall consist of an amount sufficient to make
up any diminution in the value of the Purchased Shares held by such Indemnified
Party resulting from the payment by the Company of such indemnification payment.
In connection with the obligation of the Indemnifying Party to indemnify for
expenses as set forth above, the Indemnifying Party shall, upon presentation of
appropriate invoices containing reasonable detail, reimburse each Indemnified
Party for all such expenses (including reasonable fees, disbursements and other
charges of counsel incurred by the Indemnified Party in any action between the
Indemnifying Party and the Indemnified Party or between the Indemnified Party
and any third party or otherwise) as they are incurred by such Indemnified
Party; provided, however, that if an Indemnified Party is reimbursed hereunder
-------- -------
for any expenses, such reimbursement of expenses shall be refunded to the
extent it is finally judicially determined that the Losses in question resulted
primarily from the willful misconduct or gross negligence of such Indemnified
Party. Notwithstanding the foregoing, indemnification with respect to this
Section 7.1 by the Company shall be limited to the aggregate consideration paid
by the Purchasers for the Purchased
<PAGE>
Shares, and indemnification by the Purchasers shall be limited to the aggregate
consideration paid by such Purchaser for its Purchased Shares.
7.2 Notification. Each Indemnified Party under this Article 7
------------
shall, promptly after the receipt of notice of the commencement of any action,
investigation, claim or other proceeding against such Indemnified Party in
respect of which indemnity may be sought from the Indemnifying Party under this
Article 7, notify the Indemnifying Party in writing of the commencement thereof.
The omission of any Indemnified Party to so notify the Indemnifying Party of any
such action shall not relieve the Indemnifying Party from any liability which it
may have to such Indemnified Party (a) other than pursuant to this Article 7 or
(b) under this Article 7 unless, and only to the extent that, such omission
results in the Indemnifying Party's forfeiture of substantive rights or
defenses. In case any such action, claim or other proceeding shall be brought
against any Indemnified Party, and it shall notify the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled to assume the
defense thereof at its own expense, with counsel satisfactory to such
Indemnified Party in its reasonable judgment; provided, however, that any
-------- -------
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense at its own expense. Notwithstanding the foregoing,
in any action, claim or proceeding in which both the Indemnifying Party, on the
one hand, and an Indemnified Party, on the other hand, are, or are reasonably
likely to become, a party, such Indemnified Party shall have the right to employ
separate counsel at the expense of the Indemnifying Party and to control its own
defense of such action, claim or proceeding if, in the reasonable opinion of
counsel to such Indemnified Party, a conflict or potential conflict exists
between the Indemnifying Party, on the one hand, and such Indemnified Party, on
the other hand, that would make such separate representation advisable;
provided, however, that the Indemnifying Party shall not be liable for the fees
- -------- -------
and expenses of more than one counsel to all Indemnified Parties. The
Indemnifying Party agrees that it will not, without the prior written consent of
the Indemnified Party, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the matters contemplated hereby (if any Indemnified Party is a party thereto or
has been actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of each Indemnified
Party from all liability arising or that may arise out of such claim, action or
proceeding. The Indemnifying Party shall not be liable for any settlement of
any claim, action or proceeding effected against an Indemnified Party without
the Indemnifying Party's written consent, which consent shall not be
unreasonably withheld. The rights accorded to an Indemnified Party hereunder
shall be in addition to any rights that any Indemnified Party may have at common
law, by separate agreement or otherwise; provided, however, that notwithstanding
-------- -------
the foregoing or anything to the contrary contained in this Agreement, nothing
in this Article 7 should restrict or limit any rights that any Indemnified Party
may have to seek equitable relief.
<PAGE>
ARTICLE 8
AFFIRMATIVE COVENANTS
---------------------
The Company hereby covenants and agrees with the Purchasers as
follows:
8.1 Preservation of Existence. From the date hereof until the
-------------------------
First Closing Date, the Company shall and shall cause each of its Subsidiaries
to:
(a) preserve and maintain in full force and effect its existence and
good standing under the laws of its jurisdiction of formation or organization;
(b) preserve and maintain in full force and effect all material
rights, privileges, qualifications, applications, estimates, licenses and
franchises necessary in the normal conduct of its business;
(c) use its reasonable efforts to preserve its business
organization;
(d) conduct its business in the ordinary course and in accordance with
sound business practices, keep its properties in good working order and
condition (normal wear and tear excepted), and from time to time make all needed
repairs to, renewals of or replacement of its properties (except to the extent
that any of such properties are obsolete or are being replaced) so that the
efficiency of its business operations shall be fully maintained and preserved;
(e) comply in all material respects with all Requirements of Law and
with the directions of any Governmental Authority having jurisdiction over the
Company or any of its Subsidiaries or their respective business or property;
(f) file or cause to be filed in a timely manner all reports,
applications, estimates and licenses that shall be required by a Governmental
Authority and that, if not timely filed, would have a material adverse effect on
the Condition of the Company;
(g) except in the ordinary course of business, refrain from making any
change in the rate or form of compensation or remuneration payable or to become
payable to any of its stockholders, directors, officers, employees or agents;
and
(h) refrain from (i) reserving, declaring, making or paying any
dividend on the issued and outstanding shares of capital stock of the Company or
<PAGE>
any of its Subsidiaries, or making any other distributions or appropriations of
profits or capital, or (ii) redeeming, retiring, repurchasing or otherwise
acquiring shares of capital stock of the Company or any of its Subsidiaries.
ARTICLE 9
TERMINATION OF AGREEMENT
------------------------
9.1 Termination. This Agreement may be terminated prior to the
-----------
First Closing as follows:
(a) at any time on or prior to the First Closing Date, by mutual
written consent of the Company and the GAP Purchasers;
(b) at the election of the Company or the GAP Purchasers by written
notice to the other parties hereto after 5:00 p.m., New York time, on September
30, 1998, if the First Closing shall not have occurred, unless such date is
extended by the mutual written consent of the Company and the GAP Purchasers;
provided, however, that the right to terminate this Agreement under this Section
- -------- -------
9.1(b) shall not be available to any party whose breach of any representation,
warranty, covenant or agreement under this Agreement has been the cause of, or
resulted in, the failure of the First Closing to occur on or before such date;
(c) at the election of the Company, if there has been a material
breach of any representation, warranty, covenant or agreement on the part of any
Purchaser contained in this Agreement, which breach has not been cured within
fifteen (15) Business Days of notice to the Purchasers of such breach; or
(d) at the election of the GAP Purchasers, if there has been a
material breach of any representation, warranty, covenant or agreement on the
part of the Company contained in this Agreement, which breach has not been cured
within fifteen (15) Business Days notice to the Company of such breach.
If this Agreement so terminates, it shall become null and void and have no
further force or effect, except as provided in Section 9.2.
9.2 Survival. If this Agreement is terminated and the transactions
--------
contemplated hereby are not consummated as described above, this Agreement shall
become void and of no further force and effect; except for the provisions of
Article 1, Section 10.10 and this Section 9.2; provided that (a) none of the
--------
parties hereto shall have any liability in respect of a termination of this
Agreement pursuant to Section 9.1(a) or Section 9.1(b) and (b) nothing shall
relieve any party from any liability for actual damages resulting from a
termination of this Agreement pursuant to Section
<PAGE>
9.1(c) or 9.1(d); and provided, further, that none of the parties hereto shall
-------- -------
have any liability for speculative, indirect, unforeseeable or consequential
damages resulting from any legal action relating to this Agreement or any
termination of this Agreement.
ARTICLE 10
MISCELLANEOUS
-------------
10.1 Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of the Company or
the Purchasers, or acceptance of the Purchased Shares or termination of this
Agreement until the third anniversary of the First Closing Date.
10.2 Notices. All notices, demands and other communications
-------
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
(a) if to the Company or any party
(other than GAP LP or
GAP Coinvestment):
Prime Response Group Inc.
Goat Wharf, Brentwood,
TW8OPD
United Kingdom
Telecopy: 011-441-814-003-133
Attention: Nigel Cannings, Esq.
with a copy to:
Brobeck Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Telecopy: (650) 496-2755
Attention: Thomas A. Bevilacqua, Esq.
<PAGE>
(b) if to GAP LP or GAP Coinvestment:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-8818
Attention: William E. Ford and
David A. Rosenstein, Esq.
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Matthew Nimetz, Esq.
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial courier service; five (5) Business Days
after being deposited in the mail, postage prepaid, if mailed; and when receipt
is mechanically acknowledged, if properly telecopied.
10.3 Successors and Assigns; Third Party Beneficiaries. This
-------------------------------------------------
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto. Subject to applicable securities laws,
each of the Purchasers may assign any of its rights under any of the Transaction
Documents to any of its Affiliates. The Company may not assign any of its
rights under this Agreement without the written consent of the holders of a
majority of the Purchased Shares. No Person other than the parties hereto and
their successors and permitted assigns is intended to be a beneficiary of this
Agreement.
10.4 Amendment and Waiver.
--------------------
(a) No failure or delay on the part of the Company or the Purchasers
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
the Purchasers at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any provision
of this Agreement, any waiver of any provision of this Agreement, and any
<PAGE>
consent to any departure by the Company or the Purchasers from the terms of any
provision of this Agreement, shall be effective only if it is made or given in
writing and signed by the Company and the holders of a majority of the Purchased
Shares. Except where notice is specifically required by this Agreement, no
notice to or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in similar or other circumstances.
10.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
10.6 Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not limit or otherwise affect the meaning hereof.
10.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION.
10.8 Severability. If any one or more of the provisions contained
------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
10.9 Entire Agreement. This Agreement, together with the exhibits
----------------
and schedules hereto and the other Transaction Documents, is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement, together with the exhibits
hereto, and the other Transaction Documents supersede all prior agreements and
understandings between the parties with respect to such subject matter.
10.10 Fees. Upon the First Closing the Company shall reimburse GAP
----
LP and GAP Coinvestment, in an aggregate amount not to exceed $30,000, for their
reasonable fees, disbursements and other charges of counsel incurred in
connection with the transactions contemplated by this Agreement. Except as
provided in the preceding sentence, each party hereto shall bear their own costs
and expenses
<PAGE>
in connection with the preparation, execution and delivery of this Agreement and
other Transaction Documents, and the transactions contemplated hereby and
thereby.
10.11 Publicity. Except as may be required by any applicable
---------
Requirement of Law, none of the parties hereto shall issue a publicity release
or public announcement or otherwise make any disclosure concerning this
Agreement or the transactions contemplated hereby, without prior approval by the
other parties hereto (which approval shall not be unreasonably withheld);
provided, however, that nothing in this Agreement shall restrict any Purchaser
- -------- -------
from disclosing information (a) that is already publicly available; (b) to the
prospective transferee in connection with any contemplated transfer of any of
the Purchased Shares; and (c) to its attorneys, accountants, consultants and
other advisors to the extent necessary to obtain their services in connection
with such Purchaser's investment in the Company. GAP LLC may disclose on its
worldwide web page, www.gapartners.com, the name of the Company, its address,
the identity of its Chief Executive Officer, a description of the Company's
business (which description shall be reasonably acceptable to the Company) and
the aggregate dollar amount invested by GAP LLC and its Affiliates in the
Company. If any announcement is required by any applicable Requirement of Law
to be made by any party hereto, prior to making such announcement such party
will deliver a draft of such announcement to the other parties and shall give
the other parties an opportunity to comment thereon.
10.12 Further Assurances. Each of the parties shall execute such
------------------
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person, and otherwise fulfilling, or causing the fulfillment of, the
conditions to First Closing and the Second Closing set forth in Articles 5 and
6) as may be reasonably required or desirable to carry out or to perform the
provisions of this Agreement and to consummate and make effective as promptly as
possible the transactions contemplated by this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be executed and delivered by their respective officers hereunto
duly authorized on the date first above written.
PRIME RESPONSE GROUP INC.
By: /s/ James A. Carling
____________________________
Name: James A. Carling
Title: President
GENERAL ATLANTIC PARTNERS 48, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC,
its General Partner
By:/s/ Franchon M. Smithson
________________________
Name: Franchon M. Smithson
Title: A Managing Member
GAP COINVESTMENT PARTNERS, L.P.
By:/s/ Franchon M. Smithson
_____________________________
Name: Franchon M. Smithson
Title: A General Partner
/s/ Allen Swann
__________________________________________
Allen Swann
<PAGE>
/s/ Richard S. Braddock
__________________________________________
Richard S. Braddock
<PAGE>
Schedule 2.1
------------
Purchased Shares and Purchase Price
-----------------------------------
<TABLE>
<CAPTION>
Purchaser Purchased Shares Purchase Price
----------- ------------------ ----------------
<S> <C> <C>
GAP LP 607,131 $3,642,786
GAP Coinvestment 145,619 873,714
Richard S. Braddock 13,750 82,500
Allen Swann 100,000 600,000
Total: 866,500 $5,199,000
</TABLE>
<PAGE>
Exhibit 10.16
Execution Copy
================================================================================
STOCK AND WARRANT PURCHASE AGREEMENT
among
PRIME RESPONSE GROUP INC.,
GENERAL ATLANTIC PARTNERS 52, L.P.
and
GAP COINVESTMENT PARTNERS II, L.P.
______________________________
Dated March 2, 1999
______________________________
================================================================================
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page #
<S> <C>
ARTICLE I. DEFINITIONS...................................................................... 1
A. Definitions...................................................................... 1
B. Accounting Terms; Financial Statements........................................... 5
ARTICLE II. PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS................................ 5
A. Purchase and Sale of Preferred Stock and Warrants................................ 6
B. Certificate of Incorporation..................................................... 6
C. Closing.......................................................................... 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY................................................................... 6
A. Corporate Existence and Power.................................................... 6
B. Authorization; No Contravention.................................................. 7
C. Governmental Authorization; Third Party Consents................................. 7
D. Binding Effect................................................................... 7
E. Capitalization................................................................... 7
F. Financial Statements............................................................. 8
G. No Default or Breach; Contractual Obligations.................................... 9
H. No Material Adverse Change; Ordinary Course of Business.......................... 9
I. Private Offering................................................................. 9
J. Broker's, Finder's or Similar Fees............................................... 9
K. Disclosure....................................................................... 9
L. Revised Product Plan of Record................................................... 10
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS................................. 10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
A. Existence and Power............................................................... 10
B. Authorization; No Contravention................................................... 10
C. Governmental Authorization; Third Party Consents.................................. 10
D. Binding Effect.................................................................... 10
E. Purchase for Own Account.......................................................... 11
F. Restricted Securities............................................................. 12
G. Investment Experience............................................................. 12
H. Broker's, Finder's or Similar Fees................................................ 12
ARTICLE V. CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE........................... 12
ARTICLE VI. CONDITIONS TO THE OBLIGATION OF THE
COMPANY TO CLOSE.................................................................. 14
ARTICLE VII. INDEMNIFICATION................................................................... 14
A. Indemnification................................................................... 14
B. Notification...................................................................... 15
ARTICLE VIII. AFFIRMATIVE COVENANTS............................................................. 16
A. Financial Statements and Other Information........................................ 16
ARTICLE IX. MISCELLANEOUS..................................................................... 17
A. Survival of Representations and Warranties........................................ 17
B. Notices........................................................................... 17
C. Successors and Assigns; Third Party Beneficiaries................................. 18
D. Amendment and Waiver.............................................................. 19
E. Counterparts...................................................................... 19
F. Headings.......................................................................... 19
G. GOVERNING LAW..................................................................... 19
H. Severability...................................................................... 19
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
I. Entire Agreement.................................................................. 19
J. Fees.............................................................................. 20
K. Publicity......................................................................... 20
L. Further Assurances................................................................ 20
</TABLE>
iii
<PAGE>
EXHIBITS
A Form of Stockholders Agreement Amendment
B Form of Registration Rights Agreement Amendment
C Form of GAP LP and GAPCO Warrants
SCHEDULES
2.1 Purchased Shares, Warrants and Purchase Price
3.5(a) List of Stockholders and Capital Stock and Stock Equivalents
3.5(b) Subsidiaries
<PAGE>
STOCK AND WARRANT PURCHASE AGREEMENT
STOCK AND WARRANT PURCHASE AGREEMENT, dated February 26, 1999 (this
"Agreement"), among Prime Response Group Inc., a Delaware corporation (the
"Company"), General Atlantic Partners 52, L.P., a Delaware limited partnership
("GAP LP"), and GAP Coinvestment Partners II, L.P., a Delaware limited
partnership ("GAP Coinvestment" and, together with GAP LP, the "Purchasers").
WHEREAS, upon the terms and conditions set forth in this Agreement,
the Company proposes to issue and sell to (a) GAP LP, for an aggregate purchase
price of $4,082,016, an aggregate of 680,200 shares of Series B Convertible
Participating Preferred Stock, par value $.01 per share, of the Company (the
"Preferred Stock") and a warrant (the "GAP LP Warrant") to purchase, subject to
the terms and conditions thereof, an aggregate of 340,100 shares of common
stock, par value $.01 per share, of the Company (the "Common Stock") at an
exercise price of $2.56 per share (subject to adjustment), containing the terms
and conditions set forth in the form of warrant attached hereto as Exhibit C;
---------
and (b) GAP Coinvestment, for an aggregate purchase price of $918,988, an
aggregate of 153,134 shares of Preferred Stock and a warrant (the "GAPCO
Warrant" and, together with the GAP LP Warrant, the "Warrants") to purchase,
subject to the terms and conditions thereof, an aggregate of 76,567 shares of
Common Stock, at an exercise price of $2.56 per share (subject to adjustment),
containing the terms and conditions set forth in the form of warrant attached
hereto as Exhibit C; and
---------
WHEREAS, each share of Preferred Stock is convertible (subject to
adjustment) into one share of common stock, par value $.01 per share of the
Company (the "Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:
I.
DEFINITIONS
-----------
A. Definitions. As used in this Agreement, and unless the context
-----------
requires a different meaning, the following terms have the meanings indicated:
"Affiliate" shall mean any Person who is an "affiliate" as defined in
---------
Rule 12b2 of the General Rules and Regulations under the Exchange Act. The
following shall be deemed to be Affiliates of GAP LP: (a) GAP LLC, the members
of GAP LLC and the limited partners of GAP LP; (b) any Affiliate of GAP LLC, the
members of GAP LLC and the limited partners of GAP LP; and (c) any limited
liability company or partnership a majority of whose members or partners, as the
case may be, are members
<PAGE>
of GAP LLC. GAP LP and GAP Coinvestment shall be deemed to be Affiliates of one
another.
"Agreement" means this Agreement as the same may be amended
---------
supplemented or modified in accordance with the terms hereof.
"Audited Financial Statements" has the meaning set forth in Section
----------------------------
3.6 of this Agreement.
"Board of Directors" means the Board of Directors of the Company.
------------------
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"By-laws" means the by-laws of the Company in effect on the Closing
-------
Date, as the same may be amended from time to time.
"Certificate of Incorporation" means the Certificate of Incorporation
----------------------------
of the Company, as the same shall have been amended from time to time.
"Claims" means any actions, suits, proceedings, claims, complaints,
------
disputes, arbitrations or investigations.
"Closing" has the meaning set forth in Section 2.3 of this Agreement.
-------
"Closing Date" has the meaning set forth in Section 2.3 of this
------------
Agreement.
"Commission" means the Securities and Exchange Commission or any
----------
similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" has the meaning set forth in the recitals to this
------------
Agreement.
"Company" has the meaning set forth in the recitals to this Agreement.
-------
"Condition of the Company" means the assets, business, properties,
------------------------
prospects, operations or financial condition of the Company and the
Subsidiaries, taken as a whole.
"Contingent Obligation" means, as applied to any Person, any direct or
---------------------
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of another Person (the "primary obligor"),
------------------ ---------------
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligation or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to
<PAGE>
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet item, level of income
or financial condition of the primary obligor, or (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, or (d) otherwise to assure or hold harmless the owner
of any such primary obligation against loss or failure or inability to perform
in respect thereof. The amount of any Contingent Obligation shall, unless stated
to be otherwise in the instrument constituting the Contingent Obligation, be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by the Board of Directors.
"Contractual Obligations" means as to any Person, any provision of any
-----------------------
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"Financial Statements" has the meaning set forth in Section 3.6.
--------------------
"GAAP" means generally accepted accounting principles in effect from
----
time to time in the United States or the United Kingdom, as the case may be.
"GAP Coinvestment" has the meaning set forth in the recitals to this
----------------
Agreement.
"GAP Coinvestment I" means GAP Coinvestment Partners, L.P., a New York
------------------
limited partnership.
"GAP 48" means General Atlantic Partners 48, L.P., a Delaware limited
------
partnership.
"GAP 42" means General Atlantic Partners 42, L.P., a Delaware limited
------
partnership.
"GAP LLC" means General Atlantic Partners, LLC, a Delaware limited
-------
liability company and the general partner of GAP LP, and any successor to such
entity.
"GAP LP" has the meaning set forth in the recitals to this Agreement.
------
"GAP LP Warrant" has the meaning assigned to such term in the recital
--------------
to this Agreement.
"GAPCO Warrant" has the meaning assigned to such term in the recital
-------------
to this Agreement.
"Governmental Authority" means the government of any nation, state,
----------------------
city, locality or other political subdivision thereof, any entity exercising
executive,
<PAGE>
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Indemnified Party" has the meaning set forth in Section 7.1 of this
-----------------
Agreement.
"Indemnifying Party" has the meaning set forth in Section 7.1 of this
------------------
Agreement.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences),
including, without limitation, those created by, arising under or evidenced by
any conditional sale or other title retention agreement, the interest of a
lessor under a Capital Lease Obligation, or any financing lease having
substantially the same economic effect as any of the foregoing.
"Orders" has the meaning set forth in Section 3.2 of this Agreement.
------
"Person" means any individual, firm, corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, Governmental Authority or other entity of any kind,
and shall include any successor (by merger or otherwise) of such entity.
"Preferred Stock" has the meaning set forth in the recitals to this
---------------
Agreement.
"Purchased Shares" has the meaning set forth in Section 2.1 of this
----------------
Agreement.
"Purchasers" has the meaning set forth in the recitals to this
----------
Agreement.
"Registration Rights Agreement Amendment" means Amendment No. 2 to the
---------------------------------------
Registration Rights Agreement, dated as of October 24, 1997, among the Company,
GAP 42, GAP Coinvestment I and the stockholders named therein, substantially in
the form attached hereto as Exhibit B.
---------
"Requirements of Law" means, as to any Person, any law, statute,
-------------------
treaty, rule, regulation, right, privilege, qualification, license or franchise
or determination of an arbitrator or a court or other Governmental Authority or
stock exchange, in each case applicable or binding upon such Person or any of
its property or to which such Person or any of its property is subject or
pertaining to any or all of the transactions contemplated or referred to herein.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the Commission thereunder.
<PAGE>
"Stock Equivalents" means any security or obligation which is by its
-----------------
terms convertible into or exchangeable for shares of common stock or other
capital stock or equity securities of the Company, and any option, warrant or
other subscription or purchase right with respect to common stock or such other
capital stock or equity securities.
"Stockholders Agreement" has the meaning set forth in Section 5.8 of
----------------------
this Agreement.
"Stockholders Agreement Amendment" means Amendment No. 1 to the
--------------------------------
Stockholders Agreement, dated as of October 24, 1997, among the Company, GAP 42,
GAP Coinvestment I and the stockholders named therein, substantially in the form
attached hereto as Exhibit A.
---------
"Subsidiaries" means Prime Response Limited, a company registered in
------------
England and Wales under number 2155722, and a corporation or other Person of
which 50% or more of the voting power of the outstanding voting equity
securities or 50% or more of the outstanding economic equity interest is held,
directly or indirectly, by such Person. Unless otherwise qualified, or the
contest otherwise requires, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"Transaction Documents" means collectively, this Agreement, the
---------------------
Stockholders Agreement Amendment and the Registration Rights Agreement
Amendment.
"Unaudited Financial Statements" has the meaning set forth in Section
------------------------------
3.6 of this Agreement.
"Warrant Shares" has the meaning set forth in Section 2.1 of this
--------------
Agreement.
"Warrants" has the meaning assigned to such term in the recital to
--------
this Agreement.
B. Accounting Terms; Financial Statements. All accounting terms
--------------------------------------
used herein not expressly defined in this Agreement shall have the respective
meanings given to them in accordance with sound accounting practice. The term
"sound accounting practice" shall mean such accounting practice as, in the
opinion of the independent certified public accountants regularly retained by
the Company, conforms at the time to GAAP applied on a consistent basis except
for changes with which such accountants concur.
II.
PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS
-------------------------------------------------
<PAGE>
A. Purchase and Sale of Preferred Stock and Warrants. Subject to
-------------------------------------------------
the terms and conditions herein set forth, the Company agrees to issue and sell
to each of the Purchasers, and each of the Purchasers agrees that it will
purchase from the Company, at the Closing, the aggregate number of shares of
Preferred Stock, and the Warrants to purchase the aggregate number of shares of
Common Stock, set forth opposite such Purchaser's name on Schedule 2.1 hereto,
------------
for the aggregate purchase price set forth opposite such Purchaser's name on
Schedule 2.1 hereto (all of the shares of Preferred Stock being purchased
- ------------
hereunder by the Purchasers being referred to herein as the "Purchased Shares"
and all of the shares of Common Stock issuable upon exercise of the Warrants
being purchased pursuant hereto being referred to herein as the "Warrant
Shares").
B. Certificate of Incorporation. The Purchased Shares shall be
----------------------------
shares of Preferred Stock of the Company issued pursuant to the Certificate of
Incorporation.
C. Closing. The closing of the sale and purchase of the Purchased
-------
Shares and the Warrants (the "Closing") shall take place at the offices of Paul,
Weiss, Rifkind, Wharton & Garrison, no later than 4:00 p.m., New York time, on
the date hereof, or at such other time, place, and date that the Company and the
Purchasers may agree in writing (the "Closing Date"). On the Closing Date, the
Company shall deliver to each Purchaser (a) a certificate representing the
Purchased Shares being purchased by such Purchaser and (b) the Warrants, against
delivery by the Purchasers to the Company of the aggregate purchase price
therefor by wire transfer of immediately available funds.
III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to the Purchasers as follows:
A. Corporate Existence and Power. Each of the Company and the
-----------------------------
Subsidiaries (a) is, in the case of the Company and its Subsidiaries (other than
Prime Response Limited), a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation, and in
the case of Prime Response Limited, is a company registered in England and Wales
under number 2155722; (b) has all requisite power and authority to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is currently, or is proposed to be, engaged; (c) is, in
the case of the Company and its Subsidiaries (other than Prime Response
Limited), duly qualified as a foreign corporation, licensed and in good
standing, and in the case of Prime Response Limited, is duly registered and
remains subsisting under the laws of each jurisdiction in which its ownership,
lease or operation of property or the conduct of its business requires such
qualification, except to the extent that the failure to do so would not have a
material adverse effect on the Condition of the Company; and (d) has the
corporate power and
<PAGE>
authority to execute, deliver and perform its obligations under this Agreement
and each of the other Transaction Documents to which it is a party. No
jurisdiction, other than those referred to in clause (c) above, has claimed, in
writing or otherwise, that the Company or any of the Subsidiaries is required to
qualify as a foreign corporation therein, and neither the Company nor the
Subsidiaries files any franchise, income or other tax returns in any other
jurisdiction based upon the ownership or use of property therein or the
derivation of income therefrom.
B. Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by the Company of this Agreement and each of the other Transaction
Documents and the transactions contemplated hereby and thereby (a) have been
duly authorized by all necessary corporate action of the Company; (b) do not
contravene the terms of the Certificate of Incorporation or the By-laws, or any
certificate of incorporation or by-laws or other organizational documents of any
of the Subsidiaries; (c) do not violate, conflict with or result in any breach
or contravention of, or the creation of any Lien under, any Contractual
Obligation of the Company or any of the Subsidiaries, or any Requirement of Law
applicable to the Company or any of the Subsidiaries; and (d) do not violate any
judgment, injunction, writ, award, decree or order of any nature (collectively,
"Orders") of any Governmental Authority against, or binding upon, the Company or
any of the Subsidiaries.
C. Governmental Authorization; Third Party Consents. No approval,
------------------------------------------------
consent, compliance, exemption, authorization or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, and no lapse of
a waiting period under a Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the sale, issuance and delivery of the Purchased Shares or the
Warrants) by, or enforcement against, the Company of this Agreement and the
other Transaction Documents or the transactions contemplated hereby and thereby.
D. Binding Effect. Each of the Transaction Documents has been duly
--------------
executed and delivered by the Company, and each constitutes the legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).
E. Capitalization.
--------------
(a) On the Closing Date, after giving effect to the transactions
contemplated by this Agreement, the authorized capital stock of the Company
shall consist of (i) 30,000,000 shares of Common Stock, of which 7,714,000
shares are issued and outstanding, (ii) 1,155,000 shares of Series A Convertible
Participating Preferred Stock of the Company, all of which are issued and
outstanding to GAP 42 and GAP Coinvestment I and (iii) 1,699,834 shares of
Preferred Stock, of which 866,500 shares are issued and outstanding to GAP 48,
GAP Coinvestment I, Richard S.
<PAGE>
Braddock and Allen Swann and of which 833,334 shares will be outstanding and
issued to the Purchasers. Schedule 3.5(a) sets forth, at and on the Closing
---------------
Date, a true and complete list of (x) the stockholders of the Company (including
any trust or escrow agent arrangement created in connection with any employee
stock option plan) and, opposite the name of each stockholder, the amount of all
outstanding capital stock and Stock Equivalents owned by such stockholder and
(y) the holders of Stock Equivalents (other than the stockholders set forth in
clause (x) above) and, opposite the name of each such holder, the amount of all
Stock Equivalents owned by such holder. As of the Closing Date, the Company
will have reserved an aggregate of 833,334 shares of Common Stock for issuance
upon conversion of the Purchased Shares and an aggregate of 416,667 Warrant
Shares. Except for the Warrants and as set forth on Schedule 3.5(a), there are
---------------
no options, warrants, conversion privileges, subscription or purchase rights or
other rights presently outstanding to purchase or otherwise acquire (i) any
authorized but unissued, unauthorized or treasury shares of the Company's
capital stock, (ii) any Stock Equivalents or (iii) other securities of the
Company. On the Closing Date, the Purchased Shares will be duly authorized, and
when issued and sold to the Purchasers, after payment therefor in accordance
herewith, will be validly issued, fully paid and nonassessable and will be
issued in compliance with the registration and qualification requirements of all
applicable United States federal, state and foreign securities laws (or pursuant
to exemptions therefrom). The shares of Common Stock issuable upon conversion
of the Purchased Shares and the Warrants are duly authorized and, when issued in
compliance with the provisions of the Certificate of Incorporation or the
Warrants, as the case may be, will be validly issued, fully paid and
nonassessable and will be issued in compliance with the registration and
qualification requirements of all applicable United States federal, state and
foreign securities laws (or pursuant to exemptions therefrom).
(b) Except as set forth in Schedule 3.5(b), neither the Company nor
---------------
any of the Subsidiaries directly or indirectly owns or has made any investment
in any of the capital stock of, or any other proprietary interest in, any Person
other than Prime Response Limited, a company registered in England and Wales
under number 2155722. The Company owns all of the issued and outstanding capital
stock of the Subsidiaries, free and clear of all Liens. All of such shares of
capital stock are duly authorized, validly issued and fully paid, and all of
such shares were issued in compliance with the requirements of all applicable
Requirements of Law. Except as set forth in Schedule 3.5(b), there are no
---------------
options, warrants, conversion privileges, subscription or purchase rights or
other rights to purchase or otherwise acquire any authorized but unissued shares
or other securities of, or any proprietary interest in, the Subsidiaries, and
there is no outstanding security of any kind convertible into or exchangeable
for such shares or proprietary interest.
F. Financial Statements. By the Closing Date, the Company shall
--------------------
have delivered to the Purchasers its audited consolidated financial statements
(balance sheet and statements of operation, cash flow and stockholders' equity,
together with the notes thereto) for the fiscal years ended December 31, 1996
and December 31, 1997 (the "Audited Financial Statements"), and its consolidated
unaudited financial statements (balance sheet and statement of operations) for
the fiscal quarters ending March 30, 1998, June 30, 1998 and September 30, 1998
(the "Unaudited Financial
<PAGE>
Statements" and, together with the Audited Financial Statements, the "Financial
Statements"). The Financial Statements shall be prepared in accordance with
United States GAAP applied on a consistent basis throughout the periods
indicated and with each other, except that the Unaudited Financial Statements
shall not contain footnotes or normal year-end adjustments. The Financial
Statements, at the time of their delivery to the Purchasers and at all other
times, shall fairly present the financial condition, operating results and cash
flows of the Company as of the respective dates and for the respective periods
indicated in accordance with United States GAAP, except that the Unaudited
Financial Statements shall not contain footnotes or normal year-end adjustments.
G. No Default or Breach; Contractual Obligations. Neither the
---------------------------------------------
Company nor any of its Subsidiaries has received notice of, and is not in
default under, or with respect to, any Contractual Obligation in any respect,
which, individually or together with all such defaults, could have a material
adverse effect on (i) the Condition of the Company or (ii) the ability of the
Company to perform its obligations under this Agreement or the other Transaction
Documents to which it is a party.
H. No Material Adverse Change; Ordinary Course of Business. Since
-------------------------------------------------------
September 30, 1998, (a) there has not been any material adverse change, nor to
the knowledge of the Company is any such change threatened, in the Condition of
the Company, (b) the Company has not participated in any transaction or
otherwise acted outside the ordinary course of business, including, without
limitation, declaring or paying any dividend or declaring or making any
distribution to its stockholders except out of the earnings of the Company and
(c) the Company has not increased the compensation of any of its officers or the
rate of pay of any of its employees, except as part of regular compensation
increases in the ordinary course of business.
I. Private Offering. No form of general solicitation or general
----------------
advertising was used by the Company or its representatives in connection with
the offer or sale of the Purchased Shares or the Warrants. No registration of
the Purchased Shares, the Warrants or the Warrant Shares, pursuant to the
provisions of the Securities Act or any state securities or "blue sky" laws,
will be required by the offer, sale or issuance of the Purchased Shares, the
Warrants or the Warrant Shares.
J. Broker's, Finder's or Similar Fees. There are no brokerage
----------------------------------
commissions, finder's fees or similar fees or commissions payable by the Company
or any of its Subsidiaries in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with the Company or
any of its Subsidiaries or any action taken by any such Person.
K. Disclosure. This Agreement and the documents and certificates
----------
furnished to the Purchasers by the Company, taken as a whole, do not contain any
untrue statement of a material fact or to the Company's knowledge omit to state
a material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.
<PAGE>
L. Revised Product Plan of Record. The Company has delivered to
------------------------------
each of the Purchasers a revised Product Plan of Record, including feature
functionality by release.
IV.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
Each of the Purchasers hereby represents and warrants (severally as to
itself and not jointly) to the Company as follows:
A. Existence and Power. Each of GAP LP and GAP Coinvestment (a) is
-------------------
a partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation, (b) has all requisite power and
authority to conduct the business in which it is currently, or is proposed to
be, engaged, and (c) has the requisite partnership power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the other Transaction Documents to which it is a party.
B. Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by such Purchaser of this Agreement and each of the other
Transaction Documents to which it is a party and the transactions contemplated
hereby and thereby (a) have been duly authorized by all necessary partnership
action, (b) do not contravene the terms of such Purchaser's organizational
documents, or any amendment thereof, (c) do not violate, conflict with or result
in any breach or contravention of or the creation of any Lien under, any
Contractual Obligation of such Purchaser, or any Requirement of Law applicable
to such Purchaser and (d) do not violate any Orders of any Governmental
Authority against, or binding upon, such Purchaser.
C. Governmental Authorization; Third Party Consents. No approval,
------------------------------------------------
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, and no lapse of
a waiting period under any Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the purchase of the Purchased Shares and the Warrants) by, or
enforcement against, such Purchaser of this Agreement and each of the other
Transaction Documents to which such Purchaser is a party or the transactions
contemplated hereby and thereby.
D. Binding Effect. Each of the Transaction Documents to which such
--------------
Purchaser is a party has been duly executed and delivered by such Purchaser, and
each constitutes the legal, valid and binding obligations of such Purchaser,
enforceable against it in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability (regardless of whether considered in a proceeding at law or in
equity).
<PAGE>
E. Purchase for Own Account. The Purchased Shares and the Warrants
------------------------
to be acquired by such Purchaser pursuant to this Agreement, the shares of
Common Stock issuable upon conversion of the Purchased Shares and the Warrant
Shares are being or will be acquired for investment for its own account and with
no intention of distributing or reselling, or granting any participation in,
such Purchased Shares, such shares of Common Stock, such Warrants, such Warrant
Shares or any part thereof in any transaction that would be in violation of the
securities laws of the United States of America, or any state or foreign
jurisdiction, without prejudice, however, to the rights of such Purchaser at all
times to sell or otherwise dispose of all or any part of such Purchased Shares,
such shares of Common Stock, such Warrants or such Warrant Shares under an
effective registration statement under the Securities Act and under the
applicable state or foreign securities laws, or under an exemption from such
registration available under such laws, and subject, nevertheless, to the
disposition of such Purchaser's property being at all times within its control.
If such Purchaser should in the future decide to dispose of any of such
Purchased Shares, such shares of Common Stock, such Warrants or such Warrant
Shares, such Purchaser understands and agrees that it may do so only in
compliance with the Securities Act and applicable state and foreign securities
laws, as then in effect. Such Purchaser agrees to the imprinting, so long as
required by law, of legends on certificates representing all of its Purchased
Shares, shares of Common Stock issuable upon conversion of its Purchased Shares
and Warrant Shares as required by any applicable state securities laws and to
the following effect (and acknowledges that the Company will make a notation on
its transfer books to such effect):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
LAWS OF ANY JURISDICTION OF THE UNITED STATES. THE SECURITIES MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT AND UNDER THE APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY, IF REQUESTED BY THE COMPANY, THAT THERE IS AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
DISPOSITION (EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE
STOCKHOLDERS AGREEMENT, DATED OCTOBER 24, 1997, AMONG PRIME RESPONSE GROUP
INC. AND THE STOCKHOLDERS NAMED THEREIN AS AMENDED BY AMENDMENT NO. 1
THERETO AND AS AMENDED BY AMENDMENT NO. 2 THERETO (THE "STOCKHOLDERS
AGREEMENT"). THE COMPANY WILL NOT REGISTER THE
<PAGE>
TRANSFER OF SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL
THE TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE STOCKHOLDERS
AGREEMENT. THE COMPANY WILL MAIL A COPY OF SUCH AGREEMENT, TOGETHER WITH A
COPY OF THE EXPRESS TERMS OF THE SECURITIES AND THE OTHER CLASS OR CLASSES
AND SERIES OF SHARES, IF ANY, WHICH THE COMPANY IS AUTHORIZED TO ISSUE, TO
THE RECORD HOLDER OF THIS CERTIFICATE, WITHOUT CHARGE, WITHIN FIVE DAYS
AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.
F. Restricted Securities. Such Purchaser understands that the
---------------------
Purchased Shares and the Warrants will not be registered under the Securities
Act at the time of their issuance for the reason that the sale provided for in
this Agreement is exempt pursuant to Rule 506 of Regulation D promulgated under
the Securities Act and that the reliance of the Company on such exemption is
predicated in part on such Purchaser's representations set forth herein. Such
Purchaser also represents that it is experienced in evaluating companies such as
the Company, has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of its investment and has
the ability to suffer the total loss of its investment. Such Purchaser further
represents that it has had the opportunity to ask questions of and receive
answers from the Company concerning the terms and conditions of the offering and
the Company's business, management and financial affairs and to obtain
additional information to such Purchaser's satisfaction.
G. Investment Experience. Such Purchaser is an investor in
---------------------
securities of companies in the development stage and acknowledges that it has,
by reason of its business and financial experience, the capacity to protect its
own interest in connection with the transaction and that it is able to bear the
economic risk of its investment in the transaction. GAP LP is an "Accredited
Investor" as defined in Rule 501(a) under the Securities Act.
H. Broker's, Finder's or Similar Fees. There are no brokerage
----------------------------------
commissions, finder's fees or similar fees or commissions payable by such
Purchaser, in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with such Purchaser or any action taken
by such Purchaser.
V.
CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE
--------------------------
The obligation of the Purchasers to purchase the Purchased Shares and
the Warrants, to pay the purchase price therefor at the Closing and to perform
their
<PAGE>
other obligations hereunder shall be subject to the satisfaction as determined
by, or waiver by, the Purchasers of the following conditions on or before the
Closing Date:
(a) Secretary's Certificate. The Purchasers shall have received a
-----------------------
certificate from the Company, in form and substance reasonably satisfactory to
the Purchasers, dated the Closing Date and signed by the Secretary or an
Assistant Secretary of the Company, certifying that the attached copies of the
Certificate of Incorporation, the By-laws and resolutions of the Board of
Directors approving this Agreement and each of the other Transaction Documents
to which the Company is a party and the transactions contemplated hereby and
thereby, are all true, complete and correct and remain unamended and in full
force and effect.
(b) Amendment of Certificate of Incorporation. The Certificate of
-----------------------------------------
Incorporation shall have been amended, pursuant to an amendment in form and
substance satisfactory to the Purchasers, to increase the authorized number of
shares of Preferred Stock and such amendment shall have been duly filed by or on
behalf of the Company with the Secretary of State of the State of Delaware in
accordance with the General Corporation Law of the State of Delaware.
(c) Stockholders Agreement Amendment. The Company, James Carling,
--------------------------------
Nevin Prakash, Richard S. Braddock and Allen Swann and the other stockholders
party thereto shall have duly executed and delivered the Stockholders Agreement
Amendment.
(d) Registration Rights Agreement Amendment. The Company, James
---------------------------------------
Carling and Nevin Prakash shall have duly executed and delivered the
Registration Rights Agreement Amendment.
(e) Purchased Shares. The Company shall be prepared to deliver to
----------------
each of the Purchasers certificates in definitive form representing the number
of Purchased Shares set forth opposite such Purchaser's name on Schedule 2.1
------------
hereto, registered in the name of such Purchaser.
(f) Warrants. The Company shall have duly executed and delivered to
--------
GAP LP the GAP LP Warrant and to GAP Coinvestment the GAPCO Warrant, each
substantially in the form attached hereto as Exhibit C, and registered in the
---------
name of GAP LP and GAP Coinvestment, respectively.
(g) Revised Budget. Each of the Purchasers shall have received a
--------------
revised budget of the Company for each fiscal quarter of 1999 in form and
substance reasonably satisfactory to such Purchasers.
(h) Revised Product Plan of Record. Each of the Purchasers shall have
------------------------------
received Purchaser shall have received a revised Product Plan of Record,
including feature functionality by release.
(i) Waivers. James Carling, Nevin Prakash, Richard S. Braddock and
-------
Allen Swann shall have waived any preemptive rights with respect to the
<PAGE>
Purchased Shares pursuant to Section 4 of the Stockholders Agreement, dated as
of October 24, 1997, among the Company, GAP 42, GAP Coinvestment and the
stockholders named therein, as amended (as so amended, the "Stockholders
Agreement").
VI.
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
---------------------------
The obligation of the Company to issue and sell the Purchased Shares
and the Warrants and the obligation of the Company to perform its other
obligations hereunder, shall be subject to the satisfaction as determined by, or
waiver by, the Company of the following conditions on or before the Closing
Date:
(a) Stockholders Agreement Amendment. The Purchasers shall have duly
--------------------------------
executed and delivered the Stockholders Agreement Amendment.
(b) Registration Rights Agreement Amendment. The Purchasers shall
---------------------------------------
have duly executed and delivered the Registration Rights Agreement Amendment.
(c) Payment by the Purchasers. Each of the Purchasers shall be
-------------------------
prepared to pay the aggregate purchase price for its Purchased Shares and its
Warrants.
(d) Waiver. GAP 42, GAP 48 and GAP Coinvestment I shall have waived
------
any preemptive rights with respect to the Purchased Shares pursuant to Section 4
of the Stockholders Agreement.
VII.
INDEMNIFICATION
---------------
A. Indemnification. Except as otherwise provided in this Article
---------------
7, the Company and each of the Purchasers, severally and not jointly, as
applicable (the "Indemnifying Party"), agrees to indemnify, defend and hold
harmless the Purchasers, in the case of indemnity by the Company, or the
Company, in the case of indemnity by the Purchasers, as applicable, and their
Affiliates and their respective officers, directors, agents, employees,
subsidiaries, partners, members and controlling persons (each, an "Indemnified
Party") to the fullest extent permitted by law from and against any and all
losses, Claims (including any Claim by a third party), damages, expenses
(including reasonable fees, disbursements and other charges of counsel incurred
by the Indemnified Party in any action between the Indemnifying Party and the
Indemnified Party or between the Indemnified Party and any third party or
otherwise) or other liabilities (collectively, "Losses") resulting from, arising
out of or relating to any
<PAGE>
breach of any representation or warranty, covenant or agreement by the
Indemnifying Party in this Agreement or the other Transaction Documents,
including, without limitation, any legal, administrative or other actions
(including actions brought by the Purchasers or the Company or any equity
holders or partners of such Persons or derivative actions brought by any Person
claiming through or in the Company's name or in the name of either of the
Purchasers), proceedings or investigations (whether formal or informal), or
written threats thereof, based upon, relating to or arising out of this
Agreement or the other Transaction Documents, the transactions contemplated
hereby and thereby, or any Indemnified Party's role therein or in transactions
contemplated thereby; provided, that the Indemnifying Party shall not be liable
under this Section 7.1 to an Indemnified Party to the extent that it is finally
judicially determined that such Losses resulted primarily from the material
breach by such Indemnified Party of any representation, warranty, covenant or
other agreement of such Indemnified Party contained in this Agreement; and
provided, further, that if and to the extent that such indemnification is
unenforceable for any reason, the Indemnifying Party shall make the maximum
contribution to the payment and satisfaction of such Losses which shall be
permissible under applicable laws. The amount of any payment by any Indemnifying
Party to any Indemnified Party herewith in respect of any Loss shall be of
sufficient amount to make such Indemnified Party whole, and, in the case of
indemnity by the Company, shall consist of an amount sufficient to make up any
diminution in the value of the Purchased Shares held by such Indemnified Party
resulting from the payment by the Company of such indemnification payment. In
connection with the obligation of the Indemnifying Party to indemnify for
expenses as set forth above, the Indemnifying Party shall, upon presentation of
appropriate invoices containing reasonable detail, reimburse each Indemnified
Party for all such expenses (including reasonable fees, disbursements and other
charges of counsel incurred by the Indemnified Party in any action between the
Indemnifying Party and the Indemnified Party or between the Indemnified Party
and any third party or otherwise) as they are incurred by such Indemnified
Party; provided, however, that if an Indemnified Party is reimbursed hereunder
for any expenses, such reimbursement of expenses shall be refunded to the extent
it is finally judicially determined that the Losses in question resulted
primarily from the willful misconduct or gross negligence of such Indemnified
Party. Notwithstanding the foregoing, indemnification with respect to this
Section 7.1 by the Company shall be limited to the aggregate consideration paid
by the Purchasers for the Purchased Shares, and indemnification by the
Purchasers shall be limited to the aggregate consideration paid by such
Purchaser for its Purchased Shares.
B. Notification. Each Indemnified Party under this Article 7
------------
shall, promptly after the receipt of notice of the commencement of any action,
investigation, claim or other proceeding against such Indemnified Party in
respect of which indemnity may be sought from the Indemnifying Party under this
Article 7, notify the Indemnifying Party in writing of the commencement thereof.
The omission of any Indemnified Party to so notify the Indemnifying Party of any
such action shall not relieve the Indemnifying Party from any liability which it
may have to such Indemnified Party (a) other than pursuant to this Article 7 or
(b) under this Article 7 unless, and only to the extent that, such omission
results in the Indemnifying Party's forfeiture of substantive rights or
defenses. In case any such action, claim or other proceeding shall be brought
against any Indemnified Party, and it shall notify the Indemnifying Party of
<PAGE>
the commencement thereof, the Indemnifying Party shall be entitled to assume the
defense thereof at its own expense, with counsel satisfactory to such
Indemnified Party in its reasonable judgment; provided, however, that any
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense at its own expense. Notwithstanding the foregoing,
in any action, claim or proceeding in which both the Indemnifying Party, on the
one hand, and an Indemnified Party, on the other hand, are, or are reasonably
likely to become, a party, such Indemnified Party shall have the right to employ
separate counsel at the expense of the Indemnifying Party and to control its own
defense of such action, claim or proceeding if, in the reasonable opinion of
counsel to such Indemnified Party, a conflict or potential conflict exists
between the Indemnifying Party, on the one hand, and such Indemnified Party, on
the other hand, that would make such separate representation advisable;
provided, however, that the Indemnifying Party shall not be liable for the fees
and expenses of more than one counsel to all Indemnified Parties. The
Indemnifying Party agrees that it will not, without the prior written consent of
the Indemnified Party, settle, compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the matters contemplated hereby (if any Indemnified Party is a party thereto or
has been actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of each Indemnified
Party from all liability arising or that may arise out of such claim, action or
proceeding. The Indemnifying Party shall not be liable for any settlement of any
claim, action or proceeding effected against an Indemnified Party without the
Indemnifying Party's written consent, which consent shall not be unreasonably
withheld. The rights accorded to an Indemnified Party hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise; provided, however, that notwithstanding the
foregoing or anything to the contrary contained in this Agreement, nothing in
this Article 7 should restrict or limit any rights that any Indemnified Party
may have to seek equitable relief.
VIII.
AFFIRMATIVE COVENANTS
---------------------
The Company hereby covenants and agrees with the Purchasers as
follows:
A. Financial Statements and Other Information. The Company shall
------------------------------------------
deliver to each Purchaser, in form and substance satisfactory to such Purchaser:
(a) as soon as available, but not later than one hundred twenty (120)
days after the end of each fiscal year of the Company, a copy of the audited
balance sheet of the Company as of the end of such fiscal year and the related
statements of operations and cash flows for such fiscal year, setting forth in
each case in comparative form the figures for the previous year, all in
reasonable detail and accompanied by a management summary and analysis of the
operations of the Company for such fiscal year and by the opinion of a
nationally recognized independent certified public accounting firm which report
shall state without qualification that such financial
<PAGE>
statements present fairly the financial condition as of such date and results of
operations and cash flows for the periods indicated in conformity with GAAP
applied on a consistent basis;
(b) commencing with the fiscal period ending on March 31, 1999, as
soon as available, but in any event not later than forty-five (45) days after
the end of each of the first three fiscal quarters of each fiscal year, the
unaudited balance sheet of the Company, and the related statements of operations
and cash flows for such quarter and for the period commencing on the first day
of the fiscal year and ending on the last day of such quarter, all certified by
an appropriate officer of the Company as presenting fairly the financial
condition as of such date and results of operations and cash flows for the
periods indicated in conformity with GAAP applied on a consistent basis, subject
to normal year-end adjustments and the absence of footnotes required by GAAP;
and
(c) as promptly as practicable, but not later than five (5) days after
the end of each fiscal year of the Company, a certificate signed by the Chief
Executive Officer of the Company in customary form certifying that the Company
is not a "foreign person" within the meaning of Section 1445 of the Code.
(d) Reservation of Common Stock and Preferred Stock. The Company
-----------------------------------------------
shall at all times (a) reserve and keep available out of its authorized shares
of Common Stock, solely for the purpose of issue or delivery upon conversion of
the Purchased Shares, and (b) reserve and keep available out of its authorized
shares of Common Stock, solely for the purpose of issue or delivery upon
exercise of the Warrants, as provided in the Certificate of Incorporation and
the Warrants (in the case of the Warrant Shares), the maximum number of shares
of Common Stock that may be issuable or deliverable upon such conversion or
exercise, as the case may be. Such shares of Common Stock are duly authorized
and, when issued or delivered in accordance with the Certificate of
Incorporation and the Warrants (in the case of the Warrant Shares), as the case
may be, against payment therefor, shall be validly issued, fully paid and non-
assessable. The Company shall issue such shares of Common Stock in accordance
with the terms of the Certificate of Incorporation or the Warrants, as the case
may be, and otherwise comply with the terms hereof and thereof.
IX.
MISCELLANEOUS
-------------
A. Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of the Company or
the Purchasers, or acceptance of the Purchased Shares and the Warrants or
termination of this Agreement until the third anniversary of the Closing Date.
B. Notices. All notices, demands and other communications provided
-------
for or permitted hereunder shall be made in writing and shall be by registered
<PAGE>
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
(a) if to the Company:
Prime Response Group Inc.
Goat Wharf, Brentwood,
TW8OPD
United Kingdom
Telecopy: 011-441-814-003-133
Attention: Nigel Cannings, Esq.
with a copy to:
Brobeck Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Telecopy: (650) 496-2755
Attention: Thomas A. Bevilacqua, Esq.
(b) if to the Purchasers:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-8818
Attention: William E. Ford
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Matthew Nimetz, Esq.
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial courier service; five (5) Business Days
after being deposited in the mail, postage prepaid, if mailed; and when receipt
is mechanically acknowledged, if properly telecopied.
C. Successors and Assigns; Third Party Beneficiaries. This
-------------------------------------------------
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto. Subject to applicable securities laws,
each of the Purchasers may assign any of its rights under any of the Transaction
Documents to any of its Affiliates. The Company may not assign any of its
rights under this
<PAGE>
Agreement without the written consent of the holders of a majority of the
Purchased Shares. No Person other than the parties hereto and their successors
and permitted assigns is intended to be a beneficiary of this Agreement.
D. Amendment and Waiver.
--------------------
(a) No failure or delay on the part of the Company or the Purchasers
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
the Purchasers at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any provision
of this Agreement, any waiver of any provision of this Agreement, and any
consent to any departure by the Company or the Purchasers from the terms of any
provision of this Agreement, shall be effective only if it is made or given in
writing and signed by the Company and the holders of a majority of the Purchased
Shares. Except where notice is specifically required by this Agreement, no
notice to or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in similar or other circumstances.
E. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
F. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
G. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION.
H. Severability. If any one or more of the provisions contained
------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
I. Entire Agreement. This Agreement, together with the exhibits
----------------
and schedules hereto and the other Transaction Documents, is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. There are no
restrictions, promises,
<PAGE>
warranties or undertakings, other than those set forth or referred to herein or
therein. This Agreement, together with the exhibits hereto, and the other
Transaction Documents supersede all prior agreements and understandings between
the parties with respect to such subject matter.
J. Fees. Upon the Closing the Company shall reimburse GAP LP and
----
GAP Coinvestment, in an aggregate amount not to exceed $30,000, for their
reasonable fees, disbursements and other charges of counsel incurred in
connection with the transactions contemplated by this Agreement. Except as
provided in the preceding sentence, each party hereto shall bear their own costs
and expenses in connection with the preparation, execution and delivery of this
Agreement and other Transaction Documents, and the transactions contemplated
hereby and thereby.
K. Publicity. Except as may be required by any applicable
---------
Requirement of Law, none of the parties hereto shall issue a publicity release
or public announcement or otherwise make any disclosure concerning this
Agreement or the transactions contemplated hereby, without prior approval by the
other parties hereto (which approval shall not be unreasonably withheld);
provided, however, that nothing in this Agreement shall restrict any Purchaser
- -------- -------
from disclosing information (a) that is already publicly available; (b) to the
prospective transferee in connection with any contemplated transfer of any of
the Purchased Shares or the Warrants; and (c) to its attorneys, accountants,
consultants and other advisors to the extent necessary to obtain their services
in connection with such Purchaser's investment in the Company. GAP LLC may
disclose on its worldwide web page, www.gapartners.com, the name of the Company,
its address, the identity of its Chief Executive Officer, a description of the
Company's business (which description shall be reasonably acceptable to the
Company) and the aggregate dollar amount invested by GAP LLC and its Affiliates
in the Company. If any announcement is required by any applicable Requirement
of Law to be made by any party hereto, prior to making such announcement such
party will deliver a draft of such announcement to the other parties and shall
give the other parties an opportunity to comment thereon.
L. Further Assurances. Each of the parties shall execute such
------------------
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person, and otherwise fulfilling, or causing the fulfillment of, the
conditions to the Closing set forth in Articles 5 and 6) as may be reasonably
required or desirable to carry out or to perform the provisions of this
Agreement and to consummate and make effective as promptly as possible the
transactions contemplated by this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers hereunto duly authorized
on the date first above written.
PRIME RESPONSE GROUP INC.
By: /s/ James Carling
-------------------------------
Name: James Carling
Title:
GENERAL ATLANTIC PARTNERS 52, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC,
its General Partner
By: /s/ David C. Hodgan
--------------------------
Name: David C. Hodgan
Title: A Managing Member
GAP COINVESTMENT PARTNERS II, L.P.
By: /s/ David C. Hodgan
-------------------------------
Name: David C. Hodgan
Title: A General Partner
<PAGE>
Schedule 2.1
------------
Purchased Shares, Warrants and Purchase Price
---------------------------------------------
<TABLE>
<CAPTION>
Shares of Common Stock
Purchaser Purchased Shares Issuable Upon Purchase Price
- --------- ---------------- Exercise of Warrants --------------
--------------------
<S> <C> <C> <C>
GAP LP 680,200 340,100 $4,082,016
GAP Coinvestment 153,134 76,567 918,988
------- ------- ----------
Total: 833,334 416,667 $5,001,004
</TABLE>
<PAGE>
Exhibit 10.17
Execution Copy
===============================================================================
STOCK AND WARRANT PURCHASE AGREEMENT
among
PRIME RESPONSE GROUP INC.,
GENERAL ATLANTIC PARTNERS 52, L.P.
and
GAP COINVESTMENT PARTNERS II, L.P.
______________________________
Dated as of July 15, 1999
______________________________
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
-----------------
Page #
------
<S> <C> <C>
ARTICLE I DEFINITIONS...................................................................1
1.1 Definitions............................................................................1
1.2 Accounting Terms; Financial Statements.................................................6
ARTICLE II PURCHASE AND SALE OF PREFERRED STOCK
AND WARRANTS..................................................................6
2.1 Purchase and Sale of Preferred Stock...................................................6
2.2 Purchase and Sale of Warrants..........................................................6
2.3 Certificate of Designations............................................................6
2.4 Use of Proceeds........................................................................6
2.5 Closing................................................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE COMPANY...................................................................7
3.1 Corporate Existence and Power..........................................................7
3.2 Authorization; No Contravention........................................................7
3.3 Governmental Authorization; Third Party Consents.......................................8
3.4 Binding Effect.........................................................................8
3.5 Capitalization.........................................................................8
3.6 Financial Statements...................................................................9
3.7 No Default or Breach; Contractual Obligations..........................................9
3.8 No Material Adverse Change; Ordinary Course of Business...............................10
3.9 Private Offering......................................................................10
3.10 Broker's, Finder's or Similar Fees....................................................10
3.11 Disclosure............................................................................10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
THE PURCHASERS...............................................................10
4.1 Existence and Power...................................................................10
4.2 Authorization; No Contravention.......................................................11
4.3 Governmental Authorization; Third Party Consents......................................11
4.4 Binding Effect........................................................................11
4.5 Purchase for Own Account..............................................................11
4.6 Restricted Securities.................................................................13
4.7 Investment Experience.................................................................13
4.8 Broker's, Finder's or Similar Fees....................................................13
ARTICLE V CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE ..................................................13
5.1 Secretary's Certificate...............................................................13
5.2 Filing of Certificate of Designations.................................................14
5.3 Stockholders Agreement Amendment......................................................14
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page #
------
<S> <C> <C>
5.4 Registration Rights Agreement Amendment...............................................14
5.5 Purchased Shares......................................................................14
5.6 Warrants..............................................................................14
5.7 Waivers...............................................................................14
5.8 Opinion of Counsel....................................................................14
5.9 Adjustments to Series A and Series B Conversion Prices................................14
ARTICLE VI CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE......................................................15
6.1 Stockholders Agreement Amendment......................................................15
6.2 Registration Rights Agreement Amendment...............................................15
6.3 Payment by the Purchasers.............................................................15
6.4 Waiver................................................................................15
ARTICLE VII INDEMNIFICATION..............................................................15
7.1 Indemnification.......................................................................15
7.2 Notification..........................................................................16
ARTICLE VIII AFFIRMATIVE COVENANTS........................................................17
8.1 Financial Statements and Other Information............................................17
ARTICLE IX MISCELLANEOUS................................................................19
9.1 Survival of Representations and Warranties............................................19
9.2 Notices...............................................................................19
9.3 Successors and Assigns; Third Party Beneficiaries.....................................20
9.4 Amendment and Waiver..................................................................20
9.5 Counterparts..........................................................................20
9.6 Headings..............................................................................21
9.7 GOVERNING LAW.........................................................................21
9.8 Severability..........................................................................21
9.9 Entire Agreement......................................................................21
9.10 Fees..................................................................................21
9.11 Publicity.............................................................................21
9.12 Further Assurances....................................................................22
</TABLE>
EXHIBITS
A Form of Certificate of Designations
B Form of Stockholders Agreement Amendment
C Form of Registration Rights Agreement Amendment
D Form of Opinion of Brobeck Hale and Dorr International
E Form of GAP LP Warrant and GAPCO Warrant
ii
<PAGE>
SCHEDULES
2.1 Purchased Shares, Warrants and Purchase Price
3.5(a) List of Stockholders and Capital Stock and Stock Equivalents
iii
<PAGE>
STOCK AND WARRANT PURCHASE AGREEMENT
STOCK AND WARRANT PURCHASE AGREEMENT, dated as of July 15, 1999 (this
"Agreement"), among Prime Response Group Inc., a Delaware corporation (the
"Company"), General Atlantic Partners 52, L.P., a Delaware limited partnership
("GAP LP"), and GAP Coinvestment Partners II, L.P., a Delaware limited
partnership ("GAP Coinvestment" and, together with GAP LP, the "Purchasers").
WHEREAS, upon the terms and conditions set forth in this Agreement,
the Company proposes to issue and sell to (a) GAP LP, for an aggregate purchase
price of $2,442,855, an aggregate of 814,285 shares of Series C Convertible
Preferred Stock, par value $.01 per share, of the Company (the "Preferred
Stock") and a warrant (the "GAP LP Warrant") to purchase, subject to the terms
and conditions thereof, an aggregate of 273,099 shares of common stock, par
value $.01 per share, of the Company (the "Common Stock") at an exercise price
of $0.01 per share (subject to adjustment), containing the terms and conditions
set forth in the form of warrant attached hereto as Exhibit E; and (b) GAP
---------
Coinvestment, for an aggregate purchase price of $557,145, an aggregate of
185,715 shares of Preferred Stock and a warrant (the "GAPCO Warrant" and,
together with the GAP LP Warrant, the "Warrants") to purchase, subject to the
terms and conditions thereof, an aggregate of 62,286 shares of Common Stock, at
an exercise price of $0.01 per share (subject to adjustment), containing the
terms and conditions set forth in the form of warrant attached hereto as Exhibit
-------
E; and
- -
WHEREAS, each share of Preferred Stock is convertible (subject to
adjustment) into one share of Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS
-----------
A. Definitions. As used in this Agreement, and unless the context
-----------
requires a different meaning, the following terms have the meanings indicated:
"Affiliate" shall mean any Person who is an "affiliate" as defined in
---------
Rule 12b2 of the General Rules and Regulations under the Exchange Act. The
following shall be deemed to be Affiliates of GAP LP: (a) GAP LLC, the members
of GAP LLC and the limited partners of GAP LP; (b) any Affiliate of GAP LLC, the
<PAGE>
2
members of GAP LLC and the limited partners of GAP LP; and (c) any limited
liability company or partnership a majority of whose members or partners, as the
case may be, are members of GAP LLC. GAP LP and GAP Coinvestment shall be
deemed to be Affiliates of one another.
"Agreement" means this Agreement as the same may be amended
---------
supplemented or modified in accordance with the terms hereof.
"Board of Directors" means the Board of Directors of the Company.
------------------
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"By-laws" means the by-laws of the Company in effect on the Closing
-------
Date, as the same may be amended from time to time.
"Certificate of Designations" means the Certificate of Designations
---------------------------
with respect to the Preferred Stock adopted by the Board of Directors and filed
with the Secretary of State of the State of Delaware on or before the Closing
Date substantially in the form attached hereto as Exhibit A.
---------
"Certificate of Incorporation" means the Certificate of Incorporation
----------------------------
of the Company, as the same shall have been amended from time to time.
"Claims" means any actions, suits, proceedings, claims, complaints,
------
disputes, arbitrations or investigations.
"Closing" has the meaning set forth in Section 2.5 of this Agreement.
-------
"Closing Date" has the meaning set forth in Section 2.5 of this
------------
Agreement.
"Commission" means the Securities and Exchange Commission or any
----------
similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" has the meaning set forth in the recitals to this
------------
Agreement.
"Company" has the meaning set forth in the recitals to this Agreement.
-------
"Condition of the Company" means the assets, business, properties,
------------------------
prospects, operations or financial condition of the Company and the
Subsidiaries, taken as a whole.
<PAGE>
3
"Contingent Obligation" means, as applied to any Person, any direct or
---------------------
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of another Person (the "primary obligor"),
------------------ ---------------
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligation or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, or (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss or failure or inability to perform in respect
thereof. The amount of any Contingent Obligation shall, unless stated to be
otherwise in the instrument constituting the Contingent Obligation, be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by the Board of Directors.
"Contractual Obligations" means as to any Person, any provision of any
-----------------------
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"Financial Statements" has the meaning set forth in Section 3.6.
--------------------
"GAAP" means generally accepted accounting principles in effect from
----
time to time in the United States or the United Kingdom, as the case may be.
"GAP Coinvestment" has the meaning set forth in the recitals to this
----------------
Agreement.
"GAP Coinvestment I" means GAP Coinvestment Partners, L.P., a New York
------------------
limited partnership.
"GAPCO Warrant" has the meaning set forth in the recitals to this
-------------
Agreement.
"GAP 42" means General Atlantic Partners 42, L.P., a Delaware limited
------
partnership.
"GAP 48" means General Atlantic Partners 48, L.P., a Delaware limited
------
partnership.
<PAGE>
4
"GAP LLC" means General Atlantic Partners, LLC, a Delaware limited
-------
liability company and the general partner of GAP LP, and any successor to such
entity.
"GAP LP" has the meaning set forth in the recitals to this Agreement.
------
"GAP LP Warrant" has the meaning set forth in the recitals to this
--------------
Agreement.
"Governmental Authority" means the government of any nation, state,
----------------------
city, locality or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Indemnified Party" has the meaning set forth in Section 7.1 of this
-----------------
Agreement.
"Indemnifying Party" has the meaning set forth in Section 7.1 of this
------------------
Agreement.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences),
including, without limitation, those created by, arising under or evidenced by
any conditional sale or other title retention agreement, the interest of a
lessor under a Capital Lease Obligation, or any financing lease having
substantially the same economic effect as any of the foregoing.
"Orders" has the meaning set forth in Section 3.2 of this Agreement.
------
"Person" means any individual, firm, corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, Governmental Authority or other entity of any kind,
and shall include any successor (by merger or otherwise) of such entity.
"Preferred Stock" has the meaning set forth in the recitals to this
---------------
Agreement.
"Purchased Shares" has the meaning set forth in Section 2.1 of this
----------------
Agreement.
"Purchasers" has the meaning set forth in the recitals to this
----------
Agreement.
<PAGE>
5
"Registration Rights Agreement Amendment" means Amendment No. 3 to the
---------------------------------------
Registration Rights Agreement, dated as of October 24, 1997, among the Company,
GAP 42, GAP Coinvestment I and the stockholders named therein, substantially in
the form attached hereto as Exhibit C.
---------
"Requirements of Law" means, as to any Person, any law, statute,
-------------------
treaty, rule, regulation, right, privilege, qualification, license or franchise
or determination of an arbitrator or a court or other Governmental Authority or
stock exchange, in each case applicable or binding upon such Person or any of
its property or to which such Person or any of its property is subject or
pertaining to any or all of the transactions contemplated or referred to herein.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the Commission thereunder.
"Series A Preferred Stock" means the Series A Convertible
------------------------
Participating Preferred Stock, par value $.01 per share, of the Company.
"Series B Preferred Stock" means the Series B Convertible
------------------------
Participating Preferred Stock, par value $.01 per share, of the Company.
"Stock Equivalents" means any security or obligation which is by its
-----------------
terms convertible into or exchangeable for shares of common stock or other
capital stock or equity securities of the Company, and any option, warrant or
other subscription or purchase right with respect to common stock or such other
capital stock or equity securities.
"Stockholders Agreement" has the meaning set forth in Section 5.7 of
----------------------
this Agreement.
"Stockholders Agreement Amendment" means Amendment No. 3 to the
--------------------------------
Stockholders Agreement, dated as of October 24, 1997, among the Company, GAP 42,
GAP Coinvestment I and the stockholders named therein, substantially in the form
attached hereto as Exhibit B.
---------
"Subsidiaries" means Prime Response Limited, a company registered in
------------
England and Wales under number 2155722, and a corporation or other Person of
which 50% or more of the voting power of the outstanding voting equity
securities or 50% or more of the outstanding economic equity interest is held,
directly or indirectly, by such Person. Unless otherwise qualified, or the
contest otherwise requires, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"Transaction Documents" means collectively, this Agreement, the
---------------------
Stockholders Agreement Amendment, the Registration Rights Agreement Amendment
and the Warrants.
<PAGE>
6
"Warrants" has the meaning set forth in the recitals to this
--------
Agreement.
"Warrant Shares" has the meaning set forth in Section 2.2 of this
--------------
Agreement.
1.2 Accounting Terms; Financial Statements. All accounting terms
--------------------------------------
used herein not expressly defined in this Agreement shall have the respective
meanings given to them in accordance with sound accounting practice. The term
"sound accounting practice" shall mean such accounting practice as, in the
opinion of the independent certified public accountants regularly retained by
the Company, conforms at the time to GAAP applied on a consistent basis except
for changes with which such accountants concur.
ARTICLE II.
PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS
-------------------------------------------------
2.1 Purchase and Sale of Preferred Stock. Subject to the terms and
------------------------------------
conditions herein set forth, the Company agrees to issue and sell to each of the
Purchasers, and each of the Purchasers agrees that it will purchase from the
Company, at the Closing, the aggregate number of shares of Preferred Stock set
forth opposite such Purchaser's name on Schedule 2.1 hereto, for the aggregate
------------
purchase price set forth opposite such Purchaser's name on Schedule 2.1 hereto
------------
(all of the shares of Preferred Stock being purchased hereunder by the
Purchasers being referred to herein as the "Purchased Shares").
2.2 Purchase and Sale of Warrants. Subject to the terms and
-----------------------------
conditions herein set forth, the Company agrees to issue and sell to each of the
Purchasers, and each of the Purchasers agrees that it will purchase from the
Company, on the Closing Date, its Warrant, for the aggregate purchase price set
forth opposite such Purchaser's name on Schedule 2.1 hereto (all of the shares
------------
of Preferred Stock issuable upon exercise of the Warrants being referred to
herein as the "Warrant Shares").
2.3 Certificate of Designations. The Purchased Shares shall have
---------------------------
the rights and preferences set forth in the Certificate of Designations.
2.4 Use of Proceeds. The Company shall use the proceeds from the
---------------
issue and sale of the Purchased Shares and the Warrants to the Purchasers for
working capital needs of the Company.
2.5 Closing. The closing of the sale and purchase of the Purchased
-------
Shares (the "Closing") shall take place at the offices of Paul, Weiss, Rifkind,
Wharton & Garrison, no later than 4:00 p.m., New York time, on the date hereof,
or at such other time, place, and date that the Company and the Purchasers may
agree in
<PAGE>
7
writing (the "Closing Date"). On the Closing Date, the Company shall deliver to
each Purchaser (a) a certificate representing the Purchased Shares being
purchased by such Purchaser and (b) its Warrant, against delivery by such
Purchaser to the Company of the aggregate purchase price therefor by wire
transfer of immediately available funds.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to the Purchasers as follows:
3.1 Corporate Existence and Power. Each of the Company and the
-----------------------------
Subsidiaries (a) is, in the case of the Company and its Subsidiaries (other than
Prime Response Limited), a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation, and in
the case of Prime Response Limited, is a company registered in England and Wales
under number 2155722; (b) has all requisite power and authority to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is currently, or is proposed to be, engaged; (c) is, in
the case of the Company and its Subsidiaries (other than Prime Response
Limited), duly qualified as a foreign corporation, licensed and in good
standing, and in the case of Prime Response Limited, is duly registered and
remains subsisting under the laws of each jurisdiction in which its ownership,
lease or operation of property or the conduct of its business requires such
qualification, except to the extent that the failure to do so would not have a
material adverse effect on the Condition of the Company; and (d) has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and each of the other Transaction Documents to which it is
a party. No jurisdiction, other than those referred to in clause (c) above, has
claimed, in writing or otherwise, that the Company or any of the Subsidiaries is
required to qualify as a foreign corporation therein, and neither the Company
nor the Subsidiaries files any franchise, income or other tax returns in any
other jurisdiction based upon the ownership or use of property therein or the
derivation of income therefrom.
3.2 Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by the Company of this Agreement and each of the other Transaction
Documents and the transactions contemplated hereby and thereby (a) have been
duly authorized by all necessary corporate action of the Company; (b) do not
contravene the terms of the Certificate of Incorporation or the By-laws, or any
certificate of incorporation or by-laws or other organizational documents of any
of the Subsidiaries; (c) do not violate, conflict with or result in any breach
or contravention of, or the creation of any Lien under, any Contractual
Obligation of the Company or any of the Subsidiaries, or any Requirement of Law
applicable to the Company or any of the Subsidiaries; and (d) do not violate any
judgment, injunction, writ, award, decree or
<PAGE>
8
order of any nature (collectively, "Orders") of any Governmental Authority
against, or binding upon, the Company or any of the Subsidiaries.
3.3 Governmental Authorization; Third Party Consents. No approval,
------------------------------------------------
consent, compliance, exemption, authorization or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, and no lapse of
a waiting period under a Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the sale, issuance and delivery of the Purchased Shares) by, or
enforcement against, the Company of this Agreement and the other Transaction
Documents or the transactions contemplated hereby and thereby.
3.4 Binding Effect. Each of the Transaction Documents has been duly
--------------
executed and delivered by the Company, and each constitutes the legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).
3.5 Capitalization.
--------------
(a) On the Closing Date, after giving effect to the transactions
contemplated by this Agreement, the authorized capital stock of the Company
shall consist of (i) 30,000,000 shares of Common Stock, of which 10,228,300
shares are issued and outstanding, and (ii) 3,855,000 shares of preferred stock,
par value $.01 per share, of the Company, of which (x) 1,155,000 shares are
Series A Preferred Stock, all of which are issued and outstanding to GAP 42 and
GAP Coinvestment I, (y) 1,699,834 shares are Series B Preferred Stock, all of
which are issued and outstanding to GAP 48, GAP 52, GAP Coinvestment I, GAP
Coinvestment II, Richard S. Braddock and Allen Swann and (z) 1,000,000 shares
are Preferred Stock, all of which will be outstanding and issued to the
Purchasers. Schedule 3.5(a) sets forth, at and on the Closing Date, a true and
---------------
complete list of (x) the stockholders of the Company (including any trust or
escrow agent arrangement created in connection with any employee stock option
plan) and, opposite the name of each stockholder, the amount of all outstanding
capital stock and Stock Equivalents owned by such stockholder and (y) the
holders of Stock Equivalents (other than the stockholders set forth in clause
(x) above) and, opposite the name of each such holder, the amount of all Stock
Equivalents owned by such holder. As of the Closing Date, the Company will have
reserved an aggregate of 1,000,000 shares of Common Stock for issuance upon
conversion of the Purchased Shares and an aggregate of 335,385 shares of Common
Stock for issuance upon exercise of the Warrants. Except as set forth on
Schedule 3.5(a), there are no options, warrants, conversion privileges,
- ---------------
subscription or purchase rights or other rights presently outstanding to
purchase or otherwise acquire (i) any authorized but unissued, unauthorized or
treasury shares of
<PAGE>
9
the Company's capital stock, (ii) any Stock Equivalents or (iii) other
securities of the Company. On the Closing Date, the Purchased Shares and the
Warrants will be duly authorized, and when issued and sold to the Purchasers,
after payment therefor in accordance herewith, will be validly issued, fully
paid and nonassessable and will be issued in compliance with the registration
and qualification requirements of all applicable United States federal, state
and foreign securities laws (or pursuant to exemptions therefrom). The shares of
Common Stock issuable upon conversion of the Purchased Shares are duly
authorized and, when issued in compliance with the provisions of the Certificate
of Designations, will be validly issued, fully paid and nonassessable and will
be issued in compliance with the registration and qualification requirements of
all applicable United States federal, state and foreign securities laws (or
pursuant to exemptions therefrom). The Warrant Shares issuable upon exercise of
the Warrants are duly authorized and, when issued in compliance with the
provisions of the Warrants, will be validly issued, fully paid and non-
assessable and will be issued in compliance with the registration and
qualification requirements of all applicable United States federal, state and
foreign securities laws (or pursuant to exceptions therefrom).
(b) Neither the Company nor any of the Subsidiaries directly or
indirectly owns or has made any investment in any of the capital stock of, or
any other proprietary interest in, any Person other than Prime Response Limited,
a company registered in England and Wales under number 2155722. The Company
owns all of the issued and outstanding capital stock of the Subsidiaries, free
and clear of all Liens. All of such shares of capital stock are duly
authorized, validly issued and fully paid, and all of such shares were issued in
compliance with the requirements of all applicable Requirements of Law. There
are no options, warrants, conversion privileges, subscription or purchase rights
or other rights to purchase or otherwise acquire any authorized but unissued
shares or other securities of, or any proprietary interest in, the Subsidiaries,
and there is no outstanding security of any kind convertible into or
exchangeable for such shares or proprietary interest.
3.6 Financial Statements. By the Closing Date, the Company shall
--------------------
have delivered to the Purchasers its unaudited consolidated financial statements
(balance sheet and statement of operations) for the period ending April 30,
1999, (the "Financial Statements"). The Financial Statements shall be prepared
in accordance with United States GAAP applied on a consistent basis throughout
the periods indicated and with each other, except that the Financial Statements
shall not contain footnotes or normal year-end adjustments. The Financial
Statements, at the time of their delivery to the Purchasers and at all other
times, shall fairly present the financial condition, operating results and cash
flows of the Company as of the respective dates and for the respective periods
indicated in accordance with United States GAAP, except that the Financial
Statements shall not contain footnotes or normal year-end adjustments.
3.7 No Default or Breach; Contractual Obligations. Neither the
---------------------------------------------
Company nor any of its Subsidiaries has received notice of, and is not in
default
<PAGE>
10
under, or with respect to, any Contractual Obligation in any respect, which,
individually or together with all such defaults, could have a material adverse
effect on (i) the Condition of the Company or (ii) the ability of the Company to
perform its obligations under this Agreement or the other Transaction Documents
to which it is a party.
3.8 No Material Adverse Change; Ordinary Course of Business. Since
-------------------------------------------------------
January 1, 1999 (a) there has not been any material adverse change, nor to the
knowledge of the Company is any such change threatened, in the Condition of the
Company, (b) the Company has not participated in any transaction or otherwise
acted outside the ordinary course of business, including, without limitation,
declaring or paying any dividend or declaring or making any distribution to its
stockholders except out of the earnings of the Company and (c) the Company has
not increased the compensation of any of its officers or the rate of pay of any
of its employees, except as part of regular compensation increases in the
ordinary course of business.
3.9 Private Offering. No form of general solicitation or general
----------------
advertising was used by the Company or its representatives in connection with
the offer or sale of the Purchased Shares or the Warrants. No registration of
the Purchased Shares, the Warrants or the Warrant Shares pursuant to the
provisions of the Securities Act or any state securities or "blue sky" laws,
will be required for the offer, sale or issuance of the Purchased Shares, the
Warrants or the Warrant Shares.
3.10 Broker's, Finder's or Similar Fees. There are no brokerage
----------------------------------
commissions, finder's fees or similar fees or commissions payable by the Company
or any of its Subsidiaries in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with the Company or
any of its Subsidiaries or any action taken by any such Person.
3.11 Disclosure. This Agreement and the documents and certificates
----------
furnished to the Purchasers by the Company, taken as a whole, do not contain any
untrue statement of a material fact or to the Company's knowledge omit to state
a material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
Each of the Purchasers hereby represents and warrants (severally as to
itself and not jointly) to the Company as follows:
4.1 Existence and Power. Each of GAP LP and GAP Coinvestment (a) is
-------------------
a partnership duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation, (b) has all requisite power and
authority to
<PAGE>
11
conduct the business in which it is currently, or is proposed to be, engaged,
and (c) has the requisite partnership power and authority to execute, deliver
and perform its obligations under this Agreement and each of the other
Transaction Documents to which it is a party.
4.2 Authorization; No Contravention. The execution, delivery and
-------------------------------
performance by such Purchaser of this Agreement and each of the other
Transaction Documents to which it is a party and the transactions contemplated
hereby and thereby (including, without limitation, the purchase of the Purchased
Shares and the Warrants) (a) have been duly authorized by all necessary
partnership action, (b) do not contravene the terms of such Purchaser's
organizational documents, or any amendment thereof, (c) do not violate, conflict
with or result in any breach or contravention of or the creation of any Lien
under, any Contractual Obligation of such Purchaser, or any Requirement of Law
applicable to such Purchaser and (d) do not violate any Orders of any
Governmental Authority against, or binding upon, such Purchaser.
4.3 Governmental Authorization; Third Party Consents. No approval,
------------------------------------------------
consent, compliance, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, and no lapse of
a waiting period under any Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the purchase of the Purchased Shares and the Warrants) by, or
enforcement against, such Purchaser of this Agreement and each of the other
Transaction Documents to which such Purchaser is a party or the transactions
contemplated hereby and thereby.
4.4 Binding Effect. Each of the Transaction Documents to which such
--------------
Purchaser is a party has been duly executed and delivered by such Purchaser, and
each constitutes the legal, valid and binding obligations of such Purchaser,
enforceable against it in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability (regardless of whether considered in a proceeding at law or in
equity).
4.5 Purchase for Own Account. The Purchased Shares and the Warrants
------------------------
to be acquired by such Purchaser pursuant to this Agreement and the shares of
Common Stock issuable upon conversion of the Purchased Shares and its Warrant
Shares are being or will be acquired for investment for its own account and with
no intention of distributing or reselling, or granting any participation in,
such Purchased Shares, such shares of Common Stock, such Warrants, such Warrant
Shares or any part thereof in any transaction that would be in violation of the
securities laws of the United States of America, or any state or foreign
jurisdiction, without prejudice, however, to the rights of such Purchaser at all
times to sell or otherwise dispose of all or any part of such Purchased Shares,
such shares of Common Stock, such Warrants or such Warrant Shares under an
effective registration statement under the Securities
<PAGE>
12
Act and under the applicable state or foreign securities laws, or under an
exemption from such registration available under such laws, and subject,
nevertheless, to the disposition of such Purchaser's property being at all times
within its control. If such Purchaser should in the future decide to dispose of
any of such Purchased Shares, such shares of Common Stock, such Warrants or such
Warrant Shares, such Purchaser understands and agrees that it may do so only in
compliance with the Securities Act and applicable state and foreign securities
laws, as then in effect. Such Purchaser agrees to the imprinting, so long as
required by law, of legends on certificates representing all of its Purchased
Shares, shares of Common Stock issuable upon conversion of its Purchased Shares
and its Warrant Shares as required by any applicable state securities laws and
to the following effect (and acknowledges that the Company will make a notation
on its transfer books to such effect):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
LAWS OF ANY JURISDICTION OF THE UNITED STATES. THE SECURITIES MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT AND UNDER THE APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY, IF REQUESTED BY THE COMPANY, THAT THERE IS AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
DISPOSITION (EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE
STOCKHOLDERS AGREEMENT, DATED OCTOBER 24, 1997, AMONG PRIME RESPONSE GROUP
INC. AND THE STOCKHOLDERS NAMED THEREIN AS AMENDED BY EACH OF AMENDMENT NO.
1, AMENDMENT NO. 2 AND AMENDMENT NO. 3 THERETO (THE "STOCKHOLDERS
AGREEMENT"). THE COMPANY WILL NOT REGISTER THE TRANSFER OF SUCH SECURITIES
ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER HAS BEEN MADE IN
COMPLIANCE WITH THE TERMS OF THE STOCKHOLDERS AGREEMENT. THE COMPANY WILL
MAIL A COPY OF SUCH AGREEMENT, TOGETHER WITH A COPY OF THE EXPRESS TERMS OF
THE SECURITIES AND THE OTHER CLASS OR CLASSES AND SERIES OF SHARES, IF ANY,
WHICH THE COMPANY IS AUTHORIZED TO ISSUE, TO THE RECORD HOLDER OF THIS
CERTIFICATE, WITHOUT CHARGE, WITHIN
<PAGE>
13
FIVE DAYS AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.
4.6 Restricted Securities. Such Purchaser understands that the
---------------------
Purchased Shares, its Warrant and the Warrant Shares issuable upon exercise of
its Warrant will not be registered under the Securities Act at the time of their
issuance for the reason that the sale provided for in this Agreement is exempt
pursuant to Rule 506 of Regulation D promulgated under the Securities Act and
that the reliance of the Company on such exemption is predicated in part on such
Purchaser's representations set forth herein. Such Purchaser also represents
that it is experienced in evaluating companies such as the Company, has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment and has the ability to suffer
the total loss of its investment. Such Purchaser further represents that it has
had the opportunity to ask questions of and receive answers from the Company
concerning the terms and conditions of the offering and the Company's business,
management and financial affairs and to obtain additional information to such
Purchaser's satisfaction.
4.7 Investment Experience. Such Purchaser is an investor in
---------------------
securities of companies in the development stage and acknowledges that it has,
by reason of its business and financial experience, the capacity to protect its
own interest in connection with the transaction and that it is able to bear the
economic risk of its investment in the transaction. Such Purchaser is an
"Accredited Investor" as defined in Rule 501(a) under the Securities Act.
4.8 Broker's, Finder's or Similar Fees. There are no brokerage
----------------------------------
commissions, finder's fees or similar fees or commissions payable by such
Purchaser, in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with such Purchaser or any action taken
by such Purchaser.
ARTICLE V.
CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE
----------------------------
The obligation of the Purchasers to purchase the Purchased Shares and
the Warrants, to pay the purchase price therefor at the Closing and to perform
their other obligations hereunder shall be subject to the satisfaction as
determined by, or waiver by, the Purchasers of the following conditions on or
before the Closing Date:
5.1 Secretary's Certificate. The Purchasers shall have received a
-----------------------
certificate from the Company, in form and substance reasonably satisfactory to
the Purchasers, dated the Closing Date and signed by the Secretary or an
Assistant Secretary of the Company, certifying that the attached copies of the
Certificate of
<PAGE>
14
Incorporation, the Certificate of Designations, the By-laws and resolutions of
the Board of Directors approving this Agreement and each of the other
Transaction Documents to which the Company is a party and the transactions
contemplated hereby and thereby, are all true, complete and correct and remain
unamended and in full force and effect.
5.2 Filing of Certificate of Designations. The Certificate of
-------------------------------------
Designations shall have been duly filed by the Company with the Secretary of
State of the State of Delaware in accordance with the General Corporation Law of
the State of Delaware.
5.3 Stockholders Agreement Amendment. The Company, James Carling,
--------------------------------
Nevin Prakash, Richard S. Braddock and Allen Swann and the other stockholders
party thereto shall have duly executed and delivered the Stockholders Agreement
Amendment.
5.4 Registration Rights Agreement Amendment. The Company, James
---------------------------------------
Carling and Nevin Prakash shall have duly executed and delivered the
Registration Rights Agreement Amendment.
5.5 Purchased Shares. The Company shall be prepared to deliver to
----------------
each of the Purchasers certificates in definitive form representing the number
of Purchased Shares set forth opposite such Purchaser's name on Schedule 2.1
------------
hereto, registered in the name of such Purchaser.
5.6 Warrants. The Company shall have duly executed and delivered to
--------
GAP LP the GAP LP Warrant and to GAP Coinvestment the GAPCO Warrant, each
substantially in the form attached hereto as Exhibit E, and registered in the
---------
name of GAP LP and GAP Coinvestment, respectively.
5.7 Waivers. James Carling, Nevin Prakash, Richard S. Braddock and
-------
Allen Swann shall have waived any preemptive rights with respect to the
Purchased Shares pursuant to Section 4 of the Stockholders Agreement, dated as
of October 24, 1997, among the Company, GAP 42, GAP Coinvestment and the
stockholders named therein, as amended (as so amended, the "Stockholders
Agreement").
5.8 Opinion of Counsel. The Purchasers shall have received an
------------------
opinion of Brobeck Hale and Dorr, counsel to the Company, dated the Closing
Date, relating to the transactions contemplated by or referred to herein,
substantially in the form attached hereto as Exhibit D.
---------
5.9 Adjustments to Series A and Series B Conversion Prices. The
------------------------------------------------------
Purchasers shall have received resolutions of the Board of Directors, in form
and substance satisfactory to the Purchasers, approving the anti-dilution
adjustments to the conversion prices set forth in the certificates of
designations relating to the Series A
<PAGE>
15
Preferred Stock and the Series B Preferred Stock respectively which are
triggered by the issuance of the shares of Series C Preferred Stock and the
Warrants contemplated by this Agreement.
ARTICLE VI.
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
--------------------------
The obligation of the Company to issue and sell the Purchased Shares
and the Warrants and the obligation of the Company to perform its other
obligations hereunder, shall be subject to the satisfaction as determined by, or
waiver by, the Company of the following conditions on or before the Closing
Date:
6.1 Stockholders Agreement Amendment . The Purchasers shall
--------------------------------
have duly executed and delivered the Stockholders Agreement Amendment.
6.2 Registration Rights Agreement Amendment . The Purchasers
---------------------------------------
shall have duly executed and delivered the Registration Rights Agreement
Amendment.
6.3 Payment by the Purchasers . Each of the Purchasers shall be
---------------------------------------
prepared to pay the aggregate purchase price for its Purchased Shares and its
Warrant.
6.4 Waiver. GAP 42, GAP 48 and GAP Coinvestment I shall have
------
waived any preemptive rights with respect to the Purchased Shares, the Warrants
and the Warrant Shares pursuant to Section 4 of the Stockholders Agreement.
ARTICLE VII.
INDEMNIFICATION
---------------
7.1 Indemnification. Except as otherwise provided in this Article
---------------
7, the Company and each of the Purchasers, severally and not jointly, as
applicable (the "Indemnifying Party"), agrees to indemnify, defend and hold
harmless the Purchasers, in the case of indemnity by the Company, or the
Company, in the case of indemnity by the Purchasers, as applicable, and their
Affiliates and their respective officers, directors, agents, employees,
subsidiaries, partners, members and controlling persons (each, an "Indemnified
Party") to the fullest extent permitted by law from and against any and all
losses, Claims (including any Claim by a third party), damages, expenses
(including reasonable fees, disbursements and other charges of counsel incurred
by the Indemnified Party in any action between the Indemnifying Party and the
Indemnified Party or between the Indemnified Party and any third party
<PAGE>
16
or otherwise) or other liabilities (collectively, "Losses") resulting from,
arising out of or relating to any breach of any representation or warranty,
covenant or agreement by the Indemnifying Party in this Agreement or the other
Transaction Documents, including, without limitation, any legal, administrative
or other actions (including actions brought by the Purchasers or the Company or
any equity holders or partners of such Persons or derivative actions brought by
any Person claiming through or in the Company's name or in the name of either of
the Purchasers), proceedings or investigations (whether formal or informal), or
written threats thereof, based upon, relating to or arising out of this
Agreement or the other Transaction Documents, the transactions contemplated
hereby and thereby, or any Indemnified Party's role therein or in transactions
contemplated thereby; provided, that the Indemnifying Party shall not be liable
--------
under this Section 7.1 to an Indemnified Party to the extent that it is finally
judicially determined that such Losses resulted primarily from the material
breach by such Indemnified Party of any representation, warranty, covenant or
other agreement of such Indemnified Party contained in this Agreement; and
provided, further, that if and to the extent that such indemnification is
- -------- -------
unenforceable for any reason, the Indemnifying Party shall make the maximum
contribution to the payment and satisfaction of such Losses which shall be
permissible under applicable laws. The amount of any payment by any
Indemnifying Party to any Indemnified Party herewith in respect of any Loss
shall be of sufficient amount to make such Indemnified Party whole, and, in the
case of indemnity by the Company, shall consist of an amount sufficient to make
up any diminution in the value of the Purchased Shares or the Warrants held by
such Indemnified Party resulting from the payment by the Company of such
indemnification payment. In connection with the obligation of the Indemnifying
Party to indemnify for expenses as set forth above, the Indemnifying Party
shall, upon presentation of appropriate invoices containing reasonable detail,
reimburse each Indemnified Party for all such expenses (including reasonable
fees, disbursements and other charges of counsel incurred by the Indemnified
Party in any action between the Indemnifying Party and the Indemnified Party or
between the Indemnified Party and any third party or otherwise) as they are
incurred by such Indemnified Party; provided, however, that if an Indemnified
-------- -------
Party is reimbursed hereunder for any expenses, such reimbursement of expenses
shall be refunded to the extent it is finally judicially determined that the
Losses in question resulted primarily from the willful misconduct or gross
negligence of such Indemnified Party. Notwithstanding the foregoing,
indemnification with respect to this Section 7.1 by the Company shall be limited
to the aggregate consideration paid by the Purchasers for the Purchased Shares
and the Warrants, and indemnification by the Purchasers shall be limited to the
aggregate consideration paid by such Purchaser for its Purchased Shares and its
Warrant.
7.2 Notification. Each Indemnified Party under this Article 7
------------
shall, promptly after the receipt of notice of the commencement of any action,
investigation, claim or other proceeding against such Indemnified Party in
respect of which indemnity may be sought from the Indemnifying Party under this
Article 7, notify the Indemnifying Party in writing of the commencement thereof.
The omission of any Indemnified Party to so notify the Indemnifying Party of any
such action shall not
<PAGE>
17
relieve the Indemnifying Party from any liability which it may have to such
Indemnified Party (a) other than pursuant to this Article 7 or (b) under this
Article 7 unless, and only to the extent that, such omission results in the
Indemnifying Party's forfeiture of substantive rights or defenses. In case any
such action, claim or other proceeding shall be brought against any Indemnified
Party, and it shall notify the Indemnifying Party of the commencement thereof,
the Indemnifying Party shall be entitled to assume the defense thereof at its
own expense, with counsel satisfactory to such Indemnified Party in its
reasonable judgment; provided, however, that any Indemnified Party may, at its
-------- -------
own expense, retain separate counsel to participate in such defense at its own
expense. Notwithstanding the foregoing, in any action, claim or proceeding in
which both the Indemnifying Party, on the one hand, and an Indemnified Party, on
the other hand, are, or are reasonably likely to become, a party, such
Indemnified Party shall have the right to employ separate counsel at the expense
of the Indemnifying Party and to control its own defense of such action, claim
or proceeding if, in the reasonable opinion of counsel to such Indemnified
Party, a conflict or potential conflict exists between the Indemnifying Party,
on the one hand, and such Indemnified Party, on the other hand, that would make
such separate representation advisable; provided, however, that the Indemnifying
-------- -------
Party shall not be liable for the fees and expenses of more than one counsel to
all Indemnified Parties. The Indemnifying Party agrees that it will not, without
the prior written consent of the Indemnified Party, settle, compromise or
consent to the entry of any judgment in any pending or threatened claim, action
or proceeding relating to the matters contemplated hereby (if any Indemnified
Party is a party thereto or has been actually threatened to be made a party
thereto) unless such settlement, compromise or consent includes an unconditional
release of each Indemnified Party from all liability arising or that may arise
out of such claim, action or proceeding. The Indemnifying Party shall not be
liable for any settlement of any claim, action or proceeding effected against an
Indemnified Party without the Indemnifying Party's written consent, which
consent shall not be unreasonably withheld. The rights accorded to an
Indemnified Party hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or otherwise;
provided, however, that notwithstanding the foregoing or anything to the
- -------- -------
contrary contained in this Agreement, nothing in this Article 7 should restrict
or limit any rights that any Indemnified Party may have to seek equitable
relief.
ARTICLE VIII.
AFFIRMATIVE COVENANTS
---------------------
The Company hereby covenants and agrees with the Purchasers as
follows:
8.1 Financial Statements and Other Information. The Company shall
------------------------------------------
deliver to each Purchaser, in form and substance satisfactory to such Purchaser:
<PAGE>
18
(a) as soon as available, but not later than one hundred twenty (120)
days after the end of each fiscal year of the Company, a copy of the audited
balance sheet of the Company as of the end of such fiscal year and the related
statements of operations and cash flows for such fiscal year, setting forth in
each case in comparative form the figures for the previous year, all in
reasonable detail and accompanied by a management summary and analysis of the
operations of the Company for such fiscal year and by the opinion of a
nationally recognized independent certified public accounting firm which report
shall state without qualification that such financial statements present fairly
the financial condition as of such date and results of operations and cash flows
for the periods indicated in conformity with GAAP applied on a consistent basis;
(b) commencing with the fiscal period ending on June 30, 1999, as soon
as available, but in any event not later than forty-five (45) days after the end
of each of the first three fiscal quarters of each fiscal year, the unaudited
balance sheet of the Company, and the related statements of operations and cash
flows for such quarter and for the period commencing on the first day of the
fiscal year and ending on the last day of such quarter, all certified by an
appropriate officer of the Company as presenting fairly the financial condition
as of such date and results of operations and cash flows for the periods
indicated in conformity with GAAP applied on a consistent basis, subject to
normal year-end adjustments and the absence of footnotes required by GAAP; and
(c) as promptly as practicable, but not later than five (5) days after
the end of each fiscal year of the Company, a certificate signed by the Chief
Executive Officer of the Company in customary form certifying that the Company
is not a "foreign person" within the meaning of Section 1445 of the Code.
(d) Reservation of Common Stock. The Company shall at all times (i)
---------------------------
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issue or delivery upon conversion of the Purchased Shares,
and (ii) reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issue or delivery upon exercise of the
Warrants, as provided in the Certificate of Designations and the Warrants (in
the case of the Warrant Shares), the maximum number of shares of Common Stock
that may be issuable or deliverable upon such conversion or exercise, as the
case may be. Such shares of Common Stock are duly authorized and, when issued
or delivered in accordance with the Certificate of Designations and the Warrants
(in the case of the Warrant Shares), as the case may be, against payment
therefor, shall be validly issued, fully paid and non-assessable. The Company
shall issue such shares of Common Stock in accordance with the terms of the
Certificate of Designations or the Warrants, as the case may be, and otherwise
comply with the terms hereof and thereof.
<PAGE>
19
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of the Company or
the Purchasers, or acceptance of the Purchased Shares and the Warrants or
termination of this Agreement until the third anniversary of the Closing Date.
9.2 Notices. All notices, demands and other communications provided
-------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
(a) if to the Company:
Prime Response Group Inc.
150 CambridgePark Drive
Cambridge, MA 02140
Telecopy: (617) 876-8383
Attention: Chief Executive Officer
with a copy to:
Brobeck Hale and Dorr
Hasilwood House
60 Bishopsgate
London EC2N 4AJ
England
Telecopy: 44 171 638 5888
Attention: David Ayres
(b) if to the Purchasers:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-8818
Attention: William E. Ford
<PAGE>
20
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Matthew Nimetz, Esq.
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial courier service; five (5) Business Days
after being deposited in the mail, postage prepaid, if mailed; and when receipt
is mechanically acknowledged, if properly telecopied.
9.3 Successors and Assigns; Third Party Beneficiaries. This
-------------------------------------------------
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto. Subject to applicable securities laws,
each of the Purchasers may assign any of its rights under any of the Transaction
Documents to any of its Affiliates. The Company may not assign any of its
rights under this Agreement without the written consent of the holders of a
majority of the Purchased Shares. No Person other than the parties hereto and
their successors and permitted assigns is intended to be a beneficiary of this
Agreement.
9.4 Amendment and Waiver.
--------------------
(a) No failure or delay on the part of the Company or the
Purchasers in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company or the Purchasers at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company or the Purchasers from the terms of
any provision of this Agreement, shall be effective only if it is made or given
in writing and signed by the Company and the holders of a majority of the
Purchased Shares. Except where notice is specifically required by this
Agreement, no notice to or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
9.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
<PAGE>
21
9.6 Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
9.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION.
9.8 Severability. If any one or more of the provisions contained
------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
9.9 Entire Agreement. This Agreement, together with the exhibits
----------------
and schedules hereto and the other Transaction Documents, is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein or therein. This Agreement, together with the exhibits
and schedules hereto and the other Transaction Documents, supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
9.10 Fees. Upon the Closing the Company shall reimburse GAP LP and
----
GAP Coinvestment for their reasonable fees, disbursements and other charges of
counsel incurred in connection with the transactions contemplated by this
Agreement. Except as provided in the preceding sentence, each party hereto
shall bear their own costs and expenses in connection with the preparation,
execution and delivery of this Agreement and other Transaction Documents, and
the transactions contemplated hereby and thereby.
9.11 Publicity. Except as may be required by any applicable
---------
Requirement of Law, none of the parties hereto shall issue a publicity release
or public announcement or otherwise make any disclosure concerning this
Agreement or the transactions contemplated hereby, without prior approval by the
other parties hereto (which approval shall not be unreasonably withheld);
provided, however, that nothing in this Agreement shall restrict any Purchaser
- -------- -------
from disclosing information (a) that is already publicly available; (b) to the
prospective transferee in connection with any contemplated transfer of any of
the Purchased Shares; and (c) to its attorneys, accountants, consultants and
other advisors to the extent necessary to obtain their services in connection
with such Purchaser's investment in the Company. GAP LLC may disclose on its
worldwide web page, www.gapartners.com, the name of the Company, its address,
the identity of its Chief Executive Officer, a description of the
<PAGE>
22
Company's business (which description shall be reasonably acceptable to the
Company) and the aggregate dollar amount invested by GAP LLC and its Affiliates
in the Company. If any announcement is required by any applicable Requirement of
Law to be made by any party hereto, prior to making such announcement such party
will deliver a draft of such announcement to the other parties and shall give
the other parties an opportunity to comment thereon.
9.12 Further Assurances. Each of the parties shall execute such
------------------
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person, and otherwise fulfilling, or causing the fulfillment of, the
conditions to the Closing set forth in Articles 5 and 6) as may be reasonably
required or desirable to carry out or to perform the provisions of this
Agreement and to consummate and make effective as promptly as possible the
transactions contemplated by this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock and
Warrant Purchase Agreement to be executed and delivered by their respective
officers hereunto duly authorized on the date first above written.
PRIME RESPONSE GROUP INC.
By: /s/ Peter J. Boni
________________________________
Name: Peter J. Boni
Title: President & CEO
GENERAL ATLANTIC PARTNERS 52, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC,
its General Partner
By: /s/ illegible
___________________________
Name:
Title: A Managing Member
GAP COINVESTMENT PARTNERS II, L.P.
By: /s/ illegible
________________________________
Name:
Title: A General Partner
<PAGE>
Schedule 2.1
------------
Purchased Shares, Warrants and Purchase Price
---------------------------------------------
<TABLE>
<CAPTION>
Shares of Common Stock
Issuable Upon
Purchaser Purchased Shares Exercise of Warrants Purchase Price
- --------- ---------------- -------------------- --------------
<S> <C> <C> <C>
GAP LP 814,285 273,099 $2,442,855
GAP Coinvestment 185,715 62,286 557,145
--------- ------- ----------
Total: 1,000,000 335,385 $3,000,000
</TABLE>
<PAGE>
EXHIBIT 10.18
Execution Copy
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
THE SECURITIES LAWS OF ANY STATE. NEITHER THIS WARRANT, SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH
LAWS OR PURSUANT TO A WRITTEN OPINION OF COUNSEL (WHICH COUNSEL AND OPINION
SHALL BE REASONABLY SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS NOT
REQUIRED.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER DISPOSITION
(EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES REPRESENTED BY THIS
WARRANT AND THE SECURITIES ACQUIRED PURSUANT TO THE EXERCISE OF THIS WARRANT ARE
RESTRICTED BY THE TERMS OF THE STOCKHOLDERS AGREEMENT, DATED OCTOBER 24, 1997,
AS THE SAME MAY HAVE BEEN AMENDED FROM TIME TO TIME, AMONG PRIME RESPONSE GROUP
INC., GENERAL ATLANTIC PARTNERS 42, L.P., GAP COINVESTMENT PARTNERS, L.P. AND
THE STOCKHOLDERS NAMED THEREIN, A COPY OF WHICH MAY BE INSPECTED AT THE
COMPANY'S PRINCIPAL OFFICE. THE COMPANY WILL NOT REGISTER THE TRANSFER OF SUCH
SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER HAS BEEN
MADE IN COMPLIANCE WITH THE TERMS OF THE SHAREHOLDERS AGREEMENT.
__________________________________________________
PRIME RESPONSE GROUP INC.
COMMON STOCK PURCHASE WARRANT
___________________________________________________
This certifies that, for good and valuable consideration, Prime Response
Group Inc., a Delaware corporation (the "Company"), grants to General Atlantic
----------------
Partners 52, L.P., a Delaware limited partnership (the "Warrantholder"), the
- -----------------
right to subscribe for and purchase from the Company, at any time on or prior to
the Expiration Date, 340,100 validly issued, fully paid and nonassessable
shares, par value $.01 per share, of common stock of the Company (the "Warrant
Shares"), at the exercise price per share of $2.56 (the "Exercise Price"), all
subject to the terms, conditions and adjustments herein set forth. Capitalized
terms used herein shall have the meanings ascribed to such terms in Section 9
below.
<PAGE>
2
This Warrant is issued pursuant to, and in accordance, with Section 2.1 of
the Stock and Warrant Purchase Agreement and is subject to the terms thereof.
Section 2.1 of the Stock and Warrant Purchase Agreement requires the Company to
issue to the Warrantholder a warrant to purchase an aggregate of 340,100 shares
of Common Stock.
1. Warrant Shares. This Warrant entitles the holder to purchase 340,100
--------------
shares of Common Stock.
2. Exercise of Warrant; Payment of Taxes.
-------------------------------------
2.1 Exercise of Warrant. Subject to the terms and conditions set
-------------------
forth herein, this Warrant may be exercised, in whole or in part, by the
Warrantholder at any time on or prior to the Expiration Date by:
(a) the surrender of this Warrant to the Company, with a duly
executed Exercise Form, and
(b) the delivery of payment to the Company, for the account of
the Company, by cash, wire transfer, certified or official bank check or any
other means approved by the Company, of the Exercise Price in lawful money of
the United States of America.
The Company agrees that the Warrant Shares shall be deemed to be issued to the
Warrantholder as the record holder of such Warrant Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for the Warrant Shares as aforesaid.
2.2 Cashless Exercise.
-----------------
(a) In lieu of the payment of the Exercise Price, the
Warrantholder shall have the right (but not the obligation), to require the
Company to convert this Warrant, in whole or, from time to time, in part, into
shares of Common Stock (the "Conversion Right") as provided for in this Section
2.2. Upon exercise of the Conversion Right, the Company shall deliver to the
Warrantholder (without payment by the Warrantholder of any of the Exercise
Price) that number of shares of Common Stock equal to the quotient obtained by
dividing (i) the value of the Warrant (or the part thereof being converted) at
the time the Conversion Right is exercised (determined by subtracting the
aggregate Exercise Price in effect immediately prior to the exercise of the
Conversion Right from the aggregate Current Market Price for the shares of
Common Stock issuable upon exercise of the Warrant (or the part thereof being
converted) immediately prior to the exercise of the Conversion Right) by (ii)
the Current Market Price of one share of Common Stock immediately prior to the
exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the Warrantholder on
any Business Day on or prior to the Expiration Date by delivering
<PAGE>
3
this Warrant, with a duly executed Exercise Form with the conversion section
completed, to the Company, exercising the Conversion Right and specifying the
total number of shares of Common Stock that the Warrantholder will be issued
pursuant to such conversion.
2.3 Warrant Shares Certificate. A stock certificate or certificates
--------------------------
for the Warrant Shares specified in the Exercise Form shall be delivered to the
Warrantholder within five Business Days after receipt of the Exercise Form by
the Company and, if the Conversion Right is not exercised, payment by the
Warrantholder of the purchase price. If this Warrant shall have been exercised
only in part, the Company shall, at the time of delivery of the stock
certificate or certificates, deliver to the Warrantholder a new Warrant
evidencing the rights to purchase the remaining Warrant Shares, which new
Warrant shall in all other respects be identical with this Warrant.
2.4 Payment of Taxes. The issuance of certificates for Warrant
----------------
Shares shall be made without charge to the Warrantholder at any time.
3. Restrictions on Transfer; Restrictive Legends.
---------------------------------------------
3.1 This Warrant may not be offered, sold, transferred, pledged or
otherwise disposed of, in whole or in part, to any Person other than to an
Affiliate of the Warrantholder, without the written consent of the Company,
which shall not be unreasonably withheld, and the Warrant Shares may not be
offered, sold, transferred, pledged or otherwise disposed of, in whole or in
part, to any Person other than in accordance with the Stockholders Agreement (so
long as such agreement is in effect).
3.2 Except as otherwise permitted by this Section 3, each Warrant
(and each Warrant issued in substitution for any Warrant pursuant to Section 4)
shall be stamped or otherwise imprinted with a legend in substantially the form:
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY STATE. NEITHER THIS WARRANT, SUCH
SECURITIES NOR ANY INTEREST THEREIN MAY BE TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS OR PURSUANT TO A
WRITTEN OPINION OF COUNSEL (WHICH COUNSEL AND OPINION SHALL BE REASONABLY
SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED.
<PAGE>
4
Except as otherwise permitted by this Section 3, each stock certificate for
Warrant Shares issued upon the exercise of any Warrant and each stock
certificate issued upon the direct or indirect transfer of any such Warrant
Shares shall be stamped or otherwise imprinted with a legend in substantially
the form stipulated in the Stockholders Agreement (so long as such agreement is
in effect). Notwithstanding the foregoing, the Warrantholder may require the
Company to issue a Warrant or a stock certificate for Warrant Shares, in each
case without a legend, if and to the extent permitted by, and in accordance
with, the Stockholders Agreement (so long as such agreement is in effect).
4. Reservation and Registration of Shares. The Company covenants and
--------------------------------------
agrees as follows:
(a) All Warrant Shares that are issued upon the exercise of this
Warrant shall, upon issuance, be validly issued, fully paid and nonassessable,
not subject to any preemptive rights, and, except as provided in the
Stockholders Agreement, free from all taxes, liens, security interests, charges,
and other encumbrances with respect to the issuance thereof, other than taxes in
respect of any transfer occurring contemporaneously with such issue.
(b) The Company shall at all times have authorized and reserved,
and shall keep available free from preemptive rights, a sufficient number of
shares of Common Stock to provide for the exercise of the rights represented by
this Warrant.
(c) The Company shall not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
and shall at all times in good faith assist in performing and giving effect to
the terms hereof and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of the Warrantholder against dilution
or other impairment.
5. Anti-dilution Adjustments. The number of Warrant Shares to be
-------------------------
received upon exercise of this Warrant shall be subject to adjustment as
follows:
5.1 Dividend, Subdivision, Combination or Reclassification of Common
----------------------------------------------------------------
Stock. In the event that the Company shall at any time or from time to time,
- -----
after the issuance of this Warrant but prior to the exercise hereof, (w) pay a
dividend or make a distribution on the outstanding shares of Common Stock
payable in Capital Stock, (x) subdivide the outstanding shares of Common Stock
into a larger number of shares, (y) combine the outstanding shares of Common
Stock into a smaller number of shares or (z) issue any shares of its Capital
Stock in a reclassification of the Common Stock (other than any such event for
which an adjustment is made pursuant to another clause of this Section 5), then,
and in each such case, (A) the aggregate number of Warrant Shares for which this
Warrant is exercisable (the "Warrant Share Number") immediately prior to such
event shall be adjusted (and any other appropriate actions shall be taken by the
Company) so that the Warrantholder shall be entitled to receive
<PAGE>
5
upon exercise of this Warrant the number of shares of Common Stock or other
securities of the Company that it would have owned or would have been entitled
to receive upon or by reason of any of the events described above, had this
Warrant been exercised immediately prior to the occurrence of such event and (B)
the Exercise Price payable upon the exercise of this Warrant shall be adjusted
by multiplying such Exercise Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of Warrant Shares
purchasable upon the exercise of the Warrant immediately prior to such
adjustment, and the denominator of which shall be the number of Warrant Shares
purchasable immediately thereafter; provided, however, that the Exercise Price
-------- -------
for each Warrant Share shall in no event be less than the par value of such
Warrant Share. An adjustment made pursuant to this Section 5.1 shall become
effective retroactively (x) in the case of any such dividend or distribution, to
a date immediately following the close of business on the record date for the
determination of holders of Common Stock entitled to receive such dividend or
distribution or (y) in the case of any such subdivision, combination or
reclassification, to the close of business on the day upon which such corporate
action becomes effective.
5.2 Certain Distributions. In case the Company shall at any time or
---------------------
from time to time distribute to all holders of shares of its Common Stock
(including any such distribution made in connection with a merger or
consolidation in which the Company is the resulting or surviving Person and the
Common Stock is not changed or exchanged) cash, evidences of indebtedness of the
Company or another Person, securities of the Company or another Person or other
assets (excluding dividends payable in shares of Common Stock for which
adjustment is made under Section 5.1) or rights or warrants to subscribe for or
purchase the foregoing, then, and in each such case, (A) the Warrant Share
----
Number shall be increased by being multiplied by a fraction (i) the numerator of
which shall be the Current Market Price of one share of Common Stock immediately
prior to the record date for the distribution of such cash, evidences of
indebtedness, securities, other assets or rights or warrants and (ii) the
denominator of which shall be the Current Market Price of one share of Common
Stock immediately prior to such record date less the Fair Market Value of the
portion of such cash, evidences of indebtedness, securities, other assets or
rights or warrants so distributed and (B) the Exercise Price in effect
immediately prior to such record date shall be decreased (and any other
appropriate actions shall be taken by the Corporation) by being multiplied by a
fraction (i) the numerator of which shall be such Current Market Price of the
Common Stock less the then Fair Market Value of the portion of the cash,
evidences of indebtedness, securities or other assets so distributed or of such
subscription rights or warrants applicable to one share of Common Stock and (ii)
the denominator of which shall be the Current Market Price of the Common Stock
on the record date referred to below (such decreased Exercise Price, the
"Adjusted Exercise Price"). Such adjustment shall be made whenever any such
distribution is made and shall become effective retroactively to a date
immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution; provided,
--------
however, that no adjustment shall be made with respect to any distribution of
- -------
rights to purchase securities of the Company if the Warrantholder would
otherwise be entitled to receive such rights upon exercise at any time of this
Warrant. Such adjustment shall be made whenever any such distribution is made
and
<PAGE>
6
shall become effective retroactively to the date immediately following the close
of business on the record date for the determination of shareholders entitled to
receive such distribution.
5.3 Other Changes. In case the Company at any time or from time to
-------------
time, after the issuance of this Warrant but prior to the exercise hereof, shall
take any action affecting its Common Stock similar to or having an effect
similar to any of the actions described in any of Sections 5.1, 5.2 or 5.7 (but
not including any action described in any such Section) and the Board of
Directors of the Company in good faith determines that it would be equitable in
the circumstances to adjust the Warrant Share Number as a result of such action,
then, and in each such case, the Warrant Share Number shall be adjusted in such
manner and at such time as the Board of Directors of the Company in good faith
determines would be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
Warrantholders).
5.4 De Minimis Adjustments. Notwithstanding anything herein to the
----------------------
contrary, no adjustment under this Section 5 need be made to the Warrant Share
Number if the Company receives written notice from the Warrantholder that no
such adjustment is required.
5.5 Abandonment. If the Company shall take a record of the holders
-----------
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
shareholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then no adjustment in the Warrant Share Number shall be required
by reason of the taking of such record.
5.6 Certificate as to Adjustments. Upon any increase in the Warrant
-----------------------------
Share Number or adjustment of the Exercise Price, the Company shall within a
reasonable period (not to exceed 10 days) following any of the foregoing
transactions deliver to the Warrantholder a certificate, signed by (i) the
President or a Vice President of the Company and (ii) the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the Company,
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the increased
Warrant Share Number then in effect following such adjustment.
5.7 Reorganization, Reclassification, Merger or Sale. In case of any
------------------------------------------------
spin-off by the Company of another Person (the "Spin-off Entity"), in addition
to all other adjustments of the Warrant Share Number and the Exercise Price
pursuant to this Section 5, the Company shall issue to the Warrantholder a new
warrant, in form and substance satisfactory to the Company and the
Warrantholder, entitling the Warrantholder to purchase, at an exercise price
equal to the excess of the Exercise Price in effect immediately prior to such
spin-off over the Adjusted Exercise Price, the number of shares of common stock
of the Spin-off Entity that the Warrantholder would have owned had the
Warrantholder, immediately prior to such spin-off, exercised this
<PAGE>
7
Warrant, and in case of any capital reorganization, reclassification, a Merger,
a Sale or a consolidation of the Company with or into another Person or other
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value) (each, a
"Transaction"), the Company shall execute and deliver to the Warrantholder at
least ten (10) Business Days prior to effecting such Transaction a certificate
stating that the Warrantholder shall have the right thereafter to exercise this
Warrant for the kind and amount of shares of stock or other securities, property
or cash receivable upon such Transaction by a holder of the number of shares of
Common Stock into which this Warrant could have been exercised immediately prior
to such Transaction and provision shall be made therefor in the agreement, if
any, relating to such Transaction. Such certificate shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 5. The provisions of this Section 5.7
and any equivalent thereof in any such certificate similarly shall apply to
successive transactions.
5.8 Dilution Notices. In case at any time or from time to time:
----------------
(x) the Company shall declare a dividend (or any other
distribution) on its shares of Common Stock;
(y) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or of any other rights or warrants; or
(z) there shall occur a spin-off or Transaction;
then the Company shall mail to the Warrantholder, as promptly as possible but in
any event at least ten (10) days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or granting of rights or
warrants are to be determined, or (B) the date on which such spin-off or
Transaction is expected to become effective and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for shares of stock or other securities or property or cash
deliverable upon such Transaction. Notwithstanding the foregoing, in the case
of any event to which Section 5.7 is applicable, the Company shall also deliver
the certificate described in such Section 5.7 to the Warrantholder at least 10
Business Days prior to effecting such reorganization or reclassification as
aforesaid.
6. Loss or Destruction of Warrant. Subject to the terms and conditions
------------------------------
hereof, upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
loss, theft or destruction, of such bond or indemnification as the Company may
reasonably
<PAGE>
8
require, and, in the case of such mutilation, upon surrender and cancellation of
this Warrant, the Company will execute and deliver a new Warrant of like tenor.
7. Ownership of Warrant. The Company may deem and treat the person in
--------------------
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of
transfer.
8. Amendments. Any provision of this Warrant may be amended and the
----------
observance thereof waived only with the written consent of the Company and the
Warrantholder.
9. Definitions. As used herein, unless the context otherwise requires,
-----------
the following terms have the following respective meanings:
"Adjusted Exercise Price" has the meaning specified in Section 5.2 of this
-----------------------
Warrant.
"Affiliate" has the meaning specified in the Stock and Warrant Purchase
----------
Agreement.
"Board of Directors" means the Board of Directors of the Company.
------------------
"Business Day" means any day other than a Saturday, Sunday or a day on
------------
which national banks are authorized by law to close in the State of New York.
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, participation, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock (but excluding any debt security whether or not it is exchangeable
for or convertible into such capital stock).
"Common Stock" means the common stock, par value $.01 per share, of the
------------
Company.
"Common Stock Equivalent" means any security or obligation which is by its
-----------------------
terms convertible into shares of Common Stock or another Common Stock
Equivalent, including, without limitation, any option, warrant or other
subscription or purchase right with respect to Common Stock.
"Company" has the meaning specified on the cover of this Warrant.
-------
"Current Market Price" means, as of the date of determination, (a) the
--------------------
average of the daily Market Price under clause (a), (b) or (c) of the definition
thereof of the Common Stock during the immediately preceding thirty (30) trading
days ending on such date, and (b) if the Common Stock is not then listed or
admitted to trading on any
<PAGE>
9
securities exchange or quoted in the over-the-counter market, then the Market
Price under clause (d) of the definition thereof on such date.
"Excluded Transaction" means (a) options to purchase shares of Common Stock
--------------------
which may be granted to employees, consultants or directors of the Company
pursuant to a stock option plan approved by the Board of Directors of the
Company, (b) a subdivision of the outstanding shares of Common Stock into a
larger number of shares of Common Stock or (c) capital stock issued upon
exercise, conversion or exchange of any Common Stock Equivalent.
"Exercise Form" means an Exercise Form in the form annexed hereto as
-------------
Exhibit A.
"Exercise Price" has the meaning specified on the cover of this Warrant.
--------------
"Expiration Date" means February ___, 2004.
---------------
"Fair Market Value" means the amount which a willing buyer would pay a
-----------------
willing seller in an arm's length transaction reasonably determined in good
faith by the Board of Directors or, if such determination is not reasonably
satisfactory to the Warrantholder, such determination as shall be made by a
nationally recognized investment banking firm selected by the Company and the
Warrantholder, the expenses for which shall be borne equally by the Company and
the Warrantholder. Any determination of the Fair Market Value by the Board of
Directors or such investment banking firm shall be made based on a valuation of
the Company as an entirety without regard to any discount for minority interests
or disparate voting rights among classes of capital stock.
"GAP Coinvestment II" means GAP Coinvestment Partners II, L.P., a New
--------------------
York limited partnership.
"GAP LP" means General Atlantic Partners 52, L.P., a Delaware limited
------
partnership.
"Market Price" means, as of the date of determination, (a) the closing
------------
price per share of Common Stock on such date published in The Wall Street
Journal or, if no such closing price on such date is published in The Wall
Street Journal, the average of the closing bid and asked prices on such date, as
officially reported on the principal securities exchange (including, without
limitation, The Nasdaq Stock Market, Inc.) on which the Common Stock is then
listed or admitted to trading; or (b) if the Common Stock is not then listed or
admitted to trading on any securities exchange but is designated as a national
market system security by the National Association of Securities Dealers, Inc.,
the last trading price of the Common Stock on such date; or (c) if there shall
have been no trading on such date or if the Common Stock is not so designated,
the average of the reported closing bid and asked prices of the Common Stock on
such date as shown by the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotations System and reported by any member
firm of the New York Stock Exchange selected by the Corporation; or (d)
<PAGE>
10
if none of (a), (b) or (c) is applicable, a market price per share determined in
good faith by the Board of Directors and reasonably acceptable to the
Warrantholder; provided, however, that if such determination is not reasonably
-------- -------
acceptable to the Warrantholder then a market price per share determined at the
Company's expense by an appraiser chosen by mutual agreement of the Company and
the Warrantholder; provided further, that if the Company shall have paid for any
-------- -------
such appraisal in connection with any of its outstanding Warrants within one
fiscal quarter prior to the surrender of this Warrant to the Company by a
Warrantholder, with a duly executed Exercise Form, then the market price per
share determined by such appraisal may be used without conducting an additional
appraisal. Any determination of the Market Price by an appraiser shall be based
on a valuation of the Company as an entirety without regard to any discount for
minority interests or disparate voting rights among classes of capital stock.
"Merger" means (x) the merger or consolidation of the Company into or with
------
one or more Persons or (y) the merger or consolidation of one or more Persons
into or with the Company, if, in the case of (x) or (y), the shareholders of the
Company prior to such merger or consolidation do not retain at least a majority
of the voting power of the surviving Person.
"Person" means any individual, firm, corporation, partnership, limited
------
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
"Purchaser" has the meaning specified in the Stock and Warrant Purchase
---------
Agreement.
"Sale" means the sale, conveyance, exchange or transfer to another Person
----
of (a) the voting shares of the Company if, after such sale, conveyance,
exchange or transfer, the shareholders of the Company prior to such sale,
conveyance, exchange or transfer do not, directly or indirectly, retain at least
a majority of the votes attached to the shares in the capital of the surviving
Person or (b) all or substantially all of the assets of the Company.
"Securities Act" has the meaning specified on the cover of this Warrant, or
--------------
any similar Federal statute, and the rules and regulations of the United States
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the Securities Act
shall be deemed to include a reference to the comparable section, if any, of any
such similar Federal statute.
"Spin-off Entity" has the meaning specified in Section 5.7 of this Warrant.
---------------
"Stock and Warrant Purchase Agreement" means the Stock and Warrant Purchase
------------------------------------
Agreement, dated February ___, 1999, among the Company, GAP LP and GAP
Coinvestment II.
<PAGE>
11
"Stockholders Agreement" has the meaning specified on the cover of this
----------------------
Warrant.
"Transaction" has the meaning specified in Section 5.7 of this Warrant.
-----------
"Warrantholder" has the meaning specified on the cover of this Warrant.
-------------
"Warrant Share Number" has the meaning specified in Section 5.1 of this
--------------------
Warrant.
"Warrant Shares" has the meaning specified on the cover of this Warrant.
--------------
10. Miscellaneous
-------------
10.1 Entire Agreement. This Warrant constitutes the entire agreement
----------------
between the Company and the Warrantholder with respect to the Warrant.
10.2 Binding Effect; Benefits. This Warrant shall inure to the
------------------------
benefit of and shall be binding upon the Company and the Warrantholder and their
respective permitted successors and assigns. Nothing in this Warrant, expressed
or implied, is intended to or shall confer on any person other than the Company
and the Warrantholder, or their respective permitted successors or assigns, any
rights, remedies, obligations or liabilities under or by reason of this Warrant.
10.3 Section and Other Headings. The section and other headings
--------------------------
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
10.4 Notices. All notices, demands and other communications provided
-------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service, overnight mail or personal delivery:
(a) if to the Warrantholder:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-8818
Attention: William E. Ford
with a copy to:
<PAGE>
12
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Matthew Nimetz, Esq.
(b) if to the Company:
Prime Response Group Inc.
Goat Wharf, Brentwood,
TW80PD
United Kingdom
Telecopy: 011-441-814-003-133
Attention: Nigel Cannings, Esq.
with a copy to:
Brobeck Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Telecopy: (650) 496-2755
Attention: Thomas A. Bevilacqua, Esq.
All such notices and communications shall be deemed to have been duly given
when delivered by hand, if personally delivered; when delivered by courier or
overnight mail, if delivered by commercial courier service or overnight mail;
five (5) Business Days after being deposited in the mail, postage prepaid, if
mailed; and when receipt is mechanically acknowledged, if telecopied. Any party
may by notice given in accordance with this Section 10.4 designate another
address or Person for receipt of notices hereunder.
10.5 Severability. Any term or provision of this Warrant which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
10.6 GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
<PAGE>
13
10.7 No Rights or Liabilities as Shareholder. Nothing contained in
---------------------------------------
this Warrant shall be determined as conferring upon the Warrantholder any rights
as a shareholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any securities whether such liabilities are asserted
by the Company or by creditors or shareholders of the Company or otherwise.
<PAGE>
14
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
PRIME RESPONSE GROUP INC.
By: /s/ James Carling
-----------------------------------
Name: James Carling
Title: President
Dated: February 28, 1999
<PAGE>
EXHIBIT 10.19
Execution Copy
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
THE SECURITIES LAWS OF ANY STATE. NEITHER THIS WARRANT, SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH
LAWS OR PURSUANT TO A WRITTEN OPINION OF COUNSEL (WHICH COUNSEL AND OPINION
SHALL BE REASONABLY SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS NOT
REQUIRED.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER DISPOSITION
(EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES REPRESENTED BY THIS
WARRANT AND THE SECURITIES ACQUIRED PURSUANT TO THE EXERCISE OF THIS WARRANT ARE
RESTRICTED BY THE TERMS OF THE STOCKHOLDERS AGREEMENT, DATED OCTOBER 24, 1997,
AS THE SAME MAY HAVE BEEN AMENDED FROM TIME TO TIME, AMONG PRIME RESPONSE GROUP
INC., GENERAL ATLANTIC PARTNERS 42, L.P., GAP COINVESTMENT PARTNERS, L.P. AND
THE STOCKHOLDERS NAMED THEREIN, A COPY OF WHICH MAY BE INSPECTED AT THE
COMPANY'S PRINCIPAL, OFFICE. THE COMPANY WILL NOT REGISTER THE TRANSFER OF SUCH
SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER HAS BEEN
MADE IN COMPLIANCE WITH THE TERMS OF THE SHAREHOLDERS AGREEMENT.
____________________________________________________
PRIME RESPONSE GROUP INC.
COMMON STOCK PURCHASE WARRANT
____________________________________________________
This certifies that, for good and valuable consideration, Prime Response
Group Inc., a Delaware corporation (the "Company"), grants to GAP Coinvestment
----------------
Partners II, L.P., a New York limited partnership (the "Warrantholder"), the
- ----------------
right to subscribe for and purchase from the Company, at any time on or prior to
the Expiration Date, 76,567 validly issued, fully paid and nonassessable shares,
par value $.01 per share, of common stock of the Company (the "Warrant Shares"),
at the exercise price per share of $2.56 (the "Exercise Price"), all subject to
the terms, conditions and adjustments herein set forth. Capitalized terms used
herein shall have the meanings ascribed to such terms in Section 9 below.
<PAGE>
2
This Warrant is issued pursuant to, and in accordance, with Section 2.1 of
the Stock and Warrant Purchase Agreement and is subject to the terms thereof.
Section 2.1 of the Stock and Warrant Purchase Agreement requires the Company to
issue to the Warrantholder a warrant to purchase an aggregate of 76,567 shares
of Common Stock.
1. Warrant Shares. This Warrant entitles the holder to purchase 76,567
--------------
shares of Common Stock.
2. Exercise of Warrant: Payment of Taxes.
-------------------------------------
2.1 Exercise of Warrant. Subject to the terms and conditions set
-------------------
forth herein, this Warrant may be exercised, in whole or in part, by the
Warrantholder at any time on or prior to the Expiration Date by:
(a) the surrender of this Warrant to the Company, with a duly
executed Exercise Form, and
(b) the delivery of payment to the Company, for the account of
the Company, by cash, wire transfer, certified or official bank check or any
other means approved by the Company, of the Exercise Price in lawful money of
the United States of America.
The Company agrees that the Warrant Shares shall be deemed to be issued to the
Warrantholder as the record holder of such Warrant Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for the Warrant Shares as aforesaid.
2.2 Cashless Exercise.
-----------------
(a) In lieu of the payment of the Exercise Price, the
Warrantholder shall have the right (but not the obligation), to require the
Company to convert this Warrant, in whole or, from time to time, in part, into
shares of Common Stock (the "Conversion Right") as provided for in this Section
2.2. Upon exercise of the Conversion Right, the Company shall deliver to the
Warrantholder (without payment by the Warrantholder of any of the Exercise
Price) that number of shares of Common Stock equal to the quotient obtained by
dividing (i) the value of the Warrant (or the part thereof being converted) at
the time the Conversion Right is exercised (determined by subtracting the
aggregate Exercise Price in effect immediately prior to the exercise of the
Conversion Right from the aggregate Current Market Price for the shares of
Common Stock issuable upon exercise of the Warrant (or the part thereof being
converted) immediately prior to the exercise of the Conversion Right) by (ii)
the Current Market Price of one share of Common Stock immediately prior to the
exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the Warrantholder
on any Business Day on or prior to the Expiration Date by delivering
<PAGE>
3
this Warrant, with a duly executed Exercise Form with the conversion section
completed, to the Company, exercising the Conversion Right and specifying the
total number of shares of Common Stock that the Warrantholder will be issued
pursuant to such conversion.
2.3 Warrant Shares Certificate. A stock certificate or certificates
--------------------------
for the Warrant Shares specified in the Exercise Form shall be delivered to the
Warrantholder within five Business Days after receipt of the Exercise Form by
the Company and, if the Conversion Right is not exercised, payment by the
Warrantholder of the purchase price. If this Warrant shall have been exercised
only in part, the Company shall, at the time of delivery of the stock
certificate or certificates, deliver to the Warrantholder a new Warrant
evidencing the rights to purchase the remaining Warrant Shares, which new
Warrant shall in all other respects be identical with this Warrant.
2.4 Payment of Taxes. The issuance of certificates for Warrant
----------------
Shares shall be made without charge to the Warrantholder at any time.
3. Restrictions on Transfer, Restrictive Legends.
---------------------------------------------
3.1 This Warrant may not be offered, sold, transferred, pledged or
otherwise disposed of, in whole or in part, to any Person other than to an
Affiliate of the Warrantholder, without the written consent of the Company,
which shall not be unreasonably withheld, and the Warrant Shares may not be
offered, sold, transferred, pledged or otherwise disposed of, in whole or in
part, to any Person other than in accordance with the Stockholders Agreement (so
long as such agreement is in effect).
3.2 Except as otherwise permitted by this Section 3, each Warrant
(and each Warrant issued in substitution for any Warrant pursuant to Section 4)
shall be stamped or otherwise imprinted with a legend in substantially the form:
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY STATE. NEITHER THIS WARRANT, SUCH
SECURITIES NOR ANY INTEREST THEREIN MAY BE TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS OR PURSUANT TO A
WRITTEN OPINION OF COUNSEL (WHICH COUNSEL AND OPINION SHALL BE REASONABLY
SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED.
<PAGE>
Except as otherwise permitted by this Section 3, each stock certificate for
Warrant Shares issued upon the exercise of any Warrant and each stock
certificate issued upon the direct or indirect transfer of any such Warrant
Shares shall be stamped or otherwise imprinted with a legend in substantially
the form stipulated in the Stockholders Agreement (so long as such agreement is
in effect). Notwithstanding the foregoing, the Warrantholder may require the
Company to issue a Warrant or a stock certificate for Warrant Shares, in each
case without a legend, if and to the extent permitted by, and in accordance
with, the Stockholders Agreement (so long as such agreement is in effect).
4. Reservation and Registration of Shares. The Company covenants and
--------------------------------------
agrees as follows:
(a) All Warrant Shares that are issued upon the exercise of this
Warrant shall, upon issuance, be validly issued, fully paid and nonassessable,
not subject to any preemptive rights, and, except as provided in the
Stockholders Agreement, free from all taxes, liens, security interests, charges,
and other encumbrances with respect to the issuance thereof, other than taxes in
respect of any transfer occurring contemporaneously with such issue.
(b) The Company shall at all times have authorized and reserved,
and shall keep available free from preemptive rights, a sufficient number of
shares of Common Stock to provide for the exercise of the rights represented by
this Warrant.
(c) The Company shall not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
and shall at all times in good faith assist in performing and giving effect to
the terms hereof and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of the Warrantholder against dilution
or other impairment.
5. Anti-dilution Adjustments. The number of Warrant Shares to be
-------------------------
received upon exercise of this Warrant shall be subject to adjustment as
follows:
5.1 Dividend, Subdivision, Combination or Reclassification of Common
----------------------------------------------------------------
Stock. In the event that the Company shall at any time or from time to time,
- -----
after the issuance of this Warrant but prior to the exercise hereof, (w) pay a
dividend or make a distribution on the outstanding shares of Common Stock
payable in Capital Stock, (x) subdivide the outstanding shares of Common Stock
into a larger number of shares, (y) combine the outstanding shares of Common
Stock into a smaller number of shares or (z) issue any shares of its Capital
Stock in a reclassification of the Common Stock (other than any such event for
which an adjustment is made pursuant to another clause of this Section 5), then,
and in each such case, (A) the aggregate number of Warrant Shares for which this
Warrant is exercisable (the "Warrant Share Number") immediately prior to such
event shall be adjusted (and any other appropriate actions shall be taken by the
Company) so that the Warrantholder shall be entitled to receive
<PAGE>
5
upon exercise of this Warrant the number of shares of Common Stock or other
securities of the Company that it would have owned or would have been entitled
to receive upon or by reason of any of the events described above, had this
Warrant been exercised immediately prior to the occurrence of such event and (B)
the Exercise Price payable upon the exercise of this Warrant shall be adjusted
by multiplying such Exercise Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of Warrant Shares
purchasable upon the exercise of the Warrant immediately prior to such
adjustment, and the denominator of which shall be the number of Warrant Shares
purchasable immediately thereafter; provided, however, that the Exercise Price
-------- -------
for each Warrant Share shall in no event be less than the par value of such
Warrant Share. An adjustment made pursuant to this Section 5.1 shall become
effective retroactively (x) in the case of any such dividend or distribution, to
a date immediately following the close of business on the record date for the
determination of holders of Common Stock entitled to receive such dividend or
distribution or (y) in the case of any such subdivision, combination or
reclassification, to the close of business on the day upon which such corporate
action becomes effective.
5.2 Certain Distributions. In case the Company shall at any time or
---------------------
from time to time distribute to all holders of shares of its Common Stock
(including any such distribution made in connection with a merger or
consolidation in which the Company is the resulting or surviving Person and the
Common Stock is not changed or exchanged) cash, evidences of indebtedness of the
Company or another Person, securities of the Company or another Person or other
assets (excluding dividends payable in shares of Common Stock for which
adjustment is made under Section 5.1) or rights or warrants to subscribe for or
purchase the foregoing, then, and in each such case, (A) the Warrant Share
----
Number shall be increased by being multiplied by a fraction (i) the numerator of
which shall be the Current Market Price of one share of Common Stock immediately
prior to the record date for the distribution of such cash, evidences of
indebtedness, securities, other assets or rights or warrants and (ii) the
denominator of which shall be the Current Market Price of one share of Common
Stock immediately prior to such record date less the Fair Market Value of the
portion of such cash, evidences of indebtedness, securities, other assets or
rights or warrants so distributed and (B) the Exercise Price in effect
immediately prior to such record date shall be decreased (and any other
appropriate actions shall be taken by the Corporation) by being multiplied by a
fraction (i) the numerator of which shall be such Current Market Price of the
Common Stock less the then Fair Market Value of the portion of the cash,
evidences of indebtedness, securities or other assets so distributed or of such
subscription rights or warrants applicable to one share of Common Stock and (ii)
the denominator of which shall be the Current Market Price of the Common Stock
on the record date referred to below (such decreased Exercise Price, the
"Adjusted Exercise Price"). Such adjustment shall be made whenever any such
distribution is made and shall become effective retroactively to a date
immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution; provided,
--------
however, that no adjustment shall be made with respect to any distribution of
- -------
rights to purchase securities of the Company if the Warrantholder would
otherwise be entitled to receive such rights upon exercise at any time of this
Warrant. Such adjustment shall be made whenever any such distribution is made
and
<PAGE>
6
shall become effective retroactively to the date immediately following the close
of business on the record date for the determination of shareholders entitled to
receive such distribution.
5.3 Other Changes. In case the Company at any time or from time to
-------------
time, after the issuance of this Warrant but prior to the exercise hereof, shall
take any action affecting its Common Stock similar to or having an effect
similar to any of the actions described in any of Sections 5.1, 5.2 or 5.7 (but
not including any action described in any such Section) and the Board of
Directors of the Company in good faith determines that it would be equitable in
the circumstances to adjust the Warrant Share Number as a result of such action,
then, and in each such case, the Warrant Share Number shall be adjusted in such
manner and at such time as the Board of Directors of the Company in good faith
determines would be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
Warrantholders).
5.4 De Minimis Adjustments. Notwithstanding anything herein to the
----------------------
contrary, no adjustment under this Section 5 need be made to the Warrant Share
Number if the Company receives written notice from the Warrantholder that no
such adjustment is required.
5.5 Abandonment. If the Company shall take a record of the holders
-----------
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
shareholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then no adjustment in the Warrant Share Number shall be required
by reason of the taking of such record.
5.6 Certificate as to Adjustments. Upon any increase in the Warrant
-----------------------------
Share Number or adjustment of the Exercise Price, the Company shall within a
reasonable period (not to exceed 10 days) following any of the foregoing
transactions deliver to the Warrantholder a certificate, signed by (i) the
President or a Vice President of the Company and (ii) the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the Company,
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the increased
Warrant Share Number then in effect following such adjustment.
5.7 Reorganization, Reclassification, Merger or Sale. In case of any
------------------------------------------------
spin-off by the Company of another Person (the "Spin-off Entity"), in addition
to all other adjustments of the Warrant Share Number and the Exercise Price
pursuant to this Section 5, the Company shall issue to the Warrantholder a new
warrant, in form and substance satisfactory to the Company and the
Warrantholder, entitling the Warrantholder to purchase, at an exercise price
equal to the excess of the Exercise Price in effect immediately prior to such
spin-off over the Adjusted Exercise Price, the number of shares of common stock
of the Spin-off Entity that the Warrantholder would have owned had the
Warrantholder, immediately prior to such spin-off, exercised this
<PAGE>
7
Warrant, and in case of any capital reorganization, reclassification, a Merger,
a Sale or a consolidation of the Company with or into another Person or other
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value) (each, a
"Transaction"), the Company shall execute and deliver to the Warrantholder at
least ten (10) Business Days prior to effecting such Transaction a certificate
stating that the Warrantholder shall have the right thereafter to exercise this
Warrant for the kind and amount of shares of stock or other securities, property
or cash receivable upon such Transaction by a holder of the number of shares of
Common Stock into which this Warrant could have been exercised immediately prior
to such Transaction and provision shall be made therefor in the agreement, if
any, relating to such Transaction. Such certificate shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 5. The provisions of this Section 5.7
and any equivalent thereof in any such certificate similarly shall apply to
successive transactions.
5.8 Dilution Notices. In case at any time or from time to time:
----------------
(x) the Company shall declare a dividend (or any other
distribution) on its shares of Common Stock;
(y) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or of any other rights or warrants; or
(z) there shall occur a spin-off or Transaction;
then the Company shall mail to the Warrantholder, as promptly as possible but in
any event at least ten (10) days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or granting of rights or
warrants are to be determined, or (B) the date on which such spin-off or
Transaction is expected to become effective and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for shares of stock or other securities or property or cash
deliverable upon such Transaction. Notwithstanding the foregoing, in the case
of any event to which Section 5.7 is applicable, the Company shall also deliver
the certificate described in such Section 5.7 to the Warrantholder at least 10
Business Days prior to effecting such reorganization or reclassification as
aforesaid.
6. Loss or Destruction of Warrant. Subject to the terms and conditions
------------------------------
hereof, upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
loss, theft or destruction, of such bond or indemnification as the Company may
reasonably
<PAGE>
8
require, and, in the case of such mutilation, upon surrender and cancellation of
this Warrant, the Company will execute and deliver a new Warrant of like tenor.
7. Ownership of Warrant. The Company may deem and treat the person in
--------------------
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of
transfer.
8. Amendments. Any provision of this Warrant may be amended and the
----------
observance thereof waived only with the written consent of the Company and the
Warrantholder.
9. Definitions. As used herein, unless the context otherwise requires,
-----------
the following terms have the following respective meanings:
"Adjusted Exercise Price" has the meaning specified in Section 5.2 of this
-----------------------
Warrant.
"Affiliate" has the meaning specified in the Stock and Warrant Purchase
---------
Agreement.
"Board of Directors" means the Board of Directors of the Company.
------------------
"Business Day" means any day other than a Saturday, Sunday or a day on
------------
which national banks are authorized by law to close in the State of New York.
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, participation, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock (but excluding any debt security whether or not it is exchangeable
for or convertible into such capital stock).
"Common Stock" means the common stock, par value $.01 per share, of the
------------
Company.
"Common Stock Equivalent" means any security or obligation which is by
-----------------------
its terms convertible into shares of Common Stock or another Common Stock
Equivalent, including, without limitation, any option, warrant or other
subscription or purchase right with respect to Common Stock.
"Company" has the meaning specified on the cover of this Warrant.
-------
"Current Market Price" means, as of the date of determination, (a) the
--------------------
average of the daily Market Price under clause (a), (b) or (c) of the definition
thereof of the Common Stock during the immediately preceding thirty (30) trading
days ending on such date, and (b) if the Common Stock is not then listed or
admitted to trading on any
<PAGE>
9
securities exchange or quoted in the over-the-counter market, then the Market
Price under clause (d) of the definition thereof on such date.
"Excluded Transaction" means (a) options to purchase shares of Common Stock
--------------------
which may be granted to employees, consultants or directors of the Company
pursuant to a stock option plan approved by the Board of Directors of the
Company, (b) a subdivision of the outstanding shares of Common Stock into a
larger number of shares of Common Stock or (c) capital stock issued upon
exercise, conversion or exchange of any Common Stock Equivalent.
"Exercise Form" means an Exercise Form in the form annexed hereto as
-------------
Exhibit A.
"Exercise Price" has the meaning specified on the cover of this Warrant.
--------------
"Expiration Date" means February __, 2004.
---------------
"Fair Market Value" means the amount which a willing buyer would pay a
-----------------
willing seller in an arm's length transaction reasonably determined in good
faith by the Board of Directors or, if such determination is not reasonably
satisfactory to the Warrantholder, such determination as shall be made by a
nationally recognized investment banking firm selected by the Company and the
Warrantholder, the expenses for which shall be borne equally by the Company and
the Warrantholder. Any determination of the Fair Market Value by the Board of
Directors or such investment banking firm shall be made based on a valuation of
the Company as an entirety without regard to any discount for minority interests
or disparate voting rights among classes of capital stock.
"GAP Coinvestment II" means GAP Coinvestment Partners II, L.P., a New York
-------------------
limited partnership.
"GAP LP" means General Atlantic Partners 52, L.P., a Delaware limited
------
partnership.
"Market Price" means, as of the date of determination, (a) the closing
------------
price per share of Common Stock on such date published in The Wall Street
Journal or, if no such closing price on such date is published in The Wall
Street Journal, the average of the closing bid and asked prices on such date, as
officially reported on the principal securities exchange (including, without
limitation, The Nasdaq Stock Market, Inc.) on which the Common Stock is then
listed or admitted to trading; or (b) if the Common Stock is not then listed or
admitted to trading on any securities exchange but is designated as a national
market system security by the National Association of Securities Dealers, Inc.,
the last trading price of the Common Stock on such date; or (c) if there shall
have been no trading on such date or if the Common Stock is not so designated,
the average of the reported closing bid and asked prices of the Common Stock on
such date as shown by the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotations System and reported by any member
firm of the New York Stock Exchange selected by the Corporation; or (d)
<PAGE>
10
if none of (a), (b) or (c) is applicable, a market price per share determined in
good faith by the Board of Directors and reasonably acceptable to the
Warrantholder; provided, however, that if such determination is not reasonably
-------- -------
acceptable to the Warrantholder then a market price per share determined at the
Company's expense by an appraiser chosen by mutual agreement of the Company and
the Warrantholder; provided further, that if the Company shall have paid for any
-------- -------
such appraisal in connection with any of its outstanding Warrants within one
fiscal quarter prior to the surrender of this Warrant to the Company by a
Warrantholder, with a duly executed Exercise Form, then the market price per
share determined by such appraisal may be used without conducting an additional
appraisal. Any determination of the Market Price by an appraiser shall be based
on a valuation of the Company as an entirety without regard to any discount for
minority interests or disparate voting rights among classes of capital stock.
"Merger" means (x) the merger or consolidation of the Company into or with
------
one or more Persons or (y) the merger or consolidation of one or more Persons
into or with the Company, if, in the case of (x) or (y), the shareholders of the
Company prior to such merger or consolidation do not retain at least a majority
of the voting power of the surviving Person.
"Person" means any individual, firm, corporation, partnership, limited
------
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
"Purchaser" has the meaning specified in the Stock and Warrant Purchase
---------
Agreement.
"Sale" means the sale, conveyance, exchange or transfer to another Person
----
of (a) the voting shares of the Company if, after such sale, conveyance,
exchange or transfer, the shareholders of the Company prior to such sale,
conveyance, exchange or transfer do not, directly or indirectly, retain at least
a majority of the votes attached to the shares in the capital of the surviving
Person or (b) all or substantially all of the assets of the Company.
"Securities Act" has the meaning specified on the cover of this Warrant, or
--------------
any similar Federal statute, and the rules and regulations of the United States
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the Securities Act
shall be deemed to include a reference to the comparable section, if any, of any
such similar Federal statute.
"Spin-off Entity" has the meaning specified in Section 5.7 of this Warrant.
---------------
"Stock and Warrant Purchase Agreement" means the Stock and Warrant Purchase
------------------------------------
Agreement, dated February __, 1999, among the Company, GAP LP and GAP
Coinvestment II.
<PAGE>
11
"Stockholders Agreement" has the meaning specified on the cover of this
----------------------
Warrant.
"Transaction" has the meaning specified in Section 5.7 of this Warrant.
-----------
"Warrantholder" has the meaning specified on the cover of this Warrant.
-------------
"Warrant Share Number" has the meaning specified in Section 5.1 of this
--------------------
Warrant.
"Warrant Shares" has the meaning specified on the cover of this Warrant.
---------------
10. Miscellaneous
-------------
10.1 Entire Agreement. This Warrant constitutes the entire agreement
----------------
between the Company and the Warrantholder with respect to the Warrant.
10.2 Binding Effect; Benefits. This Warrant shall inure to the
------------------------
benefit of and shall be binding upon the Company and the Warrantholder and their
respective permitted successors and assigns. Nothing in this Warrant, expressed
or implied, is intended to or shall confer on any person other than the Company
and the Warrantholder, or their respective permitted successors or assigns, any
rights, remedies, obligations or liabilities under or by reason of this Warrant.
10.3 Section and Other Headings. The section and other headings
---------------------------
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
10.4 Notices. All notices, demands and other communications provided
-------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service, overnight mail or personal delivery:
(a) if to the Warrantholder:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-8818
Attention: William E. Ford
with a copy to:
<PAGE>
12
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Matthew Nimetz, Esq.
(b) if to the Company:
Prime Response Group Inc.
Goat Wharf, Brentwood,
TW80PD
United Kingdom
Telecopy: 011-441-814-003-133
Attention: Nigel Cannings, Esq.
with a copy to:
Brobeck Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Telecopy: (650) 496-2755
Attention: Thomas A. Bevilacqua, Esq.
All such notices and communications shall be deemed to have been duly given
when delivered by hand, if personally delivered; when delivered by courier or
overnight mail, if delivered by commercial courier service or overnight mail;
five (5) Business Days after being deposited in the mail, postage prepaid, if
mailed; and when receipt is mechanically acknowledged, if telecopied. Any party
may by notice given in accordance with this Section 10.4 designate another
address or Person for receipt of notices hereunder.
10.5 Severability. Any term or provision of this Warrant which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the tenrns or provisions of
this Warrant in any other jurisdiction.
10.6 GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
<PAGE>
13
10.7 No Rights or Liabilities as Shareholder. Nothing contained in
---------------------------------------
this Warrant shall be determined as conferring upon the Warrantholder any rights
as a shareholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any securities whether such liabilities are asserted
by the Company or by creditors or shareholders of the Company or otherwise.
<PAGE>
14
IN WITNESS WHEREOF, ft Company has caused this Warrant to be signed by its
duly authorized officer.
PRIME RESPONSE GROUP INC.
By: /s/ James Carling
----------------------------------
Name: James Carling
Title: President
Dated: February 28, 1999
<PAGE>
EXHIBIT 10.20
Execution Copy
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. NEITHER THIS WARRANT,
SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS OR PURSUANT TO A WRITTEN OPINION OF
COUNSEL (WHICH COUNSEL AND OPINION SHALL BE REASONABLY SATISFACTORY TO THE
COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER DISPOSITION
(EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES REPRESENTED BY THIS
WARRANT AND THE SECURITIES ACQUIRED PURSUANT TO THE EXERCISE OF THIS WARRANT ARE
RESTRICTED BY THE TERMS OF THE STOCKHOLDERS AGREEMENT, DATED OCTOBER 24, 1997,
AMONG PRIME RESPONSE GROUP INC. AND THE STOCKHOLDERS NAMED THEREIN AS AMENDED
BY EACH OF AMENDMENT NO. 1, AMENDMENT NO. 2 AND AMENDMENT NO. 3 THERETO (THE
"STOCKHOLDERS AGREEMENT). THE COMPANY WILL NOT REGISTER THE TRANSFER OF SUCH
WARRANT OR SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE
TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE STOCKHOLDERS
AGREEMENT. THE COMPANY WILL MAIL A COPY OF SUCH AGREEMENT, TOGETHER WITH A COPY
OF THE EXPRESS TERMS OF THE SECURITIES AND THE OTHER CLASS OR CLASSES AND SERIES
OF SHARES, IF ANY, WHICH THE COMPANY IS AUTHORIZED TO ISSUE, TO THE RECORD
HOLDER OF THIS CERTIFICATE, WITHOUT CHARGE, WITHIN FIVE DAYS AFTER RECEIPT OF A
WRITTEN REQUEST THEREFOR.
__________________________________________________
PRIME RESPONSE GROUP INC.
COMMON STOCK PURCHASE WARRANT
__________________________________________________
This certifies that, for good and valuable consideration, Prime Response
Group Inc., a Delaware corporation (the "Company"), grants to General Atlantic
Partners 52, L.P., a Delaware limited partnership (the "Warrantholder"), the
right to subscribe for and purchase from the Company, at any time on or prior to
the Expiration Date, 273,099 validly issued, fully paid and nonassessable
shares, par value $.01 per share, of common stock of the Company (the "Warrant
Shares"), at the exercise price per share of $0.01 (the "Exercise Price").
Capitalized terms used herein shall have the meanings ascribed to such terms in
Section 9 below.
<PAGE>
2
1. Warrant. This Warrant is issued pursuant to, and in accordance with,
-------
the Stock and Warrant Purchase Agreement and is subject to the terms thereof.
2. Exercise of Warrant; Payment of Taxes.
-------------------------------------
2.1 Exercise of Warrant. Subject to the terms and conditions set
-------------------
forth herein, this Warrant may be exercised, in whole or in part, by the
Warrantholder at any time on or prior to the Expiration Date by:
(a) the surrender of this Warrant to the Company, with a duly
executed Exercise Form, and
(b) the delivery of payment to the Company, for the account of
the Company, by cash, wire transfer, certified or official bank check or any
other means approved by the Company, of the Exercise Price in lawful money of
the United States of America.
The Company agrees that the Warrant Shares shall be deemed to be issued to the
Warrantholder as the record holder of such Warrant Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for the Warrant Shares as aforesaid.
2.2 Cashless Exercise.
-----------------
(a) In lieu of the payment of the Exercise Price, the
Warrantholder shall have the right (but not the obligation), to require the
Company to convert this Warrant, in whole or, from time to time, in part, into
shares of Common Stock (the "Conversion Right") as provided for in this Section
2.2. Upon exercise of the Conversion Right, the Company shall deliver to the
Warrantholder (without payment by the Warrantholder of any of the Exercise
Price) that number of shares of Common Stock equal to the quotient obtained by
dividing (i) the value of the Warrant (or the part thereof being converted) at
the time the Conversion Right is exercised (determined by subtracting the
aggregate Exercise Price in effect immediately prior to the exercise of the
Conversion Right from the aggregate Current Market Price for the shares of
Common Stock issuable upon exercise of the Warrant (or the part thereof being
converted) immediately prior to the exercise of the Conversion Right) by (ii)
the Current Market Price of one share of Common Stock immediately prior to the
exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the Warrantholder on
any Business Day on or prior to the Expiration Date by delivering this Warrant,
with a duly executed Exercise Form with the conversion section completed, to the
Company, exercising the Conversion Right and specifying the total
<PAGE>
3
number of shares of Common Stock that the Warrantholder will be issued pursuant
to such conversion.
2.3 Warrant Shares Certificate. A stock certificate or certificates
--------------------------
for the Warrant Shares specified in the Exercise Form shall be delivered to the
Warrantholder within five Business Days after receipt of the Exercise Form by
the Company and, if the Conversion Right is not exercised, payment by the
Warrantholder of the aggregate Exercise Price. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of the stock
certificate or certificates, deliver to the Warrantholder a new Warrant
evidencing the right to purchase the remaining Warrant Shares, which new Warrant
shall in all other respects be identical with this Warrant.
2.4 Payment of Taxes. The issuance of certificates for Warrant
----------------
Shares shall be made without charge to the Warrantholder at any time.
3. Restrictions on Transfer; Restrictive Legends.
---------------------------------------------
3.1 This Warrant may not be offered, sold, transferred, pledged or
otherwise disposed of, in whole or in part, to any Person other than to an
Affiliate of the Warrantholder without the written consent of the Company, which
shall not be unreasonably withheld, and the Warrant Shares may not be offered,
sold, transferred, pledged or otherwise disposed of, in whole or in part, to any
Person other than in accordance with the Stockholders Agreement (so long as such
agreement is in effect).
3.2 Except as otherwise permitted by this Section 3, (a) each Warrant
(and each Warrant issued in substitution for any Warrant pursuant to Section 4)
shall be stamped or otherwise imprinted with a legend in substantially the form:
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. NEITHER THIS WARRANT,
SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS OR PURSUANT TO A WRITTEN OPINION OF
COUNSEL (WHICH COUNSEL AND OPINION SHALL BE REASONABLY SATISFACTORY TO THE
COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED.
<PAGE>
4
Except as set forth in this Section 3, each stock certificate for Warrant
Shares issued upon the exercise of any Warrant and each stock certificate issued
upon the direct or indirect transfer of any such Warrant Shares shall be stamped
or otherwise imprinted with a legend in substantially the form stipulated in the
Stockholders Agreement (so long as such agreement is in effect).
Notwithstanding the foregoing, the Warrantholder may require the Company to
issue a Warrant or a stock certificate for Warrant Shares, in each case without
a legend, if and to the extent permitted by, and in accordance with, the
Stockholders Agreement (so long as such agreement is in effect).
4. Reservation and Registration of Shares. The Company covenants and
--------------------------------------
agrees as follows:
(a) All Warrant Shares that are issued upon the exercise of this
Warrant shall, upon issuance, be validly issued, fully paid and nonassessable,
not subject to any preemptive rights, and, except as provided in the
Stockholders Agreement, free from all taxes, liens, security interests, charges,
and other encumbrances with respect to the issuance thereof, other than taxes in
respect of any transfer occurring contemporaneously with such issue.
(b) The Company shall at all times have authorized and reserved, and
shall keep available free from preemptive rights, a sufficient number of shares
of Common Stock to provide for the exercise of the rights represented by this
Warrant.
(c) The Company shall not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, spin-off,
consolidation, merger, dissolution, issue or sale of securities or any other
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and shall at all times in good faith assist in performing and
giving effect to the terms hereof and in the taking of all such actions as may
be necessary or appropriate in order to protect the rights of the Warrantholder
against dilution or other impairment.
5. Anti-dilution Adjustments. The number of Warrant Shares to be
-------------------------
received upon exercise of this Warrant shall be subject to adjustment as
follows:
5.1 Dividend, Subdivision, Combination or Reclassification of Common
----------------------------------------------------------------
Stock. In the event that the Company shall at any time or from time to time,
- -----
after the issuance of this Warrant but prior to the exercise hereof, (w) pay a
dividend or make a distribution on the outstanding shares of Common Stock
payable in Capital Stock, (x) subdivide the outstanding shares of Common Stock
into a larger number of shares, (y) combine the outstanding shares of Common
Stock into a smaller number of shares or (z) issue any shares of its Capital
Stock in a reclassification of the Common Stock (other than any such event for
which an
<PAGE>
5
adjustment is made pursuant to another clause of this Section 5), then, and in
each such case, the aggregate number of Warrant Shares for which this Warrant is
exercisable (the "Warrant Share Number") immediately prior to such event shall
be adjusted (and any other appropriate actions shall be taken by the Company) so
that the Warrantholder shall be entitled to receive upon exercise of this
Warrant the number of shares of Common Stock or other securities of the Company
that it would have owned or would have been entitled to receive upon or by
reason of any of the events described above, had this Warrant been exercised
immediately prior to the occurrence of such event. An adjustment made pursuant
to this Section 5.1 shall become effective retroactively (x) in the case of any
such dividend or distribution, to a date immediately following the close of
business on the record date for the determination of holders of Common Stock
entitled to receive such dividend or distribution or (y) in the case of any such
subdivision, combination or reclassification, to the close of business on the
day upon which such corporate action becomes effective.
5.2 Certain Distributions. In case the Company shall at any time or
---------------------
from time to time distribute to all holders of shares of its Common Stock
(including any such distribution made in connection with a merger or
consolidation in which the Company is the resulting or surviving Person and the
Common Stock is not changed or exchanged) cash, evidences of indebtedness of the
Company or another Person, securities of the Company or another Person or other
assets (excluding dividends payable in shares of Common Stock for which
adjustment is made under Section 5.1) or rights or warrants to subscribe for or
purchase the foregoing, then, and in each such case, the Warrant Share Number
----
shall be increased by being multiplied by a fraction (i) the numerator of which
shall be the Current Market Price of one share of Common Stock immediately prior
to the record date for the distribution of such cash, evidences of indebtedness,
securities, other assets or rights or warrants and (ii) the denominator of which
shall be the Current Market Price of one share of Common Stock immediately prior
to such record date less the Fair Market Value of the portion of such cash,
evidences of indebtedness, securities, other assets or rights or warrants so
distributed divided by the number of shares of Common Stock outstanding
immediately prior to such distribution. Such adjustment shall be made whenever
any such distribution is made and shall become effective retroactively to a date
immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution; provided,
--------
however, that no adjustment shall be made with respect to any distribution of
- -------
rights to purchase securities of the Company if the Warrantholder would
otherwise be entitled to receive such rights upon exercise at any time of this
Warrant. Such adjustment shall be made whenever any such distribution is made
and shall become effective retroactively to the date immediately following the
close of business on the record date for the determination of shareholders
entitled to receive such distribution.
5.3 Other Changes. In case the Company at any time or from time to
-------------
time, after the issuance of this Warrant but prior to the exercise hereof, shall
take any action affecting its Common Stock similar to or having an effect
similar
<PAGE>
6
to any of the actions described in any of Sections 5.1, 5.2 or 5.7 (but not
including any action described in any such Section) and the Board of Directors
of the Company in good faith determines that it would be equitable in the
circumstances to adjust the Warrant Share Number as a result of such action,
then, and in each such case, the Warrant Share Number shall be adjusted in such
manner and at such time as the Board of Directors of the Company in good faith
determines would be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
Warrantholders).
5.4 De Minimis Adjustments. Notwithstanding anything herein to the
----------------------
contrary, no adjustment under this Section 5 need be made to the Warrant Share
Number if the Company receives written notice from the Warrantholder that no
such adjustment is required.
5.5 Abandonment. If the Company shall take a record of the holders
-----------
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
shareholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then no adjustment in the Warrant Share Number shall be required
by reason of the taking of such record.
5.6 Certificate as to Adjustments. Upon any increase in the Warrant
-----------------------------
Share Number or adjustment of the Exercise Price, the Company shall within a
reasonable period (not to exceed 10 days) following any of the foregoing
transactions deliver to the Warrantholder a certificate, signed by (i) the
President or a Vice President of the Company and (ii) the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the Company,
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the increased
Warrant Share Number then in effect following such adjustment.
5.7 Reorganization, Reclassification, Merger or Sale. In case of any
------------------------------------------------
spin-off by the Company of another Person (the "Spin-off Entity"), in addition
to all other adjustments of the Warrant Share Number and the Exercise Price
pursuant to this Section 5, the Company shall issue to the Warrantholder a new
warrant, in form and substance satisfactory to the Company and the Majority
Warrantholders, entitling the Warrantholder to purchase, at an exercise price
equal to the Exercise Price, the number of shares of common stock of the Spin-
off Entity that the Warrantholder would have owned had the Warrantholder,
immediately prior to such spin-off, exercised this Warrant, and in case of any
capital reorganization, reclassification, a Merger, a Sale or a consolidation of
the Company with or into another Person or other change of outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value) (each, a "Transaction"), the Company
shall execute and deliver to the Warrantholder at least ten (10) Business Days
prior to effecting such Transaction a
<PAGE>
7
certificate stating that the Warrantholder shall have the right thereafter to
exercise this Warrant for the kind and amount of shares of stock or other
securities, property or cash receivable upon such Transaction by a holder of the
number of shares of Common Stock into which this Warrant could have been
exercised immediately prior to such Transaction and provision shall be made
therefor in the agreement, if any, relating to such Transaction. Such
certificate shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 5. The
provisions of this Section 5.7 and any equivalent thereof in any such
certificate similarly shall apply to successive transactions.
5.8 Dilution Notices. In case at any time or from time to time:
----------------
(x) the Company shall declare a dividend (or any other
distribution) on its shares of Common Stock;
(y) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or of any other rights or warrants; or
(z) there shall occur a spin-off or Transaction;
then the Company shall mail to the Warrantholder, as promptly as possible but in
any event at least ten (10) days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or granting of rights or
warrants are to be determined, or (B) the date on which such spin-off or
Transaction is expected to become effective and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for shares of stock or other securities or property or cash
deliverable upon such Transaction. Notwithstanding the foregoing, in the case
of any event to which Section 5.7 is applicable, the Company shall also deliver
the certificate described in such Section 5.7 to the Warrantholder at least 10
Business Days prior to effecting such reorganization or reclassification as
aforesaid.
6. Loss or Destruction of Warrant. Subject to the terms and conditions
------------------------------
hereof, upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
loss, theft or destruction, of such bond or indemnification as the Company may
reasonably require, and, in the case of such mutilation, upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor.
7. Ownership of Warrant. The Company may deem and treat the person in
--------------------
whose name this Warrant is registered as the holder and owner hereof
<PAGE>
8
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of
transfer.
8. Amendments. Any provision of this Warrant may be amended and the
----------
observance thereof waived only with the written consent of the Company and the
Warrantholder.
9. Definitions. As used herein, unless the context otherwise requires,
-----------
the following terms have the following respective meanings:
"Affiliate" has the meaning specified in the Stock and Warrant Purchase
---------
Agreement.
"Board of Directors" means the Board of Directors of the Company.
------------------
"Business Day" means any day other than a Saturday, Sunday or a day on
------------
which national banks are authorized by law to close in the State of New York.
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, participation, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock (but excluding any debt security whether or not it is exchangeable
for or convertible into such capital stock).
"Common Stock" means the common stock, par value $.01 per share, of the
------------
Company.
"Common Stock Equivalent" means any security or obligation which is by its
-----------------------
terms convertible into shares of Common Stock or another Common Stock
Equivalent, including, without limitation, any option, warrant or other
subscription or purchase right with respect to Common Stock.
"Company" has the meaning specified on the cover of this Warrant.
-------
"Conversion Right" has the meaning specified in Section 2.2 of this
----------------
Warrant.
"Current Market Price" means, as of the date of determination, (a) the
--------------------
average of the daily Market Price under clause (a), (b) or (c) of the definition
thereof of the Common Stock during the immediately preceding thirty (30) trading
days ending on such date, or (b) if the Common Stock is not then listed or
admitted to trading on any securities exchange or quoted in the over-the-counter
market, then the Market Price under clause (d) of the definition thereof on such
date.
<PAGE>
9
"Excluded Transaction" means (a) options to purchase shares of Common Stock
--------------------
which may be granted to employees, consultants or directors of the Company
pursuant to a stock option plan approved by the Board of Directors of the
Company, (b) a subdivision of the outstanding shares of Common Stock into a
larger number of shares of Common Stock or (c) capital stock issued upon
exercise, conversion or exchange of any Common Stock Equivalent.
"Exercise Form" means an Exercise Form in the form annexed hereto as
-------------
Exhibit A.
"Exercise Price" has the meaning specified on the cover of this Warrant.
--------------
"Expiration Date" means the earlier of (a) July 15, 2006 and (b) the
---------------
closing of the Initial Public Offering.
"Fair Market Value" means the amount which a willing buyer would pay a
-----------------
willing seller in an arm's length transaction reasonably determined in good
faith by the Board of Directors or, if such determination is not reasonably
satisfactory to the Warrantholder, such determination as shall be made by a
nationally recognized investment banking firm selected by the Company and the
Warrantholder, the expenses for which shall be borne equally by the Company and
the Warrantholder. Any determination of the Fair Market Value by the Board of
Directors or such investment banking firm shall be made based on a valuation of
the Company as an entirety without regard to any discount for minority interests
or disparate voting rights among classes of capital stock.
"GAP Coinvestment II" means GAP Coinvestment Partners II, L.P., a New York
-------------------
limited partnership.
"GAP LP" means General Atlantic Partners 52, L.P., a Delaware limited
------
partnership.
"Initial Public Offering" means the initial public offering of shares of
-----------------------
Common Stock of the Company pursuant to an effective registration statement
filed under the Securities Act.
"Majority Warrantholders" means the holders of a majority of the shares of
-----------------------
Common Stock issuable upon exercise of all of the warrants issued pursuant to
the Stock and Warrant Purchase Agreement assuming the exercise of all such
warrants.
"Market Price" means, as of the date of determination, (a) the closing
------------
price per share of Common Stock on such date published in The Wall Street
Journal or, if no such closing price on such date is published in The Wall
Street Journal, the
<PAGE>
10
average of the closing bid and asked prices on such date, as officially reported
on the principal securities exchange (including, without limitation, The Nasdaq
Stock Market, Inc.) on which the Common Stock is then listed or admitted to
trading; or (b) if the Common Stock is not then listed or admitted to trading on
any securities exchange but is designated as a national market system security
by the National Association of Securities Dealers, Inc., the last trading price
of the Common Stock on such date; or (c) if there shall have been no trading on
such date or if the Common Stock is not so designated, the average of the
reported closing bid and asked prices of the Common Stock on such date as shown
by the National Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System and reported by any member firm of the New York
Stock Exchange selected by the Company; or (d) if none of (a), (b) or (c) is
applicable, a market price per share determined in good faith by the Board of
Directors and reasonably acceptable to the Majority Warrantholders; provided,
--------
however, that if such determination is not reasonably acceptable to the Majority
- -------
Warrantholders, then a market price per share determined at the Company's
expense by an appraiser chosen by mutual agreement of the Company and the
Majority Warrantholders. Any determination of the Market Price by an appraiser
shall be based on a valuation of the Company as an entirety without regard to
any discount for minority interests or disparate voting rights among classes of
capital stock.
"Merger" means (x) the merger or consolidation of the Company into or with
------
one or more Persons or (y) the merger or consolidation of one or more Persons
into or with the Company, if, in the case of (x) or (y), the stockholders of the
Company prior to such merger or consolidation do not retain at least a majority
of the voting power of the surviving Person.
"Permitted Transferee" has the meaning set forth in the Stockholders
--------------------
Agreement.
"Person" means any individual, firm, corporation, partnership, limited
------
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
"Purchaser" has the meaning specified in the Stock and Warrant Purchase
---------
Agreement.
"Sale" means the sale, conveyance, exchange or transfer to another Person
----
of (a) the voting Capital Stock of the Company if, after such sale, conveyance,
exchange or transfer, the stockholders of the Company prior to such sale,
conveyance, exchange or transfer do not, directly or indirectly, retain at least
a majority of the voting power of the surviving Person or (b) all or
substantially all of the assets of the Company.
<PAGE>
11
"Securities Act" has the meaning specified on the cover of this Warrant, or
--------------
any similar Federal statute, and the rules and regulations of the United States
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the Securities Act
shall be deemed to include a reference to the comparable section, if any, of any
such similar Federal statute.
"Spin-off Entity" has the meaning specified in Section 5.7 of this Warrant.
---------------
"Stock and Warrant Purchase Agreement" means the Stock and Warrant Purchase
------------------------------------
Agreement, dated July 15, 1999, among the Company, GAP LP and GAP Coinvestment
II.
"Stockholders Agreement" has the meaning specified on the cover of this
----------------------
Warrant.
"Transaction" has the meaning specified in Section 5.7 of this Warrant.
-----------
"Transfer" has the meaning specified on the cover of this Warrant.
--------
"Warrantholder" has the meaning specified on the cover of this Warrant.
-------------
"Warrant Share Number" has the meaning specified in Section 5.1 of this
--------------------
Warrant.
"Warrant Shares" has the meaning specified on the cover of this Warrant.
--------------
10. Miscellaneous
-------------
10.1 Entire Agreement. This Warrant constitutes the entire agreement
----------------
between the Company and the Warrantholder with respect to the Warrant.
10.2 Binding Effect, Benefits. This Warrant shall inure to the
------------------------
benefit of and shall be binding upon the Company and the Warrantholder and their
respective permitted successors and assigns. Nothing in this Warrant, expressed
or implied, is intended to or shall confer on any person other than the Company
and the Warrantholder, or their respective permitted successors or assigns, any
rights, remedies, obligations or liabilities under or by reason of this Warrant.
10.3 Section and Other Headings. The section and other headings
--------------------------
contained in this Warrant are for reference purposes only and shall not be
<PAGE>
12
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
10.4 Notices. All notices, demands and other communications provided
-------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service, overnight mail or personal delivery:
(a) if to the Warrantholder:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-8818
Attention: William E. Ford
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Matthew Nimetz, Esq.
(b) if to the Company:
Prime Response Group Inc.
150 CambridgePark Drive
Cambridge, MA 02140
Telecopy: (617) 876-8383
Attention: Chief Executive Officer
with a copy to:
Brobeck Hale and Dorr
Hasilwood House
60 Bishopsgate
London EC2N 4AJ
England
Telecopy: 44 171 638 5888
Attention: David Ayres
<PAGE>
13
All such notices and communications shall be deemed to have been duly given
when delivered by hand, if personally delivered; when delivered by courier or
overnight mail, if delivered by commercial courier service or overnight mail;
five (5) Business Days after being deposited in the mail, postage prepaid, if
mailed; and when receipt is mechanically acknowledged, if telecopied. Any party
may by notice given in accordance with this Section 10.4 designate another
address or Person for receipt of notices hereunder.
10.5 Severability. Any term or provision of this Warrant which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
10.6 GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
10.7 No Rights or Liabilities as Shareholder. Nothing contained in
---------------------------------------
this Warrant shall be determined as conferring upon the Warrantholder any rights
as a shareholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any securities whether such liabilities are asserted
by the Company or by creditors or shareholders of the Company or otherwise.
<PAGE>
14
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
PRIME RESPONSE GROUP INC.
By: /s/ Peter J. Boni
-----------------------------------
Name: Peter J. Boni
Title: President & CEO
Dated: As of July 15, 1999
<PAGE>
EXHIBIT 10.21
Execution Copy
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. NEITHER THIS WARRANT,
SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS OR PURSUANT TO A WRITTEN OPINION OF
COUNSEL (WHICH COUNSEL AND OPINION SHALL BE REASONABLY SATISFACTORY TO THE
COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER DISPOSITION
(EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES REPRESENTED BY THIS
WARRANT AND THE SECURITIES ACQUIRED PURSUANT TO THE EXERCISE OF THIS WARRANT ARE
RESTRICTED BY THE TERMS OF THE STOCKHOLDERS AGREEMENT, DATED OCTOBER 24, 1997,
AMONG PRIME RESPONSE GROUP INC AND THE STOCKHOLDERS NAMED THEREIN AS AMENDED BY
EACH OF AMENDMENT NO. 1, AMENDMENT NO. 2 AND AMENDMENT NO. 3 THERETO (THE
"STOCKHOLDERS AGREEMENT"). THE COMPANY WILL NOT REGISTER THE TRANSFER OF SUCH
WARRANT OR SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE
TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE STOCKHOLDERS
AGREEMENT. THE COMPANY WILL MAIL A COPY OF SUCH AGREEMENT, TOGETHER WITH A COPY
OF THE EXPRESS TERMS OF THE SECURITIES AND THE OTHER CLASS OR CLASSES AND SERIES
OF SHARES, IF ANY, WHICH THE COMPANY IS AUTHORIZED TO ISSUE, TO THE RECORD
HOLDER OF THIS CERTIFICATE, WITHOUT CHARGE, WITHIN FIVE DAYS AFTER RECEIPT OF A
WRITTEN REQUEST THEREFOR.
___________________________________________________
PRIME RESPONSE GROUP INC.
COMMON STOCK PURCHASE WARRANT
___________________________________________________
This certifies that, for good and valuable consideration, Prime Response
Group Inc., a Delaware corporation (the "Company"), grants to GAP Coinvestment
II, L.P., a Delaware limited partnership (the "Warrantholder"), the right to
subscribe for and purchase from the Company, at any time on or prior to the
Expiration Date, 62,286 validly issued, fully paid and nonassessable shares, par
value $.01 per share, of common stock of the Company (the "Warrant Shares"), at
the exercise price per share of $0.01 (the "Exercise Price"). Capitalized terms
used herein shall have the meanings ascribed to such terms in Section 9 below.
<PAGE>
2
1. Warrant. This Warrant is issued pursuant to, and in accordance with,
-------
the Stock and Warrant Purchase Agreement and is subject to the terms thereof.
2. Exercise of Warrant; Payment of Taxes.
-------------------------------------
2.1 Exercise of Warrant. Subject to the terms and conditions set
-------------------
forth herein, this Warrant may be exercised, in whole or in part, by the
Warrantholder at any time on or prior to the Expiration Date by:
(a) the surrender of this Warrant to the Company, with a duly
executed Exercise Form, and
(b) the delivery of payment to the Company, for the account of
the Company, by cash, wire transfer, certified or official bank check or any
other means approved by the Company, of the Exercise Price in lawful money of
the United States of America.
The Company agrees that the Warrant Shares shall be deemed to be issued to the
Warrantholder as the record holder of such Warrant Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for the Warrant Shares as aforesaid.
2.2 Cashless Exercise.
-----------------
(a) In lieu of the payment of the Exercise Price, the
Warrantholder shall have the right (but not the obligation), to require the
Company to convert this Warrant, in whole or, from time to time, in part, into
shares of Common Stock (the "Conversion Right") as provided for in this Section
2.2. Upon exercise of the Conversion Right, the Company shall deliver to the
Warrantholder (without payment by the Warrantholder of any of the Exercise
Price) that number of shares of Common Stock equal to the quotient obtained by
dividing (i) the value of the Warrant (or the part thereof being converted) at
the time the Conversion Right is exercised (determined by subtracting the
aggregate Exercise Price in effect immediately prior to the exercise of the
Conversion Right from the aggregate Current Market Price for the shares of
Common Stock issuable upon exercise of the Warrant (or the part thereof being
converted) immediately prior to the exercise of the Conversion Right) by (ii)
the Current Market Price of one share of Common Stock immediately prior to the
exercise of the Conversion Right.
(b) the Conversion Right may be exercised by the WarranthoIder
on any Business Day on or prior to the Expiration Date by delivering this
Warrant, with a duly executed Exercise Form with the conversion section
completed, to the Company, exercising the Conversion Right and specifying the
total
<PAGE>
3
number of shares of Common Stock that the Warrantholder will be issued pursuant
to such conversion.
2.3 Warrant Shares Certificate. A stock certificate or certificates
--------------------------
for the Warrant Shares specified in the Exercise Form shall be delivered to the
Warrantholder within five Business Days after receipt of the Exercise Form by
the Company and, if the Conversion Right is not exercised, payment by the
Warrantholder of the aggregate Exercise Price. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of the stock
certificate or certificates, deliver to the Warrantholder a new Warrant
evidencing the right to purchase the remaining Warrant Shares, which new Warrant
shall in all other respects be identical with this Warrant.
2.4 Payment of Taxes. The issuance of certificates for Warrant
----------------
Shares shall be made without charge to the Warrantholder at any time.
3. Restrictions on Transfer, Restrictive Legends.
---------------------------------------------
3.1 This Warrant may not be offered, sold, transferred, pledged or
otherwise disposed of, in whole or in part, to any Person other than to an
Affiliate of the Warrantholder without the written consent of the Company, which
shall not be unreasonably withheld, and the Warrant Shares may not be offered,
sold, transferred, pledged or otherwise disposed of, in whole or in part, to any
Person other than in accordance with the Stockholders Agreement (so long as such
agreement is in effect).
3.2 Except as otherwise permitted by this Section 3, (a) each Warrant
(and each Warrant issued in substitution for any Warrant pursuant to Section 4)
shall be stamped or otherwise imprinted with a legend in substantially the form:
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. NEITHER THIS WARRANT,
SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS OR PURSUANT TO A WRITTEN OPINION OF
COUNSEL (WHICH COUNSEL AND OPINION SHALL BE REASONABLY SATISFACTORY TO THE
COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED.
<PAGE>
4
Except as set forth in this Section 3, each stock certificate for Warrant
Shares issued upon the exercise of any Warrant and each stock certificate issued
upon the direct or indirect transfer of any such Warrant Shares shall be stamped
or otherwise imprinted with a legend in substantially the form stipulated in the
Stockholders Agreement (so long as such agreement is in effect).
Notwithstanding the foregoing, the Warrantholder may require the Company to
issue a Warrant or a stock certificate for Warrant Shares, in each case without
a legend, if and to the extent permitted by, and in accordance with, the
Stockholders Agreement (so long as such agreement is in effect).
4. Reservation and Registration of Shares. The Company covenants and
--------------------------------------
agrees as follows:
(a) All Warrant Shares that are issued upon the exercise of this
Warrant shall, upon issuance, be validly issued, fully paid and nonassessable,
not subject to any preemptive rights, and, except as provided in the
Stockholders Agreement, free from all taxes, liens, security interests, charges,
and other encumbrances with respect to the issuance thereof, other than taxes in
respect of any transfer occurring contemporaneously with such issue.
(b) The Company shall at all times have authorized and reserved,
and shall keep available free from preemptive rights, a sufficient number of
shares of Common Stock to provide for the exercise of the rights represented by
this Warrant.
(c) The Company shall not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, spin-off,
consolidation, merger, dissolution, issue or sale of securities or any other
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, and shall at all times in good faith assist in performing and
giving effect to the terms hereof and in the taking of all such actions as may
be necessary or appropriate in order to protect the rights of the Warrantholder
against dilution or other impairment.
5. Anti-dilution Adjustments. The number of Warrant Shares to be
-------------------------
received upon exercise of this Warrant shall be subject to adjustment as
follows:
5.1 Dividend, Subdivision, Combination or Reclassification of Common
----------------------------------------------------------------
Stock. In the event that the Company shall at any time or from time to time,
- -----
after the issuance of this Warrant but prior to the exercise hereof, (w) pay a
dividend or make a distribution on the outstanding shares of Common Stock
payable in Capital Stock, (x) subdivide the outstanding shares of Common Stock
into a larger number of shares, (y) combine the outstanding shares of Common
Stock into a smaller number of shares or (z) issue any shares of its Capital
Stock in a reclassification of the Common Stock (other than any such event for
which an
<PAGE>
5
adjustment is made pursuant to another clause of this Section 5), then, and in
each such case, the aggregate number of Warrant Shares for which this Warrant is
exercisable (the "Warrant Share Number") immediately prior to such event shall
be adjusted (and any other appropriate actions shall be taken by the Company) so
that the Warrantholder shall be entitled to receive upon exercise of this
Warrant the number of shares of Common Stock or other securities of the Company
that it would have owned or would have been entitled to receive upon or by
reason of any of the events described above, had this Warrant been exercised
immediately prior to the occurrence of such event. An adjustment made pursuant
to this Section 5.1 shall become effective retroactively (x) in the case of any
such dividend or distribution, to a date immediately following the close of
business on the record date for the determination of holders of Common Stock
entitled to receive such dividend or distribution or (y) in the case of any such
subdivision, combination or reclassification, to the close of business on the
day upon which such corporate action becomes effective.
5.2 Certain Distributions. In case the Company shall at any time or
---------------------
from time to time distribute to all holders of shares of its Common Stock
(including any such distribution made in connection with a merger or
consolidation in which the Company is the resulting or surviving Person and the
Common Stock is not changed or exchanged) cash, evidences of indebtedness of the
Company or another Person, securities of the Company or another Person or other
assets (excluding dividends payable in shares of Common Stock for which
adjustment is made under Section 5.1) or rights or warrants to subscribe for or
purchase the foregoing, then, and in each such case, the Warrant Share Number
----
shall be increased by being multiplied by a fraction (i) the numerator of which
shall be the Current Market Price of one share of Common Stock immediately prior
to the record date for the distribution of such cash, evidences of indebtedness,
securities, other assets or rights or warrants and (ii) the denominator of which
shall be the Current Market Price of one share of Common Stock immediately prior
to such record date less the Fair Market Value of the portion of such cash,
evidences of indebtedness, securities, other assets or rights or warrants so
distributed divided by the number of shares of Common Stock outstanding
immediately prior to such distribution. Such adjustment shall be made whenever
any such distribution is made and shall become effective retroactively to a date
immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution; provided,
--------
however, that no adjustment shall be made with respect to any distribution of
- -------
rights to purchase securities of the Company if the Warrantholder would
otherwise be entitled to receive such rights upon exercise at any time of this
Warrant. Such adjustment shall be made whenever any such distribution is made
and shall become effective retroactively to the date immediately following the
close of business on the record date for the determination of shareholders
entitled to receive such distribution.
5.3 Other Changes. In case the Company at any time or from time to
-------------
time, after the issuance of this Warrant but prior to the exercise hereof, shall
take any action affecting its Common Stock similar to or having an effect
similar
<PAGE>
6
to any of the actions described in any of Sections 5.1, 5.2 or 5.7 (but not
including any action described in any such. Section) and the Board of Directors
of the Company in good faith determines that it would be equitable in the
circumstances to adjust the Warrant Share Number as a result of such action,
then, and in each such case, the Warrant Share Number shall be adjusted in such
manner and at such time as the Board of Directors of the Company in good faith
determines would be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
Warrantholders).
5.4 De Minimis Adjustments. Notwithstanding anything herein to the
----------------------
contrary, no adjustment under this Section 5 need be made to the Warrant Share
Number if the Company receives written notice from the Warrantholder that no
such adjustment is required.
5.5 Abandonment. If the Company shall take a record of the holders
-----------
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
shareholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then no adjustment in the Warrant Share Number shall be required
by reason of the taking of such record.
5.6 Certificate as to Adjustments. Upon any increase in the Warrant
-----------------------------
Share Number or adjustment of the Exercise Price, the Company shall within a
reasonable period (not to exceed 10 days) following any of the foregoing
transactions deliver to the Warrantholder a certificate, signed by (i) the
President or a Vice President of the Company and (ii) the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the Company,
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the increased
Warrant Share Number then in effect following such adjustment.
5.7 Reorganization, Reclassification, Merger or Sale. In case of any
------------------------------------------------
spin-off by the Company of another Person (the "Spin-off Entity"), in addition
to all other adjustments of the Warrant Share Number and the Exercise Price
pursuant to this Section 5, the Company shall issue to the Warrantholder a new
warrant, in form and substance satisfactory to the Company and the Majority
Warrantholders, entitling the Warrantholder to purchase, at an exercise price
equal to the Exercise Price, the number of shares of common stock of the Spin-
off Entity that the Warrantholder would have owned had the Warrantholder,
immediately prior to such spin-off, exercised this Warrant, and in case of any
capital reorganization, reclassification, a Merger, a Sale or a consolidation of
the Company with or into another Person or other change of outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value) (each, a "Transaction"), the Company
shall execute and deliver to the Warrantholder at least ten (10) Business Days
prior to effecting such Transaction a
<PAGE>
7
certificate stating that the Warrantholder shall have the right thereafter to
exercise this Warrant for the kind and amount of shares of stock or other
securities, property or cash receivable upon such Transaction by a holder of the
number of shares of Common Stock into which this Warrant could have been
exercised immediately prior to such Transaction and provision shall be made
therefor in the agreement, if any, relating to such Transaction. Such
certificate shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 5. The
provisions of this Section 5.7 and any equivalent thereof in any such
certificate similarly shall apply to successive transactions.
5.8 Dilution Notices. In case at any time or from time to time
----------------
(x) the Company shall declare a dividend (or any other
distribution) on its shares of Common Stock;
(y) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or of any other rights or warrants; or
(z) there shall occur a spin-off or Transaction;
then the Company shall mail to the Warrantholder, as promptly as possible but in
any event at least ten (10) days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or granting of rights or
warrants are to be determined, or (B) the date on which such spin-off or
Transaction is expected to become effective and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for shares of stock or other securities or property or cash
deliverable upon such Transaction. Notwithstanding the foregoing, in the case of
any event to which Section 5.7 is applicable, the Company shall also deliver the
certificate described in such Section 5.7 to the Warrantholder at least 10
Business Days prior to effecting such reorganization or reclassification as
aforesaid.
6. Loss or Destruction of Warrant. Subject to the terms and conditions
------------------------------
hereof, upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
loss, theft or destruction, of such bond or indemnification as the Company may
reasonably require, and, in the case of such mutilation, upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor.
7. Ownership of Warrant. The Company may deem and treat the person in
--------------------
whose name this Warrant is registered as the holder and owner hereof
<PAGE>
8
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of
transfer.
8. Amendments. Any provision of this Warrant may be amended and the
----------
observance thereof waived only with the written consent of the Company and the
Warrantholder.
9. Definitions. As used herein, unless the context otherwise requires,
-----------
the following terms have the following respective meanings:
"Affiliate" has the meaning specified in the Stock and Warrant Purchase
---------
Agreement.
"Board of Directors" means the Board of Directors of the Company.
------------------
"Business Day" means any day other than a Saturday, Sunday or a day on
------------
which national banks are authorized by law to close in the State of New York.
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, participation, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock (but excluding any debt security whether or not it is exchangeable
for or convertible into such capital stock).
"Common Stock" means the common stock, par value $.01 per share, of the
------------
Company.
"Common Stock Equivalent" means any security or obligation which is by its
-----------------------
terms convertible into shares of Common Stock or another Common Stock
Equivalent, including, without limitation, any option, warrant or other
subscription or purchase right with respect to Common Stock.
"Company" has the meaning specified on the cover of this Warrant.
-------
"Conversion Right" has the meaning specified in Section 2.2 of this
----------------
Warrant.
"Current Market Price" means, as of the date of determination, (a) the
--------------------
average of the daily Market Price under clause (a), (b) or (c) of the definition
thereof of the Common Stock during the immediately preceding thirty (30) trading
days ending on such date, or (b) if the Common Stock is not then listed or
admitted to trading on any securities exchange or quoted in the over-the-counter
market, then the Market Price under clause (d) of the definition thereof on such
date.
<PAGE>
9
"Excluded Transaction" means (a) options to purchase shares of Common Stock
--------------------
which may be granted to employees, consultants or directors of the Company
pursuant to a stock option plan approved by the Board of Directors of the
Company, (b) a subdivision of the outstanding shares of Common Stock into a
larger number of shares of Common Stock or (c) capital stock issued upon
exercise, conversion or exchange of any Common Stock Equivalent.
"Exercise Form" means an Exercise Form in the form annexed hereto as
-------------
Exhibit A.
"Exercise Price" has the meaning specified on the cover of this Warrant.
--------------
"Expiration Date" means the earlier of (a) July 15, 2006 and (b) the
---------------
closing of the Initial Public Offering.
"Fair Market Value" means the amount which a willing buyer would pay a
-----------------
willing seller in an arm's length transaction reasonably determined in good
faith by the Board of Directors or, if such determination is not reasonably
satisfactory to the Warrantholder, such determination as shall be made by a
nationally recognized investment banking firm selected by the Company and the
Warrantholder, the expenses for which shall be borne equally by the Company and
the Warrantholder. Any determination of the Fair Market Value by the Board of
Directors or such investment banking firm shall be made based on a valuation of
the Company as an entirety without regard to any discount for minority interests
or disparate voting rights among classes of capital stock.
"GAP Coinvestment II" means GAP Coinvestment Partners II, L.P., a New York
-------------------
limited partnership.
"GAP LP" means General Atlantic Partners 52, L.P., a Delaware limited
------
partnership.
"Initial Public Offering" means the initial public offering of shares of
-----------------------
Common Stock of the Company pursuant to an effective registration statement
filed under the Securities Act.
"Majority Warrantholders" means the holders of a majority of the shares of
-----------------------
Common Stock issuable upon exercise of all of the warrants issued pursuant to
the Stock and Warrant Purchase Agreement assuming the exercise of all such
warrants.
"Market Price" means, as of the date of determination, (a) the closing
------------
price per share of Common Stock on such date published in The Wall Street
Journal or, if no such closing price on such date is published in The Wall
Street Journal, the
<PAGE>
10
average of the closing bid and asked prices on such date, as officially reported
on the principal securities exchange (including, without limitation, The Nasdaq
Stock Market, Inc.) on which the Common Stock is then listed or admitted to
trading; or (b) if the Common Stock is not then listed or admitted to trading on
any securities exchange but is designated as a national market system security
by the National Association of Securities Dealers, Inc., the last trading price
of the Common Stock on such date; or (c) if there shall have been no trading on
such date or if the Common Stock is not so designated, the average of the
reported closing bid and asked prices of the Common Stock on such date as shown
by the National Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System and reported by any member firm of the New York
Stock Exchange selected by the Company; or (d) if none of (a), (b) or (c) is
applicable, a market price per share determined in good faith by the Board of
Directors and reasonably acceptable to the Majority Warrantholders; provided,
--------
however, that if such determination is not reasonably acceptable to the Majority
- -------
Warrantholders, then a market price per share determined at the Company's
expense by an appraiser chosen by mutual agreement of the Company and the
Majority Warrantholders. Any determination of the Market Price by an appraiser
shall be based on a valuation of the Company as an entirety without regard to
any discount for minority interests or disparate voting rights among classes of
capital stock.
"Merger" means (x) the merger or consolidation of the Company into or with
------
one or more Persons or (y) the merger or consolidation of one or more Persons
into or with the Company, if, in the case of (x) or (y), the stockholders of the
Company prior to such merger or consolidation do not retain at least a majority
of the voting power of the surviving Person.
"Permitted Transferee" has the meaning set forth in the Stockholders
--------------------
Agreement.
"Person" means any individual, firm, corporation, partnership, limited
------
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
"Purchaser" has the meaning specified in the Stock and Warrant Purchase
---------
Agreement.
"Sale" means the sale, conveyance, exchange or transfer to another Person
----
of (a) the voting Capital Stock of the Company if, after such sale, conveyance,
exchange or transfer, the stockholders of the Company prior to such sale,
conveyance, exchange or transfer do not, directly or indirectly, retain at least
a majority of the voting power of the surviving Person or (b) all or
substantially all of the assets of the Company.
<PAGE>
11
"Securities Act" has the meaning specified on the cover of this Warrant, or
--------------
any similar Federal statute, and the rules and regulations of the United States
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the Securities Act
shall be deemed to include a reference to the comparable section, if any, of any
such similar Federal statute.
"Spin-off Entity" has the meaning specified in Section 5.7 of this Warrant.
---------------
"Stock and Warrant Purchase Agreement" means the Stock and Warrant Purchase
------------------------------------
Agreement, dated July 15, 1999, among the Company, GAP LP and GAP Coinvestment
II.
"Stockholders Agreement" has the meaning specified on the cover of this
----------------------
Warrant.
"Transaction" has the meaning specified in Section 5.7 of this Warrant.
-----------
"Transfer" has the meaning specified on the cover of this Warrant.
--------
"Warrantholder" has the meaning specified on the cover of this Warrant.
-------------
"Warrant Share Number" has the meaning specified in Section 5.1 of this
--------------------
Warrant.
"Warrant Shares" has the meaning specified on the cover of this Warrant.
--------------
10. Miscellaneous
-------------
10.1 Entire Agreement. This Warrant constitutes the entire agreement
----------------
between the Company and the Warrantholder with respect to the Warrant.
10.2 Binding Effect; Benefits. This Warrant shall inure to the
------------------------
benefit of and shall be binding upon the Company and the Warrantholder and their
respective permitted successors and assigns. Nothing in this Warrant, expressed
or implied, is intended to or shall confer on any person other than the Company
and the Warrantholder, or their respective permitted successors or assigns, any
rights, remedies, obligations or liabilities under or by reason of this Warrant.
10.3 Section and Other Headings. The section and other headings
--------------------------
contained in this Warrant are for reference purposes only and shall not be
<PAGE>
12
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
10.4 Notices. All notices, demands and other communications provided
-------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service, overnight mail or personal delivery:
(a) if to the Warrantholder:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-8818
Attention: William E. Ford
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Matthew Nimetz, Esq.
(b) if to the Company:
Prime Response Group Inc.
150 CambridgePark Drive
Cambridge, MA 02140
Telecopy: (617) 876-8383
Attention: Chief Executive Officer
with a copy to:
Brobeck Hale and Dorr
Hasilwood House
60 Bishopsgate
London EC2N 4AJ
England
Telecopy: 44 171 638 5888
Attention: David Ayres
<PAGE>
13
All such notices and communications shall be deemed to have been duly given
when delivered by hand, if personally delivered; when delivered by courier or
overnight mail, if delivered by commercial courier service or overnight mail;
five (5) Business Days after being deposited in the mail, postage prepaid, if
mailed; and when receipt is mechanically acknowledged, if telecopied. Any party
may by notice given in accordance with this Section 10.4 designate another
address or Person for receipt of notices hereunder.
10.5 Severability. Any term or provision of this Warrant which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
10.6 GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
10.7 No Rights or Liabilities as Shareholder. Nothing contained in
---------------------------------------
this Warrant shall be determined as conferring upon the Warrantholder any rights
as a shareholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any securities whether such liabilities are asserted
by the Company or by creditors or shareholders of the Company or otherwise.
<PAGE>
14
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
PRIME RESPONSE GROUP INC.
By: /s/ Peter J. Boni
----------------------------------
Name: Peter J. Boni
Title: President & CEO
Dated: As of July 15, 1999
<PAGE>
EXHIBIT 10.22
================================================================================
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
among
PRIME RESPONSE, INC.
and
THE OTHER PARTIES NAMED HEREIN
---------------------
Dated as of December 6, 1999
---------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
1. Definitions.......................................................................... 1
2. General; Securities Subject to this Agreement........................................ 5
(a) Grant of Rights............................................................. 5
(b) Registrable Securities...................................................... 5
(c) Holders of Registrable Securities........................................... 6
3. Demand Registration.................................................................. 6
(a) Request for Demand Registration............................................. 6
(b) Incidental or "Piggy-Back" Rights with Respect to a Demand Registration..... 6
(c) Effective Demand Registration.............................................. 7
(d) Expenses................................................................... 7
(e) Underwriting Procedures.................................................... 7
(f) Selection of Underwriters.................................................. 8
4. Incidental or "Piggy-Back" Registration............................................. 8
(a) Request for Incidental Registration........................................ 8
(b) Expenses................................................................... 9
5. Form S-3 Registration............................................................... 9
(a) Request for a Form S-3 Registration........................................ 9
(b) Form S-3 Underwriting Procedures........................................... 9
(c) Limitations on Form S-3 Registrations...................................... 10
(d) Expenses................................................................... 10
(e) No Demand Registration..................................................... 10
6. Holdback Agreements................................................................. 11
(a) Restrictions on Public Sale by Designated Holders.......................... 11
(b) Restrictions on Public Sale by the Company................................. 11
7. Registration Procedures............................................................. 11
(a) Obligations of the Company................................................. 11
(b) Seller Information......................................................... 14
(c) Notice to Discontinue...................................................... 14
(d) Registration Expenses...................................................... 14
8. Indemnification; Contribution....................................................... 15
(a) Indemnification by the Company............................................. 15
(b) Indemnification by Designated Holders...................................... 15
(c) Conduct of Indemnification Proceedings..................................... 16
(d) Contribution............................................................... 16
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
9. Rule 144............................................................................ 17
10. Miscellaneous....................................................................... 17
(a) Recapitalizations, Exchanges, etc.......................................... 17
(b) No Inconsistent Agreements................................................. 17
(c) Remedies................................................................... 18
(d) Amendments and Waivers..................................................... 18
(e) Notices.................................................................... 18
(f) Successors and Assigns; Third Party Beneficiaries.......................... 19
(g) Counterparts............................................................... 20
(h) Headings................................................................... 20
(i) GOVERNING LAW.............................................................. 20
(j) Severability............................................................... 20
(k) Entire Agreement........................................................... 20
(l) Further Assurances......................................................... 20
</TABLE>
-ii-
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated as of
December 6, 1999 (this "Agreement"), among Prime Response, Inc. (previously
named "Prime Response Group, Inc."), a Delaware corporation (the "Company"),
General Atlantic Partners 42, L.P., a Delaware limited partnership ("GAP LP"),
GAP Coinvestment Partners, L.P., a New York limited partnership ("GAP
Coinvestment"), General Atlantic Partners 48, L.P., a Delaware limited
partnership ("GAP 48"), General Atlantic Partners 52, L.P., a Delaware limited
partnership ("GAP 52"), GAP Coinvestment Partners II, L.P., a Delaware limited
partnership ("GAP Coinvestment II"), General Atlantic Partners 57, L.P., a
Delaware limited partnership ("GAP 57"), Andersen Consulting LLP, an Illinois
limited liability partnership ("Andersen"), AC Ventures B.V., a Netherlands
limited liability corporation ("AC Ventures"), KITE LIMITED ("KITE") and James
Carling ("Carling").
WHEREAS, the parties hereto (other than Andersen) are parties to a
Registration Rights Agreement dated as of October 24, 1997, as amended as of
September 21, 1998, February 28, 1999 and July 15, 1999 (as amended, the
"Original Agreement"); and
WHEREAS, GAP 57 is a Permitted Transferee (as defined in the
Stockholders Agreement) of one or more General Atlantic Stockholders and KITE is
a Permitted Transferee of Nevin Prakash and, accordingly, are parties to the
Original Agreement; and
WHEREAS, the parties hereto desire to grant Andersen certain
registration rights with respect to securities of the Company as set forth in
this Agreement and to otherwise restate the provisions of the Original
Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. As used in this Agreement the following terms have
-----------
the meanings indicated:
"Affiliate" shall mean any Person who is an "affiliate" as defined in
---------
Rule 12b-2 of the General Rules and Regulations under the Exchange Act. The
following shall be deemed to be Affiliates of GAP LP: (a) GAP LLC, the members
of GAP LLC and the limited partners of GAP LP, GAP 48, GAP 52 or GAP 57; (b) any
Affiliate of GAP LLC, the members of GAP LLC and the limited partners of GAP LP,
GAP 48, GAP 52 or GAP 57; and (c) any limited liability company or partnership a
majority of whose members or partners, as the case may be, are members of GAP
LLC. GAP LP, GAP 48, GAP 52, GAP 57, GAP Coinvestment and GAP Coinvestment II
shall be deemed to be Affiliates of one another.
"Andersen Stockholders" means Andersen Consulting LLP, an Illinois
---------------------
limited liability partnership, AC Ventures B.V., a Netherlands limited liability
corporation, and all Affiliates of the foregoing.
"Andersen Warrants" means (i) that certain warrant to purchase Common
-----------------
Stock dated as of December 6, 1999, issued by the Company pursuant to that
certain Common Stock and Warrant Purchase Agreement, of the same date, among the
Company, Andersen and AC
<PAGE>
Ventures, and (ii) those certain warrants to purchase Common Stock, dated as of
December 6, 1999, issued by the Company pursuant to that certain Warrant
Purchase Agreement, of the same date, between the Company and Andersen.
"Approved Underwriter" has the meaning set forth in Section 3(f) of
--------------------
this Agreement.
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"Carling" has the meaning set forth in the recitals to this Agreement.
-------
"Closing Price" means, with respect to the Registrable Securities, as
-------------
of the date of determination, (a) the closing price per share of a Registrable
Security on such date published in the Wall Street Journal or, if no such
closing price on such date is published in the Wall Street Journal, the average
of the closing bid and asked prices on such date, as officially reported on the
principal national securities exchange (including, without limitation, The
Nasdaq Stock Market, Inc.) on which the Registrable Securities are then listed
or admitted to trading; or (b) if the Registrable Securities are not then listed
or admitted to trading on any national securities exchange but are designated as
national market system securities by the NASD, the last trading price per share
of a Registrable Security on such date; or (c) if there shall have been no
trading on such date or if the Registrable Securities are not so designated, the
average of the reported closing bid and asked prices of the Registrable
Securities on such date as shown by The Nasdaq Stock Market, Inc. (or its
successor) and reported by any member firm of the New York Stock Exchange, Inc.
selected by the Company; or (d) if none of (a), (b) or (c) is applicable, a
market price per share reasonably determined in good faith by the Company's
Board of Directors or, if such determination is not reasonably satisfactory to
the Designated Holder for whom such determination is being made, by a nationally
recognized investment banking firm selected by the Company and such Designated
Holder, the expenses for which shall be borne equally by the Company and such
Designated Holder.
"Common Stock" means the Common Stock, par value $.01 per share, of
------------
the Company or any other equity securities of the Company into which such
securities are converted, reclassified, reconstituted or exchanged or any other
common stock of the Company.
"Company" has the meaning set forth in the recitals to this Agreement.
-------
"Company Underwriter" has the meaning set forth in Section 4(a) of
-------------------
this Agreement.
"Demand Registration" has the meaning set forth in Section 3(a) of
-------------------
this Agreement.
"Designated Holder" means (i) each of the Major Stockholders, the
-----------------
General Atlantic Stockholders and any transferee of any of them to whom
Registrable Securities have been transferred in accordance with the provisions
of the Stockholders Agreement and Section 10(f) of this Agreement, other than a
transferee to whom Registrable Securities have been
<PAGE>
transferred pursuant to a Registration Statement under the Securities Act or
Rule 144 or Regulation S under the Securities Act, and (ii) Andersen, AC
Ventures and any transferee of Andersen or AC Ventures to whom Registrable
Securities have been transferred in accordance with the provisions of Section
10(f) of this Agreement, other than a transferee to whom Registrable Securities
have been transferred pursuant to a Registration Statement under the Securities
Act or Rule 144 or Regulation S under the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder.
"GAP 48" has the meaning set forth in the recitals to this Agreement.
------
"GAP 52" has the meaning set forth in the recitals to this Agreement.
------
"GAP 57" has the meaning set forth in the recitals to this Agreement.
------
"GAP Coinvestment" has the meaning set forth in the recitals to this
----------------
Agreement.
"GAP Coinvestment II" has the meaning set forth in the recitals to
-------------------
this Agreement.
"GAP LP Warrant" has the meaning set forth in the Stock and Warrant
--------------
Purchase Agreement, dated February 28, 1999, among the Company, GAP 52 and GAP
Coinvestment II.
"GAPCO Warrant" has the meaning set forth in the Stock and Warrant
-------------
Purchase Agreement, dated February 28, 1999, among the Company, GAP 52 and GAP
Coinvestment II.
"GAP LLC" means General Atlantic Partners, LLC, a Delaware limited
-------
liability company and the general partner of GAP LP, and any successor to such
entity.
"GAP LP" has the meaning set forth in the recitals to this Agreement.
------
"General Atlantic Stockholders" means GAP LP, GAP 48, GAP 52, GAP 57,
-----------------------------
GAP Coinvestment, GAP Coinvestment II and any Permitted Transferee (as defined
in the Stockholders Agreement) of any of them to which Registrable Securities
are transferred in accordance with Section 2.2 of the Stockholders Agreement.
"Holders' Counsel" has the meaning set forth in Section 7(a)(i) of
----------------
this Agreement.
"Incidental Registration" has the meaning set forth in Section 4(a) of
-----------------------
this Agreement.
"Indemnified Party" has the meaning set forth in Section 8(c) of this
-----------------
Agreement.
"Indemnifying Party" has the meaning set forth in Section 8(c) of this
------------------
Agreement.
"Initial Public Offering" means an underwritten initial public
-----------------------
offering pursuant to an effective Registration Statement filed under the
Securities Act.
<PAGE>
"Initiating Holders" has the meaning set forth in Section 3(a) of this
------------------
Agreement.
"Inspector" has the meaning set forth in Section 7(a)(vii) of this
---------
Agreement.
"IPO Effectiveness Date" means the date upon which the Company
----------------------
commences its Initial Public Offering.
"KITE" has the meaning set forth in the recitals to this Agreement.
----
"Major Stockholders" means KITE, Carling and any Permitted Transferee
------------------
of any of them to which Registrable Securities are transferred in accordance
with Section 2.2 of the Stockholders Agreement.
"Market Price" means, on any date of determination, the average of the
------------
daily Closing Price of the Registrable Securities for the immediately preceding
thirty (30) days on which the national securities exchanges are open for
trading.
"NASD" has the meaning set forth in Section 7(a)(xiii) of this
----
Agreement.
"Person" means any individual, firm, corporation, partnership, limited
------
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"Preferred Stock" means (a) the Series A Convertible Participating
---------------
Preferred Stock, par value $.01 per share, of the Company, (b) the Series B
Convertible Participating Preferred Stock, par value $.01 per share, of the
Company, (c) the Series C Convertible Participating Preferred Stock, par value
$0.1 per share, of the Company, and (d) any other series of preferred stock of
the Company issued to GAP LP, GAP 48, GAP 52, GAP 57, GAP Coinvestment, GAP
Coinvestment II or any other Affiliate of GAP LLC.
"Records" has the meaning set forth in Section 7(a)(vii) of this
-------
Agreement.
"Registrable Securities" means each of the following: (a) any and all
----------------------
shares of Common Stock owned by the Designated Holders or issued or issuable
upon conversion of shares of Preferred Stock or exercise of the Warrants or any
other warrants, including, without limitation, any shares of Common Stock issued
or issuable upon conversion of any shares of preferred stock or exercise of any
warrants owned by any of the Designated Holders on the date hereof or acquired
by any of the Designated Holders after the date hereof, (b) any other shares of
Common Stock acquired or owned by any of the Designated Holders prior to the IPO
Effectiveness Date, or acquired or owned by any of the Designated Holders after
the IPO Effectiveness Date if such Designated Holder is an Affiliate of the
Company and (c) any shares of Common Stock or voting common stock issued or
issuable to any of the Designated Holders with respect to the Registrable
Securities, shares of Preferred Stock, preferred stock, the Warrants or other
warrants by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise and any shares of Common Stock or voting common
stock issuable upon conversion, exercise or exchange thereof; provided, however,
that any shares of Common Stock owned by
<PAGE>
KITE that are subject to the Option Agreement, dated October 23, 1997, between
the Company and KITE shall not be Registrable Securities.
"Registration Expenses" has the meaning set forth in Section 7(d) of
---------------------
this Agreement.
"Registration Statement" means a Registration Statement filed pursuant
----------------------
to the Securities Act.
"S-3 Initiating Holders" has the meaning set forth in Section 5(a) of
----------------------
this Agreement.
"S-3 Registration" has the meaning set forth in Section 5(a) of this
----------------
Agreement.
"SEC" means the Securities and Exchange Commission or any similar
---
agency then having jurisdiction to enforce the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
"Stockholders Agreement" means the Stockholders Agreement, dated as of
----------------------
October 24, 1997, among the Company, GAP LP, GAP Coinvestment, Carling and KITE
(as successor-in-interest to Prakash), as amended by Amendment No. 1 thereto,
dated as of September 21, 1998, among the Company, GAP LP, GAP 48, GAP
Coinvestment, Carling, KITE, Richard S. Braddock ("Braddock") and Allen Swann
("Swann"), as amended by Amendment No. 2 thereto, dated as of March 3, 1999,
among the Company, GAP LP, GAP 48, GAP 52, GAP Coinvestment, GAP Coinvestment
II, Carling, Prakash, Braddock and Swann, and as amended by Amendment No. 3
thereto, dated as of July 15, 1999, among the Company, GAP LP, GAP 48, GAP 52,
GAP Coinvestment, GAP Coinvestment II, Carling, Prakash, Braddock and Swann.
"Stock Purchase Agreement" means the Stock Purchase Agreement dated as
------------------------
of October 1, 1997 among the Company, GAP LP and GAP Coinvestment, as amended.
"Warrants" means the GAP LP Warrant, the GAPCO Warrant and the
--------
Andersen Warrants.
2. General; Securities Subject to this Agreement.
---------------------------------------------
(a) Grant of Rights. The Company hereby grants registration rights to the
---------------
Major Stockholders, the General Atlantic Stockholders and the Andersen
Stockholders upon the terms and conditions set forth in this Agreement.
(b) Registrable Securities. For the purposes of this Agreement, Registrable
----------------------
Securities will cease to be Registrable Securities when (i) a Registration
Statement covering such Registrable Securities has been declared effective under
the Securities Act by the SEC and such Registrable Securities have been disposed
of pursuant to such effective Registration Statement, (ii) the entire amount of
Registrable Securities proposed to be sold in a
<PAGE>
single sale, in the opinion of counsel satisfactory to the Company and the
Designated Holder, each in their reasonable judgment, may be distributed to the
public without any limitation as to volume pursuant to Rule 144 (or any
successor provision then in effect) under the Securities Act or (iii) the
Registrable Securities are proposed to be sold or distributed by a Person not
entitled to the registration rights granted by this Agreement.
(c) Holders of Registrable Securities. A Person is deemed to be a holder of
---------------------------------
Registrable Securities whenever such Person owns of record Registrable
Securities, or holds an option to purchase, or a security convertible into or
exercisable or exchangeable for, Registrable Securities whether or not such
acquisition or conversion has actually been effected. If the Company receives
conflicting instructions, notices or elections from two or more Persons with
respect to the same Registrable Securities, the Company may act upon the basis
of the instructions, notice or election received from the registered owner of
such Registrable Securities. Registrable Securities issuable upon exercise of an
option or upon conversion of another security shall be deemed outstanding for
the purposes of this Agreement.
3. Demand Registration.
-------------------
(a) Request for Demand Registration. At any time after the IPO
-------------------------------
Effectiveness Date and prior to the time the Company is eligible to file a
Registration Statement on Form S-3 or any successor thereto, each of (i) one or
more of the General Atlantic Stockholders as a group, acting through GAP LLC or
its written designee, and (ii) one or more of the Major Stockholders (the
"Initiating Holders") may make a written request to the Company to register,
under the Securities Act (other than pursuant to a Registration Statement on
Form S-4 or S-8 or any successor thereto) (a "Demand Registration"), the number
of Registrable Securities stated in such request; provided, however, that the
Company shall not be obligated to effect more than one Demand Registration for
the General Atlantic Stockholders and one Demand Registration for the Major
Stockholders pursuant to this Section 3. For purposes of the preceding sentence,
two or more Registration Statements filed in response to one demand shall be
counted as one Registration Statement. If at the time of any request to register
Registrable Securities pursuant to this Section 3(a), the Company is engaged in,
or has fixed plans to engage in within sixty (60) days of the time of such
request, a registered public offering or is engaged in any other activity which,
in the good faith determination of the Board of Directors of the Company, would
be adversely affected by the requested registration to the material detriment of
the Company, then the Company may at its option direct that such request be
delayed for a reasonable period not in excess of three (3) months from the
effective date of such offering or the date of completion of such other material
activity, as the case may be, such right to delay a request to be exercised by
the Company not more than once in any one-year period. In addition, the Company
shall not be required to effect any registration within sixty (60) days after
the effective date of any other Registration Statement of the Company. Each
request for a Demand Registration by the Initiating Holders shall state the
amount of the Registrable Securities proposed to be sold and the intended method
of disposition thereof. Upon a request for a Demand Registration, the Company
shall promptly take such steps as are necessary or appropriate to prepare for
the registration of the Registrable Securities to be registered.
(b) Incidental or "Piggy-Back" Rights with Respect to a Demand
----------------------------------------------------------
Registration. Each of the Designated Holders (other than Initiating Holders
- ------------
which have
<PAGE>
requested a registration under Section 3(a)) may offer its or his Registrable
Securities under any Demand Registration pursuant to this Section 3. Within ten
(10) days after the receipt of a request for a Demand Registration from an
Initiating Holder, the Company shall (i) give written notice thereof to all of
the Designated Holders (other than Initiating Holders which have requested a
registration under Section 3(a)) and (ii) subject to Section 3(e), include in
such registration all of the Registrable Securities held by such Designated
Holders from whom the Company has received a written request for inclusion
therein within ten (10) days of the receipt by such Designated Holders of such
written notice referred to in clause (i) above. Each such request by such
Designated Holders shall specify the number of Registrable Securities proposed
to be registered and the intended method of disposition thereof. The failure of
any Designated Holder to respond within such 10-day period referred to in clause
(ii) above shall be deemed to be a waiver of such Designated Holder's rights
under this Section 3 with respect to such Demand Registration, provided that any
Designated Holder may waive its rights under this Section 3 prior to the
expiration of such 10-day period by giving written notice to the Company, with a
copy to the Initiating Holders. If a Designated Holder sends the Company a
written request for inclusion of part or all of such Designated Holder's
Registrable Securities in a registration, such Designated Holder shall not be
entitled to withdraw or revoke such request without the prior written consent of
the Company in its sole discretion unless, as a result of facts or circumstances
arising after the date on which such request was made relating to the Company or
to market conditions, such Designated Holder reasonably determines that
participation in such registration would have a material adverse effect on such
Designated Holder.
(c) Effective Demand Registration. The Company shall use all reasonable
-----------------------------
commercial efforts to cause any such Demand Registration to become and remain
effective not later than ninety (90) days after it receives a request under
Section 3(a) hereof. A registration shall not constitute a Demand Registration
until it has become effective and remains continuously effective for the lesser
of (i) the period during which all Registrable Securities registered in the
Demand Registration are sold and (ii) ninety (90) days; provided, however that a
registration shall not constitute a Demand Registration if (x) after such Demand
Registration has become effective, such registration or the related offer, sale
or distribution of Registrable Securities thereunder is interfered with by any
stop order, injunction or other order or requirement of the SEC or other
governmental agency or court for any reason not attributable to the Initiating
Holders and such interference is not thereafter eliminated or (y) the conditions
specified in the underwriting agreement, if any, entered into in connection with
such Demand Registration are not satisfied or waived, other than by reason of a
failure by the Initiating Holders.
(d) Expenses. In any registration initiated as a Demand Registration, the
--------
Company shall pay all Registration Expenses (other than broker's commissions and
underwriter's discounts and commissions) in connection therewith, whether or not
such Demand Registration becomes effective.
(e) Underwriting Procedures. If the Company or the Initiating Holders
-----------------------
holding a majority of the Registrable Securities held by all of the Initiating
Holders to which the requested Demand Registration relates so elect, the Company
shall use its reasonable efforts to cause such Demand Registration to be in the
form of a firm commitment underwritten offering and the managing underwriter or
underwriters selected for such offering shall be the Approved
<PAGE>
Underwriter selected in accordance with Section 3(f). In connection with any
Demand Registration under this Section 3 involving an underwritten offering,
none of the Registrable Securities held by any Designated Holder making a
request for inclusion of such Registrable Securities pursuant to Section 3(b)
hereof shall be included in such underwritten offering unless such Designated
Holder accepts the terms of the offering as agreed upon by the Company, the
Initiating Holders and the Approved Underwriter, and then only in such quantity
as will not, in the opinion of the Approved Underwriter, jeopardize the success
of such offering by the Initiating Holders. If the Approved Underwriter advises
the Company in writing that in its opinion the aggregate amount of such
Registrable Securities requested to be included in such offering is sufficiently
large to have a material adverse effect on the success of such offering, then
the Company shall include in such registration only the aggregate amount of
Registrable Securities that in the opinion of the Approved Underwriter may be
sold without any such material adverse effect and shall reduce the amount of
Registrable Securities to be included in such registration, first as to the
Company, second as to the Designated Holders (who are not Initiating Holders and
who requested to participate in such registration pursuant to Section 3(b)
hereof) as a group, if any, and third as to the Initiating Holders as a group,
pro rata within each group based on the number of Registrable Securities owned
by each such Designated Holder or Initiating Holder, as the case may be.
(f) Selection of Underwriters. If any Demand Registration or S-3
-------------------------
Registration, as the case may be, of Registrable Securities is in the form of an
underwritten offering, the Company shall select and obtain an investment banking
firm of national reputation to act as the managing underwriter of the offering
(the "Approved Underwriter"); provided, however, that the Approved Underwriter
shall, in any case, also be approved by the Initiating Holders or S-3 Initiating
Holders, as the case may be, such approval not to be unreasonably withheld.
4. Incidental or "Piggy-Back" Registration.
---------------------------------------
(a) Request for Incidental Registration. At any time, if the Company
-----------------------------------
proposes to file a Registration Statement under the Securities Act with respect
to an offering (including an Initial Public Offering) by the Company for its own
account (other than a Registration Statement on Form S-4 or S-8 or any successor
thereto), then the Company shall give written notice of such proposed filing to
each of the Designated Holders at least thirty (30) days before the anticipated
filing date, and such notice shall describe the proposed registration and
distribution and offer such Designated Holders the opportunity to register the
number of Registrable Securities as each such holder may request (an "Incidental
Registration"). The Company shall, and shall use all reasonable commercial
efforts (within ten (10) days of the notice provided for in the preceding
sentence) to cause the managing underwriter or underwriters of a proposed
underwritten offering (the "Company Underwriter") to permit each of the
Designated Holders who have requested in writing to participate in the
Incidental Registration to include its or his Registrable Securities in such
offering on the same terms and conditions as the securities of the Company
included therein. In connection with any Incidental Registration under this
Section 4(a) involving an underwritten offering, the Company shall not be
required to include any Registrable Securities in such underwritten offering
unless the holders thereof accept the terms of the underwritten offering as
agreed upon between the Company and the Company Underwriter, and then only in
such quantity as will not, in the opinion of the Company
<PAGE>
Underwriter, jeopardize the success of the offering by the Company. If in the
written opinion of the Company Underwriter the registration of all or part of
the Registrable Securities which the Designated Holders have requested to be
included would materially adversely affect the success of such offering, then
the Company shall be required to include in such Incidental Registration, to the
extent of the amount that the Company Underwriter believes may be sold without
causing such adverse effect, first, all of the securities to be offered for the
account of the Company; second, the Registrable Securities to be offered for the
account of the Designated Holders pursuant to this Section 4, pro rata based on
the number of Registrable Securities owned by each such Designated Holder; and
third, any other securities requested to be included in such underwritten
offering.
(b) Expenses. The Company shall bear all Registration Expenses (other than
--------
broker's commissions and underwriter's discounts and commissions with respect to
the sale of any Registrable Securities) in connection with any Incidental
Registration pursuant to this Section 4, whether or not such Incidental
Registration becomes effective.
5. Form S-3 Registration.
---------------------
(a) Request for a Form S-3 Registration. Upon the Company becoming
-----------------------------------
eligible, in the event that the Company shall receive from (i) one or more of
the General Atlantic Stockholders as a group, acting through GAP LLC or its
written designee, or (ii) one or more of the Major Stockholders (the "S-3
Initiating Holders") a written request that the Company register, under the
Securities Act, on Form S-3 (or any successor form then in effect) (an "S-3
Registration"), all or a portion of the Registrable Securities owned by such S-3
Initiating Holders, the Company shall give written notice of such request to all
of the Designated Holders (other than S-3 Initiating Holders which have
requested an S-3 Registration under this Section 5(a)) at least thirty (30) days
before the anticipated filing date of such Form S-3, and such notice shall
describe the proposed registration and offer such Designated Holders the
opportunity to register the number of Registrable Securities as each such
Designated Holder may request in writing to the Company, given within fifteen
(15) days after their receipt from the Company of the written notice of such
registration. The Company shall (i) take such steps as are necessary or
appropriate to prepare for the registration of the Registrable Securities to be
registered and (ii) subject to Section 5(b), use all reasonable commercial
efforts to (x) cause such registration pursuant to this Section 5(a) to become
and remain effective as soon as practicable, but in any event not later than
ninety (90) days after it receives a request therefor and (y) include in such
offering the Registered Securities of the Designated Holders (other than S- 3
Initiating Holders which have requested an S-3 Registration under this Section
5(a)) who have requested in writing to participate in such registration on the
same terms and conditions as the Registrable Securities of the S-3 Initiating
Holders included therein.
(b) Form S-3 Underwriting Procedures. If the Company or the S-3 Initiating
--------------------------------
Holders holding a majority of the Registrable Securities held by all of the S-3
Initiating Holders to which the requested S-3 Registration relates so elect, the
Company shall use its reasonable efforts to cause such S-3 Registration pursuant
to this Section 5 to be in the form of a firm commitment underwritten offering
and the managing underwriter or underwriters selected for such offering shall be
the Approved Underwriter selected in accordance with Section 3(f). In connection
with any S-3 Registration under Section 5(a) involving an underwritten offering,
the
<PAGE>
Company shall not be required to include any Registrable Securities in such
underwritten offering unless the Designated Holders thereof accept the terms of
the underwritten offering as agreed upon between the Company, the Approved
Underwriter and the S-3 Initiating Holders, and then only in such quantity as
will not, in the opinion of such underwriter, jeopardize the success of such
offering by the S-3 Initiating Holders. If in the written opinion of the
Approved Underwriter the registration of all or part of the Registrable
Securities which the S-3 Initiating Holders and the other Designated Holders
have requested to be included would materially adversely affect the success of
such public offering, then the Company shall be required to include in the
underwritten offering, to the extent of the amount that the Approved Underwriter
believes may be sold without causing such adverse effect, first, all of the
Registrable Securities to be offered for the account of the S-3 Initiating
Holders pro rata based on the number of Registrable Securities owned by such S-3
Initiating Holders; second, the Registrable Securities to be offered for the
account of the other Designated Holders who requested inclusion of their
Registrable Securities pursuant to Section 5(a), pro rata based on the number of
Registrable Securities owned by such Designated Holders, and third, any other
securities requested to be included in such underwritten offering.
(c) Limitations on Form S-3 Registrations. If at the time of any request to
-------------------------------------
register Registrable Securities pursuant to Section 5(a), the Company is engaged
in, or has fixed plans to engage in within sixty (60) days of the time of such
request, a registered public offering or is engaged in any other activity which,
in the good faith determination of the Board of Directors of the Company, would
be adversely affected by the requested S-3 Registration to the material
detriment of the Company, then the Company may at its option direct that such
request be delayed for a reasonable period not in excess of three (3) months
from the effective date of such offering or the date of completion of such other
material activity, as the case may be, such right to delay a request to be
exercised by the Company not more than once in any one-year period. In addition,
the Company shall not be required to effect any registration pursuant to Section
5(a)(i) within three (3) months after the effective date of any other
Registration Statement of the Company, (ii) if within the 12-month period
preceding the date of such request, the Company has effected two registrations
on Form S- 3 pursuant to Section 5(a) and all of the Registrable Securities
registered therein have been sold, (iii) if Form S-3 is not available for such
offering by the S-3 Initiating Holders or (iv) if the S-3 Initiating Holders,
together with the Designated Holders (other than S-3 Initiating Holders which
have requested an S-3 Registration under Section 5(a)) registering Registrable
Securities in such registration, propose to sell their Registrable Securities at
an aggregate price (calculated based upon the Market Price of the Registrable
Securities on the date of filing of the Form S-3 with respect to such
Registrable Securities) to the public of less than $5,000,000.
(d) Expenses. In connection with any registration pursuant to this Section
--------
5, the Company shall pay all Registration Expenses (other than broker's
commissions and underwriter's discounts and commissions), whether or not such
registration becomes effective.
(e) No Demand Registration. No registration requested by any Designated
----------------------
Holder pursuant to this Section 5 shall be deemed a Demand Registration pursuant
to Section 3.
<PAGE>
6. Holdback Agreements.
-------------------
(a) Restrictions on Public Sale by Designated Holders. If and to the extent
-------------------------------------------------
requested by the Company, the Initiating Holders or the S-3 Initiating Holders,
as the case may be, in the case of a non-underwritten public offering or if and
to the extent requested by the Approved Underwriter or the Company Underwriter,
as the case may be, in the case of an underwritten public offering, each
Designated Holder of Registrable Securities agrees (i) not to effect any public
sale or distribution of any Registrable Securities or of any securities
convertible into or exchangeable or exercisable for such Registrable Securities,
including a sale pursuant to Rule 144 under the Securities Act, and (ii) not to
make any request for a Demand Registration or S-3 Registration under this
Agreement, during the 90-day period or such shorter period agreed upon by such
Designated Holder and the requesting party beginning on the effective date of
such Registration Statement (except as part of such registration).
(b) Restrictions on Public Sale by the Company. The Company agrees not to
------------------------------------------
effect any public sale or distribution of any of its securities, or any
securities convertible into or exchangeable or exercisable for such securities
(except pursuant to registrations on Form S-4 or S-8 or any successor thereto),
during the period beginning on the effective date of any Registration Statement
in which the Designated Holders of Registrable Securities are participating and
ending on the earlier of (i) the date on which all Registrable Securities
registered on such Registration Statement are sold and (ii) 90 days after the
effective date of such Registration Statement (except as part of such
registration).
7. Registration Procedures.
-----------------------
(a) Obligations of the Company. Whenever registration of Registrable
--------------------------
Securities has been requested pursuant to Section 3, Section 4 or Section 5 of
this Agreement, the Company shall use all reasonable commercial efforts to
effect the registration and sale of such Registrable Securities in accordance
with the intended method of distribution thereof as quickly as practicable, and
in connection with any such request, the Company shall, as expeditiously as
possible:
(i) prepare and file with the SEC a Registration Statement on any form for
which the Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of such Registrable
Securities in accordance with the intended method of distribution thereof, and
use all reasonable commercial efforts to cause such Registration Statement to
become effective; provided, however, that (x) before filing a Registration
Statement or prospectus or any amendments or supplements thereto, the Company
shall provide counsel selected by the Designated Holders holding a majority of
the Registrable Securities being registered in such registration ("Holders'
Counsel") and any other Inspector with an adequate and appropriate opportunity
to review and comment on of such Registration Statement and each prospectus
included therein (and each amendment or supplement thereto) to be filed with the
SEC, subject to such documents being under the Company's control, and (y) the
Company shall notify the Holders' Counsel and each seller of Registrable
Securities of any stop order issued or threatened by the SEC and take all
reasonable action required to prevent the entry of such stop order or to remove
it if entered;
<PAGE>
(ii) prepare and file with the SEC such amendments and supplements to such
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep such Registration Statement effective for the lesser of (x) 90
days and (y) such shorter period which will terminate when all Registrable
Securities covered by such Registration Statement have been sold, and comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement;
(iii) as soon as reasonably possible, furnish to each seller of Registrable
Securities, prior to filing a Registration Statement, at least one copy of such
Registration Statement as is proposed to be filed, and thereafter such number of
copies of such Registration Statement, each amendment and supplement thereto (in
each case including all exhibits thereto), and the prospectus included in such
Registration Statement (including each preliminary prospectus) as each such
seller may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(iv) register or qualify such Registrable Securities under such other
securities or "blue sky" laws of such jurisdictions as any seller of Registrable
Securities may request, and to continue such qualification in effect in such
jurisdiction for as long as permissible pursuant to the laws of such
jurisdiction, or for as long as any such seller requests or until all of such
Registrable Securities are sold, whichever is shortest, and do any and all other
acts and things which may be reasonably necessary or advisable to enable any
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller; provided, however, that the Company
shall not be required to (x) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 7(a)(iv) (y) subject itself to taxation in any such jurisdiction or (z)
consent to general service of process in any such jurisdiction;
(v) notify each seller of Registrable Securities at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such Registration Statement contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, and the Company shall
promptly prepare a supplement or amendment to such prospectus and furnish to
each seller a reasonable number of copies of such supplement to or an amendment
of such prospectus as may be necessary so that, after delivery to the purchasers
of such Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made;
(vi) enter into and perform customary agreements (including an underwriting
agreement in customary form with the Approved Underwriter or Company
Underwriter, if any, selected as provided in Section 3, Section 4 or Section 5,
as the case may be) and take such other actions as are prudent and reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities;
<PAGE>
(vii) make available at reasonable times for inspection by any seller of
Registrable Securities, any managing underwriter participating in any
disposition of such Registrable Securities pursuant to a Registration Statement,
Holders' Counsel and any attorney, accountant or other agent retained by any
such seller or any managing underwriter (each, an "Inspector" and collectively,
the "Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's and its subsidiaries'
officers, directors and employees, and the independent public accountants of the
Company, to supply all information reasonably requested by any such Inspector in
connection with such Registration Statement. Records that the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors (and the
Inspectors shall confirm their agreement in writing in advance to the Company if
the Company shall so request) unless (x) the disclosure of such Records is
necessary, in the Company's judgment, to avoid or correct a misstatement or
omission in the Registration Statement, (y) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction after exhaustion of all appeals therefrom or (z) the information in
such Records was known to the Inspectors on a non-confidential basis prior to
its disclosure by the Company or has been made generally available to the
public. Each seller of Registrable Securities agrees that it shall, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(viii) if such sale is pursuant to an underwritten offering, use all
reasonable commercial efforts to obtain a "cold comfort" letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by "cold comfort" letters as Holders'
Counsel or the managing underwriter reasonably request;
(ix) use all reasonable commercial efforts to furnish, at the request of
any seller of Registrable Securities on the date such securities are delivered
to the underwriters for sale pursuant to such registration or, if such
securities are not being sold through underwriters, on the date the Registration
Statement with respect to such securities becomes effective, an opinion, dated
such date, of counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the seller making
such request, covering such legal matters with respect to the registration in
respect of which such opinion is being given as such seller may reasonably
request and are customarily included in such opinions;
(x) otherwise use all reasonable commercial efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable but no later than fifteen (15) months
after the effective date of the Registration Statement, an earnings statement
covering a period of twelve (12) months beginning after the effective date of
the Registration Statement, in a manner which satisfies the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(xi) cause all such Registrable Securities to be listed on each securities
exchange on which similar securities issued by the Company are then listed,
provided that the applicable listing requirements are satisfied;
<PAGE>
(xii) keep Holders' Counsel advised in writing as to the initiation and
progress of any registration under Section 3, Section 4 or Section 5 hereunder;
(xiii) cooperate with each seller of Registrable Securities and each
underwriter participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD"); and
(xiv) take all other steps reasonably necessary to effect the registration
of the Registrable Securities contemplated hereby.
(b) Seller Information. The Company may require each seller of Registrable
------------------
Securities as to which any registration is being effected to furnish to the
Company such information regarding the distribution of such securities as the
Company may from time to time reasonably request in writing.
(c) Notice to Discontinue. Each Designated Holder of Registrable Securities
---------------------
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 7(a)(v), such Designated Holder shall
forthwith discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until such
Designated Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 7(a)(v) and, if so directed by the Company,
such Designated Holder shall deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Designated Holder's
possession, of the prospectus covering such Registrable Securities which is
current at the time of receipt of such notice. If the Company shall give any
such notice, the Company shall extend the period during which such Registration
Statement shall be maintained effective pursuant to this Agreement (including,
without limitation, the period referred to in Section 7(a)(ii)) by the number of
days during the period from and including the date of the giving of such notice
pursuant to Section 7(a)(v) to and including the date when sellers of such
Registrable Securities under such Registration Statement shall have received the
copies of the supplemented or amended prospectus contemplated by and meeting the
requirements of Section 7(a)(v).
(d) Registration Expenses. The Company shall pay all expenses arising from
---------------------
or incident to the performance of, or compliance with, this Agreement,
including, without limitation, (i) SEC, stock exchange and NASD registration and
filing fees, (ii) all fees and expenses incurred in complying with securities or
"blue sky" laws (including reasonable fees, charges and disbursements of counsel
in connection with "blue sky" qualifications of the Registrable Securities),
(iii) all printing, messenger and delivery expenses, (iv) the fees, charges and
disbursements of counsel to the Company and of its independent public
accountants and any other accounting fees, charges and expenses incurred by the
Company (including, without limitation, any expenses arising from any "cold
comfort" letters or any special audits incident to or required by any
registration or qualification) and any legal fees, charges and expenses incurred
by the Company and, in the case of a Demand Registration, the Initiating Holders
and (v) any liability insurance or other premiums for insurance obtained in
connection with any Demand Registration or piggy-back registration thereon,
Incidental Registration or S-3 Registration pursuant to the terms of this
Agreement, regardless of whether such Registration
<PAGE>
Statement is declared effective. All of the expenses described in the preceding
sentence of this Section 7(d) are referred to herein as "Registration Expenses."
The Designated Holders of Registrable Securities sold pursuant to a Registration
Statement shall bear the expense of any broker's commission or underwriter's
discount or commission relating to such registration and sale of such Holders'
Registrable Securities.
8. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless, to the fullest extent permitted by law, each Designated Holder,
its officers, directors, trustees, partners, employees, advisors and agents and
each Person who controls (within the meaning of the Securities Act or the
Exchange Act) such Designated Holder from and against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue, or allegedly untrue,
statement of a material fact contained in any Registration Statement, prospectus
or preliminary prospectus or notification or offering circular (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same are caused by
or contained in any information concerning such Designated Holder furnished in
writing to the Company by such Designated Holder expressly for use therein,
including, without limitation, the information furnished to the Company pursuant
to Section 8(b). The Company shall also provide customary indemnities to any
underwriters of the Registrable Securities, their officers, directors and
employees and each Person who controls such underwriters (within the meaning of
the Securities Act and the Exchange Act) to the same extent as provided above
with respect to the indemnification of the Designated Holders of Registrable
Securities.
(b) Indemnification by Designated Holders. In connection with any
-------------------------------------
Registration Statement in which a Designated Holder is participating pursuant to
Section 3, Section 4 or Section 5 hereof, each such Designated Holder shall
promptly furnish to the Company in writing such information with respect to such
Designated Holder as the Company may reasonably request or as may be required by
law for use in connection with any such Registration Statement or prospectus and
all information required to be disclosed in order to make the information
previously furnished to the Company by such Designated Holder not materially
misleading or necessary to cause such Registration Statement not to omit a
material fact with respect to such Designated Holder necessary in order to make
the statements therein not misleading. Each Designated Holder agrees to
indemnify and hold harmless, to the fullest extent permitted by law, the
Company, any underwriter retained by the Company and their respective directors,
trustees, partners, officers, employees, advisors and agents and each Person who
controls the Company or such underwriter (within the meaning of the Securities
Act and the Exchange Act) to the same extent as the foregoing indemnity from the
Company to the Designated Holders, but only with respect to any such information
with respect to such Designated Holder furnished in writing to the Company by
such Designated Holder expressly for use therein, including, without limitation,
the information furnished to the Company pursuant to this Section 8(b);
provided, however, that the total amount to be indemnified by such Designated
Holder pursuant to this Section 8(b) shall be limited to the net proceeds
received by such Designated Holder in the offering to which the Registration
Statement or prospectus relates.
<PAGE>
(c) Conduct of Indemnification Proceedings. Any Person entitled to
--------------------------------------
indemnification hereunder (the "Indemnified Party") agrees to give prompt
written notice to the indemnifying party (the "Indemnifying Party") after the
receipt by the Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made in writing
for which the Indemnified Party intends to claim indemnification or contribution
pursuant to this Agreement; provided, however, that the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party hereunder; except to the extent that
the Indemnifying Party is materially prejudiced or otherwise forfeits
substantive rights or defenses by reason of such failure. If notice of
commencement of any such action is given to the Indemnifying Party as above
provided, the Indemnifying Party shall be entitled to participate in and, to the
extent it may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and reasonably satisfactory to such Indemnified Party. The
Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel (other than reasonable costs of investigation) shall be paid by the
Indemnified Party unless (i) the Indemnifying Party agrees to pay the same, (ii)
the Indemnifying Party fails to assume the defense of such action with counsel
satisfactory to the Indemnified Party in its reasonable judgment or (iii) the
named parties to any such action (including any impleaded parties) include both
the Indemnifying Party and the Indemnified Party), and such parties have been
advised by such counsel that either (x) representation of such Indemnified Party
and the Indemnifying Party by the same counsel would be inappropriate under
applicable standards of professional conduct or (y) there may be one or more
legal defenses available to the Indemnified Party which are different from or
additional to those available to the Indemnifying Party. In any of such cases,
the Indemnifying Party shall not have the right to assume the defense of such
action on behalf of such Indemnified Party, it being understood, however, that
the Indemnifying Party shall not be liable for the fees and expenses of more
than one separate firm of attorneys (in addition to any local counsel) for all
Indemnified Parties. No Indemnifying Party shall be liable for any settlement
entered into without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the consent of such
Indemnified Party, effect any settlement of any pending or threatened proceeding
in respect of which such Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability for claims that are the subject matter of such proceeding.
(d) Contribution. If the indemnification provided for in this Section 8
------------
from the Indemnifying Party is unavailable to an Indemnified Party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative faults of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the
<PAGE>
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Sections 8(a), 8(b) and 8(c), any legal or other fees, charges or expenses
reasonably incurred by such party in connection with any investigation or
proceeding; provided that the total amount to be indemnified by such Designated
Holder shall be limited to the net proceeds received by such Designated Holder
in the offering.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
9. Rule 144. The Company covenants that from and after the IPO
--------
Effectiveness Date it shall (a) file any reports required to be filed by it
under the Exchange Act and (b) take such further action as each Designated
Holder of Registrable Securities may reasonably request (including providing any
information necessary to comply with Rule 144 under the Securities Act), all to
the extent required from time to time to enable such Designated Holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such rule may be amended from time to time, or (ii) any similar rules or
regulations hereafter adopted by the SEC. The Company shall, upon the request of
any Designated Holder of Registrable Securities, deliver to such Designated
Holder a written statement as to whether it has complied with such requirements.
10. Miscellaneous.
-------------
(a) Recapitalizations, Exchanges, etc. The provisions of this Agreement
---------------------------------
shall apply, to the full extent set forth herein with respect to (i) the shares
of Common Stock, (ii) any and all shares of voting common stock of the Company
into which the shares of Common Stock are converted, exchanged or substituted in
any recapitalization or other capital reorganization by the Company and (iii)
any and all equity securities of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise) which
may be issued in respect of, in conversion of, in exchange for or in
substitution of, the shares of Common Stock and shall be appropriately adjusted
for any stock dividends, splits, reverse splits, combinations, recapitalizations
and the like occurring after October 24, 1997. The Company shall cause any
successor or assign (whether by sale, merger or otherwise) to enter into a new
registration rights agreement with the Designated Holders on terms substantially
the same as this Agreement as a condition of any such transaction.
(b) No Inconsistent Agreements. The Company represents and warrants that it
--------------------------
has not granted to any Person the right to request or require the Company to
register any securities issued by the Company, other than the rights granted to
the Designated Holders herein. The Company shall not enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Designated Holders in this Agreement or grant
<PAGE>
any additional registration rights to any Person or with respect to any
securities which are not Registrable Securities which are prior in right to or
inconsistent with the rights granted in this Agreement.
(c) Remedies. The Designated Holders, in addition to being entitled to
--------
exercise all rights granted by law, including recovery of damages, shall be
entitled to specific performance of their rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive in any action for specific performance the defense
that a remedy at law would be adequate.
(d) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
unless consented to in writing by (i) the Company, (ii) the Major Stockholders
holding Registrable Securities representing (after giving effect to any
adjustments) at least a majority of the aggregate number of Registrable
Securities owned by all of the Major Stockholders, (iii) the General Atlantic
Stockholders holding Registrable Securities representing (after giving effect to
any adjustments) at least a majority of the aggregate number of Registrable
Securities owned by all of the General Atlantic Stockholders and (iv) the
Andersen Stockholders holding Registrable Securities representing (after giving
effect to any adjustments) at least a majority of the aggregate number of
Registrable Securities owned by all of the Andersen Stockholders. Any such
written consent shall be binding upon the Company and all of the Designated
Holders.
(e) Notices. All notices, demands and other communications provided for or
-------
permitted hereunder shall be made in writing and shall be made by registered or
certified first-class mail, return receipt requested, telecopier, courier
service, overnight mail or personal delivery:
(i) if to the Company or the Major Stockholders:
Prime Response, Inc.
150 Cambridge Park Drive
Cambridge, Massachusetts 02140
Telecopy: (617) 876-8383
Attention: President
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telecopy: (617) 526-5000
Attention: John A. Burgess, Esq.
(ii) if to a General Atlantic Stockholder:
<PAGE>
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-8818
Attention: Mr. William E. Ford
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Matthew Nimetz, Esq.
(iii) if to an Andersen Stockholder: Andersen Consulting LLP
333 South Seventh Street Minneapolis, MN 55402
Telecopy: (612) 277-0000 Attention: J. Patrick
O'Halloran
(iv) if to any other Designated Holder, at its address as it
appears on the record books of the Company.
All such notices and communications shall be deemed to have been duly given
when delivered by hand, if personally delivered; when delivered by courier or
overnight mail, if delivered by commercial courier service or overnight mail;
five (5) Business Days after being deposited in the mail, postage prepaid, if
mailed; and when receipt is mechanically acknowledged, if properly telecopied.
(f) Successors and Assigns; Third Party Beneficiaries. This Agreement shall
-------------------------------------------------
inure to the benefit of and be binding upon the heirs, legatees, legal
representatives, successors and permitted assigns of each of the parties hereto
as hereinafter provided. The Demand Registration rights of the General Atlantic
Stockholders and the Major Stockholders contained in Section 3 hereof and the
other rights of each of the General Atlantic Stockholders and the Major
Stockholders with respect thereto shall be, with respect to any Registrable
Security, (i) automatically transferred, in the case of such rights of the
General Atlantic Stockholders, among the General Atlantic Stockholders and, in
the case of such rights of the Major Stockholders, among the Major Stockholders
and (ii) in all other cases, transferred only with the consent of the Company.
The incidental or "piggy-back" registration rights of the Designated Holders
contained in Sections 3(b) and 4 hereof, the S-3 Registration rights contained
in Section 5 hereof and the other rights of each of the Designated Holders with
respect thereto shall be, with respect to any Registrable Security,
automatically transferred by such Designated Holder to any Person who is the
transferee of such Registrable Security; provided that (x) the Company receives
notice of such transfer and (y) prior to such transfer, such assignee shall
assume all of the applicable assignor's obligations hereunder. All of the
obligations of the
<PAGE>
Company hereunder shall survive any such transfer. No Person other than the
parties hereto and their heirs, legatees, legal representatives, successors and
permitted assigns is intended to be a beneficiary of any of the rights granted
hereunder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION.
(j) Severability. If any one or more of the provisions contained herein, or
------------
the application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, it being intended that all
of the rights and privileges of the Designated Holders shall be enforceable to
the fullest extent permitted by law.
(k) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
in the Stock Purchase Agreement and Stockholders Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter, including, without limitation, the Original
Agreement.
(l) Further Assurances. Each of the parties shall execute such documents
------------------
and perform such further acts as may be reasonably required or necessary to
carry out or to perform the provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this Amended and Restated Registration Rights Agreement on the date
first written above.
PRIME RESPONSE, INC.
By: /s/ Peter J. Boni
----------------------------------
Name: Peter J. Boni
Title: Chief Executive Officer and President
GENERAL ATLANTIC PARTNERS 42, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC,
its General Partner
By: /s/ William E. Ford
----------------------------------
Name: William E. Ford
Title: A Managing Member
GAP COINVESTMENT PARTNERS, L.P.
By: /s/ William E. Ford
----------------------------------
Name: William E. Ford
Title: A General Partner
GENERAL ATLANTIC PARTNERS 48, L.P.
By: General Atalntic Partners, LLC, its general partner
By: /s/ William E. Ford
----------------------------------
Name: William E. Ford
Title: A Managing Member
GENERAL ATLANTIC PARTNERS 52, L.P.
By: General Atalntic Partners, LLC, its general partner
By: /s/ William E. Ford
----------------------------------
Name: William E. Ford
Title: A Managing Member
<PAGE>
GAP COINVESTMENT PARTNERS II, L.P.
By: /s/ William E. Ford
-------------------------------------
Name: William E. Ford
Title: A General Partner
GENERAL ATLANTIC PARTNERS 57, L.P.
By: General Atlantic Partners, LLC, is general partner
By: /s/ William E. Ford
-------------------------------------
Name: William E. Ford
Title: A Managing Member
KITE LIMITED
By: /s/ Mark Gill for Anson Limited
-------------------------------------
Name: Mark Gill
Title: Director
/s/ James Carling
-------------------------------------
James Carling
ANDERSEN CONSULTING LLP
By: /s/ J. Patrick O'Halloran
-------------------------------------
Name: J. Patrick O'Halloran
Title: Partner
<PAGE>
AC VENTURES B.V.
By: /s/ M.G. McGrath
---------------------------------
Name: M.G. McGrath
Title: Chief Financial Officer
<PAGE>
EXHIBIT 10.23
PRIME RESPONSE, INC.
COMMON STOCK AND WARRANT
PURCHASE AGREEMENT
DECEMBER 6, 1999
<PAGE>
COMMON STOCK AND WARRANT
------------------------
PURCHASE AGREEMENT
------------------
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement") is made
---------
as of the 6th day of December, 1999, by and between (i) Prime Response, Inc.
(f/k/a Prime Response Group, Inc.), a Delaware corporation (the "Company") and
-------
(ii) Andersen Consulting LLP, an Illinois limited liability partnership
("Andersen Consulting"), and AC Ventures B.V., a limited liability corporation
-------------------
formed in the Netherlands ("AC Ventures", hereinafter referred to, together with
-----------
Andersen Consulting, as "AC").
--
WHEREAS, the Company and Andersen Consulting desire to enter into certain
marketing alliance and consulting arrangements with each other and, in
connection therewith, are entering into a Marketing Agreement of even date
herewith (the "Marketing Agreement"); and
-------------------
WHEREAS, as a condition precedent to entering into the Marketing Agreement,
and vice versa, the Company and AC have agreed, among other things, to enter
into the transactions contemplated by this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Company and AC hereby agree as
follows:
1. PURCHASE AND SALE OF PURCHASED SECURITIES.
-----------------------------------------
1.1 Sale and Issuance of Common Stock and Warrants. Subject to the
----------------------------------------------
terms and conditions of this Agreement, at the Closing (as defined below), (a)
AC Ventures agrees to purchase, and the Company agrees to sell and issue to AC
Ventures, an aggregate of 570,409 shares (the "Purchased Shares") of the
----------------
Company's common stock, $0.01 par value per share (the "Common Stock"), at an
------------
aggregate price of $4,000,000, and (b) Andersen Consulting agrees to purchase,
and the Company agrees to sell and issue to Andersen Consulting, warrants to
purchase an aggregate of 909,709 shares of Common Stock (the "Warrants"), at an
--------
initial exercise price per share equal to $7.01 and substantially in the form
attached hereto as Exhibit A, and at the purchase price of $0.01. The Purchased
---------
Shares and the Warrants shall hereinafter be referred to, collectively, as the
"Purchased Securities".
--------------------
1.2 Closing. Subject to the fulfillment of the conditions set forth
-------
in Sections 5 and 6 below (or the waiver thereof by the appropriate party), the
purchase and sale of the Purchased Securities and the consummation of the
transactions set forth herein (the "Closing") shall take place at the offices of
-------
Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts 02110, at 10:00
A.M., on or before December 8, 1999 (the "Closing Date"), (the "Closing"),
------------ -------
provided, that if the Company fails to deliver the Final Audited Financial
- --------
Statements (as defined in Section 5.10) on or before the Closing Date,
<PAGE>
-3-
the Closing Date may be unilaterally extended at the sole option and discretion
of AC. At the Closing, the Company shall deliver to AC Ventures a certificate
representing the Purchased Shares and to Andersen the Warrants against payment
therefor by AC Ventures and Andersen by check or wire transfer to an account
specified in writing by the Company (or, in the case of the Warrants, in cash).
2. Representations, Warranties and Covenants of the Company. The Company
--------------------------------------------------------
hereby represents, warrants and covenants to AC that:
2.1 Organization and Authority. The Company is a corporation duly
---------------------------
organized, validly existing, and in good standing under the laws of the State of
Delaware. The Company has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as now conducted
and as proposed to be conducted. The minute books of the Company have been made
available to AC for inspection and accurately record therein all corporate
actions taken by the Board of Directors and stockholders of the Company.
2.2 Corporate Power; Binding Effect. The Company has all requisite
--------------------------------
power and full legal right to execute and deliver this Agreement, and to perform
all of its obligations hereunder in accordance with the terms set forth herein.
This Agreement and the transactions contemplated hereby have been duly approved
and authorized by all requisite corporate action on the part of the Company and
its stockholders, and this Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid, and binding obligation of the Company,
enforceable against it in accordance with the terms set forth herein. The
execution, delivery, and performance by the Company of this Agreement in
accordance with the terms set forth herein, and the consummation by the Company
of the transactions contemplated hereby, will not result (with or without the
giving of notice or the lapse of time or both) in any conflict, violation,
breach, or default, or the creation of any lien , security interest, option or
other charge or encumbrance, or the termination, acceleration, vesting, or
modification of any right or obligation, under or in respect of (x) the
Certificate of Incorporation (as amended and in effect as of the date hereof) or
by-laws of the Company, (y) any judgment, decree, order, statute, rule, or
regulation binding on or applicable to the Company, or (z) any agreement or
instrument to which the Company is a party or by which it or any of its assets
is or are bound.
2.3 Foreign Qualification. The Company is duly qualified to do
----------------------
business and is in good standing as a foreign corporation in the Commonwealth of
Massachusetts and, except as set forth in Schedule 2.3, in each jurisdiction in
which the character of the properties owned or leased by the Company or the
nature of its activities makes such qualification necessary, other than any
jurisdictions in which the failure so to qualify or be in good standing would
not, either in any case or in the aggregate, have a material adverse effect on
the business, current prospects, results of operations or financial condition of
the Company (a "Material Adverse Effect").
-----------------------
2.4 Subsidiaries. Schedule 2.4 sets forth a list of all of the
------------ ------------
Subsidiaries
<PAGE>
-4-
of the Company and, with respect to each Subsidiary, (a) the name of each
stockholder or other holder of record or beneficial owner of capital stock,
securities or other equity interests, (b) the number of shares of capital stock,
securities or other equity interests authorized, issued and outstanding, (c) the
class, series or type of capital stock, securities or other equity interests
authorized, issued and/or outstanding, and (d) the jurisdiction of incorporation
and/or formation and the type and/or form of entity (e.g., partnership,
corporation, limited liability company, etc.). Each of the Subsidiaries set
forth on Schedule 2.4 is duly organized, validly existing, and in good
------------
standing (to the extent applicable) under the laws of its jurisdiction of
incorporation or formation. Each of the Subsidiaries has all requisite
corporate or other power and authority to own or lease and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted. The minute books of each of the Subsidiaries have been made
available to AC for inspection and accurately record therein all actions taken
by the Board of Directors (or other similar governing committee or body) and
stockholders (or other equity holders) of such Subsidiary. For purposes of this
Agreement, the term "Subsidiary" means, with respect to a party, any corporation
----------
or other organization, whether incorporated or unincorporated, of which (i) such
party or any other Subsidiary of such party is a general partner or a managing
member, (ii) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. For purposes of Section 2 of this Agreement, all references to
the Company shall be deemed to include the Subsidiaries set forth on
Schedule 2.4.
- ------------
2.5 Capitalization.
--------------
(a) Immediately after the Closing, giving effect to the sale and
purchase of the Purchased Securities provided for in this Agreement, the
authorized and the outstanding capital stock of the Company will be as set forth
in Schedule 2.5(a), and all such outstanding shares of capital stock will be
---------------
owned (of record and beneficially) by the Persons and in the amounts there
indicated. All such outstanding shares of capital stock will be duly
authorized, validly issued, fully paid, and non-assessable, and, to the
Company's knowledge, free and clear of any liens, security interests, options or
other charges or encumbrances. Except as set forth on Schedule 2.5(a), no
---------------
adjustment has previously been made (or should have been made) nor will any
adjustment be required to be made as a result of the Company's issuance of the
Purchased Securities (and the issuance of Common Stock upon the exercise of the
Warrants) to the rate at which shares of the Series A Convertible Participating
Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"), the
------------------------
Series B Convertible Participating Preferred Stock, $.01 par value per share
(the "Series B Preferred Stock"), and the Series C Convertible Preferred Stock,
------------------------
$.01 par value per share (the "Series C Preferred Stock"), and any other capital
------------------------
stock or other security of the Company are convertible into or exercisable for
shares of Common Stock or Preferred Stock (as defined in the next sentence) (by
reason of any "anti-dilution" provisions or agreements or otherwise). The term
"Preferred
---------
<PAGE>
-5-
Stock" shall refer, collectively, to the Series A Preferred Stock, the Series B
- -----
Preferred Stock and the Series C Preferred Stock.
(b) Except as set forth in Schedule 2.5(b), the Company does not have,
is not bound by, and has no obligation to grant or enter into, any (i)
outstanding subscriptions, options, warrants, calls, commitments, or agreements
of any character calling for it to issue, deliver, or sell, or cause to be
issued, delivered, or sold, any shares of its capital stock, any membership
interests or any other equity security, or any securities described in the
following clause, or (ii) securities convertible into, exchangeable for, or
representing the right to subscribe for, purchase, or otherwise acquire any
shares of its capital stock, any membership interests or any other equity
security. Except as set forth in Schedule 2.5(b), no adjustment has previously
---------------
been made (or should have been made) nor will any adjustment be required to be
made as a result of the Company's issuance of the Purchased Securities (or the
issuance of Common Stock upon the exercise of the Warrants) to the number of
shares of capital stock or security of the Company into which any subscriptions,
options, warrants, calls, commitments or agreements are convertible (by reason
of any "anti-dilution" provisions or agreements or otherwise).
(c) Except as set forth in Schedule 2.5(c), the Company (i) has no
---------------
outstanding obligations, contractual or otherwise, to repurchase, redeem, or
otherwise acquire any shares of capital stock or other equity securities of the
Company, (ii) is not a party to or bound by, and has no knowledge of, any
agreement or instrument relating to the voting of any of its securities, and
(iii) is not a party to or bound by any agreement or instrument under which any
person has the right to require it to effect, or to include any securities held
by such person in, any registration under the Securities Act of 1933, as amended
(the "Securities Act"). There are no other agreements, contracts, instruments
--------------
or documents to which the Company is a party or of which the Company is aware,
except as set forth in Schedule 2.5(c), which govern or affect in any way the
---------------
rights of the holders of securities, including any class of capital stock, of
the Company.
(d) The Company has reserved, solely for the purpose of issuance upon
exercise of the Warrants, a number of shares of Common Stock sufficient to cover
the exercise of all such Warrants.
2.6 Lawful Issuance. All of the outstanding shares of capital stock
---------------
and other securities of the Company were offered, issued, and sold, and the
Purchased Securities have been offered and at the Closing will be issued and
sold, in compliance with (i) all applicable preemptive, participation, rights of
first refusal or similar rights of all persons, and (ii) assuming the
truthfulness and accuracy of the representations made by AC in Section 3 hereof,
all applicable provisions of the Securities Act, and the rules and regulations
thereunder, and all applicable state securities laws and the rules and
regulations thereunder. No person has any valid right to rescind any purchase
of any shares of capital stock or other securities of the Company.
<PAGE>
-6-
2.7 Valid Issuance of Purchased Securities. The Purchased Securities
--------------------------------------
shall, upon issuance pursuant to the terms hereof, be duly authorized and
validly issued, fully paid and non-assessable and free and clear of any lien,
security interest, option or other charge or encumbrance. In addition, the
shares of Common Stock issuable upon the exercise of the Warrants shall, upon
issuance pursuant to the terms thereof, be duly authorized and validly issued,
fully paid and non-assessable and free and clear of any lien, security interest,
option or other charge or encumbrance. The issuance of the Purchased Securities
and the Common Stock upon the exercise of the Warrants are not and will not be
subject to any pre-emptive rights, first refusal rights, right to purchase or
similar rights with respect to such Purchased Securities and the Common Stock
issuable upon the exercise of the Warrants.
2.8 Financial Statements. The Company has delivered to AC a draft
---------------------
(the "Draft Audited Financial Statements") of the audited consolidated balance
sheet of the Company as of December 31, 1996, 1997 and 1998, and September 30,
1999 (the "Most Recent Balance Sheet"), and the related consolidated statements
-------------------------
of income, changes in stockholders' equity, and cash flows for the years ended
December 31, 1996, 1997 and 1998 and for the nine month period ended September
30, 1999, a copy of which is attached hereto as Exhibit D. Each of such
---------
financial statements was prepared in accordance with generally accepted
accounting principles (GAAP) applied on a basis consistent with prior periods.
Each of such balance sheets is true and correct and accurately presents the
financial condition of the Company as of its date; and each of such statements
of income, changes in stockholders' equity, and cash flows accurately presents
the results of operations, changes in stockholders' equity, or cash flows, as
the case may be, of the Company for the period covered thereby. The Final
Audited Financial Statements (as defined in Section 5.10) shall be the same in
all material respects to the Draft Audited Financial Statements.
2.9 Absence of Certain Changes. Since the date of the Most Recent
--------------------------
Balance Sheet, there has not been:
(a) any (i) acquisition (by purchase, lease as lessee, license as
licensee, or otherwise) or disposition (by sale, lease as lessor, license as
licensor, or otherwise) by the Company of any material properties or assets, or
(ii) other transaction by, or any agreement or commitment on the part of, the
Company, other than those in the ordinary course of business, that have not
caused and will not cause, either in any case or in the aggregate, a Material
Adverse Effect;
(b) except as set forth in Schedule 2.9(b), any material change in the
---------------
condition (financial or otherwise), properties, assets, liabilities,
investments, revenues, expenses, income, operations, business, or current
prospects of the Company, or in any of its relationships with any clients,
suppliers, customers, or other third parties with whom it has financial,
commercial, or other business relationships, other than changes in the ordinary
course of business that have not caused and cannot reasonably be expected to
cause, either in any case or in the aggregate, a Material Adverse Effect;
<PAGE>
-7-
(c) any transaction or change in compensation by the Company with any
of its stockholders, directors or officers other than the payment of
compensation and reimbursement of reasonable employee travel and other business
expenses in accordance with existing employment arrangements and usual past
practices;
(d) any damage, destruction, or loss, whether or not covered by
insurance, that, either in any case or in the aggregate, has caused, or could
reasonably be expected to cause, a Material Adverse Effect;
(e) any declaration, setting aside, or payment of any dividend or any
other distribution (in cash, stock, and/or property or otherwise) in respect of
any shares of the capital stock, equity interests or other securities of the
Company;
(f) except as set forth in Schedule 2.9(f), any issuance of any shares
-------- ------
of the capital stock, equity interests or other securities of the Company, or
any direct or indirect redemption, purchase, or other acquisition by the Company
of any shares of capital stock, equity interests or other securities;
(g) except as set forth in Schedule 2.9(g), any change in the
-------- ------
officers, directors or strategic partners of the Company;
(h) any labor or employee trouble or claim of unfair labor or
employment practices involving the Company, any increase in any single case in
excess of $50,000 in the compensation or other benefits payable or to become
payable by the Company to any of its officers, employees, or independent
contractors, or any bonus payments or arrangements made to or with any of such
officers, employees, or independent contractors;
(i) any forgiveness or cancellation of any debt or claim by the
Company or any waiver by the Company of any right of material value, other than
compromises of accounts receivable in the ordinary course of business of less
than $50,000;
(j) any incurrence or any payment, discharge, or satisfaction by the
Company of any material indebtedness or any material obligations or material
liabilities, whether absolute, accrued, contingent, or otherwise (including
without limitation liabilities, as guarantor or otherwise, with respect to
obligations of others);
(k) any incurrence, discharge, or satisfaction of any material lien,
charge or other encumbrance (i) by the Company, or (ii) on any of the capital
stock, other securities or equity interests, properties, or assets owned, held
or leased by the Company;
(l) any change in the financial or tax accounting principles,
<PAGE>
-8-
practices, or methods of the Company; or
(m) any agreement, understanding, or commitment by or on behalf of the
Company, whether in writing or otherwise, to do or permit any of the things
referred to in this Section 2.9.
2.10 Properties, Leases, Etc.
-----------------------
(a) Title to Properties; Condition of Personal Properties. The
-----------------------------------------------------
Company has (i) good and marketable title to all of the assets and properties
owned by it, including without limitation all assets and properties reflected in
the Most Recent Balance Sheet, free and clear of all Liens, (ii) valid title to
the lessee interest in all assets and properties leased by them as lessee, free
and clear of all liens, charges and other encumbrances, and (iii) full right to
hold and use all of the assets and properties used in or necessary to their
respective businesses and operations, in each case all free and clear of all
liens, charges and other encumbrances, and in each case subject to applicable
laws and the terms of any lease under which the Company leases such assets or
properties as lessee. All such assets and properties are in good condition and
repair, reasonable wear and tear excepted, and are adequate and sufficient to
carry on the businesses of the Company as presently conducted and as currently
proposed to be conducted.
(b) No Owned Real Properties. The Company does not own any real
------------------------
property or any interest (other than a leasehold interest) in any real property.
(c) Leased Properties. Schedule 2.10(c) sets forth a complete and
----------------- -------- -------
correct description of all leases of real or personal property under which the
Company is lessor or lessee. Complete and correct copies of all such leases and
all amendments, supplements, and modifications thereto, other than any personal
property lease with an annual rent of less than $20,000 and total remaining
rental payments of less than $10,000, have been delivered to AC. Each such
lease is valid and subsisting and no event or condition exists that constitutes,
or after notice or lapse of time or both would constitute, a default thereunder
by the Company or, to the Company's knowledge, any other party thereto. The
Company's leasehold interests are subject to no liens, charges or other
encumbrances, and the Company is in quiet possession of the properties covered
by such leases.
2.11 Indebtedness. Except to the extent reflected or reserved in
-------------
the Most Recent Balance Sheet, incurred in the ordinary course of business since
the date of the Most Recent Balance Sheet, or as set forth on Schedule 2.11, the
-------------
Company has no Indebtedness outstanding. The Company is not in default with
respect to any outstanding Indebtedness or any instrument or agreement relating
thereto, and no such Indebtedness or any instrument or agreement relating
thereto purports to limit the issuance of any securities by the Company or the
operation of the business of the Company. Complete and correct copies of all
instruments and agreements (including all amendments, supplements, waivers, and
consents) relating to any Indebtedness of the Company have
<PAGE>
-9-
been furnished to AC. As used in this Agreement, the term "Indebtedness" means
------------
(a) all indebtedness for borrowed money, whether current or long-term, or
secured or unsecured, (b) all indebtedness for the deferred purchase price of
property or services represented by a note or security agreement, (c) all
indebtedness created or arising under any conditional sale or other title
retention agreement (even though the rights and remedies of the seller or lender
under such agreement in the event of default may be limited to repossession or
sale of such property), (d) all indebtedness secured by a purchase money
mortgage or other lien to secure all or part of the purchase price of property
subject to such mortgage or lien, (e) all obligations under leases that have
been or must be, in accordance with generally accepted accounting principles
(GAAP), recorded as capital leases in respect of which it is liable as lessee,
(f) any liability in respect of banker's acceptances or letters of credit, and
(g) all indebtedness of any person that is directly or indirectly guaranteed by
the Company or that it has agreed (contingently or otherwise) to purchase or
otherwise acquire or in respect of which it has otherwise assured a creditor
against loss.
2.12 Absence of Undisclosed Liabilities. Except to the extent
-----------------------------------
reflected or reserved in the Most Recent Balance Sheet, or incurred after the
date of such balance sheet in the ordinary course of business, or incurred in
connection with the transactions contemplated by this Agreement, the Company has
no material liabilities or obligations of any nature, whether accrued, absolute,
contingent, or otherwise (including without limitation liabilities as guarantor
or otherwise with respect to obligations of others) and whether due or to become
due.
2.13 Tax Matters.
-----------
(a) Filing of Tax Returns and Payment of Taxes. Except as set forth
------------------------------------------
on Schedule 2.13(a), the Company has timely filed all Tax Returns required to be
-------- -------
filed by the Company, each such Tax Return has been prepared in compliance with
all applicable laws and regulations, and all such Tax Returns are true and
accurate in all respects. All Taxes due and payable by the Company have been
paid, and the Company will not be liable for any additional Taxes in respect of
any taxable period ending on or before the Closing Date in an amount that
exceeds the corresponding reserve therefor, if any, reflected in the accounting
records of the Company as of the Closing Date. No claim has ever been made by a
taxing authority in a jurisdiction where the Company does not pay Tax or file
Tax Returns that the Company is or may be subject to Taxes assessed by such
jurisdiction. There are no liens for Taxes (other than current Taxes not yet
due and payable) on the assets of the Company.
(b) Audit History, Extensions, Etc. There is no action, suit, taxing
-------------------------------
authority proceeding, or audit with respect to any Tax now in progress, pending,
or to the best of the Company's knowledge, threatened, against or with respect
to the Company. No deficiency or proposed adjustment in respect of Taxes that
has not been settled or otherwise resolved has been asserted or assessed by any
taxing authority against the Company. The Company has not consented to extend
the time in which any Tax may be assessed or collected by any taxing authority.
The Company has not requested or been
<PAGE>
-10-
granted an extension of the time for filing any Tax Return to a date on or after
the Closing Date.
(c) Membership in Affiliated Groups, Etc. The Company has never been
------------------------------------
a member of any Affiliated Group, nor has ever filed or been included in a
combined, consolidated, or unitary Tax Return. The Company is not a party to or
bound by any tax sharing or allocation agreement nor has any current or
potential contractual obligation to indemnify any other person with respect to
Taxes. As used in herein, the term "Affiliated Group" has the meaning given to
it in Section 1504 of the Code, and in addition includes any analogous combined,
consolidated or unitary group, as defined under any applicable state, local or
foreign income Tax law.
(d) Withholding Taxes. The Company has withheld and paid all Taxes
-----------------
required to have been withheld and paid by it in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other Person.
(e) Certain Defined Terms. As used herein, the term "Tax" or "Taxes"
--------------------- --- -----
means any federal, state, local, or foreign income, gross receipts, franchise,
estimated, alternative minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, severance, stamp, occupation, premium,
windfall profit, customs, duties, real property, personal property, capital
stock, intangibles, social security, unemployment, disability, payroll, license,
employee, or other tax or levy, of any kind whatsoever, including any interest,
penalties, or additions to tax in respect of the foregoing. In addition, the
term "Tax Return" means any return, declaration, report, claim for refund,
----------
information return, or other document (including any related or supporting
estimates, elections, schedules, statements, or information) filed or required
to be filed in connection with the determination, assessment, or collection of
any Tax or the administration of any laws, regulations, or administrative
requirements relating to any Tax.
2.14 Litigation, Etc. Except as set forth on Schedule 2.14, no
--------------- -------------
litigation, arbitration, action, suit, claim, demand, proceeding or
investigation (whether conducted by or before any judicial or regulatory body,
arbitrator, commission) is pending or, to the Company's knowledge, threatened,
against the Company, its property or assets, nor is there any basis therefor
known to the Company.
2.15 Safety, Zoning, and Environmental Matters.
-----------------------------------------
(a) The Company is not nor has ever been in violation in any material
respect of any applicable statute, law, or regulation relating to occupational
health or safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or commenced against or
received by it alleging any failure by it to comply with any such statute, law,
or regulation, nor is there any basis therefor known to the Company.
<PAGE>
-11-
(b) To the best of the Company's knowledge, none of the real
properties presently leased, or operated by the Company, nor any leasehold
improvements thereto, nor any business conducted by the Company thereon, are in
violation in any material respect of any applicable land use or zoning
requirements, including without limitation any building line or use or occupancy
restriction, any public utility or other easement, any limitation, condition, or
covenant of record, or any zoning or building law, code, or ordinance.
(c) The Company is not presently, and has never been, in violation of
any judgment, decree, order, statute, law, permit, license, rule, or regulation
pertaining to environmental matters, including without limitation those arising
under any Environmental Laws, nor has any of them received any written notice
alleging any such violation. As used herein, the term "Environmental Laws"
------------------
means, collectively, the Resource Conservation and Recovery Act, CERCLA, the
Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, and any and
all state or local statutes, regulations, ordinances, orders, and decrees
relating to health, safety, or the environment, each, as the case may be, as
amended. The term "CERCLA" means the Comprehensive Environmental Response,
------
Compensation and Liability Act of 1980, as amended.
(d) None of the Company and its Subsidiaries has received any notice
or request for information from any third party, including without limitation
any federal, state, or local governmental authority, (i) that any of them has
been identified by the EPA or any state environmental regulatory authority as a
potentially responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 300 Appendix B, or under any equivalent
state law; (ii) that any Hazardous Substances that any of them has generated,
transported, or disposed of have been found at any site at which a federal,
state, or local agency or other third party has conducted or has ordered it to
conduct a remedial investigation, removal or other response action pursuant to
any Environmental Law; or (iii) that any of them is or will or may be a named
party to any claim, action, cause of action, complaint, or legal or
administrative proceeding arising out of any third party's incurrence of Damages
in connection with the release (within the meaning of CERCLA) of any Hazardous
Substances or any other environmental matters. No circumstances exist that
could reasonably be expected to give rise to any such notice or request for
information or to any Damages. As used herein, the term "Hazardous Substances"
--------------------
means, collectively, any hazardous waste, as defined by 42 U.S.C. (S) 6903(5),
any hazardous substances as defined by 42 U.S.C. (S) 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. (S) 9601(33), or any toxic substance,
methane gas, oil, or hazardous materials or other chemicals or substances
regulated by any Environmental Laws. In addition, as used herein, the term
"Damages" means all damages, losses, claims, demands, actions, causes of action,
-------
suits, litigations, arbitrations, liabilities, costs, and expenses, including
without limitation court costs and the fees and expenses of counsel and experts.
2.16 Labor Relations. The Company is in compliance in all material
---------------
<PAGE>
-12-
respects with all applicable federal and state laws respecting employment and
employment practices, terms and conditions of employment, wages and hours, and
nondiscrimination in employment, and is not engaged in any unfair labor
practice. There is no charge pending or, to the best of the Company's
knowledge, threatened, against or with respect to the Company before any court
or agency and alleging unlawful discrimination in employment practices, and
there is no charge of or proceeding with regard to any unfair labor practice
against the Company pending before the National Labor Relations Board. There is
no labor strike, dispute, slow-down, or work stoppage pending or, to the
Company's knowledge, threatened against or involving the Company. None of the
employees of the Company is covered by any collective bargaining agreement, and
no such collective bargaining agreement is currently being negotiated. No one
has petitioned and, to the Company's knowledge, no one is now petitioning, for
union representation of any employees of the Company. The Company has not
experienced any work stoppage or other material labor difficulty.
2.17 Material Contracts. Except for the contracts, agreements and
------------------
other arrangements listed in Schedule 2.17 and contracts, agreements, or other
-------- ----
arrangements that have been fully performed and with respect to which the
Company has no further obligations or liabilities, the Company is not a party to
or otherwise bound by (i) any agreement, instrument, or commitment that may
affect its ability to consummate the transactions contemplated hereby, or (ii)
any other material agreement, instrument, or commitment; including without
limitation any:
(a) agreement for the purchase, sale, lease, or license by or from it
of services, products, or assets, requiring total payments by or to it in excess
of $50,000 in any instance, or entered into other than in the ordinary course of
business;
(b) agreement requiring it to purchase all or substantially all of its
requirements for a particular product or service from a particular supplier or
suppliers, or requiring it to supply all of a particular customer's or
customers' requirements for a certain service or product;
(c) agreement or other commitment pursuant to which it has agreed
to indemnify or hold harmless any other person;
(d) (i) employment agreement, (ii) consulting agreement, or (iii)
agreement providing for severance payments or other additional rights or
benefits (whether or not optional) in the event of the sale or other change in
control of it;
(e) agreement with any current or former affiliate, stockholder,
officer, director, or strategic partner of the Company, or with any person in
which any such affiliate is known by the Company to have an interest;
(f) joint venture, partnership or teaming agreement;
<PAGE>
-13-
(g) agreement with any domestic or foreign government or agency or
executive office thereof or any subcontract between it and any third party
relating to a contract between such third party and any domestic or foreign
government or agency or executive office thereof;
(h) agreement imposing non-competition or exclusive dealing
obligations on it;
(i) agreement with respect to the confidentiality of the Company's
Proprietary Information (as described in Section 2.20 hereof), and the
------------
assignment to the Company of any and all rights employees of the Company might
have to acquire with respect to technology, inventions, developments, etc.,
developed in connection with this employment with the Company; and
(j) agreement the performance of which is reasonably likely to
result in a loss to it.
The Company has delivered or caused to be delivered to AC correct and
complete copies of each agreement, instrument, and commitment listed in Schedule
--------
2.17, each as amended to date. Each such agreement, instrument, and commitment
- ----
is a valid, binding and enforceable obligation of the Company and, to the
Company's knowledge, of the other party or parties thereto, and is in full force
and effect. The Company is not nor, to the Company's knowledge, is any other
party thereto, (nor to the Company's knowledge is the Company considered by any
other party thereto to be) in breach of or noncompliance with any term of any
such agreement, instrument, or commitment (nor is there any basis for any of the
foregoing), except for any breach or non-compliance that singly or in the
aggregate would not have a Material Adverse Effect. No claim, change order,
request for equitable adjustment, or request for contract price or schedule
adjustment, between the Company and any client, supplier or customer, relating
to any agreement, instrument, or commitment listed in Schedule 2.17 is pending
-------------
or, to the Company's knowledge, threatened, nor to the Company's knowledge is
there any basis for any of the foregoing. No agreement, instrument, or
commitment listed in Schedule 2.17 includes or incorporates any provision, the
-------------
effect of which may be to enlarge or accelerate any of the obligations of the
Company or to give additional rights to any other party thereto, or will
terminate, lapse, or in any other material way be affected, by reason of the
transactions contemplated by this Agreement.
2.18 Employee Benefit Plans.
----------------------
(a) Identification of Plans. Except for the arrangements set forth in
-----------------------
Schedule 2.18, the Company does not now maintain or contribute to any pension,
- -------- ----
profit-sharing, deferred compensation, bonus, stock option, share appreciation
right, severance, group or individual health, medical, life insurance, survivor
benefit, or similar plan, policy or arrangement, whether formal or informal, for
the benefit of any director, officer, consultant, or employee of any of them,
whether active or terminated; nor has it
<PAGE>
-14-
ever maintained or contributed to any such plan, policy, or arrangement that was
subject to ERISA. Each of the arrangements set forth in Schedule 2.18 is herein
-------------
referred to as an "Employee Benefit Plan." As used herein, the term "ERISA"
--------------------- -----
means the Employee Retirement Income Security Act of 1974, as amended.
(b) Compliance with Terms and Law. Each Employee Benefit Plan is and
-----------------------------
has been maintained and operated in compliance in all material respects with the
terms of such plan and with the requirements prescribed (whether as a matter of
substantive law or as necessary to secure favorable tax treatment) by any and
all statutes, governmental, or court orders, or governmental rules or
regulations in effect from time to time, including but not limited to ERISA and
the Internal Revenue Code of 1986, as amended (the "Code"), and applicable to
----
such plan. Each Employee Benefit Plan that is intended to qualify under Section
401(a) of the Code is so qualified.
(c) Absence of Certain Events and Arrangements.
------------------------------------------
(1) There is no pending or, to the Company's knowledge, threatened,
legal action, proceeding, or investigation, other than routine claims for
benefits, concerning any Employee Benefit Plan, or any fiduciary or service
provider thereof and there is no basis for any such legal action or proceeding.
(2) No Employee Benefit Plan, nor any party in interest in respect
thereof has engaged in a prohibited transaction that could subject the Company,
directly or indirectly, to liability under Section 409 or 502(i) of ERISA or
Section 4975 of the Code.
(3) No communication, report, or disclosure has been made that, at the
time made, did not accurately reflect the terms and operations of any Employee
Benefit Plan.
(4) No Employee Benefit Plan provides welfare benefits subsequent to
termination of employment to employees or their beneficiaries (except to the
extent required by applicable state insurance laws and Title I, Part 6 of
ERISA).
(5) The Company has not undertaken to maintain any Employee Benefit
Plan for any specific period of time and each such plan is terminable at the
sole discretion of the Company, subject only to such constraints as may imposed
by applicable law.
(6) No Employee Benefit Plan is maintained pursuant to a collective
bargaining agreement or is or has been subject to the minimum funding
requirements of Section 302 of ERISA or Section 412 of the Code.
(d) Funding of Certain Plans. With respect to each Employee Benefit
------------------------
Plan for which a separate fund of assets is or is required to be maintained,
full
<PAGE>
-15-
payment has been made of all amounts that, under the terms of each such plan, it
is required to have paid as contributions to that plan as of the end of such
plan's most recently ended year.
2.19 Potential Conflicts of Interest. Except as set forth on
-------------------------------
Schedule 2.19, neither the Company nor any of its officers, directors, partners,
- -------------
members or employees, (i) owns, directly or indirectly, any interest (excepting
passive holdings for investment purposes of not more than 1% of the securities
of any publicly held and traded company) in, or is an officer, director,
employee, or consultant of, any person that is a competitor, lessor, lessee,
customer, or supplier of the Company; (ii) owns, directly or indirectly, any
interest in any tangible or intangible property used in or necessary to the
business of the Company; (iii) has any cause of action or other claim whatsoever
against the Company, or owes any amount to the Company, except for claims in the
ordinary course of business, such as for accrued vacation pay, accrued benefits
under employee benefit plans, and similar matters and agreements.
2.20 Proprietary Information.
-----------------------
(a) Schedule 2.20 lists all patents, patent applications, trademarks,
-------------
trade names, service marks, logos, copyrights, and licenses used in or necessary
to the Company's business as now being conducted or as proposed to be conducted
(other than commercially available off-the-shelf software, so long as such
software is not packaged with, imbedded in, or sold in connection with any of
the Company's products) (collectively, and together with any technology, know-
how, trade secrets, processes, formulas, and techniques used in or necessary to
the Company's business, "Proprietary Information"). The Company owns, or is
-----------------------
licensed or otherwise has the full and unrestricted exclusive right to use,
without the payment of royalties or other further consideration, all Proprietary
Information, and no other intellectual property rights, privileges, licenses,
contracts, or other agreements, instruments, or evidences of interests (other
than commercially available off-the-shelf software) are necessary to or used in
the conduct of its business.
(b) In any instance where the Company's rights to Proprietary
Information arise under a license or similar agreement (other than for software
programs that have not been customized for its use), this is indicated in
Schedule 2.20 and such rights are licensed exclusively to it except as indicated
- -------------
in Schedule 2.20. No other person has an interest in or right or license to use
-------------
any of the Proprietary Information. To the best of the Company's knowledge,
none of the Proprietary Information is being infringed by others, or is subject
to any outstanding order, decree, judgment, or stipulation. No litigation (or
other proceedings in or before any court or other governmental, adjudicatory,
arbitral, or administrative body) relating to the Proprietary Information is
pending or, to the Company's knowledge, threatened, nor, to the best of the
Company's knowledge, is there any basis for any such litigation or proceeding.
The Company maintains adequate and sufficient security measures for the
preservation of the secrecy and proprietary nature of the Proprietary
Information.
<PAGE>
-16-
(c) (i) Neither the Company nor, to the Company's knowledge, any of
its employees has infringed or made unlawful use of, or is infringing or making
unlawful use of, any proprietary or confidential information of any Person,
including without limitation any former employer of any past or present employee
or consultant of the Company; and (ii) to the Company's knowledge, the
activities of the Company's employees in connection with their employment do not
violate any agreements or arrangements that any such employees or consultants
have with any former employer or any other Person. No litigation (or other
proceedings in or before any court or other governmental, adjudicatory,
arbitral, or administrative body) charging the Company with infringement or
unlawful use of any patent, trademark, copyright, or other proprietary right is
pending or, to the Company's knowledge, threatened, nor is there any basis for
any such litigation or proceeding.
(d) No officer, director, employee, partner, member or consultant of
the Company, to the Company's knowledge, is presently obligated under or bound
by any agreement or instrument, or any judgment, decree, or order of any court
of administrative agency, that (i) conflicts or may conflict with his or her
agreements and obligations to use his or her reasonable best efforts to promote
the interests of the Company, (ii) conflicts or may conflict with the business
or operations of the Company as presently conducted or as proposed to be
conducted, or (iii) restricts or may restrict the use or disclosure of any
information that may be useful to the Company.
2.21 Insurance. Schedule 2.21 lists the policies of theft, fire,
--------- -------- ----
liability, worker's compensation, life, property and casualty, directors' and
officers', and other insurance owned or held by the Company and the basis on
which such policies provide coverage. Such policies of insurance are maintained
with financially sound and reputable insurance companies, funds, or
underwriters, are of the kinds and cover such risks, and are in such amounts and
with such deductibles and exclusions, as are consistent with prudent business
practice. All such policies are, and at all times since the respective dates
set forth in Schedule 2.21, have been, in full force and effect, are sufficient
-------------
for compliance in all respects by the Company with all requirements of law and
of all agreements to which it is a party, and provide that they will remain in
full force and effect through the respective dates set forth in Schedule 2.21,
-------------
and will not terminate or lapse or otherwise be affected in any way by reason of
the transactions contemplated hereby.
2.22 Governmental and Other Third-Party Consents. Except as set
-------------------------------------------
forth on Schedule 2.22, no consent, approval, or authorization of, or
-------- ----
registration, designation, declaration, or filing with, any governmental
authority, federal or other, or any other person is required on the part of the
Company in connection with its execution, delivery, or performance of this
Agreement and its consummation of the transactions contemplated hereby, other
than pursuant to any applicable federal or state securities laws, or the
continued conduct of the present business of the Company after the Closing Date.
2.23 Brokers. No finder, broker, agent, or other intermediary has
-------
acted
<PAGE>
-17-
for or on behalf of the Company in connection with the negotiation or
consummation of the transactions contemplated hereby, and no fee will be payable
by the Company to any such person in connection with such transactions.
2.24 Compliance with Other Instruments, Laws, Etc. The Company has
--------------------------------------------
complied with, and is in compliance with, (i) all laws, statutes, governmental
regulations, judicial or administrative tribunal orders, judgments, writs,
injunctions, decrees, and similar commands applicable to it and its business,
and all unwaived terms and provisions of all agreements, instruments, and
commitments to which it is a party or to which it or any of its assets or
properties is subject, except for any non-compliances that, either individually
and in the aggregate, have not had and could not reasonably be expected to have
a Material Adverse Effect, and (ii) its charter documents and by-laws, each as
amended to date. The Company has not committed, been charged with, or, to the
Company's knowledge, been under investigation with respect to, nor does there
exist, any violation by the Company of any provision of any federal, state, or
local law or administrative regulation, except for any violations that, both
singly or in the aggregate, have not had and could not reasonably be expected to
have a material adverse effect on the business, prospects, results of operations
or financial condition of the Company. The Company has and maintains all
licenses, permits, and other authorizations from all such governmental
authorities that are legally required for the conduct of its business or in
connection with the ownership or use of its properties, except for any licenses,
permits, and other authorizations, the failure to obtain or maintain which in
effect, both singly or in the aggregate, has not had and could not reasonably be
expected to have a material adverse effect on the business, prospects, results
of operations or financial condition, and all of which are in full force and
effect in all material respects, and true and complete copies of all of which
have been delivered to AC.
2.25 Compliance with Securities Laws. Assuming the accuracy of the
-------------------------------
representations of AC contained in Section 3 hereof, the offer, issuance, and
delivery of the Purchased Securities as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and are exempt
from registration or qualification under applicable states' securities laws.
Neither the Company nor anyone acting on its behalf will hereafter offer to
sell, solicit offers to buy, or sell any securities of the Company so as to
subject the offer, issuance, and sale of the Purchased Securities to the
registration requirements of the Securities Act.
2.26 Real Property Holding Corporation. The Company hereby
---------------------------------
represents that it is not a "United States real property holding corporation"
within the meaning of Section 897 of the Code, as amended, and Treasury
Regulation (S)1.897-2.
2.27 Foreign Corrupt Practices Act. The Company has not taken any
-----------------------------
action which would cause it to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any rules or regulations thereunder. To the
Company's knowledge, there is not now, and there has never been, any employment
by the Company of, or beneficial ownership in the Company by, any governmental
or political official in any
<PAGE>
-18-
country in the world.
2.28 Year 2000. Except as to functions where the failure to
---- ----
accomplish the following will not have a Material Adverse Effect, all computer
software programs, source code, object code, data and documentation used by the
Company will (a) accurately process date information before, during and after
January 1, 2000, including, but not limited to, accepting date input, providing
date output and performing calculations on dates or portions of dates; (b)
function accurately and without interruption before, during and after January 1,
2000 without any change in operations associated with the advent of the new
century; and (c) store and provide output of date information in ways that are
unambiguous as to century.
2.29 Disclosure. No representation or warranty by the Company in
----------
this Agreement, in any schedule to this Agreement or in the draft of the Form
S-1 dated November 16, 1999 (the "Form S-1") provided by the Company to AC,
--------
contains any untrue statement of a material fact or omits to state a material
fact required to be stated herein or necessary to make the statements contained
herein not false or misleading, provided, however, that all financial
information in such draft registration statement is superceded by the financial
statements referred in Section 2.8. There is no fact or circumstance relating
specifically to the business or condition of the Company that could reasonably
be expected to result in a Material Adverse Effect that is not disclosed in a
Schedule attached hereto or in the Form S-1.
2A. Covenant Pending Closing. The Company shall use its best efforts
------------------------
to deliver to AC the Final Audited Financial Statements (as defined in Section
5.10 below) on or before December 8, 1999.
3. Representations and Warranties of AC. AC hereby represents and warrants
------------------------------------
that:
3.1 Authorization. AC has full power and authority to enter into
-------------
this Agreement and such agreement constitutes its valid and legally binding
obligation, enforceable against AC in accordance with its terms.
3.2 Purchase Entirely for Own Account. AC is acquiring the Purchased
----------------------------------
Securities for investment for AC's own account, not as a nominee or agent
(provided that loans from affiliates for the purchase price of the Purchased
Securities shall not constitute action as a nominee or agent), and not with a
view to the resale or distribution of any part thereof. AC has no present
intention of selling, granting any participation in or otherwise distributing
the same. By executing this Agreement, AC further represents that AC does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person
with respect to any of the Purchased Securities.
<PAGE>
-19-
3.3 Investment Experience. AC is an investor in securities of
---------------------
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Common Stock. AC also represents it
has not been organized for the purpose of acquiring the Purchased Securities.
3.4 Accredited Investor. AC is an "accredited investor" within the
-------------------
meaning of Rule 501 of Regulation D, as promulgated by the Securities and
Exchange Commission, as presently in effect.
3.5 Restricted Securities. AC understands that the Purchased
---------------------
Securities are "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances.
3.6 Legends. It is understood that the certificates or other
-------
instruments evidencing the Purchased Securities may bear one or all of the
legends in substantially the form specified below:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION THEREFROM."
4. REPURCHASE OF SECURITIES.
---------- -- ----------
4.1 Right to Put Securities. At any time and from time to time, on
----- -- --- ----------
or after January 1, 2001 (the "Put Exercise Date"), in the event that the
-----------------
Company has not consummated an underwritten public offering of its capital stock
registered pursuant to the Securities Act on or before the Put Exercise Date, AC
may, by written notice to the Company (the "Put Notice"), elect to sell to the
----------
Company (and the Company hereby agrees to repurchase from such holders) (the
"Put Right"), at the Repurchase Price specified in Section 4.4 hereof, all (but
---------
not less than all) of the Purchased Shares then held by AC (the "Put Shares").
----------
4.2 Put Closing. The closing (the "Put Closing") shall take place at
--- -------
the offices of the Company at 10:00 a.m. (Boston time) on a date, to be
specified in the Put Notice, which date shall be not less than fourteen (14)
days after the date of the Put Notice (the "Put Closing Date"), or at such other
----------------
place or on such other date as the Company and AC shall agree. At the closing,
the holders of the Put Shares will deliver to the Company, free and clear of all
liens and encumbrances, a certificate or certificates evidencing the Put Shares
then to be purchased by the Company (properly endorsed or
<PAGE>
-20-
accompanied by stock powers or similar appropriate documentation or authority to
transfer) against payment of the Repurchase Price to such holders in the manner
specified in Section 4.3 hereof. Except to the extent prohibited by applicable
law, prior to the Put Closing Date, the Company will provide AC with all
available information that may be material to the exercise of AC's rights under
this Section 4, including any plans or proposals for any mergers, sales of
assets, acquisitions and substantial sales of stock (either by its stockholders
or through new issuances).
4.3. Payment. The Company shall pay the Repurchase Price at any
-------
closing under Section 4.2 hereof out of funds legally available therefor in cash
or immediately available funds in three installments as follows: (a) one-half
at the Put Closing; (b) one-fourth on or before the later to occur of March 31,
2001 and the date which is three months after the Put Closing Date; and (c)
one-fourth on or before the later to occur of June 30, 2001 and the date which
is six months after the Put Closing Date. If the funds of the Company legally
available for the purchase of the Put Shares are insufficient to pay the
Repurchase Price when due in accordance with the foregoing sentence, those funds
which are legally available will be used to purchase the maximum possible number
of Put Shares ratably on the basis of the number of Put Shares that would be
purchased on such date if the funds of the Company legally available therefor
had been sufficient to purchase all Put Shares required to be purchased on such
date. At any time thereafter when additional funds of the Company become
legally available for the purchase of the remaining Put Shares, such funds will
be used, as soon as practicable, to purchase the balance of the Put Shares that
the Company was theretofore obligated to purchase, ratably on the basis and on
the dates set forth in the first sentence. In the event that any portion of the
Repurchase Price is not paid as a result of any insufficiency of legally
available funds or otherwise, until such time as the unpaid portion of the
Repurchase Price and any interest thereon is paid to the holders of the Put
Shares in full, (a) the holders of the Put Shares shall retain all rights
hereunder and in connection with the Put Shares (including all rights under this
Agreement and the Registration Rights Agreement), and (b) AC shall, by delivery
of a rescission notice to the Company, at any time or from time to time, be
entitled to rescind the put of the Put Shares by giving written notice of such
rescission (the "Rescission Notice") whereupon the Company shall immediately
-----------------
return to AC the uncancelled original stock certificate(s) representing the Put
Shares, provided that AC shall immediately repay to the Company any portion of
the Repurchase Price theretofor paid. Unless and until the Company receives
such Rescission Notice, the unpaid portion of the Repurchase Price shall remain
an obligation of the Company and shall become due and payable, in cash or
immediately available funds, as soon as there are funds legally available
therefor.
4.4. Repurchase Price for Put Shares; Additional Interest Rate. The
----------------------------------------------------------
repurchase price (the "Repurchase Price") of the Put Shares shall be equal to
---------- -----
$4,000,000 plus interest, which interest shall accrue commencing on January 1,
2001 through the date on which the entire Repurchase Price has been paid at a
rate per annum equal to eight percent (8%) (compounded annually),
notwithstanding any partial payments of the Repurchase Price. Such interest
shall become due and payable on the date when the
<PAGE>
-21-
Repurchase Price is due and payable (in accordance with Section 4.3) or, if not
then paid, on such later date as the Repurchase Price (or any portion thereof)
is paid. In the event that the Company shall fail to make any payments of the
Repurchase Price when due (in accordance with Section 4.3), then an additional
interest rate of seven percent (7%) per annum (compounded annually) for an
aggregate interest rate of fifteen percent (15%) (or such lesser amount if
required by applicable usury laws) will accrue on such amounts commencing on the
date on which the Company failed to make such payment when due and through the
date on which the entire amount has been paid.
4.5 Termination; Acceleration. In the event that the Company
----------- ------------
consummates an underwritten public offering of its capital stock registered
pursuant to the Securities Act on or before January 1, 2001, then the Put Right
set forth in this Section 4 shall automatically terminate. In addition, the
Company shall give AC written notice at least fourteen (14) days prior to the
consummation of any Liquidity Event, and in the event of such a Liquidity Event,
AC shall by written notice to the Company given at any time prior to the
consummation of such Liquidity Event, either (a) accelerate the put right under
this Section 4, whereupon the obligations of the Company under this Section 4
shall be fulfilled either immediately prior to or simultaneously with the
consummation of such Liquidity Event, or (b) waive the Put Right (or give a
Rescission Notice in the event that AC has already exercised such Put Right, in
which case AC shall immediately repay to the Company any portion of the
Repurchase Price theretofore paid and the Company shall immediately return to AC
the uncancelled original stock certificate(s) representing the Put Shares) under
this Section 4. The term "Liquidity Event" shall mean (x) an underwritten
---------------
initial public offering of the Company's capital stock which occurs after
January 1, 2001, (y) the sale of all or substantially all of the property and
assets of the Company in one transaction or a series of one or more related
transactions, or (z) the acquisition of the Company by another person or entity
by means of stock purchase (whether by transfer or outstanding shares or through
new issuances), merger, consolidation or otherwise which would result in the
exchange of shares of capital stock of the Company for cash, securities or other
consideration paid by the acquiring person or entity, or any similar
transaction.
5. Conditions of AC's Obligations at Closing. The obligation of AC to
-----------------------------------------
purchase the Purchased Securities from the Company is subject to the fulfillment
on or before the Closing of each of the following conditions:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
date hereof with the same effect as though such representations and warranties
had been made on and as of the Closing Date.
5.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
<PAGE>
-22-
5.3 Compliance Certificate. The President of the Company shall
----------------------
deliver to AC at the Closing a certificate stating that the conditions specified
in Sections 5.1 and 5.2 have been fulfilled.
5.4 Qualifications. All authorizations, approvals or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Purchased Securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
5.5 Marketing Agreement. The Company shall have entered into,
-------------------
executed and delivered the Marketing Agreement.
5.6 Stockholder Approval. The Company shall have obtained all
--------------------
requisite stockholder approval in order to consummate the transactions
contemplated by this Agreement.
5.7 Waivers. The Company shall have obtained the consents of any
-------
third parties required to consummate the transactions contemplated by this
Agreement and waivers from all persons who have pre-emptive rights, first
refusal rights, participation rights or other similar rights to purchase, with
respect to the Purchased Securities.
5.8 Legal Opinion of Hale and Dorr LLP. AC shall have received an
----------------------------------
executed legal opinion of Hale and Dorr LLP, counsel to the Company, in
substantially the form attached hereto as Exhibit B.
---------
5.9 Registration Rights Agreement. The Company shall have entered
-----------------------------
into, executed and delivered the Amended and Restated Registration Rights
Agreement, in substantially the form attached hereto as Exhibit C (the
---------
"Registration Rights Agreement").
-----------------------------
5.10 Financial Statements. The Company shall have delivered to AC,
---------------------
and signed by Pricewaterhouse Coopers LLP, the final audited consolidated
balance sheet of the Company as of December 31, 1996, 1997 and 1998 and as of
September 30, 1999 and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the years ended December 31, 1996, 1997
and 1998 and for the nine month period ended September 30, 1999 (the "Final
-----
Audited Financial Statements"), which shall be the same in all material respects
- ----------------------------
to the financial statements attached hereto as Exhibit D and acceptable to AC in
---------
its sole discretion.
6. Conditions of the Company's Obligations at Closing. The obligation of
--------------------------------------------------
the Company to issue and sell the Purchased Securities to AC is subject to the
fulfillment on or before the Closing of each of the following conditions:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of AC contained in Section 3 shall be true on and as of the date
hereof with the
<PAGE>
-23-
same effect as though such representations and warranties had been made on and
as of the Closing Date.
6.2 Qualifications. All authorizations, approvals or permits, if
---------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Purchased Securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
6.3 Marketing Agreement. Andersen shall have entered into, executed
-------------------
and delivered the Marketing Agreement.
6.4 Registration Rights Agreement. AC shall have entered into,
-----------------------------
executed and delivered the Registration Rights Agreement.
7. Purchaser Rights.
----------------
7.1 Information Rights. In the event that the Company does not
------------------
consummate an underwritten initial public offering of its common stock on or
before February 14, 2000, and so long as ac holds not less than 25% of the
Purchased Shares and the Company has not consummated an underwritten public
offering of its capital stock registered pursuant to the Securities Act, then AC
shall be entitled to the following:
(a) Annual Statements. As soon as available and in any event within
-----------------
ninety (90) days after the close of each fiscal year, commencing with the fiscal
year ending on December 31, 1999, the Company will deliver a consolidated
balance sheet and statements of income, retained earnings, and cash flows,
audited by a "big five" independent public accounting firm selected by the
Company, showing the financial condition of the Company as of the close of such
fiscal year and the results of its operations during such fiscal year. Each of
the financial statements delivered hereunder will be certified by such
accounting firm without material qualification to have been prepared in
accordance with GAAP consistently applied (except for changes in the application
of such principles that have been approved by the Company's Board of Directors).
(b) Quarterly and Monthly Statements.
--------------------------------
(i) As soon as available, and in any event within forty-five (45) days
after the end of each of the first three fiscal quarters of each fiscal year,
commencing with the fiscal quarter ending March 31, 2000, the Company will
deliver an unaudited consolidated balance sheet and statements of income,
retained earnings, and cash flows of the Company and its Subsidiaries as of the
end of and for such fiscal quarter, certified by the chief financial officer (or
other officer acting in a similar capacity, including the Treasurer) of the
Company to be true and correct and to have been prepared in accordance with GAAP
consistently applied (except for changes in the application of such principles
that have been approved by the Company's Board of Directors), subject to the
absence of footnotes and to adjustments consisting of normal
<PAGE>
-24-
year-end accruals, the effect of which, both individually and in the aggregate,
is not material.
(ii) As soon as available and in any event within thirty (30) days
after the end of each month, commencing with the month ending January 31, 2000,
the Company will deliver unaudited consolidated balance sheets and statements of
income and cash flows of the Company and its Subsidiaries as of the end of each
such month, as well as summary information as to backlog and bookings as of such
month-end, certified by the treasurer or chief financial officer (or other
officer acting in a similar capacity) of the Company to be true and correct and
to have been prepared in accordance with GAAP consistently applied (except for
changes in the application of such principles that have been approved by the
Company's Board of Directors), subject to the absence of footnotes and to
adjustments consisting of normal year-end accruals, the effect of which, both
individually and in the aggregate, is not material.
7.2 Pre-Emptive Rights. So long as AC shall hold not less than 25%
------------------
of the Purchased Shares, AC shall be entitled to the rights, and the Company
shall be bound by the obligations, set forth in this Section 7.2.
(a) Right to Purchase. If at any time after the Closing the Company
-----------------
authorizes the offer, issuance, or sale, or offers, issues or sells to any
Person (the "Offeree") any shares of capital stock or other securities (whether
-------
convertible or not) of the Company (whether as newly issued shares or other
securities or from the Company's treasury) in an offering or issuance not
registered under the Securities Act, the Company will first offer to sell, by
written notice, to AC a portion (such holder's "Portion") of such capital stock
-------
or other securities authorized to be offered, issued or sold, or proposed to be
offered, issued or sold equal to the product obtained by multiplying (i) the
number of such shares or securities authorized to be offered, issued or sold, or
proposed to be offered, issued or sold, by (ii) the quotient obtained by
dividing (A) the number of shares of Common Stock held by AC (for this purpose
assuming the conversion into Common Stock of all other securities held by AC at
such time, including without limitation the Warrants), by (B) the sum of (I) the
aggregate number of shares of Common Stock issued and outstanding as of such
date and (II) the aggregate number of shares of Preferred Stock issued and
outstanding as of such date (on an as-converted basis).
(b) Procedure. AC will be entitled (but not obligated) to purchase
---------
all or part of such holder's Portion at the same price and on the same terms as
such stock or securities are to be offered to the Offeree. AC may exercise such
purchase rights within 20 days after receipt of written notice from the Company
describing in reasonable detail the stock or securities to be offered to the
Offeree, the purchase price thereof, the payment terms, and such holder's
percentage allotment. If AC fails in whole or in part to exercise the purchase
rights hereunder within such 20-day period (other than by reason of the
Company's failure to comply with the provisions of this Section 7.2(b)), then
the Company may sell so much, and only so much, of any Portion as to which AC,
having been offered the right to purchase such Portion in accordance with all of
the provisions of
<PAGE>
-25-
this Section 7.2, have exercised such purchase rights, to the Offeree at the
same price and on the same terms as those offered to such holder, provided, that
in the event that such shares or other securities are not sold to the Offeree
within 60 days following the lapse of the 20-day exercise period provided to AC,
such unsold shares or other securities will once again be subject to the
purchase rights of AC hereunder. In the event that shares of Common Stock, other
shares of capital stock or other securities are authorized to be issued and sold
by the Company for services, property, or other non-cash consideration, AC will
be allowed to participate in such issue and sale by substituting cash in the
amount of the fair market value, per share, of such non-cash consideration.
(c) Excluded Transactions. The prohibitions and rights provided in
---------------------
this Section 7 will not apply to (i) shares of Common Stock issued by the
Company pursuant to stock dividends, stock splits, recapitalizations, and
similar transactions; (ii) shares of Common Stock issued upon the conversion of
shares of the Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock outstanding as of the date of this Agreement; and (iii)
options or other rights to purchase or receive Common Stock, and any shares of
Common Stock issued upon the exercise thereof or upon such a purchase, in each
case to officers, directors, consultants, agents and employees of the Company
pursuant to the Company's 1998 Stock Option Plan (in effect as of the date
hereof and as amended from time to time (except for amendments which increase
the number of shares reserved under such 1998 Stock Option Plan)); (iv) shares
of Common Stock or other shares of capital stock issuable upon the exercise of
options and warrants specifically identified on Schedule 2.5(a) or 2.5(b)
--------------- ------
hereof; provided, that such issuance is otherwise permitted under the terms of
--------
the Company's Certificate of Incorporation.
(d) Termination. The rights and obligations set forth in this Section
-----------
7.2 shall automatically terminate upon the consummation by the Company of an
underwritten initial public offering of its common stock pursuant to the
Securities Act.
7.3 Restriction on Transfer. AC agrees that it shall not transfer to
-----------------------
persons (other than its affiliates, who shall be bound by the provisions of this
Section) the shares of Common Stock issuable upon the exercise of the Warrant
and the warrants issuable pursuant to that certain Warrant Purchase Agreement,
dated the date hereof, between the Company and AC during the 360 days following
the consummation by the Company of an underwritten initial public offering of
its common stock pursuant to the Securities Act without the consent of the
Company.
8. Miscellaneous.
-------------
8.1 Survival of Obligations. The terms and provisions of Sections 4
-----------------------
and 7 hereof shall survive the execution and delivery of this Agreement and the
Closing for so long as by their respective terms they shall be in force and
effect.
<PAGE>
-26-
8.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Purchased Securities).
8.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the Commonwealth of Massachusetts.
8.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effective given upon personal delivery to the party to be notified, upon
confirmation of facsimile transmission or upon deposit with the United States
Post Office, by registered or certified mail, postage prepaid and addressed to
the party to be notified at the address indicated for such party on the
signature page hereof, or at such other address as such party may designate by
ten days' advance written notice to the other parties.
8.7 Finder's Fee. Each party represents that it neither is nor will
------------
be obligated for any finders' fee or commission in connection with this
transaction. AC agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which AC or any of its officers, partners, employees or
representatives is responsible. The Company agrees to indemnify and hold
harmless AC from any liability for any commission or compensation in the nature
of a finders' fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.
8.8 Expenses. Each party shall bear its own costs and expenses
--------
incurred in connection with the negotiation, execution, delivery and performance
of this Agreement, including the costs and expenses of legal counsel.
8.9 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the parties hereto. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which
<PAGE>
-27-
such securities are convertible), each future holder of all such securities and
the Company.
8.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.11 Aggregation of Stock. All shares of Common Stock and Preferred
--------------------
Stock and any other securities held or acquired by affiliated entities or
persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.
8.12 Entire Agreement. This Agreement, the exhibits and schedules
----------------
hereto and the documents referred to herein constitute the entire agreement
among the parties and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants, except as
specifically set forth herein or therein.
8.13 Disclosure. AC hereby acknowledges and agrees that the Company
----------
shall be entitled to disclose the existence and terms of this Agreement, only to
the extent required by law, in any registration statement, prospectus, report or
other document filed by the Company pursuant to any state or federal securities
laws or other applicable laws. The Company agrees to provide to AC a reasonable
opportunity to review and consent to such disclosure (which consent shall not be
unreasonably withheld or delayed) in advance of such filing.
<PAGE>
-28-
IN WITNESS WHEREOF, the parties have executed this Common Stock and Warrant
Purchase Agreement as of the date first above written.
PRIME RESPONSE, INC.
By: /s/ Peter J. Boni
--------------------------------
Name: Peter J. Boni
--------------------------
Title: Chief Executive Officer and
President
----------------------------
Address: 150 Cambridge Park Drive
Cambridge, MA 02140
Attention: President and Chief Executive
Officer
ANDERSEN CONSULTING LLP
By: /s/ J. Patrick O'Halloran
Name: J. Patrick O'Halloran
---------------------------------
Title: Partner
--------------------------------
Address: 333 South Seventh Street
Minneapolis, MN 55402
<PAGE>
-29-
AC VENTURES B.V.
By: /s/ M.G. McGrath
---------------------------------
Name: M.G. McGrath
---------------------------
Title: Chief Financial Officer
--------------------------
Address: c/o Andersen Consulting LLP
1661 Page Mill Road
Palo Alto, CA 94304
<PAGE>
Exhibit 10.24
PRIME RESPONSE, INC.
WARRANT PURCHASE AGREEMENT
--------------------------
This Agreement dated as of December 6, 1999 is entered into by and among
Prime Response, Inc. (f/k/a Prime Response Group, Inc.), a Delaware corporation
(the "Company"), and Andersen Consulting LLP, an Illinois limited liability
partnership (the "Purchaser").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
--------------------------------
1.1 Authorization. The Company has, or before the Closing (as
-------------
defined in Section 2) will have, duly authorized the sale and issuance,
pursuant to the terms of this Agreement, of (i) a warrant to purchase up to
500,000 shares of its Common Stock, $.01 par value per share ("Common Stock"),
in the form attached hereto as Exhibit A, and (ii) a warrant to purchase up to
---------
500,000 shares of Common Stock, in the form attached hereto as Exhibit B
---------
(collectively with the warrant referred to in clause (i) of this sentence, the
"Warrants").
1.2 Sale of Warrants. Subject to the terms and conditions of this
----------------
Agreement, at the Closing the Company will sell and issue to the Purchaser, and
the Purchaser will purchase, the Warrants for the aggregate purchase price of
$.01 (the "Purchase Price").
2. The Closing. The closing (the "Closing") of the sale and purchase of
-----------
the Warrants under this Agreement shall take place at the offices of Bingham
Dana LLP, 150 Federal Street, Boston, MA simultaneously with the execution
hereof, or at such other time, date and place as are mutually agreeable to the
Company and the Purchaser. At the Closing, the Company shall deliver to the
Purchaser the Warrants, against payment to the Company of the Purchase Price, by
wire transfer or certified check of immediately available funds. The date of
the Closing is hereinafter referred to as the "Closing Date."
3. Representations of the Company. The Company hereby represents and
------------------------------
warrants to the Purchaser that the representations and warranties of the Company
contained in Section 2 of the Common Stock and Warrant Purchase Agreement dated
as of the date hereof between the Company and the Purchaser (the "Stock and
Warrant Purchase Agreement") are true, complete and correct except as otherwise
set forth in any schedule thereto.
4. Representations of the Purchaser. The Purchaser hereby represents and
--------------------------------
warrants to the Company that the representations and warranties of the Purchaser
contained in Section 3 of the Stock and Warrant Purchase Agreement are true,
complete and correct.
<PAGE>
5. Conditions to the Obligations of the Purchaser. The obligation of the
----------------------------------------------
Purchaser to purchase Shares at the Closing is subject to the fulfillment, or
the waiver by the Purchaser, of each of the following conditions on or before
the Closing:
5.1 Opinion of Counsel. The Purchaser shall have received an
------------------
opinion from Hale and Dorr LLP, counsel for the Company, dated the Closing Date,
addressed to the Purchaser, and satisfactory in form and substance to the
Purchaser, to the effect set forth on Exhibit C.
---------
5.2 Other Agreements. The Stock and Warrant Purchase Agreement and
----------------
Marketing Agreement (as defined in the Stock and Warrant Purchase Agreement)
shall have been executed and delivered by the Company.
6. Condition to the Obligations of the Company. The obligations of the
-------------------------------------------
Company under Section 1.2 of this Agreement are subject to fulfillment, or the
waiver, of the following condition on or before the Closing:
6.1 Other Agreements. The Stock and Warrant Purchase Agreement and
----------------
Marketing Agreement (as defined in the Stock and Warrant Purchase Agreement)
shall have been executed and delivered by the Purchaser.
7. Transfer of Shares.
------------------
7.1 Restricted Shares. "Restricted Securities" means (i) the
-----------------
Warrants, (ii) the shares of Common Stock issued or issuable upon exercise of
the Warrants, and (iii) any other securities of the Company issued in respect of
such shares or Warrants (as a result of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events); provided, however,
-------- -------
that shares of Common Stock which are Restricted Securities shall cease to be
Restricted Securities upon any sale pursuant to a registration statement under
the Securities Act, Section 4(1) of the Securities Act or Rule 144 under the
Securities Act.
7.2 Requirements for Transfer. Restricted Securities shall not be
-------------------------
sold or transferred unless (i) they first shall have been registered under the
Securities Act, (ii) they are transferred to an affiliate in a transaction that
is exempt from the registration requirements of the Securities Act, or (iii) the
Company first shall have been furnished with an opinion of legal counsel,
reasonably satisfactory to the Company, to the effect that such sale or transfer
(to persons other than affiliates) is exempt from the registration requirements
of the Securities Act.
7.3 Legend. Each certificate representing Restricted Securities
------
shall bear a legend substantially in the following form:
"Neither this warrant nor the shares issuable upon the
exercise of this warrant have been registered under the
Securities Act of 1933, as amended, and neither this
warrant nor the shares issuable upon the exercise of this
warrant may be offered, sold or otherwise transferred,
unless the registration provisions of such Act have been
complied with or unless compliance with such provisions
is not required."
-2-
<PAGE>
The foregoing legend shall be removed from the certificates representing any
Restricted Securities, at the request of the holder thereof, at such time as
they become eligible for resale pursuant to Rule 144(k) under the Securities
Act.
8. Miscellaneous.
-------------
8.1 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties and their respective successors and
permitted assigns. No party hereto may assign its rights under this Agreement
without the prior written consent of the other party hereto.
8.2 Confidentiality. The Purchaser agrees that it will keep
---------------
confidential and will not disclose, divulge or use for any purpose other than to
monitor his, her or its investment in the Company any confidential, proprietary
or secret information which the Purchaser may obtain from the Company pursuant
to any financial statements, reports or other materials submitted by the Company
to the Purchaser in connection with this Agreement ("Confidential Information"),
unless such Confidential Information is known, or until such Confidential
Information becomes known, to the public (other than as a result of a breach of
this section by the Purchaser); provided, however, that the Purchaser may
disclose Confidential Information (i) to its attorneys, accountants,
consultants, and other professionals to the extent necessary to obtain their
services in connection with monitoring its investment in the Company, or (ii)
as may otherwise be required by law, provided that the Purchaser takes
reasonable steps to minimize the extent of any such required disclosure.
8.3 Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
8.4 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of Delaware (without
reference to the conflicts of law provisions thereof).
8.5 Notices. All notices, requests, consents, and other
-------
communications under this Agreement shall be in writing and shall be deemed
delivered (i) two business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or (ii) one business day after
being sent via a reputable nationwide overnight courier service guaranteeing
next business day delivery, in each case to the intended recipient as set forth
below:
If to the Company, at 150 Cambridge Park Drive, Cambridge, MA 02140,
Attention: President, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchaser, with a copy to Hale and
Dorr LLP, 60 State Street, Boston, MA 02109, Fax 617-526-5000, Attention: John
A. Burgess, Esq.; or
If to the Purchaser, at 333 South Seventh Street, Minneapolis, MN 55402,
Attention: J. Patrick O'Halloran, or at such other address or addresses as may
have been furnished to the Company in writing by the Purchaser, with a copy to
Bingham Dana LLP, 150 Federal Street, Boston, MA 02110, Attention: Wayne D.
Bennett, Esq. and Meerie Joung, Esq.
-3-
<PAGE>
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
8.6 Complete Agreement. This Agreement constitutes the entire
------------------
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter.
8.7 Waivers. No waivers of or exceptions to any term, condition or
-------
provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
8.8 Pronouns. Whenever the context may require, any pronouns used
--------
in this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice versa.
8.9 Counterparts; Facsimile Signatures. This Agreement may be
----------------------------------
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which shall constitute one and the same document. This
Agreement may be executed by facsimile signatures.
8.10 Section Headings. The section headings are for the convenience
----------------
of the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.
[signatures on following page]
-4-
<PAGE>
Executed as of the date first written above.
COMPANY:
PRIME RESPONSE, INC.
By: /s/ Peter J. Boni
-------------------------------
Name: Peter J. Boni
Title: Chief Executive Officer
and President
PURCHASER:
ANDERSEN CONSULTING LLP
By: /s/ J. Patrick O'Halloran
-------------------------------
Name: J. Patrick O'Halloran
Title: Partner
-5-
<PAGE>
Exhibit 10.25
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER
THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE SOLD
OR TRANSFERRED UNLESS THE REGISTRATION PROVISIONS OF SAID ACT HAVE BEEN COMPLIED
WITH OR UNLESS COMPLIANCE WITH SUCH PROVISIONS IS NOT REQUIRED.
No. AC-1 Dated: December 9, 1999
PRIME RESPONSE, INC.
Common Stock
Purchase Warrant
THIS IS TO CERTIFY THAT, for value received, Andersen Consulting LLP (the
"Initial Warrant Holder"), and its registered successors and permitted assigns
------- ------- ------
are entitled, subject to the terms and conditions set forth below, to purchase
from PRIME RESPONSE, INC. (f/k/a Prime Response Group, Inc.), a Delaware
corporation (the "Corporation"), at any time or from time to time on and after
-----------
the date hereof and prior to 5:00 P.M., Boston, Massachusetts time, on the
Expiration Date (as defined in Section 1 below), all or any portion of the
Warrant Shares (as defined in Section 1), at a purchase price per share equal to
the Exercise Price (as defined in Section 1 below). The number and character of
the Warrant Shares and the Exercise Price are subject to adjustment as provided
herein.
1. DEFINITIONS. As used in this Warrant, the following terms shall
-----------
have the respective meanings set forth below or elsewhere in this Warrant as
referred to below:
"Certificate of Incorporation" shall mean the Certificate of Incorporation
----------- -- -------------
of the Corporation, as amended and in effect from time to time.
"Common Stock" shall mean shares of the Common Stock of the Corporation,
------ -----
$0.01 par value per share of the Corporation and shall also include any capital
stock of any class of the Corporation authorized after the date hereof which
shall neither be limited to a fixed sum or percentage of par value in respect of
the rights of the holders thereof to participate in dividends or any
distribution of earnings or assets (in liquidation or otherwise) of the
Corporation, whether or not such capital stock is entitled to a preference in
the distribution of assets upon the voluntary of involuntary liquidation,
dissolution or winding up of the Corporation.
<PAGE>
-2-
"Corporation" shall mean Prime Response, Inc. and/or any Person that shall
-----------
succeed to, or assume the obligations hereunder of, Prime Response, Inc.
"Derivative Securities" shall mean (i) all shares of stock and other
---------- ----------
securities that are, directly or indirectly, convertible into or exchangeable
for shares of Common Stock and (ii) all options, warrants and other rights to
acquire, directly or indirectly, shares of Common Stock or securities, directly
or indirectly, convertible into or exchangeable for shares of Common Stock.
"Exercise Date" shall have the meaning set forth in Section 2.2 hereof.
-------- ----
"Exercise Price" shall mean, as of the Initial Exercise Date, the Initial
-------- -----
Exercise Price and after the Initial Exercise Date, the Initial Exercise Price
as adjusted from time to time pursuant to the terms of this Warrant.
"Expiration Date" shall mean December 9, 2006.
---------- ----
"Fair Market Value" shall mean (i) the last reported sale price per share
---- ------ -----
of Stock on the Nasdaq National Market or any national securities exchange in
which such Stock is quoted or listed, as the case may be, on the date
immediately preceding the Exercise Date or, if no such sale price is reported on
such date, such price on the next preceding business day in which such price was
reported, or (ii) if such Stock is not quoted or listed on the Nasdaq National
Market or any national securities exchange, the fair market value of a share of
such Stock, as determined in good faith by the Board of Directors of the
Corporation and based upon the fair market value of the Corporation as a whole,
using customary and appropriate valuation methods (and not taking into account
any discounts for minority ownership or restrictions or transfer of the capital
stock of the Corporation).
"Holder" shall mean, as applicable, (i) the Initial Warrant Holder, or (ii)
------
any successor of the Initial Warrant Holder.
"Initial Exercise Date" shall mean the date on which this Warrant first
------- -------- ----
vests in accordance with the provisions of the second paragraph of Section 2.1
hereof.
"Initial Exercise Price" shall mean an amount equal to $7.01 per share.
------- -------- -----
"Initial Warrant Holder" shall have the meaning set forth in the first
------- ------- ------
paragraph of this Warrant.
"Initial Warrant Shares" shall mean 909,709 shares of Common Stock.
------- ------- ------
"Issue Date" shall mean the date hereof.
----- ----
<PAGE>
-3-
"Person" shall mean an individual, partnership, corporation, limited
------
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"Preferred Stock" shall mean the Series A Preferred Stock, the Series B
--------- -----
Preferred Stock and the Series C Preferred Stock and all other capital stock of
the Corporation having a preference on dissolution or liquidation of the
Corporation.
"Purchase Agreement" shall mean that certain Common Stock and Warrant
-------- ---------
Purchase Agreement, dated as of December 6, 1999, by and between the Corporation
and Andersen Consulting LLP.
"Registrable Securities" shall have the meaning ascribed to it in the
----------- ----------
Registration Rights Agreement.
"Registration Rights Agreement" shall mean the Amended and Restated
------------ ------ ---------
Registration Rights Agreement, dated as of December 6, 1999, by and among the
Corporation and the other parties thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
---------- ---
"Series A Preferred Stock" shall mean the Series A Convertible
------ - --------- -----
Participating Preferred Stock of the Corporation, $0.01 par value per share.
"Series B Preferred Stock" shall mean the Series B Convertible
------ - --------- -----
Participating Preferred Stock of the Corporation, $0.01 par value per share.
"Series C Preferred Stock" shall mean the Series C Convertible Preferred
------ - --------- -----
Stock of the Corporation, $0.01 par value per share.
"Stock" shall mean (i) Common Stock, (ii) capital stock of the Corporation
-----
(other than Common Stock) or of any other Person or any other securities of the
Corporation or of any other Person that the Holder is entitled to receive, or
receives, upon exercise of this Warrant, in lieu of or in addition to Common
Stock, and/or (iii) capital stock of the Corporation (other than Common Stock)
or of any other Person or any other securities of the Corporation or of any
other Person that may be issued in replacement of, substitution, exchange or
redemption for, or upon reclassification or conversion of, Common Stock or any
other Stock, in each case whether as a result of a reorganization,
reclassification, merger, consolidation or sale of substantially all of the
assets of the Corporation.
"Warrant" shall have the meaning set forth in the second paragraph of this
-------
Warrant.
<PAGE>
-4-
"Warrant Shares" shall mean, at any time, the Initial Warrant Shares after
------- ------
giving effect to the number of shares of Stock previously purchased by the
Holder pursuant to any and all exercises of this Warrant prior to such time and
after giving effect to all adjustments with respect to the number of Warrant
Shares purchaseable hereunder as provided for herein, including, without
limitation, those set forth in Section 4 hereof, prior to such time.
2. EXERCISE OF WARRANT.
-------------------
2.1 METHOD OF EXERCISE. Subject to and upon all of the terms and conditions
------------------
set forth in this Warrant, the Holder may exercise this Warrant, in whole or in
part with respect to any Warrant Shares, at any time and from time to time
during the period commencing on the date that this Warrant vests in accordance
with the second paragraph of this Section 2.1 and ending at 5:00 p.m., Boston,
Massachusetts time, on the Expiration Date, by presentation and surrender of
this Warrant to the Corporation at its principal office, together with (a) a
properly completed and duly executed subscription form, in the form attached
hereto, which subscription form shall specify the number of Warrant Shares for
which this Warrant is then being exercised, and (b) payment of the aggregate
Exercise Price payable hereunder in respect of the number of Warrant Shares
being purchased upon exercise of this Warrant. Payment of such aggregate
Exercise Price shall be made (i) in cash or by money order, certified or bank
cashier's check or wire transfer (in each case in lawful currency of the United
States of America), or (ii) by cancellation of indebtedness owing from the
Corporation to the Holder, (iii) if the Common Stock is then traded on the
Nasdaq National Market or a national securities exchange, by cancellation of a
portion of this Warrant exercisable for such number of Warrant Shares as is
determined by dividing (A) the total Exercise Price payable in respect of the
number of Warrant Shares being purchased upon such exercise by (B) the excess of
the Fair Market Value per share of Common Stock as of the Exercise Date (as
defined below) over the Exercise Price per share; if the Holder wishes to
exercise this Warrant pursuant to this clause (iii) with respect to the maximum
number of Warrant Shares purchasable pursuant to this method, then the number of
Warrant Shares so purchased shall be equal to the total number of Warrant
Shares, minus the product obtained by multiplying (x) the total number of
Warrant Shares by (y) a fraction, the numerator of which shall be the Exercise
Price per share and the denominator of which shall be the Fair Market Value per
share of Common Stock as of the Exercise Date, or (iv) any combination of the
methods described in the foregoing clauses (i), (ii) or (iii).
This Warrant will become exercisable ("vest") in full automatically and
without further action upon the earlier to occur of September 9, 2000 [9-
months after the Issue Date] and (ii) a Liquidity Event. The term "Liquidity
---------
Event" shall mean (y) the sale of all or substantially all of the property and
- -----
assets of the Corporation in one transaction or a series of one or more related
transactions, or (z) the acquisition of the Company by another person or entity
by means of stock purchase (whether by transfer or outstanding
<PAGE>
-5-
shares or through new issuances), merger, consolidation or otherwise which would
result in the exchange of shares of capital stock of the Company for cash,
securities or other consideration paid by the acquiring person or entity, or any
similar transaction.
2.2 EFFECTIVENESS OF EXERCISE; OWNERSHIP. Each exercise of this Warrant by
------------------------------------
the Holder shall be deemed to have been effected immediately prior to the close
of business on the date upon which all of the requirements of Section 2.1 hereof
with respect to such exercise shall have been complied with in full (each such
date, an "Exercise Date"). On the applicable Exercise Date with respect to any
-------- ----
exercise of this Warrant by the Holder, the Corporation shall be deemed to have
issued to the Holder, and the Holder shall be deemed to have become the holder
of record and legal owner of, the number of Warrant Shares being purchased upon
such exercise of this Warrant, notwithstanding that the stock transfer books of
the Corporation shall then be closed or that certificates representing such
number of Warrant Shares being purchased shall not then be actually delivered to
the Holder.
2.3 DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as practicable
------------------------------------------
after the exercise of this Warrant, and in any event within ten (10) days
thereafter, the Corporation, at its expense and in accordance with applicable
securities laws, will cause to be issued in the name of and delivered to the
Holder, or as the Holder may direct (subject in all cases, to the provisions of
Section 9 hereof), a certificate or certificates for the number of Warrant
Shares purchased by the Holder on such exercise, plus, in lieu of any fractional
----
share to which the Holder would otherwise be entitled, cash equal to such
fraction multiplied by the Fair Market Value.
2.4 SHARES TO BE FULLY PAID AND NONASSESSABLE. All Warrant Shares issued
-----------------------------------------
upon the exercise of this Warrant shall be validly issued, fully paid and
nonassessable, free of all liens, transfer taxes, charges and other encumbrances
or restrictions on sale (other than those set forth herein) and free and clear
of all preemptive rights.
2.5 FRACTIONAL SHARES. No fractional shares of Stock or scrip representing
-----------------
fractional shares of Stock shall be issued upon the exercise of this Warrant.
With respect to any fraction of a share of Stock called for upon any exercise
hereof, the Corporation shall make a cash payment to the Holder as set forth in
Section 2.3 hereof.
2.6 ISSUANCE OF NEW WARRANTS; CORPORATION ACKNOWLEDGMENT. Upon any partial
----------------------------------------------------
exercise of this Warrant, the Corporation, at its expense, will forthwith and,
in any event, within ten (10) days after such partial exercise issue and deliver
to the Holder a new warrant or warrants of like tenor, registered in the name of
the Holder, exercisable, in the aggregate, for the balance of the Warrant
Shares.
2.7 PAYMENT OF TAXES AND EXPENSES. The Corporation shall pay any recording,
-----------------------------
filing, stamp or similar tax which may be payable in respect of any transfer
involved in the issuance of, and the preparation and delivery of certificates
(if applicable)
<PAGE>
-6-
representing, (i) any Warrant Shares purchased upon exercise of this Warrant
and/or (ii) new or replacement warrants in the Holder's name or the name of any
transferee of all or any portion of this Warrant.
3. REGISTRATION AND OTHER RIGHTS.
-----------------------------
(A) REGISTRATION RIGHTS. The Holder of this Warrant shall have the
-------------------
right to cause the Corporation to register any and all Warrant Shares under the
Securities Act and under any blue sky or securities laws of any jurisdictions
within the United States, at the time and in the manner specified and as
provided for in the Registration Rights Agreement, and any and all Warrant
Shares shall be deemed to be included within the definition of Registrable
Securities for all purposes thereof.
(B) PURCHASE AGREEMENT. Subject to Section 10.4 of this Warrant, for
------------------
the purposes of the Purchase Agreement, the shares of Common Stock issuable upon
exercise of this Warrant shall be included for the purposes of determining the
number of shares of Common Stock held by such Holder for all purposes of such
agreement.
4. ADJUSTMENTS.
-----------
4.1 ADJUSTMENTS FOR STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS.
--------------------------------------------------------------
(a) In the event that, at any time and from time to time after the
Issue Date, the Corporation shall (A) issue any additional shares of Stock as a
dividend or distribution on its outstanding Stock or options, warrants or other
rights to purchase, directly or indirectly, Stock as a dividend or distribution
on its outstanding Stock or securities convertible, directly or indirectly, into
Stock as a dividend or distribution on its outstanding Stock (other than shares
of Stock issued upon conversion of Preferred Stock), (B) subdivide its
outstanding shares of Stock into a greater number of shares of Stock or (C)
combine its outstanding shares of Stock into a smaller number of shares of
Stock, then and in each such event, (x) the Exercise Price shall, simultaneously
with the happening of such event, be adjusted by multiplying the then current
Exercise Price by a fraction, (i) the numerator of which shall be the number of
shares of Stock outstanding immediately prior to such event on a fully-diluted
basis, assuming exercise in full of all options, warrants or other rights to
purchase Stock, directly or indirectly, outstanding immediately prior to such
event and conversion into or exchange for Stock, directly or indirectly, of all
securities convertible into or exchangeable for Stock outstanding immediately
prior to such event, each in accordance with their terms, and (ii) the
denominator of which shall be the number of shares of Stock outstanding
immediately after such event on a fully-diluted basis, assuming exercise in full
of all options, warrants or other rights to purchase Stock, directly or
indirectly, outstanding immediately after such event and conversion into or
exchange for Stock, directly or indirectly, of all securities convertible into
or exchangeable for Stock outstanding immediately after such event, each in
accordance with their terms, and the product so obtained shall thereafter be the
Exercise Price then in effect, and (y) the number of Warrant
<PAGE>
-7-
Shares shall be adjusted by increasing or decreasing, as the case may be, the
number of shares of Stock included within the Warrant Shares by the percentage
increase or decrease in the total number of shares of Stock outstanding
immediately after such event as compared to the total number of shares of Stock
outstanding immediately prior to such event and the result so obtained shall be
the number of Warrant Shares then in effect.
(b) The Exercise Price and the number of Warrant Shares, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described in this Section 4.1
4.2 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION OR MERGER. In the event
------------------------------------------------------
that, at any time or from time to time after the Issue Date, the Corporation
shall (a) effect a reorganization, (b) consolidate with or merge into any other
Person, or (c) sell or transfer all or substantially all of its properties or
assets or more than 50% of the voting capital stock of the Corporation (whether
issued and outstanding, newly issued, from treasury, or any combination thereof)
to any other Person under any plan or arrangement contemplating the
reorganization, consolidation or merger, sale or transfer, or dissolution of the
Corporation, then, in each such case, the Holder, upon the exercise of this
Warrant as provided in Section 2 hereof at any time or from time to time after
the consummation of such reorganization, consolidation, merger or sale or the
effective date of such dissolution (subject to the limitation contained in
Section 4.6, if applicable), as the case may be, shall receive, in lieu of the
Warrant Shares issuable on such exercise immediately prior to such consummation
or such effective date, as the case may be, the Stock and property (including
cash) to which the Holder would have been entitled upon the consummation of such
reorganization, consolidation or merger, or sale or transfer, or in connection
with such dissolution, as the case may be, if the Holder had so exercised this
Warrant immediately prior thereto (assuming the payment by the Holder of the
Exercise Price therefor as required hereby in a form permitted hereby, which
payment shall be included in the assets of the Corporation for the purposes of
determining the amount available for distribution), all subject to successive
adjustments thereafter from time to time pursuant to, and in accordance with,
the provisions of this Section 4.
4.3 ADJUSTMENTS FOR RECLASSIFICATIONS. If the Common Stock issuable upon
---------------------------------
the conversion of this Warrant shall be changed into the same or a different
number of shares of any class(es) or series of stock, whether by
reclassification or otherwise (other than an adjustment under Section 4.1 or a
merger, consolidation, or sale of assets provided for under Section 4.2), then
and in each such event, the Holder hereof shall have the right thereafter to
convert each Warrant Share into the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, or other change
by holders of the number of shares of Common Stock into which such Warrant
Shares would have been convertible immediately prior to such reclassification,
or change, all subject to further adjustment as provided herein.
<PAGE>
-8-
4.4 DISTRIBUTIONS. In the event that, at any time or from time to time
-------------
after the Issue Date, the Corporation shall make or issue, or shall fix a record
date for the determination of eligible holders entitled to receive, a dividend
or other distribution with respect to Common Stock payable in (i) shares of its
capital stock (other than a stock dividend provided for in Section 4.1), (ii)
other securities of the Corporation or any other Person, (iii) evidences of
indebtedness issued by the Company or any other Person, (iv) options, warrants
or rights to subscribe for or purchase any of the foregoing, or (v) assets
(excluding cash dividends) then, in each such case, the Holder of this Warrant
shall receive, in addition to the shares of Stock issuable upon the exercise of
this Warrant prior to such date, and without the payment of additional
consideration therefor, the shares of capital stock, other securities, evidence
of indebtedness, options, warrants or other rights or assets, as the case may
be, to which such Holder would have been entitled upon such date as if such
Holder had exercised this Warrant on the date hereof and had thereafter, during
the period from the date hereof to and including the date of the actual exercise
of this Warrant, retained such shares and/or all other additional stock
available to it as aforesaid during such period, giving effect to all
adjustments pursuant to this Section 4. The Company shall reserve and set aside,
for the life of this Warrant or until exercised in full, all such distributions
to which the Holder is entitled to receive pursuant to the this Section 4.4.
4.5 CONTINUATION OF TERMS. Upon any reorganization, reclassification, sale,
---------------------
consolidation, merger or other transfer (and any liquidation, dissolution or
winding up of the Corporation following any such transfer) referred to in this
Section 4, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of Stock and property (including cash,
where applicable) receivable upon the exercise of this Warrant after the
consummation of such reorganization, reclassification, sale, consolidation,
merger or other transfer or the effective date of liquidation, dissolution or
winding up of the Corporation following any such transfer, as the case may be,
and shall be binding upon the issuer of any such Stock, including, in the case
of any such transfer, the Person acquiring all or substantially all of the
properties or assets or more than 50% of the voting capital stock of the
Corporation (whether issued and outstanding, newly issued or from treasury or
any combination thereof), whether or not such Person shall have expressly
assumed the terms of this Warrant.
5. OFFICER'S CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment
---------------------------------------
or readjustment in the number and kind of Warrant Shares, or property, issuable
hereunder from time to time, or the Exercise Price, the Corporation, at its
expense, will promptly cause an officer of the Corporation to compute such
adjustment or readjustment in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment or readjustment and showing
the facts upon which such adjustment or readjustment is based. The Corporation
will forthwith send a copy of each such certificate to the Holder in accordance
with Section 10.5 below.
<PAGE>
-9-
6. NOTICES OF RECORD DATE, ETC. In the event of
---------------------------
(a) any taking by the Corporation of a record of the holders of Stock for
the purpose of determining the holders thereof who are entitled to receive any
shares of Stock as a dividend or other distribution or pursuant to a stock
split, or
(b) any reorganization of the Corporation, or any sale or transfer, in a
single transaction or a series of related transactions, of all or substantially
all the assets of the Corporation to, or the consolidation or merger of the
Corporation with or into, any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Corporation, or
(d) any sale, in a single transaction or a series of related transactions,
of a majority of the Corporation's voting stock (whether newly issued, or from
treasury, or previously issued and then outstanding, or any combination
thereof),
then and in each such event the Corporation will mail or cause to be mailed to
the Holder a notice specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or stock split, and stating
the amount and character of such dividend, distribution or stock split, or (ii)
the date on which any such reorganization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of any one or more classes of
Stock shall be entitled to exchange their shares of Stock for securities or
other property deliverable on such reorganization, transfer, consolidation,
merger, dissolution, liquidation or winding-up, or (iii) the date on which any
such sale of a majority of the Corporation's voting stock is to take place and
the material terms thereof , as the case may be. Such notice shall be mailed at
least ten (10) days prior to the date specified in such notice on which any such
action is to be taken.
7. EXCHANGE OF WARRANT. Subject to the provisions of Section 9 hereof (if
-------------------
and to the extent applicable), this Warrant shall be exchangeable, upon the
surrender hereof by the Holder at the principal office of the Corporation, for
new warrants of like tenor, each registered in the name of the Holder or in the
name of such other Persons as the Holder may direct. Each of such new warrants
shall be exercisable for such number of Warrant Shares as the Holder shall
direct, provided that all of such new warrants shall represent, in the
--------
aggregate, the right to purchase the same number of Warrant Shares and cash,
securities or other property, if any, which may be purchased by the Holder upon
exercise of this Warrant at the time of its surrender.
8. REPLACEMENT OF WARRANT. On receipt of evidence reasonably satisfactory
----------------------
to the Corporation of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of a customary
<PAGE>
-10-
affidavit of the Holder and an indemnity agreement or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Corporation at
its expense will execute and deliver, in lieu thereof, a new warrant of like
tenor.
9. TRANSFER PROVISIONS, ETC.
------------------------
9.1 LEGENDS.
-------
(a) Each certificate representing any Warrant Shares issued upon
exercise of this Warrant shall bear the following legend:
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY BE TRANSFERRED ONLY PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED.
(b) Each certificate representing any shares of Stock issued from time
to time upon exercise of this Warrant shall also bear any legend required under
any applicable state securities or blue sky laws.
9.2 MECHANICS OF TRANSFER. Any transfer of all or any portion of this
---------------------
Warrant, or of any interest therein, that is otherwise in compliance with
applicable law shall be effected by surrendering this Warrant to the Corporation
at its principal office, together with (i) a duly executed form of assignment,
in the form attached hereto, (ii) payment of any applicable transfer taxes, if
any. In the event of any such transfer of this Warrant, in whole, the
Corporation shall issue a new warrant of like tenor to the transferee,
representing the right to purchase the same number of Warrant Shares, and cash,
securities or other property, if any, which were purchasable by the Holder upon
exercise of this Warrant at the time of its transfer. In the event of any such
transfer of any portion of this Warrant, (i) the Corporation shall issue a new
warrant of like tenor to the transferee, representing the right to purchase the
same number of Warrant Shares, and cash, securities or other property, if any,
which were purchasable by the Holder upon exercise of the transferred portion of
this Warrant at the time of such transfer, and (ii) the Corporation shall issue
a new warrant of like tenor to the Holder, representing the right to purchase
the number of Warrant Shares, and cash, securities or other property, if any,
purchasable by the Holder upon exercise of the portion of this Warrant not
transferred to such transferee. Until this Warrant or any portion thereof is
transferred on the books of the Corporation, the Corporation may treat the
Holder as the absolute holder of this Warrant and all right, title and interest
therein for all purposes, notwithstanding any notice to the contrary.
9.3. RESTRICTIONS ON TRANSFER. Subject to compliance with applicable
------------------------
securities laws and any contractual restrictions to which the Holder may be
subject, this Warrant,
<PAGE>
-11-
and any portion hereof, and the Warrant Shares, may be transferred by the Holder
in its sole discretion at any time to affiliates of the Holder without the
consent of the Corporation. Except as permitted pursuant to the foregoing
sentence, this warrant may not be transferred without the consent of the
Corporation.
10. GENERAL.
-------
10.1 STATEMENT ON WARRANT. Irrespective of any adjustments in the Exercise
--------------------
Price or the number or kind of Warrant Shares, this Warrant may continue to
express the same kind of Warrant Shares as are stated on the front page hereof.
10.2 AUTHORIZED SHARES; RESERVATION OF SHARES FOR ISSUANCE. At all times
-----------------------------------------------------
while this Warrant is outstanding, the Corporation shall maintain its corporate
authority to issue, and shall have authorized and reserved for issuance upon
exercise of this Warrant, such number of shares of Stock as shall be sufficient
to perform its obligations under this Warrant (after giving effect to any and
all adjustments to the number and kind of Warrant Shares purchasable upon
exercise of this Warrant).
10.3 NO IMPAIRMENT. The Corporation will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities, sale or
other transfer of any of its assets or properties, or any other voluntary
action, 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 action as may be necessary or
appropriate in order to protect the rights of the Holder hereunder against
impairment. Without limiting the generality of the foregoing, the Corporation
(a) will not increase the par value of any shares of Stock receivable upon the
exercise of this Warrant above the amount payable therefor on such exercise, and
(b) will take all action that may be necessary or appropriate in order that the
Corporation may validly and legally issue fully paid and nonassessable shares of
Stock on the exercise of this Warrant.
10.4 NO RIGHTS AS STOCKHOLDER. The Holder shall not be entitled to vote or
------------------------
to receive dividends or to be deemed the holder of Stock that may at any time be
issuable upon exercise of this Warrant for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the Holder any of the
rights of a stockholder of the Corporation until the Holder shall have exercised
this Warrant and been issued Warrant Shares in accordance with the provisions
hereof.
10.5 NOTICES. All notices, demands, requests, certificates or other
-------
communications under this Warrant shall be in writing and shall be either mailed
by certified mail, postage prepaid, in which case such notice, demand, request,
certificate or other communications shall be deemed to have been given three (3)
days after the date on which it is first deposited in the mails, or hand
delivered or sent by facsimile
<PAGE>
-12-
transmission, by tested or otherwise authenticated telex or cable or by private
expedited courier for overnight delivery with signature required, in each such
case, such notice, demand, request, certificate or other communications being
deemed to have been given upon delivery or receipt, as the case may be:
(i) if to the Corporation, Prime Response, Inc., 150 Cambridge Park Drive,
Cambridge, MA 02140, Attention: President, or at such other address as the
Corporation may have furnished in writing to the Holder; and
(ii) if to the Holder, at the Holder's address appearing in the books
maintained by the Corporation.
10.6 AMENDMENT AND WAIVER. No failure or delay of the Holder in exercising
--------------------
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Holder are cumulative and not exclusive of any rights
or remedies which it would otherwise have. The provisions of this Warrant may
be amended, modified or waived with (and only with) the written consent of the
Corporation and the Holder.
10.7 GOVERNING LAW. This Warrant shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the Commonwealth of Massachusetts.
10.8 COVENANTS TO BIND SUCCESSOR AND ASSIGNS. All covenants, stipulations,
---------------------------------------
promises and agreements in this Warrant contained by or on behalf of the
Corporation shall bind its successors and assigns, whether so expressed or not.
10.9 SEVERABILITY. In case any one or more of the provisions contained in
------------
this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
10.10 CONSTRUCTION. The definitions of this Warrant shall apply equally to
------------
both the singular and the plural forms of the terms defined. Wherever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The section and paragraph headings used herein are
for convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
<PAGE>
-13-
10.11 REMEDIES. The Holder, in addition to being entitled to exercise all
--------
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Corporation agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Warrant and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate. In any action or proceeding brought to enforce any provision
of this Warrant or where any provision hereof is validly asserted as a defense,
the successful party to such action or proceeding shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
[rest of page intentionally left blank]
<PAGE>
-14-
IN WITNESS WHEREOF, the Corporation has caused this Common Stock Purchase
Warrant to be executed as an instrument under seal in its corporate name by one
of its officers thereunto duly authorized, all as of the day and year first
above written.
PRIME RESPONSE, INC.
[Corporate Seal]
By: /s/ Frederick H. Phillips
---------------------------------
Name: Frederick H. Phillips
Title: Secretary, Treasury,
Senior Vice President and
Chief Executive Officer
<PAGE>
FORM OF SUBSCRIPTION
(To be executed upon exercise of Warrant)
To: PRIME RESPONSE, INC.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to exercise thereunder, _______
shares of Common Stock, $.01 par value per share ("Common Stock"), of Prime
------ -----
Response, Inc., a Delaware corporation, and tenders herewith payment of
$__________, representing the aggregate purchase price for such shares based on
the price per share provided for in such Warrant. Such payment is being made in
accordance with [Section 2.1(b)(i)] [Section 2.1(b)(ii)] [Section 2.1(b)(iii)]
of the attached Warrant.
Please issue a certificate or certificates for such shares of Common Stock
in the following name or names and denominations and deliver such certificate or
certificates to the person or persons listed below at their respective addresses
set forth below:
Dated:
--------------------- --------------------------------
--------------------------------
(Address)
If said number of shares of Common Stock shall not be all the shares of
Common Stock issuable upon exercise of the attached Warrant, a new Warrant is to
be issued in the name of the undersigned for the balance remaining of such
shares of Common Stock less any fraction of a share of Common Stock paid in
cash.
Dated:
---------------, ---- ---------------------------------
NOTE: The above signature should
correspond exactly with the name on the
face of the attached Warrant or with the
name of the assignee appearing in the
assignment form below.
<PAGE>
FORM OF ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, _____________________________________ hereby sells,
assigns and transfers unto _________________ the attached Warrant [__% of the
attached Warrant], together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ___________________________ attorney
to transfer said Warrant [said percentage of said Warrant] on the books of Prime
Response, Inc., a Delaware corporation, with full power of substitution in the
premises.
If not all of the attached Warrant is to be so transferred, a new Warrant
is to be issued in the name of the undersigned for the balance of said Warrant.
Dated:
--------------, ---- ---------------------------------
NOTE: The above signature should
correspond exactly with the name on the
face of the attached Warrant.
<PAGE>
Exhibit 10.26
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER
THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE SOLD
OR TRANSFERRED UNLESS THE REGISTRATION PROVISIONS OF SAID ACT HAVE BEEN COMPLIED
WITH OR UNLESS COMPLIANCE WITH SUCH PROVISIONS IS NOT REQUIRED.
No. AC-2 Dated: December 9, 1999
PRIME RESPONSE, INC.
Common Stock
Purchase Warrant
THIS IS TO CERTIFY THAT, for value received, Andersen Consulting LLP (the
"Initial Warrant Holder"), and its registered successors and permitted assigns
are entitled, subject to the terms and conditions set forth below, to purchase
from PRIME RESPONSE, INC. (f/k/a Prime Response Group, Inc.), a Delaware
corporation (the "Corporation"), at any time or from time to time on and after
the date hereof and prior to 5:00 P.M., Boston, Massachusetts time, on the
Expiration Date (as defined in Section 1 below), all or any portion of the
Warrant Shares (as defined in Section 1), at a purchase price per share equal to
the Exercise Price (as defined in Section 1 below). The number and character of
the Warrant Shares and the Exercise Price are subject to adjustment as provided
herein.
1. Definitions. As used in this Warrant, the following terms shall have
the respective meanings set forth below or elsewhere in this Warrant as referred
to below:
"Certificate of Incorporation" shall mean the Certificate of Incorporation
of the Corporation, as amended and in effect from time to time.
"Common Stock" shall mean shares of the Common Stock of the Corporation,
$0.01 par value per share of the Corporation and shall also include any capital
stock of any class of the Corporation authorized after the date hereof which
shall neither be limited to a fixed sum or percentage of par value in respect of
the rights of the holders thereof to participate in dividends or any
distribution of earnings or assets (in liquidation or otherwise) of the
Corporation, whether or not such capital stock is entitled to a
<PAGE>
preference in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation.
"Corporation" shall mean Prime Response, Inc. and/or any Person that shall
succeed to, or assume the obligations hereunder of, Prime Response, Inc.
"Derivative Securities" shall mean (i) all shares of stock and other
securities that are, directly or indirectly, convertible into or exchangeable
for shares of Common Stock and (ii) all options, warrants and other rights to
acquire, directly or indirectly, shares of Common Stock or securities, directly
or indirectly, convertible into or exchangeable for shares of Common Stock.
"Exercise Date" shall have the meaning set forth in Section 2.2 hereof.
"Exercise Price" shall mean, as of the Initial Exercise Date, the Initial
Exercise Price and after the Initial Exercise Date, the Initial Exercise Price
as adjusted from time to time pursuant to the terms of this Warrant.
"Expiration Date" shall mean December 9, 1999.
"Fair Market Value" shall mean (i) the last reported sale price per share
of Stock on the Nasdaq National Market or any national securities exchange in
which such Stock is quoted or listed, as the case may be, on the date
immediately preceding the Exercise Date or, if no such sale price is reported on
such date, such price on the next preceding business day in which such price was
reported, or (ii) if such Stock is not quoted or listed on the Nasdaq National
Market or any national securities exchange, the fair market value of a share of
such Stock, as determined in good faith by the Board of Directors of the
Corporation and based upon the fair market value of the Corporation as a whole,
(and not taking into account any discounts for minority ownership or
restrictions or transfer of capital stock of the Corporation).
"Holder" shall mean, as applicable, (i) the Initial Warrant Holder, or (ii)
any successor of the Initial Warrant Holder.
"Initial Exercise Date" shall mean the date on which this Warrant first
vests in accordance with the provisions of the second paragraph of Section 2.1
hereof.
"Initial Exercise Price" shall mean an amount equal to $7.01 per share.
"Initial Warrant Holder" shall have the meaning set forth in the first
paragraph of this Warrant.
"Initial Warrant Shares" shall mean 500,000 shares of Common Stock.
-2-
<PAGE>
"Issue Date" shall mean the date hereof.
"Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"Preferred Stock" shall mean the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock and all other capital stock of
the Corporation having a preference on dissolution or liquidation of the
Corporation.
"Purchase Agreement" shall mean that certain Common Stock and Warrant
Purchase Agreement, dated of December 6, 1999, by and between the Corporation
and Andersen Consulting LLP.
"Registrable Securities" shall have the meaning ascribed to it in the
Registration Rights Agreement.
"Registration Rights Agreement" shall mean the Amended and Restated
Registration Rights Agreement, dated as of December 6, 1999, by and among the
Corporation and the other parties thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series A Preferred Stock" shall mean the Series A Convertible
Participating Preferred Stock of the Corporation, $0.01 par value per share.
"Series B Preferred Stock" shall mean the Series B Convertible
Participating Preferred Stock of the Corporation, $0.01 par value per share.
"Series C Preferred Stock" shall mean the Series C Convertible Preferred
Stock of the Corporation, $0.01 par value per share.
"Stock" shall mean (i) Common Stock, (ii) capital stock of the Corporation
(other than Common Stock) or of any other Person or any other securities of the
Corporation or of any other Person that the Holder is entitled to receive, or
receives, upon exercise of this Warrant, in lieu of or in addition to Common
Stock, and/or (iii) capital stock of the Corporation (other than Common Stock)
or of any other Person or any other securities of the Corporation or of any
other Person that may be issued in replacement of, substitution, exchange or
redemption for, or upon reclassification or conversion of, Common Stock or any
other Stock, in each case whether as a result of a reorganization,
reclassification, merger, consolidation or sale of substantially all of the
assets of the Corporation.
-3-
<PAGE>
"Warrant" shall have the meaning set forth in the second paragraph of this
Warrant.
"Warrant Shares" shall mean, at any time, the Initial Warrant Shares after
giving effect to the number of shares of Stock previously purchased by the
Holder pursuant to any and all exercises of this Warrant prior to such time and
after giving effect to all adjustments with respect to the number of Warrant
Shares purchaseable hereunder as provided for herein, including, without
limitation, those set forth in Section 4 hereof, prior to such time.
2. Exercise Of Warrant.
2.1 Method of Exercise. Subject to and upon all of the terms and
conditions set forth in this Warrant, the Holder may exercise this Warrant, in
whole or in part with respect to any Warrant Shares, at any time and from time
to time during the period commencing on the date that this Warrant vests in
accordance with the second paragraph of this Section 2.1 and ending at 5:00
p.m., Boston, Massachusetts time, on the Expiration Date, by presentation and
surrender of this Warrant to the Corporation at its principal office, together
with (a) a properly completed and duly executed subscription form, in the form
attached hereto, which subscription form shall specify the number of Warrant
Shares for which this Warrant is then being exercised, and (b) payment of the
aggregate Exercise Price payable hereunder in respect of the number of Warrant
Shares being purchased upon exercise of this Warrant. Payment of such aggregate
Exercise Price shall be made (i) in cash or by money order, certified or bank
cashier's check or wire transfer (in each case in lawful currency of the United
States of America), (ii) by cancellation of indebtedness owing from the
Corporation to the Holder, (iii) if the Common Stock is then traded on the
Nasdaq National Market or a national securities exchange, by cancellation of a
portion of this Warrant exercisable for such number of Warrant Shares as is
determined by dividing (A) the total Exercise Price payable in respect of the
number of Warrant Shares being purchased upon such exercise by (B) the excess of
the Fair Market Value per share of Common Stock as of the Exercise Date (as
defined below) over the Exercise Price per share; if the Holder wishes to
exercise this Warrant pursuant to this clause (iii) with respect to the maximum
number of Warrant Shares purchasable pursuant to this method, then the number of
Warrant Shares so purchased shall be equal to the total number of Warrant
Shares, minus the product obtained by multiplying (x) the total number of
Warrant Shares by (y) a fraction, the numerator of which shall be the Exercise
Price per share and the denominator of which shall be the Fair Market Value per
share of Common Stock as of the Exercise Date, or (iv) any combination of the
methods described in the foregoing clauses (i), (ii) or (iii).
The Warrant will become exercisable ("vest") based on the extent (if any) to
which the Market Capitalization (as defined below) of the Company exceeds the
IPO Capitalization (as defined below) of the Company, in accordance with the
following schedule:
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If the Market Capitalization is less than $2 billion, warrants
to purchase such number of shares of Common Stock as is equal to
(i) 400,000 divided by (ii) (a) $2 billion minus the IPO
Capitalization divided by (b) $100 million, will become
exercisable for each $100 million by which the Market
Capitalization exceeds the IPO Capitalization.
If the Market Capitalization is between $2 billion and $3 billion,
inclusive, warrants to purchase 10,000 shares of Common Stock will
become exercisable for each $100 million by which the Market
Capitalization exceeds the IPO Capitalization.
No additional warrants will become exercisable once the Market
Capitalization exceeds $3 billion. In no event shall this Warrant become
exercisable for more than 500,000 shares of Common Stock.
For purposes of the foregoing, the Market Capitalization shall be measured
on the following dates and on no other dates: December 31, 2000, 2001 and 2002
and on the final day that the Marketing Agreement (as defined below) is in
effect.
Once this Warrant becomes exercisable with respect to Warrant Shares in
accordance with the foregoing provisions, this Warrant shall not cease to be
exercisable with respect to such Warrant Shares as a result of the Market
Capitalization decreasing below the amount that resulted in this Warrant (or any
portion hereof) becoming exercisable. Notwithstanding anything to the contrary
contained herein, upon termination of the Marketing Agreement between the
Company and Andersen Consulting LLP ("Andersen") dated the date hereof (the
"Marketing Agreement") at the election of the Company as a result of a breach by
Andersen pursuant to Section 10.2(a) thereof, no further vesting of this Warrant
shall occur, but the Warrant shall remain exercisable during its term to the
extent then vested.
"Market Capitalization" on any given date shall equal (i) the last sale
price of the Common Stock as reported by the Nasdaq National Market (or, if
applicable, The Nasdaq Stock Market or any national securities exchange on which
the common stock is then traded) on such date, multiplied by (ii) the number of
shares of Common Stock outstanding as of the close of business on such date as
reflected on the stock records of the Company.
"IPO Capitalization" shall equal (i) the price to public reflected in the
prospectus filed pursuant to Rule 424(b) under the Securities Act relating to
the Company's initial public offering of Common Stock registered under the
Securities Act, multiplied by (ii) the number of shares of Common Stock to be
outstanding after such offering as reflected in such prospectus under the
heading "The Offering."
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2.2 Effectiveness of Exercise; Ownership. Each exercise of this Warrant by
------------------------------------
the Holder shall be deemed to have been effected immediately prior to the close
of business on the date upon which all of the requirements of Section 2.1 hereof
with respect to such exercise shall have been complied with in full (each such
date, an "Exercise Date"). On the applicable Exercise Date with respect to any
-------------
exercise of this Warrant by the Holder, the Corporation shall be deemed to have
issued to the Holder, and the Holder shall be deemed to have become the holder
of record and legal owner of, the number of Warrant Shares being purchased upon
such exercise of this Warrant, notwithstanding that the stock transfer books of
the Corporation shall then be closed or that certificates representing such
number of Warrant Shares being purchased shall not then be actually delivered to
the Holder.
2.3 Delivery of Stock Certificates on Exercise. As soon as practicable
after the exercise of this Warrant, and in any event within ten (10) days
thereafter, the Corporation, at its expense and in accordance with applicable
securities laws, will cause to be issued in the name of and delivered to the
Holder, or as the Holder may direct (subject in all cases, to the provisions of
Section 9 hereof), a certificate or certificates for the number of Warrant
Shares purchased by the Holder on such exercise, plus, in lieu of any fractional
share to which the Holder would otherwise be entitled, cash equal to such
fraction multiplied by the Fair Market Value.
2.4 Shares To Be Fully Paid and Nonassessable. All Warrant Shares issued
upon the exercise of this Warrant shall be validly issued, fully paid and
nonassessable, free of all liens, transfer taxes, charges and other encumbrances
or restrictions on sale (other than those set forth herein) and free and clear
of all preemptive rights.
2.5 Fractional Shares. No fractional shares of Stock or scrip
representing fractional shares of Stock shall be issued upon the exercise of
this Warrant. With respect to any fraction of a share of Stock called for upon
any exercise hereof, the Corporation shall make a cash payment to the Holder as
set forth in Section 2.3 hereof.
2.6 Issuance of New Warrants; Corporation Acknowledgment. Upon any
partial exercise of this Warrant, the Corporation, at its expense, will
forthwith and, in any event, within ten (10) days after such partial exercise
issue and deliver to the Holder a new warrant or warrants of like tenor,
registered in the name of the Holder, exercisable, in the aggregate, for the
balance of the Warrant Shares.
2.7 Payment of Taxes and Expenses. The Corporation shall pay any
recording, filing, stamp or similar tax which may be payable in respect of any
transfer involved in the issuance of, and the preparation and delivery of
certificates (if applicable) representing, (i) any Warrant Shares purchased upon
exercise of this Warrant and/or (ii) new or replacement warrants in the Holder's
name or the name of any transferee of all or any portion of this Warrant.
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3. Registration and Other Rights.
(a) Registration Rights. The Holder of this Warrant shall have the right
to cause the Corporation to register any and all Warrant Shares under the
Securities Act and under any blue sky or securities laws of any jurisdictions
within the United States, at the time and in the manner specified and as
provided for in the Registration Rights Agreement, and any and all Warrant
Shares shall be deemed to be included within the definition of Registrable
Securities for all purposes thereof.
(b) Purchase Agreement. Subject to Section 10.4 of this Warrant, for the
purposes of the Purchase Agreement, the shares of Common Stock issuable upon
exercise of this Warrant shall be included for the purposes of determining the
number of shares of Common Stock held by such Holder for all purposes of such
agreement.
4. Adjustments.
4.1 Adjustments for Stock Dividends, Subdivisions and Combinations.
(a) In the event that, at any time and from time to time after the Issue
Date, the Corporation shall (A) issue any additional shares of Stock as a
dividend or distribution on its outstanding Stock or options, warrants or other
rights to purchase, directly or indirectly, Stock as a dividend or distribution
on its outstanding Stock or securities convertible, directly or indirectly, into
Stock as a dividend or distribution on its outstanding Stock (other than shares
of Stock issued upon conversion of Preferred Stock), (B) subdivide its
outstanding shares of Stock into a greater number of shares of Stock or (C)
combine its outstanding shares of Stock into a smaller number of shares of
Stock, then and in each such event, (x) the Exercise Price shall, simultaneously
with the happening of such event, be adjusted by multiplying the then current
Exercise Price by a fraction, (i) the numerator of which shall be the number of
shares of Stock outstanding immediately prior to such event on a fully-diluted
basis, assuming exercise in full of all options, warrants or other rights to
purchase Stock, directly or indirectly, outstanding immediately prior to such
event and conversion into or exchange for Stock, directly or indirectly, of all
securities convertible into or exchangeable for Stock outstanding immediately
prior to such event, each in accordance with their terms, and (ii) the
denominator of which shall be the number of shares of Stock outstanding
immediately after such event on a fully-diluted basis, assuming exercise in full
of all options, warrants or other rights to purchase Stock, directly or
indirectly, outstanding immediately after such event and conversion into or
exchange for Stock, directly or indirectly, of all securities convertible into
or exchangeable for Stock outstanding immediately after such event, each in
accordance with their terms, and the product so obtained shall thereafter be the
Exercise Price then in effect, and (y) the number of Warrant Shares shall be
adjusted by increasing or decreasing, as the case may be, the number of shares
of Stock included within the Warrant Shares by the percentage increase or
decrease in the total number of shares of Stock outstanding immediately after
such event as compared to
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the total number of shares of Stock outstanding immediately prior to such event
and the result so obtained shall be the number of Warrant Shares then in effect.
(b) The Exercise Price and the number of Warrant Shares, as so adjusted,
shall be readjusted in the same manner upon the happening of any successive
event or events described in this Section 4.1.
4.2 Adjustment for Reorganization, Consolidation or Merger. In the event
that, at any time or from time to time after the Issue Date, the Corporation
shall (a) effect a reorganization, (b) consolidate with or merge into any other
Person, or (c) sell or transfer all or substantially all of its properties or
assets or more than 50% of the voting capital stock of the Corporation (whether
issued and outstanding, newly issued, from treasury, or any combination thereof)
to any other Person under any plan or arrangement contemplating the
reorganization, consolidation or merger, sale or transfer, or dissolution of the
Corporation, then, in each such case, the Holder, upon the exercise of this
Warrant as provided in Section 2 hereof at any time or from time to time after
the consummation of such reorganization, consolidation, merger or sale or the
effective date of such dissolution (subject to the limitation contained in
Section 4.6, if applicable), as the case may be, shall receive, in lieu of the
Warrant Shares issuable on such exercise immediately prior to such consummation
or such effective date, as the case may be, the Stock and property (including
cash) to which the Holder would have been entitled upon the consummation of such
reorganization, consolidation or merger, or sale or transfer, or in connection
with such dissolution, as the case may be, if the Holder had so exercised this
Warrant immediately prior thereto (assuming the payment by the Holder of the
Exercise Price therefor as required hereby in a form permitted hereby, which
payment shall be included in the assets of the Corporation for the purposes of
determining the amount available for distribution), all subject to successive
adjustments thereafter from time to time pursuant to, and in accordance with,
the provisions of this Section 4.
4.3 Adjustments for Reclassifications. If the Common Stock issuable upon
the conversion of this Warrant shall be changed into the same or a different
number of shares of any class(es) or series of stock, whether by
reclassification or otherwise (other than an adjustment under Section 4.1 or a
merger, consolidation, or sale of assets provided for under Section 4.2), then
and in each such event, the Holder hereof shall have the right thereafter to
convert each Warrant Share into the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, or other change
by holders of the number of shares of Common Stock into which such Warrant
Shares would have been convertible immediately prior to such reclassification,
or change, all subject to further adjustment as provided herein.
4.4 Distributions. In the event that, at any time or from time to time
after the Issue Date, the Corporation shall make or issue, or shall fix a record
date for the determination of eligible holders entitled to receive, a dividend
or other distribution with respect to Common Stock payable in (i) shares of its
capital stock (other than a stock
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dividend provided for in Section 4.1), (ii) other securities of the Corporation
or any other Person, (iii) evidences of indebtedness issued by the Company or
any other Person, (iv) options, warrants or rights to subscribe for or purchase
any of the foregoing, or (v) assets (excluding cash dividends) then, in each
such case, the Holder of this Warrant shall receive, in addition to the shares
of Stock issuable upon the exercise of this Warrant prior to such date, and
without the payment of additional consideration therefor, the shares of capital
stock, other securities, evidence of indebtedness, options, warrants or other
rights or assets, as the case may be, to which such Holder would have been
entitled upon such date as if such Holder had exercised this Warrant on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of the actual exercise of this Warrant, retained such shares
and/or all other additional stock available to it as aforesaid during such
period, giving effect to all adjustments pursuant to this Section 4. The Company
shall reserve and set aside, for the life of this Warrant or until exercised in
full, all such distributions to which the Holder is entitled to receive pursuant
to this Section 4.4.
4.5 Continuation of Terms. Upon any reorganization, reclassification,
sale, consolidation, merger or other transfer (and any liquidation, dissolution
or winding up of the Corporation following any such transfer) referred to in
this Section 4, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of Stock and property (including
cash, where applicable) receivable upon the exercise of this Warrant after the
consummation of such reorganization, reclassification, sale, consolidation,
merger or other transfer or the effective date of liquidation, dissolution or
winding up of the Corporation following any such transfer, as the case may be,
and shall be binding upon the issuer of any such Stock, including, in the case
of any such transfer, the Person acquiring all or substantially all of the
properties or assets or more than 50% of the voting capital stock of the
Corporation (whether issued and outstanding, newly issued or from treasury or
any combination thereof), whether or not such Person shall have expressly
assumed the terms of this Warrant.
5. Officer's Certificate as to Adjustments. In each case of any
adjustment or readjustment in the number and kind of Warrant Shares, or
property, issuable hereunder from time to time, or the Exercise Price, the
Corporation, at its expense, will promptly cause an officer of the Corporation
to compute such adjustment or readjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment or readjustment
and showing the facts upon which such adjustment or readjustment is based. The
Corporation will forthwith send a copy of each such certificate to the Holder in
accordance with Section 10.5 below.
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6. Notices of Record Date, Etc. In the event of
(a) any taking by the Corporation of a record of the holders of Stock for
the purpose of determining the holders thereof who are entitled to receive any
shares of Stock as a dividend or other distribution or pursuant to a stock
split, or
(b) any reorganization of the Corporation, or any sale or transfer, in a
single transaction or a series of related transactions, of all or substantially
all the assets of the Corporation to, or the consolidation or merger of the
Corporation with or into, any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Corporation, or
(d) any sale, in a single transaction or a series of related transactions,
of a majority of the Corporation's voting stock (whether newly issued, or from
treasury, or previously issued and then outstanding, or any combination
thereof),
then and in each such event the Corporation will mail or cause to be mailed to
the Holder a notice specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or stock split, and stating
the amount and character of such dividend, distribution or stock split, or (ii)
the date on which any such reorganization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of any one or more classes of
Stock shall be entitled to exchange their shares of Stock for securities or
other property deliverable on such reorganization, transfer, consolidation,
merger, dissolution, liquidation or winding-up, or (iii) the date on which any
such sale of a majority of the Corporation's voting stock is to take place and
the material terms thereof, as the case may be. Such notice shall be mailed at
least ten (10) days prior to the date specified in such notice on which any such
action is to be taken.
7. Exchange of Warrant. Subject to the provisions of Section 9 hereof (if
and to the extent applicable), this Warrant shall be exchangeable, upon the
surrender hereof by the Holder at the principal office of the Corporation, for
new warrants of like tenor, each registered in the name of the Holder or in the
name of such other Persons as the Holder may direct. Each of such new warrants
shall be exercisable for such number of Warrant Shares as the Holder shall
direct, provided that all of such new warrants shall represent, in the
aggregate, the right to purchase the same number of Warrant Shares and cash,
securities or other property, if any, which may be purchased by the Holder upon
exercise of this Warrant at the time of its surrender.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Corporation of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of a customary
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affidavit of the Holder and an indemnity agreement or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Corporation at
its expense will execute and deliver, in lieu thereof, a new warrant of like
tenor.
9. Transfer Provisions, etc.
9.1 Legends.
(a) Each certificate representing any Warrant Shares issued upon
exercise of this Warrant shall bear the following legend:
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY BE TRANSFERRED ONLY PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED.
(b) Each certificate representing any shares of Stock issued from time
to time upon exercise of this Warrant shall also bear any legend required under
any applicable state securities or blue sky laws.
9.2 Mechanics of Transfer. Any transfer of all or any portion of this
Warrant, or of any interest therein, that is otherwise in compliance with
applicable law shall be effected by surrendering this Warrant to the Corporation
at its principal office, together with (i) a duly executed form of assignment,
in the form attached hereto, (ii) payment of any applicable transfer taxes, if
any. In the event of any such transfer of this Warrant, in whole, the
Corporation shall issue a new warrant of like tenor to the transferee,
representing the right to purchase the same number of Warrant Shares, and cash,
securities or other property, if any, which were purchasable by the Holder upon
exercise of this Warrant at the time of its transfer. In the event of any such
transfer of any portion of this Warrant, (i) the Corporation shall issue a new
warrant of like tenor to the transferee, representing the right to purchase the
same number of Warrant Shares, and cash, securities or other property, if any,
which were purchasable by the Holder upon exercise of the transferred portion of
this Warrant at the time of such transfer, and (ii) the Corporation shall issue
a new warrant of like tenor to the Holder, representing the right to purchase
the number of Warrant Shares, and cash, securities or other property, if any,
purchasable by the Holder upon exercise of the portion of this Warrant not
transferred to such transferee. Until this Warrant or any portion thereof is
transferred on the books of the Corporation, the Corporation may treat the
Holder as the absolute holder of this Warrant and all right, title and interest
therein for all purposes, notwithstanding any notice to the contrary.
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9.3. Restrictions on Transfer. Subject to compliance with applicable
securities laws and any other contractual restrictions to which the Holder may
be subject, this Warrant, and any portion hereof, and the Warrant Shares may be
transferred by the Holder in its sole discretion at any time to affiliates of
the Holder without the consent of the Corporation. Except as permitted pursuant
to the foregoing sentence, this warrant may not be transferred without the
consent of the Corporation.
10. General.
10.1 Statement on Warrant. Irrespective of any adjustments in the
Exercise Price or the number or kind of Warrant Shares, this Warrant may
continue to express the same kind of Warrant Shares as are stated on the front
page hereof.
10.2 Authorized Shares; Reservation of Shares for Issuance. At all times
while this Warrant is outstanding, the Corporation shall maintain its corporate
authority to issue, and shall have authorized and reserved for issuance upon
exercise of this Warrant, such number of shares of Stock as shall be sufficient
to perform its obligations under this Warrant (after giving effect to any and
all adjustments to the number and kind of Warrant Shares purchasable upon
exercise of this Warrant).
10.3 No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities, sale or
other transfer of any of its assets or properties, or any other voluntary
action, 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 action as may be necessary or
appropriate in order to protect the rights of the Holder hereunder against
impairment. Without limiting the generality of the foregoing, the Corporation
(a) will not increase the par value of any shares of Stock receivable upon the
exercise of this Warrant above the amount payable therefor on such exercise, and
(b) will take all action that may be necessary or appropriate in order that the
Corporation may validly and legally issue fully paid and nonassessable shares of
Stock on the exercise of this Warrant.
10.4 No Rights as Stockholder. The Holder shall not be entitled to vote
or to receive dividends or to be deemed the holder of Stock that may at any time
be issuable upon exercise of this Warrant for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the Holder any of the
rights of a stockholder of the Corporation until the Holder shall have exercised
this Warrant and been issued Warrant Shares in accordance with the provisions
hereof.
10.5 Notices. All notices, demands, requests, certificates or other
communications under this Warrant shall be in writing and shall be either mailed
by certified mail, postage prepaid, in which case such notice, demand, request,
certificate or
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other communications shall be deemed to have been given three (3) days after the
date on which it is first deposited in the mails, or hand delivered or sent by
facsimile transmission, by tested or otherwise authenticated telex or cable or
by private expedited courier for overnight delivery with signature required, in
each such case, such notice, demand, request, certificate or other
communications being deemed to have been given upon delivery or receipt, as the
case may be:
(i) if to the Corporation, Prime Response, Inc., 150 Cambridge Park Drive,
Cambridge, MA 02140, Attention: President, or at such other address as the
Corporation may have furnished in writing to the Holder; and
(ii) if to the Holder, at the Holder's address appearing in the books
maintained by the Corporation.
10.6 Amendment and Waiver. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Corporation and the Holder.
10.7 Governing Law. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the Commonwealth of Massachusetts.
10.8 Covenants To Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Corporation shall bind its successors and assigns, whether so expressed
or not.
10.9 Severability. In case any one or more of the provisions contained in
this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
10.10 Construction. The definitions of this Warrant shall apply equally
to both the singular and the plural forms of the terms defined. Wherever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The section and paragraph headings used herein are
for convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
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10.11 Remedies. The Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Corporation agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Warrant and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate. In any action or proceeding brought to enforce any provision
of this Warrant or where any provision hereof is validly asserted as a defense,
the successful party to such action or proceeding shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
[rest of page intentionally left blank]
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IN WITNESS WHEREOF, the Corporation has caused this Common Stock Purchase
Warrant to be executed as an instrument under seal in its corporate name by one
of its officers thereunto duly authorized, all as of the day and year first
above written.
PRIME RESPONSE, INC.
[Corporate Seal]
By: /s/ Frederick H. Phillips
---------------------------------
Name: Frederick H. Phillips
Title: Secretary, Treasurer,
Senior Vice President and
Chief Financial Officer
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FORM OF SUBSCRIPTION
(To be executed upon exercise of Warrant)
To: PRIME RESPONSE, INC.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to exercise thereunder, _______
shares of Common Stock, $.01 par value per share ("Common Stock"), of Prime
Response, Inc., a Delaware corporation, and tenders herewith payment of
$__________, representing the aggregate purchase price for such shares based on
the price per share provided for in such Warrant. Such payment is being made in
accordance with [Section 2.1(b)(i)] [Section 2.1(b)(ii)] [Section 2.1(b)(iii)]
of the attached Warrant.
Please issue a certificate or certificates for such shares of Common Stock
in the following name or names and denominations and deliver such certificate or
certificates to the person or persons listed below at their respective addresses
set forth below:
Dated:
(Address)
If said number of shares of Common Stock shall not be all the shares of
Common Stock issuable upon exercise of the attached Warrant, a new Warrant is to
be issued in the name of the undersigned for the balance remaining of such
shares of Common Stock less any fraction of a share of Common Stock paid in
cash.
Dated: ____________, ____
NOTE: The above signature should
correspond exactly with the name
on the face of the attached
Warrant or with the name of the
assignee appearing in the
assignment form below.
<PAGE>
FORM OF ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, _____________________________________ hereby sells,
assigns and transfers unto _________________ the attached Warrant [__% of the
attached Warrant], together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ___________________________ attorney
to transfer said Warrant [said percentage of said Warrant] on the books of Prime
Response, Inc., a Delaware corporation, with full power of substitution in the
premises.
If not all of the attached Warrant is to be so transferred, a new Warrant
is to be issued in the name of the undersigned for the balance of said Warrant.
Dated: ____________, ____
NOTE: The above
signature should
correspond exactly with
the name on the face of
the attached Warrant.
<PAGE>
Exhibit 10.27
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER
THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY BE SOLD
OR TRANSFERRED UNLESS THE REGISTRATION PROVISIONS OF SAID ACT HAVE BEEN COMPLIED
WITH OR UNLESS COMPLIANCE WITH SUCH PROVISIONS IS NOT REQUIRED.
No. AC-3 Dated: December 9, 1999
PRIME RESPONSE, INC.
COMMON STOCK
PURCHASE WARRANT
THIS IS TO CERTIFY THAT, for value received, Andersen Consulting LLP
(the "Initial Warrant Holder"), and its registered successors and permitted
assigns are entitled, subject to the terms and conditions set forth below, to
purchase from PRIME RESPONSE, INC. (f/k/a Prime Response Group, Inc.), a
Delaware corporation (the "Corporation"), at any time or from time to time on
and after the date hereof and prior to 5:00 P.M., Boston, Massachusetts time, on
the Expiration Date (as defined in Section 1 below), all or any portion of the
Warrant Shares (as defined in Section 1), at a purchase price per share equal to
the Exercise Price (as defined in Section 1 below). The number and character of
the Warrant Shares and the Exercise Price are subject to adjustment as provided
herein.
1. DEFINITIONS. As used in this Warrant, the following terms shall
have the respective meanings set forth below or elsewhere in this Warrant as
referred to below:
"Certificate of Incorporation" shall mean the Certificate of
Incorporation of the Corporation, as amended and in effect from time to time.
"Common Stock" shall mean shares of the Common Stock of the
Corporation, $0.01 par value per share of the Corporation and shall also include
any capital stock of any class of the Corporation authorized after the date
hereof which shall neither be limited to a fixed sum or percentage of par value
in respect of the rights of the holders thereof to participate in dividends or
any distribution of earnings or assets (in liquidation or otherwise) of the
Corporation, whether or not such capital stock is entitled to a
<PAGE>
preference in the distribution of assets upon the voluntary of involuntary
liquidation, dissolution or winding up of the Corporation.
"Corporation" shall mean Prime Response, Inc. and/or any Person that
shall succeed to, or assume the obligations hereunder of, Prime Response, Inc.
"Derivative Securities" shall mean (i) all shares of stock and other
securities that are, directly or indirectly, convertible into or exchangeable
for shares of Common Stock and (ii) all options, warrants and other rights to
acquire, directly or indirectly, shares of Common Stock or securities, directly
or indirectly, convertible into or exchangeable for shares of Common Stock.
"Exercise Date" shall have the meaning set forth in Section 2.2
hereof.
"Exercise Price" shall mean, as of the Initial Exercise Date, the
Initial Exercise Price and after the Initial Exercise Date, the Initial Exercise
Price as adjusted from time to time pursuant to the terms of this Warrant.
"Expiration Date" shall mean December 9, 2006.
"Fair Market Value" shall mean (i) the last reported sale price per
share of Stock on the Nasdaq National Market or any national securities exchange
in which such Stock is quoted or listed, as the case may be, on the date
immediately preceding the Exercise Date or, if no such sale price is reported on
such date, such price on the next preceding business day in which such price was
reported, or (ii) if such Stock is not quoted or listed on the Nasdaq National
Market or any national securities exchange, the fair market value of a share of
such Stock, as determined in good faith by the Board of Directors of the
Corporation and based upon the fair market value of the Corporation as a whole,
(and not taking into account any discounts for minority ownership or
restrictions or transfer of capital stock of the Corporation).
"Holder" shall mean, as applicable, (i) the Initial Warrant Holder, or
(ii) any successor of the Initial Warrant Holder.
"Initial Exercise Date" shall mean the date on which this Warrant
first vests in accordance with the provisions of the second paragraph of Section
2.1 hereof.
"Initial Exercise Price" shall mean an amount equal to $7.01 per
share.
"Initial Warrant Holder" shall have the meaning set forth in the first
paragraph of this Warrant.
"Initial Warrant Shares" shall mean 500,000 shares of Common Stock.
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<PAGE>
"Issue Date" shall mean the date hereof.
"Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"Preferred Stock" shall mean the Series A Preferred Stock, the Series
B Preferred Stock and the Series C Preferred Stock and all other capital stock
of the Corporation having a preference on dissolution or liquidation of the
Corporation.
"Purchase Agreement" shall mean that certain Common Stock and Warrant
Purchase Agreement, dated of December 6, 1999, by and between the Corporation
and Andersen Consulting LLP.
"Registrable Securities" shall have the meaning ascribed to it in the
Registration Rights Agreement.
"Registration Rights Agreement" shall mean the Amended and Restated
Registration Rights Agreement, dated as of December 6, 1999, by and among the
Corporation and the other parties hereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series A Preferred Stock" shall mean the Series A Convertible
Participating Preferred Stock of the Corporation, $0.01 par value per share.
"Series B Preferred Stock" shall mean the Series B Convertible
Participating Preferred Stock of the Corporation, $0.01 par value per share.
"Series C Preferred Stock" shall mean the Series C Convertible
Preferred Stock of the Corporation, $0.01 par value per share.
"Stock" shall mean (i) Common Stock, (ii) capital stock of the
Corporation (other than Common Stock) or of any other Person or any other
securities of the Corporation or of any other Person that the Holder is entitled
to receive, or receives, upon exercise of this Warrant, in lieu of or in
addition to Common Stock, and/or (iii) capital stock of the Corporation (other
than Common Stock) or of any other Person or any other securities of the
Corporation or of any other Person that may be issued in replacement of,
substitution, exchange or redemption for, or upon reclassification or conversion
of, Common Stock or any other Stock, in each case whether as a result of a
reorganization, reclassification, merger, consolidation or sale of substantially
all of the assets of the Corporation.
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<PAGE>
"Warrant" shall have the meaning set forth in the second paragraph of
this Warrant.
"Warrant Shares" shall mean, at any time, the Initial Warrant Shares
after giving effect to the number of shares of Stock previously purchased by the
Holder pursuant to any and all exercises of this Warrant prior to such time and
after giving effect to all adjustments with respect to the number of Warrant
Shares purchaseable hereunder as provided for herein, including, without
limitation, those set forth in Section 4 hereof, prior to such time.
2. EXERCISE OF WARRANT.
2.1 METHOD OF EXERCISE. Subject to and upon all of the terms and
conditions set forth in this Warrant, the Holder may exercise this Warrant, in
whole or in part with respect to any Warrant Shares, at any time and from time
to time during the period commencing on the date that this Warrant vests in
accordance with the second paragraph of this Section 2.1 and ending at 5:00
p.m., Boston, Massachusetts time, on the Expiration Date, by presentation and
surrender of this Warrant to the Corporation at its principal office, together
with (a) a properly completed and duly executed subscription form, in the form
attached hereto, which subscription form shall specify the number of Warrant
Shares for which this Warrant is then being exercised, and (b) payment of the
aggregate Exercise Price payable hereunder in respect of the number of Warrant
Shares being purchased upon exercise of this Warrant. Payment of such aggregate
Exercise Price shall be made (i) in cash or by money order, certified or bank
cashier's check or wire transfer (in each case in lawful currency of the United
States of America), (ii) by cancellation of indebtedness owing from the
Corporation to the Holder, (iii) if the Common Stock is then traded on the
Nasdaq National Market or a national securities exchange, by cancellation of a
portion of this Warrant exercisable for such number of Warrant Shares as is
determined by dividing (A) the total Exercise Price payable in respect of the
number of Warrant Shares being purchased upon such exercise by (B) the excess of
the Fair Market Value per share of Common Stock as of the Exercise Date (as
defined below) over the Exercise Price per share; if the Holder wishes to
exercise this Warrant pursuant to this clause (iii) with respect to the maximum
number of Warrant Shares purchasable pursuant to this method, then the number of
Warrant Shares so purchased shall be equal to the total number of Warrant
Shares, minus the product obtained by multiplying (x) the total number of
Warrant Shares by (y) a fraction, the numerator of which shall be the Exercise
Price per share and the denominator of which shall be the Fair Market Value per
share of Common Stock as of the Exercise Date, or (iv) any combination of the
methods described in the foregoing clauses (i), (ii) or (iii).
This Warrant will become exercisable ("vest") based on the Product Revenue
("Product Revenue") achieved under the Marketing Agreement (the "Marketing
Agreement") dated the date hereof between the Company and Andersen Consulting
LLP ("Andersen") that
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<PAGE>
is attributable to joint marketing efforts of the Company and Andersen pursuant
to Section 2.3 of such Marketing Agreement, as follows:
<TABLE>
<CAPTION>
Product Revenue Warrants Becoming Exercisable
----------------- -----------------------------
<S> <C>
First $25 million 14,000 for each $1 million of sales revenue
Next $25 million 6,000 for each $1 million of sales revenue
</TABLE>
Product Revenue shall be determined in accordance with the procedures set
forth in Sections 4.3 and 4.4 of the Marketing Agreement. Once this Warrant
becomes exercisable with respect to Warrant Shares in accordance with the
foregoing provisions, this Warrant shall not cease to be exercisable with
respect to such Warrant Shares as a result of the Product Revenue decreasing
below the amount that resulted in this Warrant (or any portion hereof) becoming
exercisable.
In no event shall this Warrant become exercisable for more than 500,000
shares of Common Stock. Notwithstanding anything to the contrary contained
herein, upon termination of the Marketing Agreement at the election of the
Company as a result of a breach by Andersen pursuant to Section 10.2(a) thereof,
no further vesting of this Warrant shall occur, but the Warrant shall remain
exercisable during its term to the extent then vested.
2.2 EFFECTIVENESS OF EXERCISE; OWNERSHIP. Each exercise of this Warrant
------------------------------------
by the Holder shall be deemed to have been effected immediately prior to the
close of business on the date upon which all of the requirements of Section 2.1
hereof with respect to such exercise shall have been complied with in full (each
such date, an "Exercise Date"). On the applicable Exercise Date with respect to
-------------
any exercise of this Warrant by the Holder, the Corporation shall be deemed to
have issued to the Holder, and the Holder shall be deemed to have become the
holder of record and legal owner of, the number of Warrant Shares being
purchased upon such exercise of this Warrant, notwithstanding that the stock
transfer books of the Corporation shall then be closed or that certificates
representing such number of Warrant Shares being purchased shall not then be
actually delivered to the Holder.
2.3 DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as
practicable after the exercise of this Warrant, and in any event within ten (10)
days thereafter, the Corporation, at its expense and in accordance with
applicable securities laws, will cause to be issued in the name of and delivered
to the Holder, or as the Holder may direct (subject in all cases, to the
provisions of Section 9 hereof), a certificate or certificates for the number of
Warrant Shares purchased by the Holder on such exercise, plus, in lieu of any
fractional share to which the Holder would otherwise be entitled, cash equal to
such fraction multiplied by the Fair Market Value.
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<PAGE>
2.4 SHARES TO BE FULLY PAID AND NONASSESSABLE. All Warrant Shares
issued upon the exercise of this Warrant shall be validly issued, fully paid and
nonassessable, free of all liens, taxes, charges and other encumbrances or
restrictions on sale (other than those set forth herein) and free and clear of
all preemptive rights.
2.5 FRACTIONAL SHARES. No fractional shares of Stock or scrip
representing fractional shares of Stock shall be issued upon the exercise of
this Warrant. With respect to any fraction of a share of Stock called for upon
any exercise hereof, the Corporation shall make a cash payment to the Holder as
set forth in Section 2.3 hereof.
2.6 ISSUANCE OF NEW WARRANTS; CORPORATION ACKNOWLEDGMENT. Upon any
partial exercise of this Warrant, the Corporation, at its expense, will
forthwith and, in any event, within ten (10) days after such partial exercise
issue and deliver to the Holder a new warrant or warrants of like tenor,
registered in the name of the Holder, exercisable, in the aggregate, for the
balance of the Warrant Shares.
2.7 PAYMENT OF TAXES AND EXPENSES. The Corporation shall pay any
recording, filing, stamp or similar tax which may be payable in respect of any
transfer involved in the issuance of, and the preparation and delivery of
certificates (if applicable) representing, (i) any Warrant Shares purchased upon
exercise of this Warrant and/or (ii) new or replacement warrants in the Holder's
name or the name of any transferee of all or any portion of this Warrant.
3. REGISTRATION AND OTHER RIGHTS.
(a) REGISTRATION RIGHTS. The Holder of this Warrant shall have the
right to cause the Corporation to register any and all Warrant Shares under the
Securities Act and under any blue sky or securities laws of any jurisdictions
within the United States, at the time and in the manner specified and as
provided for in the Registration Rights Agreement, and any and all Warrant
Shares shall be deemed to be included within the definition of Registrable
Securities for all purposes thereof.
(b) PURCHASE AGREEMENT. Subject to Section 10.4 of this Warrant, for
the purposes of the Purchase Agreement, the shares of Common Stock issuable upon
exercise of this Warrant shall be included for the purposes of determining the
number of shares of Common Stock held by such Holder for all purposes of such
agreement.
4. ADJUSTMENTS.
4.1 ADJUSTMENTS FOR STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS.
(a) In the event that, at any time and from time to time after the
Issue Date, the Corporation shall (A) issue any additional shares of Stock as a
dividend or
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<PAGE>
distribution on its outstanding Stock or options, warrants or other rights to
purchase, directly or indirectly, Stock as a dividend or distribution on its
outstanding Stock or securities convertible, directly or indirectly, into Stock
as a dividend or distribution on its outstanding Stock (other than shares of
Stock issued upon conversion of Preferred Stock), (B) subdivide its outstanding
shares of Stock into a greater number of shares of Stock or (C) combine its
outstanding shares of Stock into a smaller number of shares of Stock, then and
in each such event, (x) the Exercise Price shall, simultaneously with the
happening of such event, be adjusted by multiplying the then current Exercise
Price by a fraction, (i) the numerator of which shall be the number of shares of
Stock outstanding immediately prior to such event on a fully-diluted basis,
assuming exercise in full of all options, warrants or other rights to purchase
Stock, directly or indirectly, outstanding immediately prior to such event and
conversion into or exchange for Stock, directly or indirectly, of all securities
convertible into or exchangeable for Stock outstanding immediately prior to such
event, each in accordance with their terms, and (ii) the denominator of which
shall be the number of shares of Stock outstanding immediately after such event
on a fully-diluted basis, assuming exercise in full of all options, warrants or
other rights to purchase Stock, directly or indirectly, outstanding immediately
after such event and conversion into or exchange for Stock, directly or
indirectly, of all securities convertible into or exchangeable for Stock
outstanding immediately after such event, each in accordance with their terms,
and the product so obtained shall thereafter be the Exercise Price then in
effect, and (y) the number of Warrant Shares shall be adjusted by increasing or
decreasing, as the case may be, the number of shares of Stock included within
the Warrant Shares by the percentage increase or decrease in the total number of
shares of Stock outstanding immediately after such event as compared to the
total number of shares of Stock outstanding immediately prior to such event and
the result so obtained shall be the number of Warrant Shares then in effect.
(b) The Exercise Price and the number of Warrant Shares, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described in this Section 4.1
4.2 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION OR MERGER. In the
event that, at any time or from time to time after the Issue Date, the
Corporation shall (a) effect a reorganization, (b) consolidate with or merge
into any other Person, or (c) sell or transfer all or substantially all of its
properties or assets or more than 50% of the voting capital stock of the
Corporation (whether issued and outstanding, newly issued, from treasury, or any
combination thereof) to any other Person under any plan or arrangement
contemplating the reorganization, consolidation or merger, sale or transfer, or
dissolution of the Corporation, then, in each such case, the Holder, upon the
exercise of this Warrant as provided in Section 2 hereof at any time or from
time to time after the consummation of such reorganization, consolidation,
merger or sale or the effective date of such dissolution (subject to the
limitation contained in Section 4.6, if applicable), as the case may be, shall
receive, in lieu of the Warrant Shares issuable on such exercise immediately
prior to such consummation or such effective date, as the case may be, the Stock
and property (including cash) to which the Holder would have been entitled upon
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<PAGE>
the consummation of such reorganization, consolidation or merger, or sale or
transfer, or in connection with such dissolution, as the case may be, if the
Holder had so exercised this Warrant immediately prior thereto (assuming the
payment by the Holder of the Exercise Price therefor as required hereby in a
form permitted hereby, which payment shall be included in the assets of the
Corporation for the purposes of determining the amount available for
distribution), all subject to successive adjustments thereafter from time to
time pursuant to, and in accordance with, the provisions of this Section 4.
4.3 ADJUSTMENTS FOR RECLASSIFICATIONS. If the Common Stock issuable
upon the conversion of this Warrant shall be changed into the same or a
different number of shares of any class(es) or series of stock, whether by
reclassification or otherwise (other than an adjustment under Section 4.1 or a
merger, consolidation, or sale of assets provided for under Section 4.2), then
and in each such event, the Holder hereof shall have the right thereafter to
convert each Warrant Share into the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, or other change
by holders of the number of shares of Common Stock into which such Warrant
Shares would have been convertible immediately prior to such reclassification,
or change, all subject to further adjustment as provided herein.
4.4 DISTRIBUTIONS. In the event that, at any time or from time to
time after the Issue Date, the Corporation shall make or issue, or shall fix a
record date for the determination of eligible holders entitled to receive, a
dividend or other distribution with respect to Common Stock payable in (i)
shares of its capital stock (other than a stock dividend provided for in Section
4.1), (ii) other securities of the Corporation or any other Person, (iii)
evidences of indebtedness issued by the Company or any other Person, (iv)
options, warrants or rights to subscribe for or purchase any of the foregoing,
or (v) assets (excluding cash dividends) then, in each such case, the Holder of
this Warrant shall receive, in addition to the shares of Stock issuable upon the
exercise of this Warrant prior to such date, and without the payment of
additional consideration therefor, the shares of capital stock, other
securities, evidence of indebtedness, options, warrants or other rights or
assets, as the case may be, to which such Holder would have been entitled upon
such date as if such Holder had exercised this Warrant on the date hereof and
had thereafter, during the period from the date hereof to and including the date
of the actual exercise of this Warrant, retained such shares and/or all other
additional stock available to it as aforesaid during such period, giving effect
to all adjustments pursuant to this Section 4. The Company shall reserve and
set aside, for the life of this Warrant or until exercised in full, all such
distributions to which the Holder is entitled to receive pursuant to the this
Section 4.4.
4.5 CONTINUATION OF TERMS. Upon any reorganization,
reclassification, sale, consolidation, merger or other transfer (and any
liquidation, dissolution or winding up of the Corporation following any such
transfer) referred to in this Section 4, this Warrant shall continue in full
force and effect and the terms hereof shall be applicable to the shares of Stock
and property (including cash, where applicable) receivable upon the
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<PAGE>
exercise of this Warrant after the consummation of such reorganization,
reclassification, sale, consolidation, merger or other transfer or the effective
date of liquidation, dissolution or winding up of the Corporation following any
such transfer, as the case may be, and shall be binding upon the issuer of any
such Stock, including, in the case of any such transfer, the Person acquiring
all or substantially all of the properties or assets or more than 50% of the
voting capital stock of the Corporation (whether issued and outstanding, newly
issued or from treasury or any combination thereof), whether or not such Person
shall have expressly assumed the terms of this Warrant.
5. OFFICER'S CERTIFICATE AS TO ADJUSTMENTS. In each case of any
adjustment or readjustment in the number and kind of Warrant Shares, or
property, issuable hereunder from time to time, or the Exercise Price, the
Corporation, at its expense, will promptly cause an officer of the Corporation
to compute such adjustment or readjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment or readjustment
and showing the facts upon which such adjustment or readjustment is based. The
Corporation will forthwith send a copy of each such certificate to the Holder in
accordance with Section 10.5 below.
6. NOTICES OF RECORD DATE, ETC. In the event of
(a) any taking by the Corporation of a record of the holders of Stock
for the purpose of determining the holders thereof who are entitled to receive
any shares of Stock as a dividend or other distribution or pursuant to a stock
split, or
(b) any reorganization of the Corporation, or any sale or transfer, in
a single transaction or a series of related transactions, of all or
substantially all the assets of the Corporation to, or the consolidation or
merger of the Corporation with or into, any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Corporation, or
(d) any sale, in a single transaction or a series of related
transactions, of a majority of the Corporation's voting stock (whether newly
issued, or from treasury, or previously issued and then outstanding, or any
combination thereof),
then and in each such event the Corporation will mail or cause to be mailed to
the Holder a notice specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or stock split, and stating
the amount and character of such dividend, distribution or stock split, or (ii)
the date on which any such reorganization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of any one or more classes of
Stock shall be entitled to exchange their shares of Stock for securities or
other property deliverable on such reorganization, transfer, consolidation,
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<PAGE>
merger, dissolution, liquidation or winding-up, or (iii) the date on which any
such sale of a majority of the Corporation's voting stock is to take place and
the material terms thereof, as the case may be. Such notice shall be mailed at
least ten (10) days prior to the date specified in such notice on which any such
action is to be taken.
7. EXCHANGE OF WARRANT. Subject to the provisions of Section 9
hereof (if and to the extent applicable), this Warrant shall be exchangeable,
upon the surrender hereof by the Holder at the principal office of the
Corporation, for new warrants of like tenor, each registered in the name of the
Holder or in the name of such other Persons as the Holder may direct. Each of
such new warrants shall be exercisable for such number of Warrant Shares as the
Holder shall direct, provided that all of such new warrants shall represent, in
the aggregate, the right to purchase the same number of Warrant Shares and cash,
securities or other property, if any, which may be purchased by the Holder upon
exercise of this Warrant at the time of its surrender.
8. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Corporation of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of a customary affidavit of the Holder and an indemnity
agreement or, in the case of any such mutilation, on surrender and cancellation
of this Warrant, the Corporation at its expense will execute and deliver, in
lieu thereof, a new warrant of like tenor.
9. TRANSFER PROVISIONS, ETC.
9.1 LEGENDS.
(a) Each certificate representing any Warrant Shares issued upon
exercise of this Warrant shall bear the following legend:
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY BE TRANSFERRED ONLY PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED.
(b) Each certificate representing any shares of Stock issued from
time to time upon exercise of this Warrant shall also bear any legend required
under any applicable state securities or blue sky laws.
9.2 MECHANICS OF TRANSFER. Any transfer of all or any portion of this
Warrant, or of any interest therein, that is otherwise in compliance with
applicable law shall be effected by surrendering this Warrant to the Corporation
at its principal office, together with (i) a duly executed form of assignment,
in the form attached hereto, (ii) payment of
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<PAGE>
any applicable transfer taxes, if any. In the event of any such transfer of this
Warrant, in whole, the Corporation shall issue a new warrant of like tenor to
the transferee, representing the right to purchase the same number of Warrant
Shares, and cash, securities or other property, if any, which were purchasable
by the Holder upon exercise of this Warrant at the time of its transfer. In the
event of any such transfer of any portion of this Warrant, (i) the Corporation
shall issue a new warrant of like tenor to the transferee, representing the
right to purchase the same number of Warrant Shares, and cash, securities or
other property, if any, which were purchasable by the Holder upon exercise of
the transferred portion of this Warrant at the time of such transfer, and (ii)
the Corporation shall issue a new warrant of like tenor to the Holder,
representing the right to purchase the number of Warrant Shares, and cash,
securities or other property, if any, purchasable by the Holder upon exercise of
the portion of this Warrant not transferred to such transferee. Until this
Warrant or any portion thereof is transferred on the books of the Corporation,
the Corporation may treat the Holder as the absolute holder of this Warrant and
all right, title and interest therein for all purposes, notwithstanding any
notice to the contrary.
9.3. RESTRICTIONS ON TRANSFER. Subject to compliance with applicable
securities laws and any other contractual restrictions to which the Holder may
be subject, this Warrant, and any portion hereof, and the Warrant Shares may be
transferred by the Holder in its sole discretion at any time to affiliates of
the Holder without the consent of the Corporation. Except as permitted pursuant
to the foregoing sentence, this warrant may not be transferred without the
consent of the Corporation.
10. GENERAL.
10.1 STATEMENT ON WARRANT. Irrespective of any adjustments in the Exercise
Price or the number or kind of Warrant Shares, this Warrant may continue to
express the same kind of Warrant Shares as are stated on the front page hereof.
10.2 AUTHORIZED SHARES; RESERVATION OF SHARES FOR ISSUANCE. At all times
while this Warrant is outstanding, the Corporation shall maintain its corporate
authority to issue, and shall have authorized and reserved for issuance upon
exercise of this Warrant, such number of shares of Stock as shall be sufficient
to perform its obligations under this Warrant (after giving effect to any and
all adjustments to the number and kind of Warrant Shares purchasable upon
exercise of this Warrant).
10.3 NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities, sale or
other transfer of any of its assets or properties, or any other voluntary
action, 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 action as may be necessary or
appropriate in order to protect the rights of the Holder hereunder against
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impairment. Without limiting the generality of the foregoing, the Corporation
(a) will not increase the par value of any shares of Stock receivable upon the
exercise of this Warrant above the amount payable therefor on such exercise, and
(b) will take all action that may be necessary or appropriate in order that the
Corporation may validly and legally issue fully paid and nonassessable shares of
Stock on the exercise of this Warrant.
10.4 NO RIGHTS AS STOCKHOLDER. The Holder shall not be entitled to vote or
to receive dividends or to be deemed the holder of Stock that may at any time be
issuable upon exercise of this Warrant for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the Holder any of the
rights of a stockholder of the Corporation until the Holder shall have exercised
this Warrant and been issued Warrant Shares in accordance with the provisions
hereof.
10.5 NOTICES. All notices, demands, requests, certificates or other
communications under this Warrant shall be in writing and shall be either mailed
by certified mail, postage prepaid, in which case such notice, demand, request,
certificate or other communications shall be deemed to have been given three (3)
days after the date on which it is first deposited in the mails, or hand
delivered or sent by facsimile transmission, by tested or otherwise
authenticated telex or cable or by private expedited courier for overnight
delivery with signature required, in each such case, such notice, demand,
request, certificate or other communications being deemed to have been given
upon delivery or receipt, as the case may be:
(i) if to the Corporation, Prime Response, Inc., 150 Cambridge Park Drive,
Cambridge, MA 02140, Attention: President, or at such other address as the
Corporation may have furnished in writing to the Holder; and
(ii) if to the Holder, at the Holder's address appearing in the books
maintained by the Corporation.
10.6 AMENDMENT AND WAIVER. No failure or delay of the Holder in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Holder are cumulative and not exclusive of any rights
or remedies which it would otherwise have. The provisions of this Warrant may
be amended, modified or waived with (and only with) the written consent of the
Corporation and the Holder.
10.7 GOVERNING LAW. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the Commonwealth of Massachusetts.
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10.8 COVENANTS TO BIND SUCCESSOR AND ASSIGNS. All covenants, stipulations,
promises and agreements in this Warrant contained by or on behalf of the
Corporation shall bind its successors and assigns, whether so expressed or not.
10.9 SEVERABILITY. In case any one or more of the provisions contained in
this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
10.10 CONSTRUCTION. The definitions of this Warrant shall apply equally to
both the singular and the plural forms of the terms defined. Wherever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The section and paragraph headings used herein are
for convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
10.11 REMEDIES. The Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Corporation agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Warrant and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate. In any action or proceeding brought to enforce any provision
of this Warrant or where any provision hereof is validly asserted as a defense,
the successful party to such action or proceeding shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
[rest of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Common Stock Purchase
Warrant to be executed as an instrument under seal in its corporate name by one
of its officers thereunto duly authorized, all as of the day and year first
above written.
PRIME RESPONSE, INC.
[Corporate Seal]
By: /s/ Frederick H. Phillips
---------------------------------
Name: Frederick H. Phillips
Title: Secretary, Treasurer,
Senior Vice President and
Chief Financial Officer
-14-
<PAGE>
FORM OF SUBSCRIPTION
(To be executed upon exercise of Warrant)
To: PRIME RESPONSE, INC.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the attached Warrant for, and to exercise thereunder, _______
shares of Common Stock, $.01 par value per share ("Common Stock"), of Prime
Response, Inc., a Delaware corporation, and tenders herewith payment of
$__________, representing the aggregate purchase price for such shares based on
the price per share provided for in such Warrant. Such payment is being made in
accordance with [Section 2.1(b)(i)] [Section 2.1(b)(ii)] [Section 2.1(b)
(iii)] of the attached Warrant.
Please issue a certificate or certificates for such shares of Common Stock
in the following name or names and denominations and deliver such certificate or
certificates to the person or persons listed below at their respective addresses
set forth below:
Dated:
(Address)
If said number of shares of Common Stock shall not be all the shares of
Common Stock issuable upon exercise of the attached Warrant, a new Warrant is to
be issued in the name of the undersigned for the balance remaining of such
shares of Common Stock less any fraction of a share of Common Stock paid in
cash.
Dated: ____________, ____
NOTE: The above signature should
correspond exactly with the name on the
face of the attached Warrant or with the
name of the assignee appearing in the
assignment form below.
<PAGE>
FORM OF ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, _____________________________________ hereby sells,
assigns and transfers unto _________________ the attached Warrant [__% of the
attached Warrant], together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ___________________________ attorney
to transfer said Warrant [said percentage of said Warrant] on the books of Prime
Response, Inc., a Delaware corporation, with full power of substitution in the
premises.
If not all of the attached Warrant is to be so transferred, a new Warrant is
to be issued in the name of the undersigned for the balance of said Warrant.
Dated: ____________, ____
NOTE: The above signature should
correspond exactly with the name on the
face of the attached Warrant.
<PAGE>
Exhibit 10.28
MARKETING AGREEMENT
This Marketing Agreement is entered into as of December 6, 1999 (EFFECTIVE
DATE) by and between Prime Response, Inc., a Delaware corporation (PR) and
Andersen Consulting LLP, an Illinois partnership (ANDERSEN CONSULTING)
Background
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PR develops, manufactures and sells multi-channel marketing automation software
products for the customer relationship management (CRM) market; Andersen
Consulting provides consulting services, including third party software
developer and Business Integration Services, to clients; and PR and Andersen
Consulting desire to enter into an agreement granting Andersen Consulting the
right to market the Products (as defined below).
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, PR and Andersen Consulting agree
as follows:
1. DEFINITIONS.
Capitalized terms used in this Agreement and not otherwise defined herein
shall have the meaning set forth below.
AFFILIATE means with respect to either party, any Person that, directly or
indirectly, is controlled by, controls or is under common control with such
party and, with respect to Andersen Consulting, Proquire LLC. For purposes of
this Agreement, CONTROL means, with respect to any Person, the direct or
indirect ownership of more than fifty percent (50%) of the voting or income
interest in such Person or the possession otherwise, directly or indirectly, of
the power to direct the management or policies of such Person.
BUSINESS INTEGRATION SERVICES shall include, but not be limited to, the
provision by Andersen Consulting or an Affiliate of systems design and
development and implementation of modifications, extensions and interfaces to a
software system, modifications to current applications, identification of
operational strategies and business changes required to take advantage of a
software product, integration, implementation and conversion assistance, and
organization design and conversion training, and as a general matter may include
strategic systems planning, productivity improvement/work simplification,
systems design, change management and training, and systems management and
outsourcing.
CLIENT means those third parties and all subsidiaries or affiliates of
those third parties which have licensed or purchased the Products or that may
license or purchase the Products.
CONFIDENTIAL INFORMATION means all data, specifications, training and any
other know-how related to the design, implementation, performance or manufacture
of the Products, as well as all other information and data provided by either
party to the other party pursuant to this Agreement in written or other tangible
medium and marked as confidential, or if disclosed orally or displayed,
confirmed in writing at the time of disclosure, except any portion thereof
which: (i) is known to the receiving party, as evidenced by the receiving
party's written records, before receipt from the disclosing party; (ii) is
disclosed to the receiving party by a third person who is under no obligation of
confidentiality to the
<PAGE>
disclosing party hereunder with respect to such information and who otherwise
has a right to make such disclosure; (iii) is or becomes generally known in the
trade through no fault of the receiving party; (iv) is independently developed
by the receiving party, as evidenced by the receiving party's written records,
without access to such information; or (v) is the subject of a subpoena or other
validly issued administrative or judicial process requesting disclosure of such
Confidential Information; provided, the party that receives such order or
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process provide prompt notice to the disclosing party and permits the disclosing
party to contest or narrow such request for disclosure and thereafter complies
with such subpoena or other process.
LIST PRICE means PR's standard published list prices for the Products, as
in effect from time to time.
FORCE MAJEURE means any event beyond the control of the parties, including,
without limitation, failures of computers, computer-related equipment, hardware
or software, fire, flood, riots, strikes, epidemics, war (declared or undeclared
and including the continuance, expansion or new outbreak of any war or conflict
now in existence), embargoes and governmental actions or decrees.
IMPROVEMENTS means any additions, developments, enhancements,
modifications, new versions, updates and other changes in the Products,
including but not limited to any derivatives for any Product(s) and any new
designs for the Product(s) delivered by PR to Andersen Consulting hereunder.
PERSON means any individual, corporation, association, partnership
(general or limited), joint venture, trust, estate, limited liability company,
limited liability partnership, unincorporated organization, government (or any
agency or political subdivision thereof) or other legal entity or organization.
PRODUCTS means the object code (machine readable format); version of and
the user documentation regarding PR's multi-channel customer relationship
management software products marketed under the name "Prime@Vantage" and
"[email protected]," as further described in Attachment A, together with any
---------- -
Improvements and any related Third Party Products that are incorporated into the
Product.
PRODUCT SPECIFICATIONS means the specifications for the Product set forth
in Attachment A, as such specifications may be modified from time to time to
---------- -
reflect Improvements (if any) as notified by PR to Andersen Consulting.
RESELL means that Andersen Consulting shall purchase copies of a Product
from PR (at a price that is discounted in accordance with Section 4.1(b)) and
distribute such Products in their original form to a Client at a price to be
negotiated by Andersen Consulting and the Client, provided that Andersen
Consulting shall have no right to use, copy or sublicense such Products and the
Client shall be required to enter into a separate license agreement with PR
governing any use of such Product.
THIRD PARTY PRODUCT(S) means the object code version of any software, which
is proprietary to a third party and embedded in the Products.
TRADEMARKS means (i) the trademarks described on Attachment C, and (ii)
---------- -
any other trademarks, as may be agreed upon in writing from time to time by the
parties for use by
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Andersen Consulting in connection with the promotion, marketing and sale of the
Products in accordance with the terms hereof.
OTHER DEFINED TERMS. Each of the following terms have the meanings
ascribed to it in the section set forth opposite such term:
ANDERSEN CONSULTING Recitals
AGREEMENT Recitals
ASC Section 2.2
CRM Recitals
EAI Section 2.1
EFFECTIVE DATE Recitals
INDEMNIFYING PARTY Section 9.3
Indemnitees Section 9.3
LOSSES Section 9.2
PERSONNEL Section 11.18
PLAN Section 2.2
PRODUCT INFORMATION Section 7.1
PRODUCT REVENUE Section 4.1(c)
PROJECT WORK Section 5.3
PROSPECT REGISTRATION FORM Section 2.3
PR Recitals
REGISTERED PROSPECT Section 2.3
RFP Section 5.2
THIRD PARTY DEVELOPMENT FIRM Section 5.4
WORK PRODUCT Section 5.3
Y2K COMPLIANT Section 8.3
2. MARKETING ARRANGEMENT.
2.1 APPOINTMENT. (a) Subject to the terms of this Agreement, PR
hereby appoints Andersen Consulting as PR's non-exclusive reseller for the
promotion, sale and delivery of the Products to customers. Andersen Consulting
hereby accepts the appointment as non-exclusive reseller.
(b) Subject to the terms set forth in this Agreement, PR will also
designate Andersen Consulting as a "Preferred" Business Integration Services
provider for the Products and will provide Andersen Consulting with the
opportunity to participate in certain joint marketing activities and Client
proposal opportunities described herein. Subject to the terms of this
Agreement, Andersen Consulting may recommend PR as a preferred Enterprise
Application Integration (EAI) technology for its offerings that embody CRM
functionality.
(c) It is understood and agreed that each of Andersen Consulting and
PR reserves the right to continue to recommend the most appropriate available
solution for their client(s). As a result, each party recognizes situations
will arise among target clients where they shall mutually determine it is not
beneficial to pursue an opportunity together. It is further understood and
agreed that: (i) Andersen Consulting may market and demonstrate other software
solutions to its clients, and if a Client selects an alternative or competing
solution, Andersen Consulting will not be restricted from installing or
implementing such alternative or competing solution; (ii) nothing in this
Agreement shall restrict Andersen Consulting or its Affiliates from developing,
marketing or installing competing software or entering into arrangements with
any third party; and (iii) neither party makes any commitment that a minimum
number of sales or licenses of the Products will be effected or
3
<PAGE>
a minimum amount of total revenue will be generated by either party as a result
of this Agreement.
(d) Neither party shall have the right to make commitments of any kind for
or on behalf of the other party without the prior written consent of the other
party, in each and every case. Except as set forth herein, each party will be
responsible for its own costs associated with any marketing activities performed
pursuant to this Agreement.
2.2 MARKET DEVELOPMENT STRATEGY; ALLIANCE STEERING COMMITTEE. (a)
The parties will work together to create a joint marketing and business
development plan (PLAN)each year, which Plan shall be completed and approved by
the parties at least thirty (30) business days prior to the end of each such
year. Each party will use commercially reasonable efforts to implement such
Plan.
(b) An Alliance Steering Committee (ASC) shall be responsible for
quarterly review and oversight of the Plan. The ASC shall consist of four
members, two members to be appointed by each of Andersen Consulting and PR.
Each party may with notice to the other substitute any of its members serving on
the ASC. The initial PR members shall be James Plantan and Anthony O'Donnell
and the initial Andersen Consulting members shall be Patrick O'Halloran and
Jacques Habib.
(c) The ASC shall be responsible for the development management and
execution of the Plan and shall in particular: (i) consider, review and amend
the Plan from time to time in such manner as may be appropriate; (ii) monitor
progress of the Plan; and (iii) report regularly to the management of both
parties upon the progress of the Plan.
(d) The ASC shall hold formal meetings quarterly or at any time upon the
reasonable request of either party during the term of the agreement. Unless
otherwise agreed by the parties all meetings of the ASC shall be held in Chicago
and in Boston on an alternating basis, with the first meeting to be held in
Paris on or around November 17, 1999. Meetings shall be scheduled with at least
twenty-one (21) business days notice; the party that seeks to convene a
particular meeting shall be responsible for the meeting notice and scheduling;
provided, that the hosting party shall be responsible for notice and scheduling
- --------
of the quarterly meetings. The quorum for ASC meetings shall be two, provided
there are at least one member from each of Andersen Consulting and PR present.
The ASC will act by vote of a majority of those present at any meeting, but at
least one member from each party will be required to take any action.
2.3 JOINT MARKETING EFFORTS. (a) Subject to the provisions of this
Agreement, Andersen Consulting and PR will jointly work together to create a
mutual understanding of opportunities which are of priority interest and assist
each party in focusing their marketing efforts. The parties shall also work to
identify target Clients and develop proposals for potential Clients to propose a
solution encompassing PR's Products and Andersen Consulting's professional
services.
(b) For each Client opportunity that either party is aware of, such
party will notify the other party and the parties shall use reasonable efforts
to mutually agree upon and execute a PROSPECT REGISTRATION FORM in the form of
Attachment B, with such changes as the parties may mutually agree upon. The
- ------------
Prospect Registration Form the parties will (i)describe the Client (each a
REGISTERED PROSPECT), (ii) the project, (ii) the specific roles each party will
play in obtaining such Client and performing such project, and (iv) the
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<PAGE>
applicable Prospect resale/marketing assistance fee Percentage (determined in
accordance with Section 4.1).
(c) If a party does not respond to the other party's submission of a
Prospect Registration Form within five (5) business days, then such non-
responding party will be deemed to have agreed to the Prospect Registration
Form. For each Registered Prospect, as mutually agreed by the parties PR shall:
(i) authorize Andersen Consulting to Resell such Products to the Registered
Prospect; or (ii) provide its Products directly to the Registered Prospect on
PR's standard licensing terms and conditions and, if the Registered Prospect
licenses the Product, remit to Andersen Consulting a marketing assistance fee in
accordance with Section 4.1. In cases where Andersen Consulting does not elect
to Resell Products to a Registered Prospect, Andersen Consulting shall be
entitled to receive a marketing assistance fee in respect of such Registered
Prospect if Andersen Consulting participates, to the extent provided in the
applicable Prospect Registration Form, in the sale to such Registered Prospect
if the Registered Prospect licenses the Product. Participation in a sale may
include: (1) introducing PR to contacts at the Registered Prospect having the
authority to make purchasing decisions; (2) performing software demonstrations
of the Product for the Registered prospect; and (3) making a formal, written
recommendation to the Registered Prospect which details, with a high degree of
specificity, ways in which Products can be used by the Registered Prospect.
Andersen Consulting shall be entitled to Resell or receive a marketing
assistance fee as described in Section 2.3(c)(i)-(ii) for the duration of the
project described in the applicable Prospect Registration Form.
(d) PR and Andersen Consulting will address the specifics of each
client opportunity on a case-by-case basis. These arrangements shall specify
the scope, roles and responsibilities, staffing, and other terms for the
engagement. In general, the parties contemplate PR providing Products and
Andersen Consulting providing its Business Integration Services to Clients,
under separate agreements with the Client. In the event that Andersen
Consulting requires professional services from PR that are directed or
customized to the needs of a particular Client, the parties will use reasonable
efforts to enter into a subcontractor services agreement containing mutually
acceptable terms.
(e) Unless the parties mutually agree otherwise in writing, in the
event that a Registered Prospect requires that PR Products and Business
Integration Services be delivered under a single contract as a condition of
awarding the contract, Andersen Consulting will be the prime contractor and PR
would provide subcontracted services pursuant to the subcontractor agreement
described above. In such event the parties will operate as independent
contractors in providing such services to such Client.
(f) In accordance with Sections 6.1 and 7.1, each party will appoint
one or more business development personnel who will be responsible for the
exchange of information with the other party and for coordinating the
development of jointly pursued leads.
(g) Except as set forth herein, each party will be responsible for its
own costs and expenses associated with activities under this Agreement, such as
any cost or expenses related to marketing to any Registered Prospects.
3. RESELLER PRODUCT ORDERS; MARKETING ASSISTANCE PRODUCT ORDERS
3.1 PRODUCT ORDERS. In the event that Andersen Consulting Resells PR
Products to a Registered Prospect, Proquire LLC or Andersen Consulting shall
place an order for Products by mail or facsimile, or by other means agreed upon
by the parties. No order shall be binding upon PR until the same shall have
been accepted by PR. PR shall use
5
<PAGE>
reasonable efforts to accept or reject all orders within ten (10) business days
following receipt of same and shall use reasonable efforts to deliver all orders
that are accepted by a mutually agreed upon delivery date. PR may reject any
order that does not comply with the provisions of this Agreement by providing to
Andersen Consulting, a written notice specifying the noncompliance. In case of
conflict between the standard printed terms of purchase/sale of Andersen
Consulting and PR, the former shall prevail, but in no event shall either
party's standard terms override any provisions of this Agreement. When
allocating production with respect to filling orders for Products, PR shall use
reasonable efforts to ensure that Andersen Consulting orders are accepted and
filled in a manner that is in all material respects the same as or superior to
the priority and fill rate PR applies to Products ordered by third parties or
PR's own sales organization.
3.2 CHANGED ORDERS. In the event that Andersen Consulting cancels,
reschedules or otherwise changes a purchase order less than five (5) days in
advance of the scheduled delivery date, Andersen Consulting shall pay to PR a
cancellation fee equal to ten percent (10%) of the price of the Products that
are the subject of such cancellation.
3.3 OBLIGATION TO SUPPLY. PR shall use reasonable efforts to accept
and fill each order for Products submitted by Andersen Consulting. Without
limiting the generality of the foregoing, it is expressly understood PR shall
not be in breach of this Section 3.3 if PR's failure to supply Products is due
to a Force Majeure event.
3.4 PRODUCT PRICES; SHIPPING. (a) Prices for the Products shall be as
described in Section 4.1, exclusive of shipping charges and other costs which
shall be imposed on Andersen Consulting pursuant to Section 3.4(b). At all times
during the term of this Agreement, Andersen Consulting's price for the Products
shall be at least as favorable as the pricing PR is then offering to any third
party with similar volumes and terms. In the event that PR reduces its prices on
any Products ordered by Andersen Consulting but which have not yet been shipped
to Andersen Consulting, then all Andersen Consulting orders that have been
accepted by PR shall be invoiced at a price that reflects the reduction in PR's
price .
(b) PR shall arrange for shipment and invoicing to Andersen Consulting of
the Products ordered by Andersen Consulting or its Affiliates via common
carrier, FCA PR's loading dock (as defined in Incoterms).
3.5. ACCEPTANCE. (a) Andersen Consulting shall notify PR within five
(5) business days of the receipt of a shipment of the Product of any apparent
non-conformity of the Product to the Product Specifications. PR's obligations
under Section 9.2 shall survive acceptance of the Product by Andersen
Consulting.
(b) PR shall at its expense and at no further cost to Andersen Consulting
replace any Products that do not conform to the Product Specifications. All
defective units of the Product shall be returned to PR using the procedure
specified in this Section 3.5(b). Andersen Consulting shall notify PR in
writing of its rejection of Product under Section 3.5(a), shall request a Return
Material Authorization (RMA) number and shall within five (5) business days of
receipt of such RMA number return such rejected Product to PR freight prepaid
and properly insured, along with a reasonably detailed statement of the claimed
defect and proof of date of purchase. In the event PR determines that the
returned Product is defective and properly rejected by Andersen Consulting, PR
shall replace such defective Product. PR shall return to Andersen Consulting
within three (3) business days following receipt of the defective Products,
freight prepaid, all replaced Products properly rejected,
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<PAGE>
along with reimbursement of the shipment charges for return of the nonconforming
Product. In the event that any rejected Product is determined by PR to not be
defective, Andersen Consulting shall reimburse PR for all costs and expenses
related to the inspection, repair, if any, and return of such Product to
Andersen Consulting.
3.6. NON-RESELLER SALES. In the event that Andersen Consulting does
not Resell PR Products to a Registered Prospect, the provisions of Sections 3.1-
3.5 shall not apply to such transaction as between Andersen Consulting and PR.
Instead, Andersen Consulting shall place PR in contact with the Registered
Prospect and PR shall negotiate directly with the Registered Prospect concerning
the license of the Products to such Registered Prospect.
4. RESALE DISCOUNTS; MARKETING ASSISTANCE COMPENSATION.
4.1 REVENUE SHARING RATES. (a) Until the earlier of (i) the first
anniversary of the Effective Date or (ii) the licensing of Products to five (5)
Registered Prospects pursuant to this Agreement, PR will provide Andersen
Consulting with Products for Resale to Registered Prospects at a price equal to
one-half (50%) of the List Price or pay Andersen Consulting a marketing
--
assistance fee (if Andersen Consulting elects to have PR sell such Products
directly to such Registered Prospects) equal to one-half (50%) of the Product
Revenue associated with the Registered Prospect. Notwithstanding the sales
strategy and compensation structures set forth in this Section 4, the parties
acknowledge and agree that Andersen Consulting shall have no right to sublicense
the Products to Clients, and that all licenses shall be directly between PR and
the Client.
(b) After the expiration of the period described in Section 4.1(a), PR
will provide Andersen Consulting with Products for Resale to Registered
Prospects at a discount level equal to twenty percent (20%) of the List Price,
or pay Andersen Consulting a marketing assistance fee (if Andersen Consulting
- --
elects to have PR sell such Products directly to such Registered Prospects)
equal to twenty percent (20%) of the Product Revenue associated with the
Registered Prospect.
(c) PRODUCT REVENUE means the aggregate license fees invoiced to a
Registered Prospect who licenses Products less charges in respect of (i)
outbound shipping, packaging, insurance and delivery, separately billed to the
Registered Prospect or prepaid; (ii) taxes, duties, and similar governmental
charges (not including PR's net income tax); (iii) rebates, discounts and
refunds remitted to the Registered Prospect; and (iv) Product returns by the
Registered Prospect. Product Revenue shall include both initial and subsequent
licenses by PR to such Registered Prospect, at any time during the duration of
the project that is the subject of the Prospect Registration Form. Product
Revenue shall not include any revenue payable in respect of PR's maintenance,
support, training, installation and other professional services. Andersen
Consulting may, however, mark up and resell PR's professional services on a
case-by-case basis pursuant to a mutually agreed subcontract agreement among the
parties.
(d) Neither party shall disclose any billing or cost rates of the other
party to any Client, potential Client or Registered Prospect without prior
written approval of the other party.
(e) It is understood and agreed that Andersen Consulting will retain all
(100%) of its professional fees related to Business Integration Services
provided by Andersen Consulting to third parties, including Registered
Prospects.
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4.2 PAYMENT. Except as otherwise provided in any agreement between the
parties with respect to a particular Registered Prospect, Andersen Consulting
shall pay for Products (or PR shall pay Andersen Consulting the applicable
marketing assistance fee) within thirty (30) business days after receipt of PR's
invoice. All payments shall be stated and paid in U.S. Dollars. Product Revenue
received in currencies other than U.S. Dollars shall be converted to U.S.
Dollars using the exchange rate in effect as of the date that the payment is
received by Andersen Consulting as stated in the Wall Street Journal, New York
edition. All payments will be reduced by any applicable withholding taxes.
Andersen Consulting and PR will cooperate to minimize, to the extent legally
permissible, the tax liabilities related to the transactions contemplated by
this Agreement; provided such cooperation shall not cause any adverse tax
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consequences to be incurred by either party which would not have been incurred
under the terms and conditions as described in this Agreement. Each party shall
provide and make available to the other party any resale certificates,
information regarding out-of-state or out-of-country sales, and other exemption
certificates or information reasonably requested by the other party.
4.3 REPORTS. PR, when accounting for sales of Products and Product
Revenue, shall maintain records in accordance with Generally Accepted Accounting
Principles, as specified by the American Institute of Certified Public Accounts,
consistently applied, sufficient to determine sales revenue and marketing
assistance fees relating to sales of Products to Registered Prospects. Within
forty-five (45) days following each March 31, June 30, September 30 and December
31, PR shall provide Andersen Consulting with a report including at least (a)
the quantity of Products sold to Registered Prospects during the preceding
quarter; (b) the monetary amount, in the applicable national currency, of such
sales; (c) actual Product Revenue, by country; (d) the currency conversion rate
used and U.S. dollar-equivalent of such sales (for sales made in currency other
than U.S. dollars); (e) the calculation of marketing assistance fees thereon;
and (f) the marketing assistance fees so computed and due Andersen Consulting.
Such reports shall be submitted whether or not any sales of Products have been
made during such period. Upon delivery of the report due for the period ending
December 31 of each year, PR shall also report the aggregate sales and aggregate
marketing assistance fees due Andersen Consulting for the entire preceding year.
4.4 AUDITS. Andersen Consulting shall have the right, not more than once
in any twelve (12)-month period, to have PR's relevant books and records audited
by an independent certified public accountant of Andersen Consulting's choosing
and reasonably acceptable to PR, to ascertain the accuracy of the reports under
Section 4.3. All such audits shall be scheduled within thirty (30) days
following delivery of notice by Andersen Consulting, and conducted during PR's
normal business hours, in a manner that does not unreasonably interfere with
PR's normal business activities. If any audit discloses underreporting of sales
of Products to Registered Prospects or underpayment of marketing assistance
fees, PR shall promptly amend the report with respect to aggregate sales of
Registered users and pay Andersen the marketing assistance fees due, as
applicable. Andersen Consulting shall be responsible for all expenses it incurs
in connection with any audit; provided, that if any audit determines that the
reported sales of Products to Registered Prospects or the reported Product
Revenue was less than the actual sales of Products or Product Revenue for the
period in question, the actual out-of-pocket cost of such audit shall be borne
by PR. Andersen Consulting will hold in confidence, and will require any
certified public accountant it retains to perform an audit to hold in
confidence, all information learned in the course of any audit, except to the
extent necessary for Andersen Consulting to enforce its rights under this
Agreement.
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5. CONFIDENTIALITY; PROPRIETARY RIGHTS; LICENSES
5.1. PUBLICITY. (a) Except as is necessary to comply with applicable
laws and regulations or to enforce their respective rights under this Agreement,
or to a party's legal or financial advisors, and except as otherwise agreed to
by the parties in writing, the parties shall: (i) keep the material terms of
this Agreement confidential, (ii) agree upon the text and the exact timing of an
initial public announcement relating to the transactions contemplated by this
Agreement as soon as possible after the Effective Date (such agreement not to be
unreasonably withheld or delayed) and (iii) agree on the text and the timing of
any subsequent public announcements regarding this Agreement or the transactions
contemplated herein. If this Agreement is required to be filed by PR with the
Securities and Exchange Commission, PR shall not file this Agreement with the
Securities and Exchange Commission without first notifying Andersen Consulting
and seeking confidential treatment for any provisions of this Agreement that
Andersen Consulting believes would disclose trade secrets, confidential
commercial or financial information that would impair the value of the
contractual rights represented by this Agreement or provide detailed commercial
and financial information to competitors or third parties.
(b) Except as otherwise provided in Section 5.6, neither party shall use
the name of the other party or any director, officer or employee of the other
party or any adaptation thereof without the prior written approval of the other
party; provided that: (i) Andersen Consulting shall have the right to inform its
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customers and prospective customers of its designation as a Global Reseller of
the Products and its relationship with PR as a marketer and reseller of the
Products as set forth in this Agreement and (ii) subject to approval of the text
of any promotional material(s) or disclosures by Andersen Consulting, PR shall
have the right to promote Andersen Consulting as its Preferred Business
Integration Services provider in its marketing collateral and in customer
presentations (including press tours, industry analyst visits, production of
vision presentations, white papers, speaking engagements, executive events,
trade shows, demonstration center exhibits, marketing brochures, and product
demonstration script/scenario development).
5.2 CONFIDENTIALITY. (a) It is contemplated that in the course of the
performance of this Agreement each party may, from time to time, disclose
Confidential Information to the other. Each party agrees to take all reasonable
steps to prevent disclosure of Confidential Information and not to use any
Confidential Information except for the limited purposes set forth in this
Agreement.
(b) All Confidential Information made available hereunder, including
copies thereof, shall be returned or destroyed upon the first to occur of (a)
termination of this Agreement or (b) written request by the discloser.
(c) In the event either party receives a Requests for Proposals (RFP) from
any client or prospective client under circumstances permitting it to share such
RFP with the other party to this Agreement, then such RFP will be treated as
Confidential Information for purposes of this Agreement.
5.3 PROPRIETARY RIGHTS; WORK PRODUCT; ETC. (a) This Agreement does not
convey to Andersen Consulting any ownership rights in any Products or in any
intellectual property rights embodied in such Products by implication, estoppel
or otherwise except for the license rights expressly granted under this
Agreement. Title to the Products and the intellectual property rights embodied
in the Products shall at all times remain vested in PR or its licensors.
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(b) This Agreement does not convey to PR any ownership rights in any
products, materials, tools and methodologies that are proprietary to Andersen
Consulting or to its licensors or in any intellectual property rights embodied
in such products, materials, tools and methodologies by implication, estoppel or
otherwise except for the rights expressly granted under this Agreement. Title
to all such products, materials, tools and methodologies and the intellectual
property rights embodied in such products, materials, tools and methodologies
shall at all times remain vested in Andersen Consulting or its licensors.
Andersen Consulting may, at its discretion, license such products, materials,
tools and methodologies and the intellectual property rights embodied in such
products, materials, tools and methodologies to Clients under a separate license
agreement.
(c) In the course of performing Business Integration Services for Clients
pursuant to this Agreement, Andersen Consulting may develop new products,
materials, tools and methodologies that operate with, or link to, the Products
and may make modifications or enhancements to its existing products, materials,
tools and methodologies (collectively, WORK PRODUCT). The foregoing does not in
any way, however, grant Andersen Consulting the right to modify, enhance or
create derivative works of the Product; any right to modify, enhance or create
derivative works must be the subject of a separate written agreement between the
parties. Andersen Consulting or the applicable Client, as agreed upon between
such parties, will own any Work Product which is linked, combined or otherwise
operated with the Products. PR shall have or obtain no rights in such Work
Product other than (i) to use them as authorized by Andersen Consulting in
writing from time to time solely for purposes of performing PR's
responsibilities pursuant to an agreement for a particular Client, or (ii)
pursuant to Andersen Consulting's standard license for such Work Product. If
Work Product is made available to PR under Section 5.3(c)(i), it will be made
available in an "AS IS" condition and without express or implied warranties of
any kind.
(d) Subject to the terms hereof, including the confidentiality provisions
of Section 5, in no event shall Andersen Consulting be precluded from
independently developing for itself, or for others, materials which are
competitive with the Products. In addition, Andersen Consulting shall be free to
use its general knowledge, skills and experience, and any ideas, concepts, know-
how, and techniques within the scope of its consulting practice that are used in
the course of providing services to Clients pursuant to this Agreement.
5.4 JOINT DEVELOPMENT OF PRODUCT. PR will not (a) offer or negotiate with
any third party commercial enterprise that engages in software development
projects (excluding individuals or small businesses with whom PR regularly
contracts for such work) (THIRD PARTY DEVELOPMENT FIRM) to have such Third Party
Development Firm design, develop, implement or integrate any modifications,
extensions or interfaces to the Products, or (b) enter into any other form of
collaboration with any Third Party Development Firm for the design, development,
implementation or integration of any modifications, extensions or interfaces
relating to the Products, unless PR shall first offer such opportunity to
Andersen Consulting. For purposes of offering Andersen Consulting any such
opportunity, PR shall notify Andersen Consulting of the opportunity, including
sufficient detail to permit Andersen Consulting to evaluate its interest in the
opportunity, and Andersen Consulting shall meet with PR as soon as possible, but
no later than fifteen (15) business days following such notice to discuss the
technical features of the opportunity. Andersen Consulting shall notify PR
within thirty (30) business ) business days following PR's initial notice of its
interest (or lack of interest) in pursuing such opportunity. If Andersen
Consulting indicates that it wishes to pursue such opportunity, then the parties
shall within ten(10) business days following Andersen Consulting's notice engage
in good faith negotiation of terms for a development and/or integration
agreement which shall be in substantially the form attached hereto as
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Attachment E. If the Parties cannot negotiate mutually acceptable terms for an
agreement within thirty (30) business days from the commencement of
negotiations period, then PR may negotiate with a third party concerning such
opportunity; provided, however, that any such agreement shall contain terms
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that in the aggregate are no more favorable to such third party than those
offered to Andersen Consulting. If PR wishes to offer such opportunity to a
third party on terms that in the aggregate are more favorable than those
offered to Andersen Consulting, PR shall first notify Andersen Consulting and
provide it a period of ten (10) business days to consider such improved terms.
The parties agree that this Section 5.4 shall under no circumstances restrict or
limit PR's right to develop any software using its own resources or personnel.
5.5 ENABLING LICENSES. (a) PR hereby grants to Andersen Consulting a
worldwide, paid-up and royalty-free license during the term of this Agreement to
(i) demonstrate and display the Products, alone or in conjunction with third
party products, in object code form to potential Clients and Andersen Consulting
personnel (including but not limited to activities performed at exhibits and
Andersen Consulting demonstration centers) and (ii) use up to ten (10) copies of
the Products internally, in object code form to (1) develop and demonstrate
proof-of-concepts, implementation methodology, and implementation aides relating
to the Products; (2) train Andersen Consulting personnel; and (3) provide
Business Integration Services to Clients who have a license from PR for the
Products. Andersen Consulting shall provide PR with a copy of all
implementation methodology, aids, etc. and other tools or processes that are
used in conjunction with the Products for PR's review and comment prior to their
release.
(b) Andersen Consulting, its Affiliates shall not (i) copy or reproduce
the Products except as necessary to demonstrate and use internally the Products,
as allowed under this Agreement; (ii) copy the Product documentation except as
necessary to perform its obligations under this Agreement; (iii) translate,
adapt, vary or modify the Products; (iv) disassemble, decompile or reverse
engineer the Products or create any derivative works based thereon; (v)
sublicense, lease, distribute or enter into any time share or service bureau
arrangement with respect to the Products; (vi) make more than one (1) copy of
the Products for back-up purposes, which must be stored in a secure place and be
clearly marked; and (vii) permit use of the Products other than by its own
authorized employees. It is understood and agreed that the limitations imposed
under this Section 5.5(b) shall not restrict Andersen Consulting from producing
Work Product in accordance with Section 5.3.
(c) PR will provide Andersen Consulting at no charge with PR's standard
maintenance and technical support services for the Products licensed under this
Section 5.5 (including installation support).
(d) PR will provide Andersen Consulting at no charge any updates and
upgrades it makes to the Products that PR makes available to its Clients
receiving maintenance or support services. PR will also provide Andersen
Consulting at no charge any new releases it makes for the Products. All such
Improvements shall be considered "Products" for all purposes hereunder. PR
shall use reasonable efforts to deliver updates and upgrades to Andersen
Consulting not later than the date it initially releases such updates and
upgrades to Clients.
(e) Where reasonably possible, PR will provide Andersen Consulting at no
charge with advanced releases of all new versions of the Products (Beta
versions) within the context of PR's Beta testing program. Andersen Consulting
will use such advanced releases
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of the Products only for internal training and demonstration unless PR provides
prior written approval for external use of such advanced releases.
5.6 TRADEMARK LICENSE. (a) Subject to Andersen Consulting's compliance
with this Agreement, PR hereby grants to Andersen Consulting a fully paid up and
royalty-free right and license to use the Trademarks in connection with the
promotion and marketing of the Products during the term of this Agreement. All
right, title and interest to the Trademarks, and all goodwill therein, shall
remain with PR and no other license relating thereto is granted hereunder. PR
shall have no obligation to maintain or file for trademark protection in any
given jurisdiction.
(b) Subject to the wind-down rights set forth in Section 9.3, upon any
expiration or termination of this Agreement, the license to Andersen Consulting
to use the Trademarks shall terminate, and Andersen Consulting shall take all
necessary action and execute and deliver to PR all necessary documents and
instruments to remove Andersen Consulting as a registered user and/or a recorded
licensee of the Trademarks.
(c) Each party hereto agrees to notify the other in writing promptly
(but not later than thirty (30) business days) after obtaining knowledge of any
infringements or imitations of the Trademarks by third parties.
(d) PR reserves the right to modify or abandon the Trademarks or
substitute alternative marks for any or all of the Trademarks at any time
provided, that Andersen Consulting shall not be required to incur any expense to
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re-mark or otherwise modify packaging or sales collateral to adopt such
modified, substituted or alternative marks but shall implement such marks in a
commercially reasonable manner consistent with the depletion of then existing
inventory and sales collateral, but in no event shall Andersen Consulting
display or distribute obsolete marks later than sixty (60) business days after
notice from PR.
(e) No later than thirty (30) business days prior to anticipated release,
Andersen Consulting shall provide PR with a sample of all product packaging and
advertising that makes use of the Trademarks for purposes of permitting PR to
verify that Andersen Consulting's use of the Trademarks is consistent with the
provisions of Attachment C. Andersen Consulting shall not challenge, directly
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or indirectly, PR's rights in respect of the Trademarks, nor shall it register
any trademark, logo, mark or name that is confusingly similar therewith, as a
trademark, trade name, corporate name or domain name in any jurisdiction
provided, that Andersen Consulting shall not waive its rights with respect to
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existing trademarks owned by Andersen Consulting or trademarks that Andersen
Consulting acquires during the term of this Agreement, and Andersen Consulting
shall not waive any rights with respect to the protection of its trademarks.
Andersen Consulting shall comply with the Trademark guidelines set forth in
Attachment C. Andersen Consulting shall not adopt other marks for use in the
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promotion, marketing and sale of the Products without the prior written
consent of PR, which consent shall not be given unless PR jointly owns such
marks.
6. ANDERSEN CONSULTING'S MARKETING OBLIGATIONS.
6.1 JOINT MARKETING FUNDING. Andersen Consulting will provide an
aggregate $1 Million in funding to support targeted industry seminars and
educational events that feature the Products as determined by the ASC. Andersen
Consulting's obligation to provide funding under this Section 6.1 is subject to
and shall accrue upon Andersen Consulting's prior receipt of a corresponding
amount of revenue pursuant to Section 2.3 of this Agreement, in the form of
reseller discounts or marketing assistance fees.
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6.2 BUSINESS DEVELOPMENT STAFFING. Andersen Consulting will appoint two
(2) full-time Business Development Directors for the Products: one based in
Europe and one based in the United States. Said Business Development Directors
shall be responsible for (a) building awareness and acceptance of the Products
within Andersen Consulting and its Affiliates and (b) coordinating joint
marketing and sales efforts pursuant to this Agreement.
6.3 PRODUCT FEEDBACK; SALES TOOLS. Andersen Consulting will provide PR
with guidance and field feedback from Andersen Consulting staff concerning the
Products and PR's software development plans at monthly feedback meetings
organized by the ASC. Such feedback shall be focused on: (a) core architecture
review and enhancements; (b) real time integration capabilities to web and call
center functions; and (c) integration of the Products with analytical tools.
Andersen Consulting will develop return on investment models that demonstrate
the benefit of marketing automation to be used in joint sales efforts according
to a schedule developed by the ASC.
6.4 SALES SUPPORT. Andersen Consulting shall, and shall cause its
Affiliates to, devote commercially reasonable efforts to promote the Products to
appropriate Clients and prospective Clients and the acceptance of the Products
by such Clients and prospective Clients. Andersen Consulting's promotion and
sales efforts shall include the following general activities performed in the
manner dictated by the reasonable business judgment of Andersen Consulting: (a)
considering the Products as a component of any CRM-related offering or venture
it proposes for its customers; (b) considering, as the relationship between PR
and Andersen Consulting progresses, expanding the scope of this Agreement to
include development of industry vertical solutions incorporating the Products;
(c) considering, on a case-by-case basis, speaking at private invitation
conferences and seminars with PR; (d) targeting early engagements that include
the Products to develop case studies and return on investment models, and
customer testimonials to be leveraged in joint marketing efforts incorporating
the Products; (e) tailoring and extending Andersen Consulting's existing
methodologies to reflect the nuances of marketing automation and PR Products;
and (f) otherwise conducting such activities as are reasonably appropriate for
the marketing and sale of the Products. Notwithstanding any provision of this
Agreement to the contrary, Andersen Consulting shall promote the Products using
only the information and sales material provided by PR pursuant to Section 7.3,
and Andersen Consulting shall make no statement or representation regarding the
operation, capabilities or performance of the Products except as stated by PR in
such written materials. Except as set forth herein, it is understood and agreed
that Andersen Consulting will have no obligation to establish or maintain a
formal sales organization or marketing program related to this Agreement.
6.5 PRODUCT TRAINING. Andersen Consulting shall put twenty (20) of its
consulting personnel through PR training concerning the Products. Such training
shall be provided in accordance with Section 7.6 and scheduled by mutual
agreement of the parties.
7. PR'S OTHER OBLIGATIONS.
7.1 THIS SECTION INTENTIONALLY OMITTED.
7.2 BUSINESS DEVELOPMENT STAFFING. PR will appoint one (1) full-time
Alliance Relationship Manager. Said Alliance Relationship Manager shall be
responsible for (a) building awareness and acceptance of the Business
Integration Services within PR and (b) coordinating joint marketing and sales
efforts pursuant to this Agreement.
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7.3 SALES COLLATERAL. (a) PR shall furnish at no cost to Andersen
Consulting reasonable quantities of promotional materials, such as sales
literature, technical data, instruction manuals and technical journal reprints
(the PRODUCT INFORMATION)in order for Andersen Consulting to promote the
Products as provided for in this Agreement. PR shall supply Andersen Consulting
with Product Information in electronic and paper format. Except as otherwise
agreed by the parties, Andersen Consulting may use such Product Information
without any limitation on disclosure. In any event, PR hereby grants Andersen
Consulting permission to disclose certain Product Information to be designated
and furnished by PR to Clients without the requirement for non-disclosure
agreements. PR may require a Client to enter into a nondisclosure agreement
with PR to protect its Confidential Information after a sales opportunity is
qualified and reaches a detailed discussion stage. PR shall control the release
of its Confidential Information to prospective Clients and will be responsible
for putting in place such nondisclosure agreements with prospective Clients. PR
will use reasonable efforts to ensure that the Product Information as provided
to Andersen Consulting shall be accurate in all material respects when provided,
and PR undertakes to update such Product Information when necessary.
(b) PR will provide Andersen Consulting with its current form(s) of license
agreements and maintenance agreements. The current versions of such materials
are attached as Attachment D to this Agreement. PR will provide Andersen
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Consulting with any revisions or updates to such materials and shall provide
additional copies of such materials upon request of Andersen Consulting.
7.4 SALES SUPPORT. PR shall devote commercially reasonable efforts to
support Andersen Consulting's promotion and sales efforts, including the
following general activities: (a) supplying experts to support detailed
technical presentations and meetings relating to the Products; (b) providing
quotations for standard and custom configurations for the Products; and (c)
responding to phone calls from prospective Clients.
7.5 SALES INCENTIVES. PR shall create an incentive structure for the PR
direct sales force that rewards such sales personnel for undertaking and closing
joint engagements as contemplated by this Agreement. Specifically, PR will
implement a sales reward structure that provides the PR sales force with
financial incentives for closing sales with Registered Prospects and Clients
that purchase PR Products and Andersen Consulting services as a combined
solution that are greater than any other PR reward program for its sales force.
7.6 TRAINING; TECHNICAL ASSISTANCE. (a) PR will provide Andersen
Consulting at no charge with a total of at one hundred sixty (160) hours of
training services covering the Products for up to twenty (20) Andersen
Consulting personnel. PR shall also provide Andersen Consulting at no charge
with a reasonable level of update or "delta" training for each major release of
the Products for up to twenty (20) Andersen Consulting personnel; such update
training to be provided in a timely manner to enable Andersen Consulting to
remain current with all Improvements. Training will be performed at a PR
facility. PR will provide Andersen Consulting personnel with written
educational materials as part of the training program and will ensure that
Andersen Consulting personnel are afforded the opportunity to discuss with PR
trainers the operation of the Products. Andersen Consulting may use (but not
copy) PR training materials for purposes of training additional Andersen
Consulting personnel after the initial training. PR will make additional copies
of training materials available to Andersen Consulting at its standard rates.
In the event that Andersen Consulting requests that PR deliver training at a
site other than a PR training facility, Andersen Consulting agrees to reimburse
PR for travel and living expenses based on PR's
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standard internal expense policies. PR shall provide a copy of such expense
policy upon request by Andersen Consulting.
(b) PR shall provide to Andersen Consulting upon request such technical
assistance and/or additional training as Andersen Consulting may reasonably
request to enable Andersen Consulting to more effectively market, sell, and
distribute the Products, and enable Andersen Consulting to install, operate and
use the Products effectively (and train Clients to do so). PR shall also
provide to Andersen Consulting any service or other support information that
would assist Andersen Consulting in marketing the Products. Such technical
assistance or additional training shall be provided at a discount of 30% off of
PR's normal rates for such services.
8. REPRESENTATIONS AND WARRANTIES.
8.1 AUTHORIZATION; ENFORCEABILITY. Each of PR and Andersen Consulting
represent and warrant to the other that: (a) it is duly organized, validly
existing and in good standing under the laws of its incorporating jurisdiction;
(b) it has all requisite corporate power and authority to enter into this
Agreement; (c) it is duly authorized to execute and deliver this Agreement and
to perform its obligations hereunder and consummate the transactions
contemplated hereby; and (d) this Agreement is a valid and binding obligation of
such party enforceable in accordance with its terms.
8.2 PRODUCT WARRANTY. (a) PR represents and warrants to Andersen
Consulting that owns or has valid licenses to all copyrights, patents, trade
secrets, trademarks, and other proprietary or intellectual property rights
relating to the Products and has the right to grant to Andersen Consulting the
rights and licenses purported to be granted by or pursuant to this Agreement,
and has all other rights necessary for the performance of its obligations under
this Agreement.
(b) PR represents and warrants to Andersen Consulting that there have been
no claims filed against PR alleging that the Products infringe a third party's
intellectual property rights.
(c) PR represents and warrants to Andersen Consulting that to its
knowledge there are no products liability or other claims pending or any alleged
problem or defect in any of the Products.
8.3 CLIENT WARRANTIES. (a) PR shall extend to each Client that enters into
an agreement to acquire Products pursuant to this Agreement, the warranties and
indemnification for its Products and services that it generally extends to its
Clients.
(b) PR will offer each Client that enters into an agreement to acquire
Products pursuant to this Agreement, the software maintenance, technical
support and training services that PR generally offers to its Clients.
(c) It is understood and agreed that, as between the parties, PR shall
remain solely responsible to Clients for the performance and good working order
of the Products and the performance of its services. Andersen Consulting is not
responsible for the performance of PR's Products or services, and PR is not
responsible for the performance of Andersen Consulting's products or services.
(d) PR represents and warrants that it will provide each of the Clients
that licenses the Product pursuant to this Agreement with the following warranty
concerning millenium
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compliance: "During the period ending at midnight on June 30, 1999, the Product,
when used properly in accordance with its documentation, is capable of correctly
receiving, processing and providing date data without regard to whether any date
involved in the operation occurs in the 20th or 21st Century and without regard
to the system date at the time the calculation is performed; provided that all
applications, hardware and other systems used in conjunction with the Product
correctly exchange date data with or provide data to the Product and that the
most current and an unaltered version of the Product is being used (Y2K
COMPLIANT). The foregoing warranty shall not apply if any failure of the Product
to be Y2K Compliant results from its interaction with applications, hardware or
other systems not supplied by PR. PR represents and warrants that the Product
does not embody a "windowing" approach to resolve issues concerning the correct
performance of date related operations".
9. RISK ALLOCATION
9.1 LIMITATION OF LIABILITY. EXCEPT FOR INFRINGEMENT OF THE OTHER PARTY'S
INTELLECTUAL PROPERTY RIGHTS OR BREACH OF CONFIDENTIALITY OBLIGATIONS UNDER
SECTION 5.2 AND EXCEPT AS OTHERWISE PROVIDED IN SECTION 9.2 WITH RESPECT TO
THIRD PARTY CLAIMS, THE AGGREGATE LIABILITY OF EITHER PARTY FOR DIRECT DAMAGES
ARISING OUT OF THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE
LIMITED TO THE AGGREGATE AMOUNT OF $[1,000,000]. IN NO EVENT SHALL EITHER PARTY
BE LIABLE TO THE OTHER FOR LOST PROFITS OR SAVINGS OR FOR ANY INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES IN CONNECTION
WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, HOWEVER
CAUSED, UNDER ANY THEORY OF LIABILITY.
9.2. INFRINGEMENT INDEMNIFICATION. (a) Subject to the provisions of Section
9.4, PR shall defend, indemnify and hold harmless Andersen Consulting, its
subsidiaries, parent corporations, Affiliates, officers, directors, independent
contractors, partners, shareholders, employees, agents, successors and assigns
from and against any claim, suit, demand, loss, damage, expense (including
reasonable attorney's fees of indemnitee(s) and those that may be asserted by a
third party) or liability (collectively, LOSSES) arising from or related to an
allegation by any third party (including any Client) that the Products
(including any Improvements) provided by PR to Andersen Consulting pursuant to
this Agreement infringe or misappropriate any intellectual property right of any
third party (including without limitation, any United States patent, copyright,
trade secret or trademark).
(b) Subject to the provisions of Section 9.4, Andersen Consulting shall
defend, indemnify and hold harmless PR, its subsidiaries, parent corporations,
Affiliates, officers, directors, independent contractors, partners,
shareholders, employees, agents, successors and assigns from and against any
Losses arising from or related to an allegation that any
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Business Integration Services of Andersen Consulting (or the offering or
performance thereof) infringe or misappropriate any intellectual property right
of any third party (including without limitation, any United States patent,
copyright, trade secret or trademark).
In addition to its obligations under Section 9.2(a), if any Product licensed to
Andersen Consulting hereunder is held to constitute an infringement or
misappropriation of any third party's intellectual property rights or if in PR's
opinion, any Product is, or is likely to be held to constitute, an infringement
or misappropriation, PR may at its expense and option: (i) procure the right
for Andersen Consulting to continue using the Product; (ii) replace each copy of
the Product in Andersen Consulting's inventory for resale to a Client and each
copy of the Product licensed by Andersen Consulting for use pursuant to Section
5.5 with a non-infringing and non-misappropriating substantially equivalent
product; or (iii) modify the Product to make it non-infringing and non-
misappropriating while conforming to the Product Specifications or if (i), (ii)
and (iii) are not reasonably practical, PR will (iv) terminate the applicable
license and require the return of the infringing Product and refund to Andersen
Consulting the purchase price of such Products.
9.3 OTHER CLAIMS. (a) Subject to the provisions of Section 9.4, each of
PR and Andersen Consulting (each, an INDEMNIFYING PARTY) will defend, indemnify
and hold harmless the other party, its subsidiaries, parent corporations,
affiliates, officers, directors, partners, shareholders, employees, agents, and
their successors and assigns (collectively, the INDEMNITEES) from and against
any Losses imposed upon the Indemnitee(s) by any third party arising from or
related to personal injury or property damage which is proximately caused by any
negligence or intentional misconduct by such Indemnifying Party (or its
employees, agents or representatives) in performing its obligations under this
Agreement. The foregoing indemnification action shall not apply in the event
and to the extent that a court of competent jurisdiction determines that such
Losses arose as a result of any Indemnitee's negligence, intentional misconduct
or breach of this Agreement.
(b) Subject to the provisions of Section 9.4, each party (as an
Indemnifying Party) will defend, indemnify and hold harmless the other party and
its Indemnitees from and against any Losses imposed upon the Indemnitee(s) by
any employee, agent or representative of the Indemnifying Party or its
Affiliates under any applicable termination. labor, social security or other
similar laws or regulations and arising from or related to the transactions
contemplated by this Agreement.
9.4 PROCEDURE. To receive the benefit of indemnification under 9.2 or 9.3,
the party seeking indemnification must promptly notify the other party in
writing of a claim or suit and provide reasonable cooperation (at the
Indemnifying Party's expense) and tender to the Indemnifying Party (and its
insurer) full authority to defend or settle the claim or suit. Neither party
has any obligation to indemnify the other party in connection with any
settlement made without the Indemnifying Party's written consent. The
Indemnitee has the right to participate at its own expense in the claim or suit
and in selecting counsel therefor. The Indemnitee shall cooperate with
Indemnifying Party (and its insurer), as reasonably requested, at Indemnifying
Party's sole cost and expense.
9.5 INSURANCE. Each party shall procure and maintain insurance or self-
insurance, including product liability insurance, adequate to cover its
obligations hereunder and which are consistent with normal business practices of
prudent companies similarly situated. It is understood that such insurance
shall not be construed to create a limit of either party's liability with
respect to its indemnification obligations under this Section 9. Each party
shall
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provide the other with written evidence of such insurance (or financial
information that describes the amounts available under any self-insurance
facility) upon request. Each party shall provide the other with written notice
at least fifteen (15) business days prior to the cancellation, non-renewal or
material change in such insurance or self-insurance which materially adversely
affects the rights of the other party hereunder. If such party does not obtain
replacement insurance or take other measures that allow it to provide comparable
coverage within such 15-day period, the other party shall have the right to
terminate this Agreement effective at the end of such fifteen (15) day period
without notice or any additional waiting periods.
10. TERM AND TERMINATION.
10.1 TERM. This Agreement shall take effect as the Effective Date and
shall remain in effect until the fourth anniversary of the Effective Date,
unless sooner terminated in accordance with Section 10.2 or extended in
accordance with this Section 10.1. Not later than three (3) months prior to the
fourth anniversary of the Effective Date, the parties shall confer regarding
renewal of this Agreement for an additional term. If the parties agree to
renew this Agreement the terms of this Agreement shall remain in effect during
the renewal term, unless expressly amended by mutual agreement of the parties.
10.2 TERMINATION. (a) Either party may terminate this Agreement at any
time upon sixty (60) business days notice to the other party in the event that
the other party shall have breached any of its material obligations hereunder
and shall not have cured such breach prior to the expiration of the sixty (60)-
day period. In addition, either party shall have the right to terminate this
Agreement upon thirty (30) business days notice if a Force Majeure condition has
prevented performance by the other party for more than one hundred twenty (120)
consecutive days. The parties may also terminate this Agreement at any time
upon mutual written agreement of the parties.
(b) Andersen Consulting shall have the right to terminate this Agreement
upon thirty (30) days notice to PR following the closing of any transaction in
which a third party acquires control of PR by means of a merger or acquisition
of PR's capital stock. For purposes of this Section 10.2(b) "control" has the
meaning ascribed to it under the definition of Affiliate.
10.3 EFFECT OF TERMINATION. (a) Upon termination (including expiration) of
this Agreement:
(i) PR and Andersen Consulting will terminate all tasks for all
affected Client projects being performed pursuant to Section 2.3 in an
orderly manner, as soon as practical or in accordance with a schedule
agreed to by Andersen Consulting and PR to minimize disruption to Clients;
(ii) each party shall return to the other party or certify in writing
to the other party that it has destroyed all documents and other tangible
items it or its employees or agents have received or created pertaining,
referring or relating to the Confidential Information of the other party;
(iii) (1) Andersen Consulting and its Affiliates shall discontinue
making any representation regarding its status as a "Global Reseller" or
"Preferred Business Integration Services Provider" for the Products and
shall cease conducting any activities with respect to the marketing,
promotion, sale or distribution of the Products; and (2) PR shall
discontinue making any representation regarding its status
18
<PAGE>
as a "Preferred EAI Technology Provider" for offerings that embody CRM
functionality;
(iv) Each party and its Affiliates will discontinue any and all use of
trade names and/or trademarks authorized for use under this Agreement,
except as necessary to fulfill its obligations to Clients in accordance
with this Section 10.3;
(v) Andersen Consulting will discontinue any and all use of the
licenses granted under Section 5.5; and
(vi) each party will return to the other party or certify in writing
to the other party that it has destroyed all documents and other tangible
items it or its employees or agents have received or created pursuant to
this Agreement pertaining, referring or relating to the Confidential
Information of the other party, except that each party may retain one (1)
complete copy of Confidential Information (1) for use in accordance with
Sections 10.3(a)(i) and (2) for archival purposes to assure compliance with
this Agreement.
(b) Termination of this Agreement by either party for any reason shall not
affect the rights and obligations of the parties that accrued prior to the
effective date of termination of this Agreement or release either party from
obligations to resell or license Products made prior to the date of termination,
or affect existing licenses or purchase orders for the Products.
Notwithstanding any provision of this Agreement to the contrary, each party may
continue to exercise the rights and licenses granted hereunder to the extent
necessary to allow such party to fulfill its obligations under existing
engagement agreements or included in any proposal to a Client that was
outstanding at the time of termination.
(c) The provisions of Sections 5.1-5.3, 5.5-5.6, 7.6(a), 8, 9, 10 and 11
shall survive any expiration or termination of this Agreement (except that
Sections 5.5-5.6 and 7.6(a) may subsequently terminate in accordance with the
provisions of Section 10.3(a)-(b)).
(d) In the event of a termination or upon expiration of this Agreement in
accordance with this Section 10, neither party shall have any obligation to the
other party or any of its Affiliates, or to any of their employees for
compensation or for damages of any kind, whether on account of the loss by such
party or any of its Affiliates or their employees of present or prospective
sales, investments, compensation or goodwill. Each party and its Affiliates,
for theirselves and on behalf of each of their employees, hereby waives any
rights which may be granted to them under the laws and regulations of state, any
province, county, district or similar political entity world wide or otherwise
which are not granted to it or them by this Agreement.
11. GENERAL PROVISIONS.
11.1 ISSUE RESOLUTION. In the event that any dispute arises relating to
this Agreement, the Representatives shall promptly meet and attempt to resolve
same through good faith discussions. If the Representatives are unable to
resolve any dispute to their mutual satisfaction within thirty (30) business
days after they commence discussions regarding same, and do not agree to extend
the time for resolution of the issue at the end of their meeting, then they may
by mutual agreement: (a) escalate the matter to higher levels in their
organizations and, (b) if necessary, resort to a mutually agreed alternative
dispute resolution technique prior to resorting to litigation.
19
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11.2 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Massachusetts excluding its
rules on conflicts of laws.
11.3 THIS SECTION INTENTIONALLY OMITTED.
11.4 AMENDMENT AND WAIVER. No provision of or right under this Agreement
shall be deemed to have been waived by any act or acquiescence on the part of
either party, its agents or employees, but only by an instrument in writing
signed by an authorized officer of each party. No waiver by either party of any
breach of this Agreement by the other party shall be effective as to any other
breach, whether of the same or any other term or condition and whether occurring
before or after the date of such waiver.
11.5 INDEPENDENT CONTRACTORS. Each party represents that it is acting on
its own behalf as an independent contractor and is not acting as an agent for or
on behalf of any third party. This Agreement and the relations hereby
established by and between PR and Andersen Consulting do not constitute a
partnership, joint venture, franchise, agency or contract of employment.
Neither party is granted, and neither party shall exercise, the right or
authority to assume or create any obligation or responsibility on behalf of or
in the name of the other party or its Affiliates.
11.6 ASSIGNMENT. Neither party may assign its rights or obligations
hereunder without the prior written consent of the other party, which consent
shall not be unreasonably withheld in the case of any assignment; provided that
the proposed assignee under this Section 11.6 agrees in writing to assume all of
the obligations of the assignor party under this Agreement.
11.7 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
11.8 NOTICES. Unless otherwise provided herein, any notice, report,
payment or document to be given by one party to the other shall be in writing
and shall be deemed given when delivered personally or mailed by certified or
registered mail, postage prepaid (such mailed notice to be effective on the date
which is three (3) business days after the date of mailing), or sent by
nationally recognized overnight courier (such notice sent by courier to be
effective one business day after it is deposited with such courier), or sent by
telefax (such notice sent by telefax to be effective when sent, if confirmed by
certified or registered mail or overnight courier as aforesaid):
If to PR:
Prime Response Group, Inc.
150 CambridgePark Drive
Cambridge, MA 02140
Phone: 617-876-8300
Fax: 617-876-8383
If to Andersen Consulting:
Andersen Consulting LLP
333 South Seventh Street
Minneapolis, MN 55402
Attn: J. Patrick O'Halloran
20
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Phone: 612.277.0000
Fax: 612.277.1010
Copy to:
Andersen Consulting LLP
1661 Page Mill Road
Palo Alto, CA 94304
Attn: General Counsel
Phone: 650.213.2136
Fax: 650.213.2222
or to such other place as any party may designate as to itself by written notice
to the other party.
11.9 SEVERABILITY. In the event any provision of this Agreement shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other term or
provision hereof. The parties agree that they will negotiate in good faith or
will permit a court or arbitrator to replace any provision hereof so held
invalid, illegal or unenforceable with a valid provision which is as similar as
possible in substance to the invalid, illegal or unenforceable provision.
11.10 CONFLICT OR INCONSISTENCY. In the event of any conflict or
inconsistency between the terms and conditions hereof and any terms or
conditions set forth in the Plan, any purchase order or other document relating
to the transactions contemplated by this Agreement, the terms and conditions set
forth in this Agreement shall prevail.
11.11 CAPTIONS. Captions of the sections and subsections of this
Agreement are for reference purposes only and do not constitute terms or
conditions of this Agreement and shall not limit or affect the meaning or
construction of the terms and conditions hereof.
11.12 WORD MEANINGS. Words such as HEREIN, HEREINAFTER, HEREOF and
HEREUNDER refer to this Agreement as a whole and not merely to a section or
paragraph in which such words appear, unless the context otherwise requires.
The singular shall include the plural, and each masculine, feminine and neuter
reference shall include and refer also to the others, unless the context
otherwise requires.
11.13 ENTIRE AGREEMENT. The terms and provisions contained in this
Agreement (including the Attachments) constitute the entire understanding of the
parties with respect to the transactions and matters contemplated hereby and
supersede all previous communications, representations, agreements and
understandings relating to the subject matter hereof. No representations,
inducements, promises or agreements, whether oral or otherwise, between the
parties not contained in this Agreement or incorporated by reference in this
Agreement shall be of any force or effect. No agreement or understanding
extending this Agreement or varying its terms (including any inconsistent terms
in any purchase order, acknowledgment or similar form) shall be binding upon
either party unless it is in a writing specifically referring to this Agreement
and signed by the duly authorized representative of the applicable party.
11.14 RULES OF CONSTRUCTION. The parties agree that they have
participated equally in the formation of this Agreement and that the language
and terms of this Agreement shall not be construed against either party by
reason of the extent to which such party or its professional advisors
participated in the preparation of this Agreement.
21
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11.15 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. In making proof of this
Agreement, it shall not be necessary to produce or account for more than one
such counterpart.
11.16 FORCE MAJEURE. Except as otherwise provided in this Agreement, in
the event that a delay or failure of a party to comply with any obligation,
other than a payment obligation, created by this Agreement is caused by a Force
Majeure condition, that obligation shall be suspended during the continuance of
the Force Majeure condition.
11.17 FURTHER ASSURANCES. Each party covenants and agrees that,
subsequent to the execution and delivery of this Agreement and without any
additional consideration, it will execute and deliver any further legal
instruments and perform any acts which are or may become reasonably necessary to
effectuate the purposes of this Agreement.
[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
22
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11.18 NON-SOLICITATION. Except as the parties may expressly agree
otherwise in writing, neither party shall solicit, offer work to, employ, or
contract with, whether as a partner, employee or independent contractor,
directly or indirectly, any of the other party's Personnel during their
participation in the activities addressed by this Agreement or during the twelve
(12) months thereafter. For purposes of this Section 11.18, PERSONNEL includes
any Person a party employs as a partner, employee or independent contractor and
with which the other party comes into direct contact in the course of the
transactions contemplated by this Agreement.
BOTH PARTIES REPRESENT THAT THEY HAVE READ THIS AGREEMENT, UNDERSTAND IT, AND
AGREE TO BE BOUND BY THE TERMS AND CONDITIONS STATED HEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized officers, and have duly delivered and
executed this Agreement under seal as of the date first set forth above.
PRIME RESPONSE, INC. ANDERSEN CONSULTING LLP
By: /s/ Frederick H. Phillips By: /s/ J. Patrick O'Halloran
--------------------------------- ---------------------------------
Name: Frederick H. Phillips Name: J. Patrick O'Halloran
------------------------------- -------------------------------
Title: Secretary, Treasurer, Senior Title: Partner
Vice President and Chief ------------------------------
Financial Officer
------------------------------
Date: December 6, 1999 Date: December 6, 1999
------------------------------ ------------------------------
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<PAGE>
Exhibit 10.29
December 6, 1999
Mr. Peter Boni
CEO
Prime Response, Inc.
150 Cambridge Park Dr
Cambridge, MA 02140
Dear Peter:
Over the past few months, our firms have worked toward creating a comprehensive
and robust relationship that we each believe will benefit our respective
businesses. In our discussions, we have outlined an arrangement whereby Prime
Response will commit to purchase a specified minimum level of consulting
services from Andersen Consulting over the course of the next twenty four (24)
months and we will enter into a joint marketing alliance to market Prime
Response's software and Andersen Consulting's integration services.
This letter documents more specifically our agreement with respect to Prime
Response's purchase of consulting services. This agreement is a material part
of our overall transaction which includes a joint marketing alliance and an
equity investment by Andersen Consulting in Prime Response. Prime Response
agrees to pay Andersen Consulting a minimum $1 million to provide consulting
services between the date of this letter and December 31, 2001 (the "Service
Period"). The specifics of scope of work and costs will be documented in
separate arrangements discussed below. These services provided to Prime Response
will be at Andersen's then current standard rates. This letter is a binding
commitment on Prime Response to, on or before December 31, 2001, either arrange
for and pay for $1 million in consulting services, or pay Andersen Consulting
the difference between $1 million and the total consulting fees paid by Prime
Response to Andersen Consulting during the Service Period. If Andersen
Consulting exercises the option to put the shares back to Prime Response this
agreement will terminate.
These services will be performed under the terms of Andersen Consulting's
standard Consulting Services Agreement. A detailed description of the scope of
our services will be contained in arrangement letters to which we will both
agree prior to the commencement of any work. Each arrangement letter will be
subject to the terms of the Consulting Services Agreement.
The kinds of services we would expect to provide under these arrangements
include creation of prototypes and demos for external presentations, development
of training materials and potentially conducts of the training, product testing,
and other activities to
<PAGE>
support Prime Response's product releases. In addition, Prime Response may
determine that we should work on projects related to the development and
deployment of your business capabilities, for example, deployment of business
systems, planning and analysis work related to marketing, deployment of
technology infrastructure to support your business activities, etc. We do not
expect that we would be involved in Prime Response's product development, where
the results of our work would be a material element in a product that Prime
Response sells and licenses.
Again, we are pleased to have this opportunity to work with you on this
important project. If you have any questions please call me at (612) 277-6099.
Sincerely,
/s/ J. Patrick O'Halloran
Andersen Consulting LLP
J. Patrick O'Halloran
Partner
Agreed and accepted:
PRIME RESPONSE, INC.
By: /s/ Peter J. Boni
---------------------------------
Name: Peter J. Boni
-------------------------------
Title: Chief Executive Officer and President
----------------------------------------
Date: 12/6/99
-------------------------------
<PAGE>
Exhibit 10.30
- --------------------------------------------------------------------------------
[LOGO OF GREYROCK CAPITAL APPEARS HERE]
LOAN AND SECURITY AGREEMENT
BORROWER: PRIME RESPONSE, INC.
ADDRESS: 150 CAMBRIDGE PARK DRIVE
CAMBRIDGE, MASSACHUSETTS 02140
DATE: OCTOBER 28, 1999
This Loan and Security Agreement is entered into on the above date between
GREYROCK CAPITAL, a Division of Banc of America Commercial Finance Corporation
("GC"), whose address is 10880 Wilshire Boulevard, Suite 1850, Los Angeles,
California 90024 and the borrower named above ("Borrower"), whose chief
executive office is located at the above address ("Borrower's Address"). Banc
of America Commercial Finance Corporation is hereinafter referred to as "GC".
The Schedule to this Agreement (the "Schedule") being signed concurrently is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 LOANS. GC will make loans to Borrower (the "Loans") up to the amounts
(the "Credit Limit") shown on the Schedule, provided no Default or Event of
Default has occurred and is continuing. If at any time or for any reason the
total of all outstanding Loans and all other Obligations exceeds the Credit
Limit, Borrower shall pay the amount of the excess to GC, without notice or
demand*.
*WITHIN ONE BUSINESS DAY
1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement or in another written agreement signed by GC and
Borrower. Interest shall be payable monthly, on the last day of the month.
Unpaid interest* may, in GC's discretion, be charged to Borrower's loan account,
and the same shall thereafter bear interest at the same rate as the other Loans.
*UNPAID INTEREST
1.3 FEES. Borrower shall pay GC the fee(s) shown on the Schedule, which
are in addition to all interest and other sums payable to GC and are not
refundable.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to GC a security interest in all of
Borrower's interest in the following, whether now owned or hereafter acquired,
and wherever located (collectively, the "Collateral"): All Inventory,
Equipment, Receivables, Investment Property and General Intangibles, including,
without limitation, all of Borrower's Deposit Accounts, all money, all
collateral in which GC is granted a security interest pursuant to any other
present or future agreement, all property now or at any time in the future in
GC's possession, and all proceeds (including proceeds of any insurance policies,
proceeds of letters of credit, proceeds of proceeds and claims against third
parties), all products of the foregoing, and all books and records related to
any of the foregoing. Borrower's payment and performance of all of the
Obligations when due shall be secured also by the Additional Collateral.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce GC to enter into this Agreement and to make Loans,
Borrower represents and warrants to GC as follows, and Borrower covenants that
the following representations will continue to be true,* and that
-1-
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Borrower will at all times comply with all of the following covenants:
*(EXCEPT AS EXPRESSLY PROVIDED BELOW FOR CHANGES PURSUANT TO WRITTEN NOTICE
BY BORROWER TO GC)
3.1 EXISTENCE AND AUTHORITY. Borrower is and will continue to be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Borrower is and will continue to be
qualified and licensed to do business in all jurisdictions in which any failure
to do so would have a material adverse effect on Borrower. The execution,
delivery and performance by Borrower of this Agreement, and all other documents
contemplated hereby (i) have been duly and validly authorized, (ii) are
enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), (iii) do not violate Borrower's articles or certificate of
incorporation or bylaws or any law or any material agreement or instrument which
is binding upon Borrower or its property, and (iv) do not constitute grounds for
acceleration of any material indebtedness or obligation under any material
agreement or instrument which is binding upon Borrower or its property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give GC 30 days prior written notice before changing its name or
doing business under any other name. Borrower has complied, and will in the
future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule*. Borrower will give GC at least 30 days' prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral** other than Borrower's
Address or one of the locations set forth on the Schedule.
*(EXCEPT FOR SALES OFFICES AT WHICH NOT MORE THAN $50,000 OF COLLATERAL IS
LOCATED)
**TO ANY NEW LOCATION NOT PREVIOUSLY REPORTED TO GC
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. GC now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend GC and the Collateral against all claims of
others. So long as any Loan is outstanding which is a term loan, none of the
Collateral now is or will be affixed to any real property in such a manner, or
with such intent, as to become a fixture. Borrower is not and will not become a
lessee under any real property lease pursuant to which the lessor may obtain any
rights in any of the Collateral* and no such lease now prohibits, restrains,
impairs or will prohibit, restrain or impair Borrower's right to remove any
Collateral from the leased premises. Whenever any Collateral is located upon
premises in which any third party has an interest (whether as owner, mortgagee,
beneficiary under a deed of trust, lien or otherwise), Borrower shall, whenever
requested by GC, use its best efforts to cause such third party to execute and
deliver to GC, in form acceptable to GC, such waivers and subordinations as GC
shall specify, so as to ensure that GC's rights in the Collateral are, and will
continue to be, superior to the rights of any such third party. Borrower will
keep in full force and effect, and will comply with all the** terms of, any
lease of real property where any of the Collateral now or in the future may be
located***.
*(UNLESS BORROWER PROVIDES GC WITH A LANDLORD WAIVER WITH RESPECT THERETO IN
FORM AND SUBSTANCE SATISFACTORY TO GC, IF SO REQUESTED BY GC, OR UNLESS THE SAME
IS A SALES OFFICE AT WHICH NOT MORE THAN $50,000 OF COLLATERAL IS LOCATED)
**MATERIAL
***EXCEPT FOR LEASES OF SALES OFFICES AT WHICH NOT MORE THAN $50,000 OF
COLLATERAL IS LOCATED
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the *Collateral in
good working condition, ordinary wear and tear excepted, and Borrower will not
use the Collateral for any unlawful purpose. Borrower will immediately advise GC
in writing of any material loss or damage to the Collateral. Borrower will
maintain the validity of, and otherwise maintain, preserve and protect, its
patents, trademarks, copyrights and other intellectual property in accordance
with prudent business practices.
*EQUIPMENT AND OTHER TANGIBLE
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting
-2-
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system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements
now or in the future delivered to GC have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and fairly reflect the financial condition of Borrower,
at the times and for the periods therein stated. Between the last date covered
by any such statement provided to GC and the date hereof, there has been no
material adverse change in the financial condition or business of Borrower.
Borrower is now and will continue to be solvent.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by applicable
law, and Borrower has timely paid, and will timely pay, all applicable taxes,
assessments, deposits and contributions now or in the future owed by Borrower*.
Borrower may, however, defer payment of any contested taxes, provided that
Borrower (i) in good faith contests Borrower's obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted, (ii)
notifies GC in writing of the commencement of, and any material development in,
the proceedings, and (iii) posts bonds or takes any other steps required to keep
the contested taxes from becoming a lien upon any of the Collateral. Borrower
is unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or any other governmental agency. Borrower shall, at all
times, maintain a separate payroll account which shall be used exclusively for
payment of payroll and payroll taxes and other items related directly to
payroll.
*(EXCEPT WHERE FAILURE TO DO SO WOULD NOT HAVE A MATERIAL ADVERSE EFFECT ON
BORROWER AND WOULD NOT RESULT IN A LIEN ON ANY OF THE COLLATERAL, BUT ONLY SO
LONG AS THE BORROWER MAINTAINS ADEQUATE RESERVES WITH RESPECT TO SUCH
LIABILITIES IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
CONSISTENTLY APPLIED)
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all applicable laws and regulations,
including, but not limited to, those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, and all
environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which *
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform GC in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower**.
*IS REASONABLY LIKELY TO
**WHICH, IF DETERMINED ADVERSELY TO THE BORROWER, WOULD BE REASONABLY LIKELY
TO RESULT IN (I) A JUDGMENT, LOSS OR PAYMENT OF $50,000 OR MORE, OR $100,000 OR
MORE IN THE AGGREGATE, OR (II) A MATERIAL ADVERSE CHANGE IN THE BUSINESS OR
CONDITION OF BORROWER, OR A MATERIAL IMPAIRMENT IN THE ABILITY OF BORROWER TO
CARRY ON ITS BUSINESS IN SUBSTANTIALLY THE SAME MANNER AS IT IS NOW BEING
CONDUCTED
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes.
3.12 YEAR 2000 COMPLIANCE. The Borrower has (i) initiated a review and
assessment of all areas within its and each of its subsidiaries' business and
operations (including those affected by suppliers and vendors) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower or any of its subsidiaries (or its suppliers
and vendors) may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
on a timely basis, and (iii) to date, implemented that plan in accordance with
that timetable. The Borrower reasonably believes that all computer applications
(including those of its suppliers and vendors) that are material to its or any
of its subsidiaries' business and operations will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure
to do so could not reasonably be expected to have material adverse effect. The
Borrower will promptly notify GC in the event the
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Borrower discovers or determines that any computer application (including those
of its suppliers and vendors) that is material to its or any of its
subsidiaries' business and operations will not be Year 2000 compliant on a
timely basis, except to the extent that such failure could not reasonably be
expected to have a material adverse effect.
4. RECEIVABLES AND INVESTMENT PROPERTY.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower and each Related
Company represents and warrants to GC that each Receivable with respect to which
Loans are requested by Borrower shall, on the date each Loan is requested and
made, represent an undisputed, bona fide, existing, unconditional obligation of
the Account Debtor created by the sale, delivery, and acceptance of goods* or
the rendition of services, in the ordinary course of Borrower's business or any
Related Company's business**.
*, THE LICENSING OF SOFTWARE,
**(EXCEPT AS DISCLOSED TO AND APPROVED BY GC)
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
and Related Companies each represents and warrants to GC as follows: All
statements made and all unpaid balances appearing in all invoices, instruments
and other documents evidencing the Receivables are and shall be true and correct
and all such invoices, instruments and other documents and all of Borrower's (or
any Related Company's, as the case may be) books and records are and shall be
genuine and in all respects what they purport to be, and all signatories and
endorsers* have the capacity to contract. All sales and other transactions
underlying or giving rise to each Receivable shall comply with all applicable
laws and governmental rules and regulations. All signatures and indorsements on
all documents, instruments, and agreements relating to all Receivables* are and
shall be genuine, and all such documents, instruments and agreements are and
shall be legally enforceable in accordance with their terms.
*(TO THE BEST OF BORROWER'S KNOWLEDGE, FOR PARTIES OTHER THAN BORROWER)
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES AND INVESTMENT
PROPERTY. Borrower shall deliver to GC transaction reports and loan requests,
schedules and assignments of all Receivables, and schedules of collections, all
on GC's standard forms*; provided, however, that Borrower's failure to execute
and deliver the same shall not affect or limit GC's security interest and other
rights in all of Borrower's and any Related Company's Receivables, nor shall
GC's failure to advance or lend against a specific Receivable affect or limit
GC's security interest and other rights therein. Together with each such
schedule and assignment, or later if requested by GC, Borrower shall furnish GC
with copies (or, at GC's request, originals) of all contracts, orders, invoices,
and other similar documents, and all original shipping instructions, delivery
receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Receivables, and Borrower
warrants the genuineness of all of the foregoing. Borrower shall also furnish to
GC an aged accounts receivable trial balance in such form and at such intervals
as GC shall request. In addition, Borrower shall deliver to GC the originals of
all instruments, chattel paper, security agreements, guarantees and other
documents and property evidencing or securing any Receivables, immediately upon
receipt thereof and in the same form as received, with all necessary
indorsements, and, upon the request of GC, Borrower shall deliver to GC all
letters of credit and also all certificated securities with respect to any
Investment Property, with all necessary indorsements, and obtain such account
control agreements with securities intermediaries and take such other action
with respect to any Investment Property, as GC shall request, in form and
substance satisfactory to GC. Upon request of GC Borrower additionally shall
obtain consents from any letter of credit issuers with respect to the assignment
to GC of any letter of credit proceeds.
*, AS GC SHALL REASONABLY REQUEST
4.4 COLLECTION OF RECEIVABLES AND INVESTMENT PROPERTY INCOME. Borrower and
Related Companies each shall have the right to collect all Receivables and
retain all Investment Property payments and distributions, unless and until a
Default or an Event of Default has occurred*. Borrower shall hold all payments
on, and proceeds of, and distributions with respect to, Receivables and
Investment Property in trust for GC, and Borrower shall deliver all such
payments, proceeds and distributions to GC, within one business day after
receipt of the same, in their original form, duly endorsed, to be applied to the
Obligations in such order as GC shall determine. Except to the extent otherwise
provided in the Schedule or as otherwise agreed with GC, each Related Company
shall hold all payments on, and proceeds of, and distributions with respect to,
each Related Company's Receivables in trust for GC, and each Related Company
shall deliver all such payments, proceeds and distributions to GC, within one
Business Day after receipt of the same, in their original form, duly endorsed,
to be applied to the Obligations in such order as GC shall determine.
4.5 Upon the request of GC, any such distributions and payments with
respect to any Investment Property held in any securities account shall be held
and retained in such securities account as part of the Collateral.
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*AND IS CONTINUING
**, SUBJECT TO SECTION 7.5
4.6 DISPUTES. Borrower and Related Companies each shall notify GC promptly
of all disputes* or claims relating to Receivables on the regular reports to GC.
Borrower shall not forgive, or settle any Receivable for less than payment in
full, or agree to do any of the foregoing (nor shall any Related Company agree
to do any of the foregoing), except that each of the Related Companies and
Borrower may do so, provided that: (i) Borrower or any Related Company, as the
case may be, does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's-length transactions, which are
reported to GC on the regular reports provided to GC; (ii) no Default or Event
of Default has occurred and is continuing; and (iii) taking into account all
such settlements and forgiveness, the total outstanding Loans and other
Obligations will not exceed the Credit Limit.
*IN EXCESS OF $50,000
4.7 RETURNS. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to Borrower (or a Related Company)
in the ordinary course of its business, Borrower (or a Related Company) shall
promptly determine the reason for such return and promptly issue a credit
memorandum to the Account Debtor in the appropriate amount (sending a copy to
GC). In the event any attempted return occurs after the occurrence of any Event
of Default, Borrower (or a Related Company) shall (i) not accept any return
without GC's prior written consent, (ii) hold the returned Inventory in trust
for GC, (iii) segregate all returned Inventory from all of Borrower's (or a
Related Company's) other property, (iv) conspicuously label the returned
Inventory as GC's property, and (v) immediately notify GC of the return of any
Inventory, specifying the reason for such return, the location and condition of
the returned Inventory, and on GC's request deliver such returned Inventory to
GC.
4.8 VERIFICATION. GC may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or a Related Company or GC or such other name as GC may choose, and GC
or its designee may, at any time, notify Account Debtors that it has a security
interest in the Receivables.
4.9 NO LIABILITY. GC shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall GC be deemed to be responsible for any of Borrower's obligations under any
contract or agreement giving rise to a Receivable. Nothing herein shall,
however, relieve GC from liability for its own gross negligence or willful
misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 INSURANCE. Borrower shall, at all times, insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to GC, in such form and amounts as GC may
reasonably require, and Borrower shall provide evidence of such insurance to GC,
so that GC is satisfied that such insurance is, at all times, in full force and
effect. All such insurance policies shall name GC as an additional loss payee,
and shall contain a lenders loss payee endorsement in form reasonably acceptable
to GC. Upon receipt of the proceeds of any such insurance, GC shall apply such
proceeds in reduction of the Obligations as GC shall determine in its sole
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, GC shall release to Borrower* insurance proceeds with respect
to Equipment totaling less than $100,000, which shall be utilized by Borrower
for the replacement of the Equipment with respect to which the insurance
proceeds were paid**. GC may require reasonable assurance that the insurance
proceeds so released will be so used. If Borrower fails to provide or pay for
any insurance, GC may, but is not obligated to, obtain the same at Borrower's
expense. Borrower shall promptly deliver to GC copies of all**** reports made
to insurance companies.
*(I)
**AND (II) INSURANCE PROCEEDS WITH RESPECT TO INVENTORY TOTALING LESS THAN
$100,000, WHICH SHALL BE UTILIZED BY BORROWER FOR THE REPLACEMENT OF THE
INVENTORY WITH RESPECT TO WHICH THE INSURANCE PROCEEDS WERE PAID.
*** MATERIAL
5.2 REPORTS. Borrower, at its expense, shall provide GC with the written
reports set forth in the Schedule, and such other written reports with respect
to Borrower and the Related Companies (including budgets, sales projections,
operating plans and other financial documentation), as GC shall from time to
time reasonably specify.
5.3 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on
one business day's notice, GC, or its agents, shall have the right to inspect
the Collateral,
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and the right to audit and copy Borrower's and any Related Company's books and
records. GC shall take reasonable steps to keep confidential all information
obtained in any such inspection or audit, but GC shall have the right to
disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $600 per person per day (or such higher amount as shall represent GC's
then current standard charge for the same), plus reasonable out-of-pockets
expenses. Borrower shall not be charged more than $3,000 per audit (plus
reasonable out-of-pockets expenses), nor shall audits be done more frequently
than four times per calendar year, provided that * the foregoing limits shall
not apply after the occurrence of a Default or Event of Default, nor shall they
restrict GC's right to conduct audits at its own expense (whether or not a
Default or Event of Default has occurred). Borrower will not enter into any
agreement with any accounting firm, service bureau or third party to store
Borrower's books or records at any location other than Borrower's Address,
without first obtaining GC's written consent, which may be conditioned upon such
accounting firm, service bureau or other third party agreeing to give GC the
same rights with respect to access to books and records and related rights as GC
has under this Agreement.
* GC SHALL NOT CHARGE FOR MORE THAN ONE SUCH AUDIT PER YEAR; AND PROVIDED
FURTHER THAT
5.4 REMITTANCE OF PROCEEDS. All proceeds arising from the sale or other
disposition of any Collateral shall be delivered, in kind, by Borrower or any
Related Company to GC* in the original form in which received by Borrower or
such Related Company not later than the following business day after receipt by
Borrower**, to be applied to the Obligations in such order as GC shall
determine***; provided that, if no Default or Event of Default has occurred and
is continuing, and if no term loan is outstanding hereunder, then Borrower shall
not be obligated to remit to GC the proceeds of the sale of Equipment which is
sold in the ordinary course of business, in a good-faith arm's-length
transaction****. Except for the proceeds of the sale of Equipment as set forth
above and except as provided in the Schedule as to Related Company, Borrower and
each Related Company shall not commingle proceeds of Collateral with any of
Borrower's or a Related Company's other funds or property, and shall hold such
proceeds separate and apart from such other funds and property and in an express
trust for GC. Nothing in this Section limits the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
*(OR, AT GC'S REQUEST, INTO A LOCKBOX ACCOUNT, OR OTHER BLOCKED ACCOUNT,
ESTABLISHED PURSUANT TO AN AGREEMENT ACCEPTABLE TO GC, AND WITH A BANK SELECTED
BY BORROWER WHICH IS ACCEPTABLE TO GC)
**(EXCEPT WIRE TRANSFER REMITTANCES RECEIVED BY BORROWER OR A RELATED
COMPANY SHALL BE TRANSMITTED TO GC IN TOTAL THE DAY FOLLOWING POSTING TO
BORROWER'S BANK ACCOUNT)
***(SUBJECT TO SECTION 7.5)
****NOR SHALL BORROWER OR ANY RELATED COMPANY BE OBLIGATED TO REMIT TO GC ANY
SUCH PROCEEDS UNLESS THE AGGREGATE AMOUNT THEREOF RECEIVED AND HELD BY THE
BORROWER OR SUCH RELATED COMPANY EQUALS OR EXCEEDS $25,000
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule, neither
Borrower nor any Related Company shall, without GC's prior written consent, do
any of the following: (i) merge or consolidate with another corporation or
entity; (ii) acquire any assets, except in the ordinary course of business;
(iii) sell or transfer any Collateral, except that, provided no Default or Event
of Default has occurred and is continuing, each of Borrower and the Related
Companies may (A) sell finished Inventory in the ordinary course of Borrower's
or such Related Company's business, (B) sell Equipment in the ordinary course of
business, in good-faith arm's-length transactions, and (C) license or sublicense
on a non-exclusive basis intellectual property in the ordinary course of
Borrower's or such Related Company's business; (IV) store any Inventory or other
Collateral with any warehouseman or other third party*; (V) sell any Inventory
on a sale-or-return, guaranteed sale, consignment, or other contingent basis;
(VI) make any loans of any money or other assets**; (VII) incur any debts,
outside the ordinary course of business, which would have a material, adverse
effect on Borrower or a Related Company or on the prospect of repayment of the
Obligations; (VIII) guarantee or otherwise become liable with respect to the
obligations of another party or entity***; (IX) pay or declare any dividends on
Borrower's or a Related Company's stock (except for dividends payable solely in
stock of Borrower or a Related Company) other than to Parent Company; (X)
redeem, retire, purchase or otherwise acquire, directly or indirectly, any of
Borrower's or a Related Company's stock****; (XI) make any change in Borrower's
or a Related Company's capital structure which would have a material adverse
effect on Borrower or a Related Company or on the prospect of repayment of the
Obligations; (XII) dissolve or elect to dissolve; or (XIII) agree to do any of
the foregoing.
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*, UNLESS SUCH WAREHOUSEMAN OR OTHER THIRD PARTY ENTERS INTO A BAILEE
AGREEMENT WITH GC ON TERMS SATISFACTORY TO GC IN ITS SOLE DISCRETION
**, EXCEPT (A) ADVANCES TO SUBSIDIARIES OF THE BORROWER OR A RELATED COMPANY
AND CUSTOMERS OR SUPPLIERS, IN EACH CASE, IF CREATED, ACQUIRED OR MADE IN THE
ORDINARY COURSE OF BUSINESS, (B) TRAVEL ADVANCES IN THE ORDINARY COURSE OF
BUSINESS, (C) EMPLOYEE RELOCATION LOANS IN THE ORDINARY COURSE OF BUSINESS, (D)
INTERCOMPANY ADVANCES, (E) OTHER EMPLOYEE LOANS AND ADVANCES IN THE ORDINARY
COURSE OF BUSINESS, (F) LOANS TO EMPLOYEES, OFFICERS AND DIRECTORS FOR THE
PURPOSE OF PURCHASING EQUITY SECURITIES OF THE PARENT COMPANY, (G) OTHER LOANS
TO OFFICERS AND EMPLOYEES APPROVED BY THE BOARD OF DIRECTORS OF THE BORROWER OR
THE APPLICABLE RELATED COMPANY AND (H) OTHER LOANS OR EXTENSIONS OF CREDIT NOT
OTHERWISE PERMITTED HEREUNDER, PROVIDED THAT THE AGGREGATE AMOUNT OF ALL OF THE
FOREGOING ITEMS SET FORTH IN (A), (B), (E), (F), (G) AND (H) SHALL NOT EXCEED
$1,000,000 AT ANY ONE TIME OUTSTANDING EXCEPT THAT ANY LOANS MADE PRIOR TO THE
DATE HEREOF PURSUANT TO ITEM (A) SHALL NOT BE INCLUDED IN SAID $1,000,000 LIMIT,
AND PROVIDED, FURTHER, THAT NO DEFAULT OR EVENT OF DEFAULT SHALL EXIST EITHER
IMMEDIATELY PRIOR TO OR AFTER GIVING EFFECT TO THE MAKING OF ANY OF THE
FOREGOING ADVANCES, LOANS OR OTHER EXTENSIONS OF CREDIT IN CLAUSES (A) THROUGH
(H)
***EXCEPT THAT PARENT COMPANY MAY ISSUE GUARANTEES OF ITS SUBSIDIARIES'
OBLIGATIONS IN THE ORDINARY COURSE OF BUSINESS
****(EXCEPT THAT THE PARENT COMPANY MAY REPURCHASE OR REDEEM SHARES OF ITS
CAPITAL STOCK (A) PURSUANT TO EMPLOYEE OPTION PLANS FOR AN AGGREGATE PURCHASE
PRICE NOT TO EXCEED $250,000 PLUS PAYMENTS MADE FROM THE PROCEEDS OF THE
EXERCISE OF STOCK OPTIONS PER FISCAL YEAR, ON A NON-CUMULATIVE BASIS AND (B) IF
A CAPITAL CONTRIBUTION TO THE PARENT COMPANY HAS BEEN MADE PRIOR TO ANY SUCH
PURCHASE OR REDEMPTION IN AN AGGREGATE AMOUNT AT LEAST EQUAL TO THE AMOUNT OF
THE PURCHASE OR REDEMPTION)
5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against GC with respect to any Collateral or in any manner
relating to Borrower or any Related Company, Borrower or any Related Company, as
the case may be, shall, without expense to GC, make available Borrower and its
officers, employees and agents, and Borrower's or any Related Company's, as the
case may be, books and records, without charge, to the extent that GC may deem
them reasonably necessary in order to prosecute or defend any such suit or
proceeding.
5.7 NOTIFICATION OF CHANGES. Borrower and the Related Companies each will
promptly notify GC in writing of any change in its*, the opening of any
new bank account or other deposit account, the opening of any new securities
account, and any material adverse change in the business or financial affairs of
Borrower.
*EXECUTIVE OFFICERS
5.8 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by GC,
to execute all documents and take all actions, as GC may deem reasonably
necessary or useful in order to perfect and maintain GC's perfected security
interest in the Collateral, and in order to fully consummate the transactions
contemplated by this Agreement.
5.9 INDEMNITY. Borrower hereby agrees to indemnify GC and hold GC harmless
from and against any and all claims, debts, liabilities, demands, obligations,
actions, causes of action, penalties, costs and expenses (including attorneys'
fees), of every nature, character and description, which GC may sustain or incur
based upon or arising out of any of the Obligations, any actual or alleged
failure to collect and pay over any withholding or other tax relating to
Borrower or its employees, any relationship or agreement between GC and
Borrower, any actual or alleged failure of GC to comply with any writ of
attachment or other legal process relating to Borrower or any of its property,
or any other matter, cause or thing whatsoever occurred, done, omitted or
suffered to be done by GC relating to Borrower or the Obligations (except any
such amounts sustained or incurred as the result of the gross negligence or
willful misconduct of GC or any of its directors, officers, employees, agents,
attorneys, or any other person affiliated with or representing GC).
Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section shall survive any termination of this
Agreement and shall for all purposes continue in full force and effect.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided that the
Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless one party gives written notice to the other, not less than
sixty days prior to the next Maturity Date, that such party elects to terminate
this Agreement effective on the next Maturity Date.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three business days after
written notice of termination is given to GC; or (ii) by GC at any time after
the occurrence of an Event of Default, without notice, effective immediately. If
this Agreement is terminated by Borrower or by GC under this Section 6.2,
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Borrower shall pay to GC a termination fee (the "Termination Fee") in the amount
shown on the Schedule. The Termination Fee shall be due and payable on the
effective date of termination and thereafter shall bear interest at a rate equal
to the highest rate applicable to any of the Obligations.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding letters of
credit issued based upon an application, guarantee, indemnity or similar
agreement on the part of GC, then on such date Borrower shall provide to GC cash
collateral in an amount equal to 110% of the face amount of all such letters of
credit plus all interest, fees and costs due or (in GC's estimation) likely to
become due in connection therewith, to secure all of the Obligations relating to
said letters of credit, pursuant to GC's then standard form cash pledge
agreement. Notwithstanding any termination of this Agreement, all of GC's
security interests in all of the Collateral and all of the terms and provisions
of this Agreement shall continue in full force and effect until all Obligations
have been paid and performed in full; provided that GC may, in its sole
discretion, refuse to make any further Loans after termination. No termination
shall in any way affect or impair any right or remedy of GC, nor shall any such
termination relieve Borrower of any Obligation to GC, until all of the
Obligations have been paid and performed in full. Upon payment and performance
in full of all the Obligations and termination of this Agreement, GC shall
promptly deliver to Borrower termination statements, requests for reconveyances
and such other documents as may be reasonably required to terminate GC's
security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
GC immediate written notice thereof: (A) Any warranty, representation,
statement, report or certificate made or delivered to GC by Borrower or any
Guarantor or any of Borrower's or any Guarantor's officers, employees or agents,
now or in the future, shall be untrue or misleading in a material respect*; or
(B) Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation**; or (C) the total Loans and other Obligations
outstanding at any time shall exceed the Credit Limit***; or (D) Borrower shall
fail to perform any non-monetary Obligation which by its nature cannot be cured;
or (e) Borrower shall fail to perform any other non-monetary Obligation, which
failure is not cured within **** business days after the date performance is
due; or (f) any levy, assessment, attachment, seizure, lien or encumbrance
(other than a Permitted Lien) is made on all or any part of the Collateral which
is not cured within ***** days after the occurrence of the same; or (g) any
default or event of default occurs under any obligation secured by a Permitted
Lien, which is not cured within any applicable cure period or waived in writing
by the holder of the Permitted Lien+; or (h) Borrower or any Guarantor breaches
any material contract or obligation, which has or may reasonably be expected to
have a material adverse effect on Borrower's or such Guarantor's business or
financial condition; or (i) dissolution, termination of existence, insolvency or
business failure of Borrower or any Guarantor; or appointment of a receiver,
trustee or custodian, for all or any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding by Borrower or
any Guarantor under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect; or (j) the commencement of any
proceeding against Borrower or any Guarantor under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect,
which is not cured by the dismissal thereof within 45 days after the date
commenced; or (k) revocation or termination of, or limitation or denial of
liability upon, any guaranty of the Obligations or any attempt to do any of the
foregoing; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset pledged by any other Person to secure any or all of the
Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such Person under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (m) Borrower or
any Guarantor makes any payment on account of any indebtedness or obligation
which has been subordinated to the Obligations other than as permitted in the
applicable subordination agreement, or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits or terminates its
subordination agreement; or (n) there shall be a change in the record or
beneficial ownership of an aggregate of more than 20% of the outstanding shares
of stock of Parent Company, in one or more transactions, compared to the
ownership of outstanding shares of stock of Parent Company in effect on the date
hereof, ++ without the prior written consent of GC; or (o) Borrower or any
Guarantor shall generally not pay its debts as they become due, or Borrower or
any Guarantor shall conceal, remove or transfer any part of its property, with
intent to hinder, delay or defraud its creditors, or make or suffer any
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transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or (p) there shall be a material adverse
change in Borrower's or any Guarantor's business or financial condition; or (q)
there shall be a change in the record or beneficial ownership of Borrower or
Borrower Affiliate such that Parent Company ceases to hold 100% of the common
stock and all other capital stock of Borrower and Borrower Affiliate, without
the prior written consent of GC; or (r) any defined "Event of Default" shall
exist under any Related Company Guaranty or Security Agreement, or the security
provided by the Borrower Affiliate shall become enforceable. GC may cease making
any Loans hereunder during any of the above cure periods, and thereafter if an
Event of Default has occurred.
*WHEN MADE
**AND IN THE CASE OF ANY AMOUNT OTHER THAN PRINCIPAL, SUCH DEFAULT SHALL
CONTINUE FOR THREE BUSINESS DAYS
***AND ARE NOT PROMPTLY REPAID TO THE EXTENT OF SUCH EXCESS WITHIN ONE
BUSINESS DAY
****20
*****30
+, PROVIDED THAT IF THE AMOUNT INVOLVED IS LESS THAN $50,000 THEN THE SAME
SHALL NOT BE AN EVENT OF DEFAULT UNLESS AND UNTIL THE HOLDER OF THE PERMITTED
LIEN COMMENCES ANY ACTION TO ENFORCE ITS LIEN AGAINST ANY COLLATERAL;
++, OTHER THAN IN CONNECTION WITH AN INITIAL PUBLIC OFFERING OF PARENT
COMPANY'S SECURITIES OR ANY PUBLIC OFFERING THEREAFTER,
7.2 REMEDIES. Upon the occurrence and during the continuance of any Event of
Default,* GC, at its option, and without notice or demand of any kind (all of
which are hereby expressly waived by Borrower), may do any one or more of the
following**: (A) Cease making Loans or otherwise extending credit to Borrower
under this Agreement or any other document or agreement; (B) Accelerate and
declare all or any part of the Obligations to be immediately due, payable, and
performable, notwithstanding any deferred or installment payments allowed by any
instrument evidencing or relating to any Obligation; (C) Take possession of any
or all of the Collateral wherever it may be found, and for that purpose Borrower
hereby authorizes GC without judicial process to enter onto any of Borrower's
premises without interference to search for, take possession of, keep, store, or
remove any of the Collateral, and remain on the premises or cause a custodian to
remain on the premises in exclusive control thereof, without charge for so long
as GC deems it reasonably necessary in order to complete the enforcement of its
rights under this Agreement or any other agreement; provided, however, that
should GC seek to take possession of any of the Collateral by Court process,
Borrower hereby irrevocably waives: (i) any bond and any surety or security
relating thereto required by any statute, court rule or otherwise as an incident
to such possession; (ii) any demand for possession prior to the commencement of
any suit or action to recover possession thereof; and (iii) any requirement that
GC retain possession of, and not dispose of, any such Collateral until after
trial or final judgment; (D) Require Borrower to assemble any or all of the
Collateral and make it available to GC at places designated by GC which are
reasonably convenient to GC and Borrower, and to remove the Collateral to such
locations as GC may deem advisable; (e) Complete the processing, manufacturing
or repair of any Collateral prior to a disposition thereof and, for such purpose
and for the purpose of removal, GC shall have the right to use Borrower's
premises, vehicles, hoists, lifts, cranes, equipment and all other property
without charge; (f) Sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time GC obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. GC shall have the right to conduct
such disposition on Borrower's premises without charge, for such time or times
as GC deems reasonable, or on GC's premises, or elsewhere and the Collateral
need not be located at the place of disposition. GC may directly or through any
affiliated company purchase or lease any Collateral at any such public
disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Receivables and General Intangibles comprising Collateral
and, in connection therewith, Borrower irrevocably authorizes GC to endorse or
sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in GC's sole discretion, to grant extensions of time to pay,
compromise claims and settle Receivables, General Intangibles and the like for
less than face value; (h) Collect, receive, dispose of and realize upon any
Investment Property, including withdrawal of any and all funds from any
securities accounts; and (i) Demand and receive possession of any of Borrower's
federal and state income tax returns and the books and records utilized in the
preparation thereof or
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referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities
and obligations incurred by GC with respect to the foregoing shall be added to
and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations.
*AND AT ANY TIME THEREAFTER, WHILE SUCH EVENT OF DEFAULT IS CONTINUING
**(EXCEPT THAT, PRIOR TO OR CONCURRENTLY WITH THE TAKING OF THE FIRST OF ANY
OF THE FOLLOWING ACTIONS, GC SHALL GIVE BORROWER ONE GENERAL WRITTEN NOTICE
STATING THAT GC IS "PROCEEDING TO EXERCISE ITS RIGHTS AND REMEDIES" OR WORDS TO
THAT EFFECT)
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and GC
agree that a sale or other disposition (collectively, "sale") of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Borrower at least
seven days prior to the sale, and, in the case of a public sale, notice of the
sale is published at least seven days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, non-specific terms; (iii) The sale is
conducted at a place designated by GC, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m.;
(v) Payment of the purchase price in cash or by cashier's check or wire transfer
is required; (vi) With respect to any sale of any of the Collateral, GC may (but
is not obligated to) direct any prospective purchaser to ascertain directly from
Borrower any and all information concerning the same. GC shall be free to
employ other methods of noticing and selling the Collateral, in its discretion,
if they are commercially reasonable. Without limiting the generality of the
foregoing, Borrower recognizes that GC may be unable to make a public sale of
any or all of the Investment Property, by reason of prohibitions contained in
applicable securities laws or otherwise, and expressly agrees that a private
sale to a restricted group of purchasers for investment and not with a view to
any distribution thereof shall * be considered a commercially **sale ***.
*NOT
**UNREASONABLE
***FOR SUCH REASON
7.4 POWER OF ATTORNEY. Upon the occurrence and during the continuance of
any Event of Default, without limiting GC's other rights and remedies, Borrower
grants to GC an irrevocable power of attorney coupled with an interest,
authorizing and permitting GC (acting through any of its employees, attorneys or
agents) at any time*, at its option, but without obligation, with or without
notice to Borrower, and at Borrower's expense, to do any or all of the
following, in Borrower's name or otherwise, but GC agrees to exercise the
following powers in a commercially reasonable manner: (A) Execute on behalf of
Borrower any documents that GC may, in its sole discretion, deem advisable in
order to perfect and maintain GC's security interest in the Collateral, or in
order to exercise a right of Borrower or GC, or in order to fully consummate all
the transactions contemplated under this Agreement, and all other present and
future agreements; (B) Execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose of
or to lease (as lessor or lessee) any real or personal property which is part of
GC's Collateral or in which GC has an interest; (C) Execute on behalf of
Borrower, any invoices relating to any Receivable, any draft against any Account
Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy,
any Notice of Lien, claim of mechanic's, materialman's or other lien, or
assignment or satisfaction of mechanic's, materialman's or other lien; (D) Take
control in any manner of any cash or non-cash items of payment or proceeds of
Collateral; endorse the name of Borrower upon any instruments, or documents,
evidence of payment or Collateral that may come into GC's possession; (e)
Endorse all checks and other forms of remittances received by GC; (f) Pay,
contest or settle any lien, charge, encumbrance, security interest and adverse
claim in or to any of the Collateral, or any judgment based thereon, or
otherwise take any action to terminate or discharge the same; (g) Grant
extensions of time to pay, compromise claims and settle Receivables and General
Intangibles for less than face value and execute all releases and other
documents in connection therewith; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give GC the same rights of access and other rights with respect
thereto as GC has under this Agreement; (k) Execute and deliver to any
securities intermediary or other Person any entitlement order, account control
agreement or other notice, document or instrument with respect to any Investment
Property; and (l) Take any action or pay any sum required of Borrower pursuant
to this Agreement and any other present or future agreements. Any and all
reasonable sums paid and any and all reasonable costs, expenses, liabilities,
obligations and reasonable attorneys' fees incurred by GC with respect to the
foregoing shall be added to and become part of the Obligations, shall be payable
on demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. In no event shall GC's rights under the
-10-
<PAGE>
foregoing power of attorney or any of GC's other rights under this Agreement be
deemed to indicate that GC is in control of the business, management or
properties of Borrower.
*DURING THE CONTINUANCE OF SUCH EVENT OF DEFAULT
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale or other disposition of the Collateral shall be applied by GC first to the
reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by GC in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as GC shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to GC for any deficiency. If, GC, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, GC shall have
the option, exercisable at any time, in its sole discretion, of either reducing
the Obligations by the principal amount of purchase price or deferring the
reduction of the Obligations until the actual receipt by GC of the cash
therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth
in this Agreement, GC shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between GC and Borrower, and all of such rights and remedies
are cumulative and none is exclusive. Exercise or partial exercise by GC of one
or more of its rights or remedies shall not be deemed an election, nor bar GC
from subsequent exercise or partial exercise of any other rights or remedies.
The failure or delay of GC to exercise any rights or remedies shall not operate
as a waiver thereof, but all rights and remedies shall continue in full force
and effect until all of the Obligations have been fully paid and performed.
8. DEFINITIONS. AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS HAVE THE
FOLLOWING MEANINGS:
"Account Debtor" means the obligor on a Receivable.
--------------
"Additional Collateral" means all property and interests in property and
---------------------
proceeds thereof described as collateral in the Related Company Security
Agreements.
"Affiliate" means, with respect to any Person, a relative, partner,
---------
shareholder, director, member, officer, or employee of such Person, or any
parent or subsidiary of such Person, or any Person controlling, controlled by or
under common control with such Person.
"Agreement" and "this Agreement" means this Loan and Security Agreement and
--------- --------------
all modifications and amendments thereto, extensions thereof, and replacements
therefor.
"Borrower Affiliate" means Prime Response, Ltd., a corporation organized under
------------------
the laws of England.
"Business Day" means a day on which GC is open for business.
------------
"Code" means the Uniform Commercial Code as adopted and in effect in the State
----
of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
----------
"Default" means any event which with notice or passage of time or both, would
-------
constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
---------------
"Eligible Receivables" means unconditional Receivables arising in the ordinary
--------------------
course of Borrower's or a Related Company's business from the completed sale of
goods or rendition of services*, which GC, in its sole judgment, shall deem
eligible for borrowing, based on such considerations as GC may from time to time
deem appropriate.
*OR THE LICENSING OF SOFTWARE
"Equipment" means all of Borrower's present and hereafter acquired
---------
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Event of Default" means any of the events set forth in Section 7.1 of this
----------------
Agreement.
-11-
<PAGE>
lists, security and other deposits, rights in all litigation presently or
hereafter pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom, all claims of
Borrower against GC, rights to purchase or sell real or personal property,
rights as a licensor or licensee of any kind, royalties, telephone numbers,
proprietary information, purchase orders, and all insurance policies and claims
(including life insurance, key man insurance, credit insurance, liability
insurance, property insurance and other insurance), tax refunds and claims,
computer programs, discs, tapes and tape files, claims under guaranties,
security interests or other security held by or granted to Borrower, all rights
to indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Guarantor" means any Person who has guaranteed any of the Obligations.
---------
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
---------
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including all raw materials,
work in process, finished goods and goods in transit), and all materials and
supplies of every kind, nature and description which are or might be used or
consumed in Borrower's business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods, merchandise
or other personal property, and all warehouse receipts, documents of title and
other documents representing any of the foregoing.
"Investment Property" means any and all investment property of Borrower,
-------------------
including all securities, whether certificated or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or otherwise, wherever
located, and whether now existing or hereafter acquired or arising.
"Obligations" means all present and future Loans, advances, debts,
-----------
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to GC, whether evidenced by this Agreement or any note or
other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect, absolute or
contingent, due or to become due, including, without limitation, all interest,
charges, expenses, fees, attorney's fees, expert witness fees, audit fees,
letter of credit fees, loan fees, termination fees, minimum interest charges and
any other sums chargeable to Borrower under this Agreement or under any other
present or future instrument or agreement between Borrower and GC.
"Parent Company" means Prime Response Group, Inc., a corporation organized
--------------
under the laws of __________________.
"Permitted Liens" means the following: (i) purchase money security interests
-----------------
in specific items of Equipment; (ii) leases of specific items of Equipment;
(iii) liens for taxes*; (iv) additional security interests and
liens which are subordinate to the security interest in favor of GC and are
consented to in writing by GC (which consent shall not be unreasonably
withheld); (v) security interests being terminated substantially concurrently
with this Agreement; (vi) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business and
securing obligations which are not delinquent**; (vii) liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods***. GC will have the
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on GC's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of GC, and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
*, OR GOVERNMENTAL FEES, ASSESSMENTS OR OTHER GOVERNMENTAL CHARGES OR
LEVIES, EITHER NOT DELINQUENT OR BEING CONTESTED IN GOOD FAITH BY APPROPRIATE
PROCEEDINGS, PROVIDED THE SAME HAVE NO PRIORITY OVER ANY OF GC'S SECURITY
INTERESTS AND THE BORROWER OR RELATED COMPANY MAINTAINS ADEQUATE RESERVES
THEREFOR IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES,
CONSISTENTLY APPLIED.
**MORE THAN 45 DAYS, OR ARE BEING CONTESTED IN GOOD FAITH (PROVIDED SUCH
LIEN IS NOT FORECLOSED)
***;(IX) ANY JUDGMENT, ATTACHMENT OR SIMILAR LIEN, UNLESS THE JUDGMENT IT
SECURES IS NOT FULLY COVERED BY INSURANCE AND HAS NOT BEEN DISCHARGED OR
EXECUTION THEREOF EFFECTIVELY STAYED AND BONDED AGAINST PENDING APPEAL WITHIN 45
DAYS OF THE ENTRY THEREOF PROVIDED THAT, IF THE JUDGMENT IS NOT FULLY COVERED BY
INSURANCE OR EXECUTION THEREOF HAS NOT BEEN SO STAYED AND BONDED, GC SHALL NOT
BE REQUIRED TO MAKE ANY LOANS OR OTHERWISE EXTEND CREDIT TO OR FOR THE BENEFIT
OF
-12-
<PAGE>
BORROWER; (X) LICENSES OR SUBLICENSES GRANTED TO OTHERS NOT INTERFERING IN ANY
MATERIAL RESPECT WITH THE BUSINESS OF BORROWER OR RELATED COMPANY; AND (XI)
LIENS WHICH CONSTITUTE RIGHTS OF SET-OFF OF A CUSTOMARY NATURE OR BANKER'S LIENS
ON AMOUNTS ON DEPOSIT, WHETHER ARISING BY CONTRACT OR BY OPERATION OF LAW, IN
CONNECTION WITH ARRANGEMENTS ENTERED INTO WITH DEPOSITORY INSTITUTIONS IN THE
ORDINARY COURSE OF BUSINESS
"Person" means any individual, sole proprietorship, partnership, joint
------
venture trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's or a Related Company's now owned and
-----------
hereafter acquired accounts (whether or not earned by performance), letters of
credit, contract rights, chattel paper, instruments, documents and all other
forms of obligations at any time owing to Borrower or a Related Company, all
guaranties and other security therefor, all merchandise returned to or
repossessed by Borrower or a Related Company, and all rights of stoppage in
transit and all other rights or remedies of an unpaid vendor, lienor or secured
party.
"Related Company" means Parent Company or Borrower Affiliate.
---------------
"Related Company Guaranty" means a guaranty of a Related Company, in form
------------------------
and substance satisfactory to GC, pursuant to which such Related Company
guarantees the Obligations.
"Related Company Obligations" means all obligations of a Related Company
---------------------------
under a Related Company Guaranty.
"Related Company Security Agreement" means (i) as to Parent Company, a
----------------------------------
security agreement between Borrower Affiliate and GC, and (ii) as to Borrower
Affiliate, a Debenture of Parent Company in favor of GC, each in form and
substance satisfactory to GC, pursuant to which such Related Company pledges to
GC, and grants to GC a security interest in, such Related Company's accounts
receivable and other property and interests in property described therein as
security for the Obligations.
Other Terms. All accounting terms used in this Agreement, unless otherwise
-----------
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
Each reference to Borrower in Sections 9.5 through 9.17 below shall be
deemed to include a reference to each Related Company.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by GC (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by GC on account of the Obligations THREE Business Days after receipt by
GC of immediately available funds. GC shall not, however, be required to credit
Borrower's account for the amount of any item of payment which is unsatisfactory
to GC in its discretion, and GC may charge Borrower's Loan account for the
amount of any item of payment which is returned to GC unpaid.
9.2 APPLICATION OF PAYMENTS. *payments with respect to the Obligations
may be applied, and in GC's sole discretion reversed and reapplied, to the
Obligations, in such order and manner as GC shall determine in its sole
discretion.
*SUBJECT TO SECTION 7.5, ALL
9.3 CHARGES TO ACCOUNT. GC may, in its discretion, require that Borrower
pay monetary Obligations in cash to GC, or charge them to Borrower's Loan
account, in which event they will bear interest at the same rate applicable to
the Loans.
9.4 MONTHLY ACCOUNTINGS. GC shall provide Borrower monthly with an account
of advances, charges, expenses and payments made pursuant to this Agreement.
Such account shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by GC), unless Borrower notifies GC in writing
to the contrary within *days after each account is rendered, describing
the nature of any alleged errors or admissions.
*90
9.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service, or by facsimile, or by regular first-class mail, or certified mail
return receipt requested, addressed to GC or Borrower at the addresses shown in
the heading to this Agreement, or at any other address designated in writing by
one party to the other party. All notices shall be deemed to have been given
upon delivery in the case of notices personally delivered, or at the expiration
of one business day following delivery to the private delivery service, or one
day after the date sent by facsimile, or two business days
-13-
<PAGE>
following the deposit thereof in the United States mail, with postage prepaid*.
* (OR FIVE DAYS FOLLOWING THE DEPOSIT THEREOF IN THE U.K. MAIL, WITH POSTAGE
PREPAID)
9.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
9.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and GC and supersede all
prior and contemporaneous negotiations and oral representations and agreements,
all of which are merged and integrated in this Agreement. There are no oral
-----------------
understandings, representations or agreements between the parties which are not
- -------------------------------------------------------------------------------
set forth in this Agreement or in other written agreements signed by the parties
- --------------------------------------------------------------------------------
in connection herewith.
- ----------------------
9.8 WAIVERS. The failure of GC at any time or times to require Borrower to
strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and GC shall not waive or diminish
any right of GC later to demand and receive strict compliance therewith. Any
waiver of any default shall not waive or affect any other default, whether prior
or subsequent, and whether or not similar. None of the provisions of this
Agreement or any other agreement now or in the future executed by Borrower and
delivered to GC shall be deemed to have been waived by any act or knowledge of
GC or its agents or employees, but only by a specific written waiver signed by
an authorized officer of GC and delivered to Borrower. Borrower waives demand,
protest, notice of protest and notice of default or dishonor, notice of payment
and nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, instrument, account, General Intangible, document or guaranty
at any time held by GC on which Borrower is or may in any way be liable, and
notice of any action taken by GC, unless expressly required by this Agreement.
9.9 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of GC.
9.10 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.11 ATTORNEYS' FEES AND COSTS. Borrower shall reimburse GC for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by GC, pursuant to, or in
connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any reasonable attorneys' fees and costs
GC incurs in order to do the following: prepare and negotiate this Agreement and
the documents relating to this Agreement; obtain legal advice in connection with
this Agreement or Borrower; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, Account Debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of Borrower's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce GC's
security interest in, the Collateral; and otherwise represent GC in any
litigation relating to Borrower. If either GC or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including (but not limited to) reasonable attorneys' fees and costs
incurred in the enforcement of, execution upon or defense of any order, decree,
award or judgment. All attorneys' fees and costs to which GC may be entitled
pursuant to this Paragraph shall immediately become part of Borrower's
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.
9.12 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and GC; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of GC, and any prohibited assignment shall be
void. No consent by GC to any assignment shall release Borrower from its
liability for the Obligations.
9.13 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.14 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against GC, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Agreement, or any other
present or future document or agreement, or any other transaction contemplated
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by GC, its
directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted
-14-
<PAGE>
by Borrower by the commencement of an action or proceeding in a court of
competent jurisdiction by the filing of a complaint within one year after* the
first act, occurrence or omission upon which such claim or cause of action, or
any part thereof, is based, and the service of a summons and complaint on an
officer of GC, or on any other person authorized to accept service on behalf of
GC, within thirty (30) days thereafter. Borrower agrees that such one-year
period is a reasonable and sufficient time for Borrower to investigate and act
upon any such claim or cause of action. The one-year period provided herein
shall not be waived, tolled, or extended except by the written consent of GC in
its sole discretion. This provision shall survive any termination of this
Agreement or any other present or future agreement.
*BORROWER LEARNS OF, OR IN THE EXERCISE OF REASONABLE DILIGENCE SHOULD HAVE
LEARNED OF,
9.15 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used in
this Agreement for convenience. Borrower and GC acknowledge that the headings
may not describe completely the subject matter of the applicable paragraph, and
the headings shall not be used in any manner to construe, limit, define or
interpret any term or provision of this Agreement. The term "including,"
whenever used in this Agreement, shall mean "including (but not limited to)."
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against GC or Borrower under any rule of construction or
otherwise.
9.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of GC and Borrower shall
be governed by the laws of the State of California. As a material part of the
consideration to GC to enter into this Agreement, Borrower (i) agrees that all
actions and proceedings relating directly or indirectly to this Agreement shall,
at GC's option, be litigated in courts located within California*, and that the
exclusive venue for ** shall be Los Angeles County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights Borrower may have to object to the
jurisdiction of any such court, or to transfer or change the venue of any such
action or proceeding.
* OR THE UNITED KINGDOM
** ANY ACTION OR PROCEEDING IN CALIFORNIA
9.17 Mutual Waiver of Jury Trial. BORROWER AND GC EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN GC AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF GC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GC OR BORROWER, IN ALL OF
THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
(remainder of page intentionally left blank)
-15-
<PAGE>
BORROWER:
PRIME RESPONSE, INC.
By: /s/ Jamie Gunn
--------------------------------------
President or Vice President
By: /s/ Jamie Gunn
--------------------------------------
Secretary or Ass't Secretary
GC:
GREYROCK CAPITAL,
A DIVISION OF BANC OF AMERICA COMMERCIAL FINANCE
CORPORATION
By: /s/ Lisa Nagano
--------------------------------------
TITLE: Senior Vice President
-----------------------------------
RELATED COMPANY CONSENTS
------------------------
Each of Prime Response Group, Inc., a
corporation organized under the laws of
Delaware, and Prime Response, Ltd., a
corporation organized under the laws of
England, hereby approves of, agrees to and
consents to all of the terms and provisions
of the foregoing as they relate to it, and
agrees to be bound thereby.
RELATED COMPANIES:
PRIME RESPONSE GROUP, INC.
BY: /s/ Jamie Gunn
--------------------------------------
TITLE: Vice President
-----------------------------------
PRIME RESPONSE, LTD.
BY: /s/ Jamie Gunn
--------------------------------------
TITLE: Vice President
-----------------------------------
-16-
<PAGE>
[GREYROCK LOGO APPEARS HERE]
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: PRIME RESPONSE, INC.
Address: 150 CAMBRIDGE PARK DRIVE
CAMBRIDGE, MASSACHUSETTS 02140
Date: OCTOBER 28, 1999
This Schedule is an integral part of the Loan and Security Agreement between
GREYROCK CAPITAL, A DIVISION OF BANC OF AMERICA COMMERCIAL FINANCE CORPORATION
("GC") and the borrower named above ("Borrower") of even date.
===============================================================================
1. CREDIT LIMIT
(Section 1.1):
An amount not to exceed the lesser of (1) or (2) below:
(1) $5,000,000 at any one time outstanding; or
(2) an amount equal to the sum of the following (without
duplication): (A) the amount equal to 85% of the amount
of Borrower's Eligible Receivables (as defined in
Section 8 above), plus (B) the unpaid principal balance
----
of the Term Loan in the original principal amount of
$2,000,000 being made concurrently herewith by GC to
Borrower (the "Term Loan") and evidenced by the Secured
Promissory Note (the "Term Note") of even date herewith
made by Borrower to the order of GC.
===============================================================================
2. INTEREST
INTEREST RATE (Section 1.2):
The interest rate in effect throughout each calendar
month during the term of this Agreement shall be the
highest "Prime Rate" in effect during such month, plus
2% per annum; provided that the interest rate in effect
in each month shall not be less than 7% per annum, and
provided further that the interest charged for each
month shall be a minimum of $12,000, regardless of the
amount of the Obligations outstanding. Interest shall be
calculated on the basis of a 360-day year for the actual
number of days elapsed. As used herein, "Prime Rate"
shall mean the actual prime rate or the substitute
therefor of Bank of
<PAGE>
America, N.A. ("BofA") whether or not that rate is the
lowest interest rate charged by BofA. If the Prime Rate,
as so defined, is unavailable on any date of
determination, "Prime Rate" shall mean the highest of
the prime rates published in the Wall Street Journal, on
such date of determination, as the base rate on
corporate loans at large United States money center
commercial banks, as determined in good faith by GC,
which determination shall be conclusive absent manifest
error.
================================================================================
3. FEES (Section 1.3/Section 6.2):
LOAN FEE: $50,000, payable on the Closing Date.
TERMINATION FEE: None.
NSF CHECK CHARGE: $15.00 per item.
WIRE TRANSFERS: $15.00 per transfer.
===============================================================================
4. MATURITY DATE November 30, 2000, subject to automatic renewal
Section 6.1 (Section 6.1): as provided in above, and early termination as
provided in Section 6.2 above.
===============================================================================
5. REPORTING Borrower shall provide GC with the following:
(Section 5.2):
1. Annual financial statements, as soon as available,
and in any event within 90 days following the end of
Parent Company's fiscal year, certified by
independent certified public accountants acceptable
to GC.
2. Quarterly unaudited financial statements, as soon as
available, and in any event within 30 days after the
end of each fiscal quarter of Parent Company.
3. Copies of the regular, periodic or special reports
that Parent Company or any subsidiary may make to,
or file with, any governmental authority or entity
in the U.S. or U.K. within 5 days after the earlier
of the date they are filed or required to be filed.
4. Monthly unaudited financial statements as soon as
available and, in any event, no later than 30 days
after the end of each month.
5. Monthly Receivable agings, aged by invoice date,
within 10 days after the end of each month.
6. Monthly accounts payable agings, aged by invoice
date, and outstanding or held check registers within
10 days after the end of each month.
7. Such other information as GC shall from time to time
reasonably request with respect to Receivables of
Borrower and the Related Companies and such other
information reasonably requested by GC relating
thereto.
==============================================================================
-2-
<PAGE>
6. BORROWER INFORMATION:
PRIOR NAMES OF BORROWER
(Section 3.2): ---------------------------------------------
PRIOR TRADE NAMES OF BORROWER
(Section 3.2): ---------------------------------------------
EXISTING TRADE NAMES OF
BORROWER
(Section 3.2): ---------------------------------------------
OTHER LOCATIONS AND ADDRESSES
(Section 3.3): 1099 18th Street, Suite 500, Denver, CO 80202
---------------------------------------------
MATERIAL ADVERSE LITIGATION
(Section 3.10): See attached
---------------------------------------------
===============================================================================
7. ADDITIONAL 1. RELATED COMPANY RECEIVABLES. (A) In order
PROVISIONS: to be Eligible Receivables, the Borrower
Affiliate's Receivables (the "U.K.
Receivables") shall be billed from and payable
to offices in England (even though bills may
be sent to, and payments may be remitted from,
other countries). Currencies in other than
U.S. Dollars or English pounds sterling in
which U.K. Receivables are denominated shall
be acceptable to GC in its sole discretion.
For purposes hereof, all determinations based
on any Receivables denominated in a currency
other than U.S. Dollars shall be made using
the equivalent amount in U.S. Dollars at the
spot rate of exchange of Bank of America, N.A.
(B) Daily reporting of transactions and daily
schedules and assignments of Receivables and
schedules of collections, called for by
Section 4.3 of the Loan Agreement, will not be
required with respect to any Related Company's
Receivables. Instead, Borrower will provide GC
with a monthly Borrowing Base Certificate, in
such form as GC shall from time to time
specify, within 10 days after the end of each
month, with respect to any Related Company's
Receivables. In the event, as of the end of
any month, the total of all Loans and all
other Obligations secured by all Eligible
Receivables (determined after including all
Related Company Receivables) exceeds the
Credit Limit set forth above, Borrower shall
immediately pay the amount of the excess to
GC. (C) Delivery of the proceeds of any
Related Company's Receivables and other
Additional Collateral within one business day
after receipt, as called for by Sections 4.4
and 5.4 of the Loan Agreement, will not be
required. (D) The foregoing provisions of this
Section 7 shall immediately terminate if any
Default or Event of Default occurs and is
continuing. Upon any such termination,
Borrower shall, then and thereafter, provide
GC with the daily reporting of transactions
and daily schedules and assignments of the
Related Company's Receivables and schedules of
collections, as called for by Section 4.3 of
the Loan Agreement, and Borrower shall deliver
all proceeds of the Related Company's
Receivables and other Additional Collateral to
GC, within one business day after receipt,
-3-
<PAGE>
as called for by Sections 4.4 and 5.4 of the
Loan Agreement.
2. CERTAIN CONDITIONS PRECEDENT. The
availability of all Loans shall be subject to
the conditions precedent that GC shall have
received, in form and substance satisfactory
to GC and its counsel:
(i) the Parent Company's Security Agreement,
duly executed by the Parent Company; and
(ii) the Parent Company's Guaranty, duly
executed by the Parent Company.
The availability of Loans secured by any U.K.
Receivables shall be subject to the conditions
precedent that GC shall have received, in form
and substance satisfactory to GC and its
counsel:
(i) a certificate of the Secretary or other
appropriate officer of Borrower Affiliate
certifying (A) copies of the articles of
incorporation and bylaws (or other
applicable organizational documents), of
the Borrower Affiliate and the
resolutions and other actions taken or
adopted by the Borrower Affiliate
authorizing the execution, delivery and
performance of the Borrower Affiliate
Security Agreement and Guaranty to which
it is a party (the "U.K. Documents"), and
(B) the incumbency, authority and
signatures of each officer of Borrower
Affiliate authorized to execute and
deliver the U.K. Documents, and act with
respect thereto; and
(ii) a favorable legal opinion of U.K. counsel
to the Borrower Affiliate as to such
matters as GC may reasonably request.
The availability of Loans to be secured by any
Related Company Receivables shall be subject
to the condition precedent that GC shall have
received, in form and substance satisfactory
to GC and its counsel, evidence that all
filings, registrations and recordings have
been made in the appropriate governmental
offices, and all other action has been taken,
which shall be necessary to create, in favor
of GC, a perfected first priority pledge of
and security interest in the Additional
Collateral.
3. CORPORATE STRUCTURE. Borrower represents
and warrants that its corporate structure is
as follows: Parent Company owns (directly or
indirectly) 100% of the outstanding stock of
Borrower and Borrower Affiliate. The Parent
Company has no other subsidiaries, other than
as set forth above.
4. FOREIGN LAW PROVISIONS. (A) Each of
Borrower and the Related Companies (each an
"Obligor") shall pay all amounts of principal,
interest, fees and other amounts due under
this Agreement and any and all related
instruments and agreements (collectively, the
"Loan Documents") free and clear of, and
without reduction for or on account of, any
present and future taxes, levies, imposts,
duties, fees, assessments, charges,
-4-
<PAGE>
deductions or withholdings and all liabilities
with respect thereto excluding, in the case of
GC, income and franchise taxes imposed on it
by the jurisdiction under the laws of which GC
is organized or in which its principal
executive offices may be located or any
political subdivision or taxing authority
thereof or therein, and by the jurisdiction of
GC's lending office and any political
subdivision or taxing authority thereof or
therein (all such nonexcluded taxes, levies,
imposts, duties, fees, assessments, charges,
deductions, with-holdings and liabilities
being hereinafter referred to as "Taxes"). If
any Taxes shall be required by law to be
deducted or withheld from any payment, Obligor
shall increase the amount paid so that GC
receives when due (and is entitled to retain),
after deduction or with-holding for or on
account of such Taxes (including deductions or
withholdings applicable to additional sums
payable under this Section), the full amount
of the payment pro-vided for in the Loan
Documents. (B) If an Obligor makes any payment
hereunder in respect of which it is required
by law to make any deduction or withholding,
it shall pay the full amount to be deducted or
withheld to the relevant taxation or other
authority within the time allowed for such
payment under applicable law and promptly
thereafter shall furnish to GC an original or
certified copy of a receipt evidencing payment
thereof, together with such other information
and documents as GC may reasonably request. If
no Taxes are payable in respect of any payment
hereunder or in connection herewith, the
Obligor shall, upon request of GC, furnish to
GC a certificate from each appropriate taxing
authority, or an opinion of counsel acceptable
to GC, in either case stating that such
payment is exempt from or not subject to
Taxes. (C) If GC is required by law to make
any payment on account of Taxes, or any
liability in respect of any Tax is imposed,
levied or assessed against GC, the Obligor
shall indemnify GC for and against such
payment or liability, together with any
incremental taxes, interest or penalties, and
all costs and expenses, payable or incurred in
connection therewith, including Taxes imposed
on amounts payable under this Section 8,
whether or not such payment or liability was
correctly or legally asserted. A certificate
of GC as to the amount of any such payment
shall, in the absence of manifest error, be
conclusive and binding for all purposes. (D)
The Obligor agrees to indemnify GC against and
hold it harmless from any and all present and
future stamp, transfer, documentary and other
such taxes, levies, fees, assessments and
other charges made by any jurisdiction by
reason of the execution, delivery, performance
and enforcement of the Loan Documents. (E)
Payment in U.S. Dollars of all amounts due
under the Loan Documents is of the essence,
and U.S. Dollars shall be the currency of
account in all events. The payment obligations
of an Obligor under the Loan Documents shall
not be discharged by an amount paid in another
currency or in another place, whether pursuant
to a judgment or otherwise, to
-5-
<PAGE>
the extent that the amount so paid on
conversion to U.S. Dollars and transfer to GC
under normal banking procedures (after premium
and costs of exchange) does not yield the
amount of U.S. Dollars due under the Loan
Documents. If, for the purposes of obtaining
judgment in any court, it is necessary to
convert a sum due hereunder or any other Loan
Document in U.S. Dollars into another currency
(the "Other Currency"), the rate of exchange
used shall be that at which in accordance with
normal banking procedures GC could purchase
U.S. Dollars with the Other Currency on the
Business Day preceding that on which final
judgment is given. The obligation of any
Obligor in respect of any such sum due from it
to GC under the Loan Documents shall,
notwithstanding any judgment in such Other
Currency, be discharged only to the extent
that on the Business Day following receipt by
GC of any sum adjudged to be so due in the
Other Currency, GC may in accordance with
normal banking procedures purchase U.S.
Dollars with the Other Currency; if the U.S.
Dollars so purchased are less than the sum
originally due to GC in U.S. Dollars, each
Obligor agrees, as a separate and independent
obligation and notwithstanding any such
judgment, to indemnify GC against such loss,
and if the U.S. Dollars so purchased exceed
the sum originally due to GC in U.S. Dollars,
GC agrees to remit to Borrower such excess.
5. CLOSING AS TO BORROWER AFFILIATE. Not
later than 30 days from the date hereof, all
documentary conditions precedent set forth in
Section 7(2) above as to Borrower Affiliate
must be satisfied. It shall be an Event of
Default if such conditions are not satisfied
by such date.
(remainder of page intentionally left blank)
-6-
<PAGE>
BORROWER: GC:
PRIME RESPONSE, INC. GREYROCK CAPITAL,
A DIVISION OF BANC OF AMERICA COMMERCIAL
FINANCE CORPORATION
By: /s/ Jamie Gunn By: /s/ Lisa Nagano
-------------------------- ---------------------------------
President or Vice President Title: Senior Vice President
------------------------------
By: /s/ Jamie Gunn
--------------------------
Secretary or Ass't Secretary
RELATED COMPANY CONSENTS
------------------------
Each of Prime Response Group, Inc.,
a corporation organized under the laws of
Delaware, and Prime Response, Ltd., a
corporation organized under the laws of
England, hereby approves of, agrees to and
consents to all of the terms and provisions
of the foregoing as they relate to it, and
agrees to be bound thereby.
RELATED COMPANIES:
PRIME RESPONSE GROUP, INC.
BY: /s/ Jamie Gunn
--------------------------------
TITLE: Vice President
-----------------------------
PRIME RESPONSE, LTD.
BY: /s/ Jamie Gunn
--------------------------------
TITLE: Vice President
-----------------------------
-7-
<PAGE>
Exhibit 10.31
- --------------------------------------------------------------------------------
[LOGO OF GREYROCK CAPITAL APPEARS HERE]
SECURITY AGREEMENT
Debtor: PRIME RESPONSE GROUP, INC.
ADDRESS: 150 CAMBRIDGE PARK DRIVE
CAMBRIDGE, MASSACHUSETTS 02140
DATE: OCTOBER 28, 1999
THIS SECURITY AGREEMENT is entered into as of the above date at Los Angeles,
California, between the above-named debtor (the "Debtor"), whose chief executive
office is set forth above ("Debtor's Address"), and Greyrock Capital, a Division
of Banc of America Commercial Finance Corporation ("GC"), whose address is
10880 Wilshire Blvd., Suite 1850, Los Angeles, CA 90024.
1. DEFINITIONS OF OBLIGATIONS AND COLLATERAL; GRANT OF SECURITY INTEREST.
1.1 OBLIGATIONS. The term "Obligations" as used in this Agreement shall mean
and include each and all of the following: the obligation to pay and perform
when due all indebtedness, liabilities, obligations, guarantees, covenants,
agreements, warranties and representations of Debtor to GC, whether heretofore,
now or hereafter existing, owing or arising; whether primary, secondary, direct,
absolute, contingent, fixed, secured or unsecured; joint or several, monetary or
non-monetary; and whether created pursuant to, or caused by Debtor's breach of,
this Agreement, or any other present or future agreement or instrument, or
created by operation of law or otherwise. The Obligations include without
limitation the obligations of Debtor under that certain Continuing Guaranty in
favor of GC with respect to the indebtedness of Prime Response, Inc. (the
"Borrower") delivered under the Loan and Security Agreement dated October 28,
1999 between GC and the Borrower (the "Loan Agreement"), and all extensions and
renewals thereof.
1.2 COLLATERAL. As security and collateral for all Obligations, Debtor hereby
grants to GC a continuing security interest in, and assigns to GC, all of
Debtor's interest in the following, whether now owned or hereafter acquired, and
wherever located (collectively, the "Collateral"): All Inventory, Equipment,
Receivables, Investment Property and General Intangibles, including, without
limitation, all of Debtor's Deposit Accounts, all money, all collateral in which
GC is granted a security interest pursuant to any other present or future
agreement, all property now or at any time in the future in GC's possession, and
all proceeds (including proceeds of any insurance policies, proceeds of letters
of credit, proceeds of proceeds and claims against third parties), all products
of the foregoing, and all books and records related to any of the foregoing.
Payment and performance of the Obligations are collateralized by the Collateral
and by any security interest created in any other agreement now or hereafter
existing between GC and Debtor unless such other agreement is a deed of trust or
other security instrument having real property or rents from real property as
its subject matter and expressly provides to the contrary.
-1-
<PAGE>
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.
Debtor represents and warrants that each of the following representations and
warranties now is, and hereafter will continue to be, true and that Debtor will
at all times comply with each of the following covenants:
2.1 CORPORATE EXISTENCE AND POWER. Debtor, if a corporation, is and will
continue to be, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Debtor is and will continue to
be qualified and licensed to do business in all jurisdictions in which any
failure to do so would have a material adverse effect on Debtor, and Debtor has
and will continue to have all requisite power and authority to carry on its
business as it is now, or may hereafter be, conducted.
2.2 AUTHORITY. Debtor is, and will continue to be, authorized to enter into,
to grant security interests in its property pursuant to, and to perform its
obligations under, this Agreement, and all other instruments and transactions
contemplated herein. The execution, delivery and performance by Debtor of this
Agreement, and all other documents contemplated hereby (i) have been duly and
validly authorized, (ii) are enforceable against Debtor in accordance with their
terms (except as enforcement may be limited by equitable principles and by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
creditors' rights generally), (iii) do not violate Debtor's articles or
certificate of incorporation, or Debtor's by-laws, or any law or any material
agreement or instrument which is binding upon Debtor or its property, and
(iv) do not constitute grounds for acceleration of any material indebtedness or
obligation under any material agreement or instrument which is binding upon
Debtor or its property.
2.3 NAME; TRADE NAMES AND STYLES. The name of Debtor set forth in the heading
to this Agreement is its correct name. Listed on the Schedule are all prior
names of Debtor and all of Debtor's present and prior trade names. Debtor shall
give GC 30 days' prior written notice before changing its name or doing business
under any other name. Debtor has complied, and will in the future comply, with
all laws relating to the conduct of business under a fictitious business name.
2.4 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is Debtor's chief executive office. In addition,
Debtor has places of business and Collateral is located only at the locations
set forth on the Schedule*. Debtor will give GC at least 30 days' prior written
notice before opening any additional place of business, changing its chief
executive office, or moving any of the Collateral** other than Debtor's Address
or one of the locations set forth on the Schedule.
*(EXCEPT FOR SALES OFFICES AT WHICH NOT MORE THAN $50,000 OF COLLATERAL IS
LOCATED)
** TO ANY NEW LOCATION NOT PREVIOUSLY REPORTED TO GC
2.5 TITLE TO COLLATERAL; PERMITTED LIENS. Debtor is now, and will at all times
in the future be, the sole owner of all the Collateral, except for items of
Equipment which are leased by Debtor. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. GC now has, and will continue
to have, a first-priority perfected and enforceable security interest in all of
the Collateral, subject only to the Permitted Liens, and Debtor will at all
times defend GC and the Collateral against all claims of others. So long as any
Loan is outstanding which is a term loan, none of the Collateral now is or will
be affixed to any real property in such a manner, or with such intent, as to
become a fixture. Debtor is not and will not become a lessee under any real
property lease pursuant to which the lessor may obtain any rights in any of the
Collateral* and no such lease now prohibits, restrains, impairs or will
prohibit, restrain or impair Debtor's right to remove any Collateral from the
leased premises. Whenever any Collateral is located upon premises in which any
third party has an interest (whether as owner, mortgagee, beneficiary under a
deed of trust, lien or otherwise), Debtor shall, whenever requested by GC, use
its best efforts to cause such third party to execute and deliver to GC, in form
acceptable to GC, such waivers and subordinations as GC shall specify, so as to
ensure that GC's rights in the Collateral are, and will continue to be, superior
to the rights of any such third
-2-
<PAGE>
party. Debtor will keep in full force and effect, and will comply with all the**
terms of, any lease of real property where any of the Collateral now or in the
future may be located***.
*(UNLESS DEBTOR PROVIDES GC WITH A LANDLORD WAIVER WITH RESPECT THERETO IN
FORM AND SUBSTANCE SATISFACTORY TO GC, IF SO REQUESTED BY GC, OR UNLESS THE SAME
IS A SALES OFFICE AT WHICH NOT MORE THAN $50,000 OF COLLATERAL IS LOCATED)
**MATERIAL
***EXCEPT FOR LEASES OF SALES OFFICES AT WHICH NOT MORE THAN $50,000 OF
COLLATERAL IS LOCATED
2.6 MAINTENANCE OF COLLATERAL. Debtor will maintain the * Collateral in good
working condition, ordinary wear and tear excepted, and Debtor will not use the
Collateral for any unlawful purpose. Debtor will immediately advise GC in
writing of any material loss or damage to the Collateral. Debtor will maintain
the validity of, and otherwise maintain, preserve and protect, its patents,
trademarks, copyrights and other intellectual property in accordance with
prudent business practices.
*EQUIPMENT AND OTHER TANGIBLE
2.7 BOOKS AND RECORDS. Debtor has maintained and will maintain at Debtor's
Address complete and accurate books and records comprising an accounting system
in accordance with generally accepted accounting principles.
2.8 FINANCIAL CONDITION AND STATEMENTS. All financial statements now or in the
future delivered to GC have been, and will be, prepared in conformity with
generally accepted accounting principles and now and in the future will
completely and fairly reflect the financial condition of Debtor, at the times
and for the periods therein stated. Between the last date covered by any such
statement provided to GC and the date hereof, there has been no material adverse
change in the financial condition or business of Debtor. Debtor is now and will
continue to be solvent in both the "equity" and "bankruptcy" sense. Debtor will
deliver to GC a copy of all financial statements prepared with respect to Debtor
no later than five (5) days after the preparation or receipt thereof by Debtor.
Debtor will cause to be prepared, and will provide GC (i) within thirty (30)
days following the end of each fiscal quarter, complete quarterly financial
statements, and (ii) within ninety (90) days following the end of Debtor's
fiscal year, complete annual financial statements, certified by independent
certified public accountants acceptable to GC.
2.9 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Debtor has timely filed,
and will timely file, all tax returns and reports required by foreign, federal,
state or local law. Debtor has timely paid, and will timely pay, all foreign,
federal, state and local taxes, assessments, deposits and contributions now or
hereafter owed by Debtor *. Debtor may defer payment of any contested taxes
provided that Debtor (i) in good faith contests Debtor's obligation to pay such
taxes by appropriate proceedings promptly and diligently instituted and
conducted, (ii) notifies GC in writing of the commencement of and any material
development in such proceedings, and (iii) posts bonds or takes any other steps
required to keep such contested taxes from becoming a lien against or charge
upon any of the Collateral. Debtor shall, at all times, maintain a separate
payroll account which shall be used exclusively for payment of payroll and
payroll taxes and other items related directly to payroll. Debtor is unaware of
any claims or adjustments proposed for any of Debtor's prior tax years which
could result in additional taxes becoming due and payable by Debtor. Debtor has
paid, and shall continue to pay, all amounts necessary to fund all present and
future pension, profit sharing and deferred compensation plans in accordance
with their terms, and Debtor has not and will not withdraw from participation
in, permit partial or complete termination of, or permit the occurrence of any
other event with respect to, any such plan which could result in any liability
of Debtor, including, without limitation, any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
*(EXCEPT WHERE FAILURE TO DO SO WOULD NOT HAVE A MATERIAL ADVERSE EFFECT ON
DEBTOR AND WOULD NOT RESULT IN A LIEN ON ANY OF THE COLLATERAL, BUT ONLY SO LONG
AS THE DEBTOR MAINTAINS ADEQUATE RESERVES WITH RESPECT TO SUCH LIABILITIES IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES CONSISTENTLY APPLIED)
-3-
<PAGE>
2.10 COMPLIANCE WITH LAW. Debtor has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to Debtor, including, but not limited to, those
relating to Debtor's ownership of real or personal property, the conduct and
licensing of Debtor's business and employment of Debtor's personnel and all
environmental matters.
2.11 LITIGATION. Except as disclosed in the Schedule, there is no claim, suit,
litigation, proceeding or investigation pending or (to best of Debtor's
knowledge) threatened by or against or affecting Debtor in any court or before
any governmental agency (or any basis therefor known to Debtor) which * result,
either separately or in the aggregate, in any material adverse change in the
financial condition or business of Debtor, or in any material impairment in the
ability of Debtor to carry on its business in substantially the same manner as
it is now being conducted. Debtor will promptly inform GC in writing of any
claim, proceeding, litigation or investigation in the future threatened or
instituted by or against Debtor **.
**IS REASONABLY LIKELY TO
**WHICH, IF DETERMINED ADVERSELY TO THE DEBTOR, WOULD BE REASONABLY LIKELY TO
RESULT IN (I) A JUDGMENT, LOSS OR PAYMENT OF $50,000 OR MORE, OR $100,000 OR
MORE IN THE AGGREGATE, OR (II) A MATERIAL ADVERSE CHANGE IN THE BUSINESS OR
CONDITION OF DEBTOR, OR A MATERIAL IMPAIRMENT IN THE ABILITY OF DEBTOR TO CARRY
ON ITS BUSINESS IN SUBSTANTIALLY THE SAME MANNER AS IT IS NOW BEING CONDUCTED
2.12 YEAR 2000 COMPLIANCE. The Debtor has (i) initiated a review and
assessment of all areas within its and each of its subsidiaries' business and
operations (including those affected by suppliers and vendors) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Debtor or any of its subsidiaries (or its suppliers and
vendors) may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
on a timely basis, and (iii) to date, implemented that plan in accordance with
that timetable. The Debtor reasonably believes that all computer applications
(including those of its suppliers and vendors) that are material to its or any
of its subsidiaries' business and operations will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after
January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a
failure to do so could not reasonably be expected to have material adverse
effect. The Debtor will promptly notify GC in the event the Debtor discovers or
determines that any computer application (including those of its suppliers and
vendors) that is material to its or any of its subsidiaries' business and
operations will not be Year 2000 compliant on a timely basis, except to the
extent that such failure could not reasonably be expected to have a material
adverse effect.
2.13 REPRESENTATIONS RELATING TO RECEIVABLES. Debtor represents and warrants
to GC that each of its Receivables represents an undisputed, bona fide,
existing, unconditional obligation of the Account Debtor created by the sale,
delivery, and acceptance of goods* or the rendition of services, in the ordinary
course of Debtor's business business**.
*, THE LICENSING OF SOFTWARE,
**(EXCEPT AS DISCLOSED TO AND APPROVED BY GC)
2.14 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Debtor
represents and warrants to GC as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Receivables are and shall be true and correct and all such invoices,
instruments and other documents and all of Debtor's books and records are and
shall be genuine and in all respects what they purport to be, and all
signatories and endorsers* have the capacity to contract. All sales and other
transactions underlying or giving rise to each Receivable shall comply with all
applicable laws and governmental rules and regulations. All signatures and
indorsements on all documents, instruments, and agreements relating to all
Receivables* are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.
-4-
<PAGE>
*(TO THE BEST OF DEBTOR'S KNOWLEDGE, FOR PARTIES OTHER THAN DEBTOR)
2.15 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES AND INVESTMENT PROPERTY.
Debtor shall deliver to GC transaction reports and loan requests, schedules and
assignments of all Receivables, and schedules of collections, all on GC's
standard forms*; provided, however, that Debtor's failure to execute and deliver
the same shall not affect or limit GC's security interest and other rights in
all of Debtor's Receivables, nor shall GC's failure to advance or lend against a
specific Receivable affect or limit GC's security interest and other rights
therein. Together with each such schedule and assignment, or later if requested
by GC, Debtor shall furnish GC with copies (or, at GC's request, originals) of
all contracts, orders, invoices, and other similar documents, and all original
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Receivables, and Debtor warrants the genuineness of all of the foregoing.
Debtor shall also furnish to GC an aged accounts receivable trial balance in
such form and at such intervals as GC shall request. In addition, Debtor shall
deliver to GC the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Receivables, immediately upon receipt thereof and in the same form as
received, with all necessary indorsements, and, upon the request of GC, Debtor
shall deliver to GC all letters of credit and also all certificated securities
with respect to any Investment Property, with all necessary indorsements, and
obtain such account control agreements with securities intermediaries and take
such other action with respect to any Investment Property, as GC shall request,
in form and substance satisfactory to GC. Upon request of GC Debtor additionally
shall obtain consents from any letter of credit issuers with respect to the
assignment to GC of any letter of credit proceeds.
*, AS GC SHALL REASONABLY REQUEST
2.16 COLLECTION OF RECEIVABLES AND INVESTMENT PROPERTY INCOME. Debtor shall
have the right to collect all Receivables and retain all Investment Property
payments and distributions, unless and until a Default or an Event of Default
has occurred. Except as otherwise provided in the Schedule to the Loan
Agreement, Debtor shall hold all payments on, and proceeds of, and distributions
with respect to, Receivables and Investment Property in trust for GC, and Debtor
shall deliver all such payments, proceeds and distributions to GC, within one
business day after receipt of the same, in their original form, duly endorsed,
to be applied to the Obligations in such order as GC shall determine. Upon the
occurrence of a Default or an Event of Default, any such distributions and
payments with respect to any Investment Property held in any securities account
shall be held and retained in such securities account as part of the Collateral.
2.17 DISPUTES. Debtor shall notify GC promptly of all disputes * or claims
relating to Receivables, as requested by GC. Debtor shall not forgive, or
settle any Receivable for less than payment in full, or agree to do any of the
foregoing, except that Debtor may do so, provided that: (i) Debtor does so in
good faith, in a commercially reasonable manner, in the ordinary course of
business, and in arm's length transactions, which are reported to GC on in any
reports requested by to GC hereunder; and (ii) no Default or Event of Default
has occurred and is continuing.
* IN EXCESS OF $50,000
2.18 RETURNS. Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Debtor in the ordinary course of its
business, Debtor shall promptly determine the reason for such return and
promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (and, if requested by GC with respect to such returns, sending a copy to
GC). In the event any attempted return occurs after the occurrence of any Event
of Default, Debtor shall (i) not accept any return without GC's prior written
consent, (ii) hold the returned Inventory in trust for GC, (iii) segregate all
returned Inventory from all of Debtor's other property, (iv) conspicuously label
the returned Inventory as GC's property, and (v) immediately notify GC of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on GC's request deliver such returned
Inventory to GC.
2.19 VERIFICATION. GC may, from time to time, verify directly with the
respective Account Debtors
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the validity, amount and other matters relating to the Receivables, by means of
mail, telephone or otherwise, either in the name of Debtor or GC or such other
name as GC may choose, and GC or its designee may, at any time, notify Account
Debtors that it has a security interest in the Receivables.
2.20 NO LIABILITY. GC shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall GC be deemed to be responsible for any of Debtor's obligations under any
contract or agreement giving rise to a Receivable. Nothing herein shall,
however, relieve GC from liability for its own gross negligence or willful
misconduct.
2.21 CONTINUING EFFECT. All representations, warranties and covenants of
Debtor contained in this Agreement and any other agreement with GC shall be true
and correct at the time of the effective date of each such agreement and shall
be deemed continuing and shall remain true, correct and in full force and effect
until payment and satisfaction in full of all of the Obligations, and Debtor
acknowledges that GC is and will be expressly relying on such representations,
warranties and covenants.
3. ADDITIONAL DUTIES OF DEBTOR.
3.1 INSURANCE. Debtor shall, at all times, insure all of the tangible personal
property Collateral and carry such other business insurance, with insurers
reasonably acceptable to GC, in such form and amounts as GC may reasonably
require, and Debtor shall provide evidence of such insurance to GC, so that GC
is satisfied that such insurance is, at all times, in full force and effect.
All such insurance policies shall name GC as an additional loss payee, and shall
contain a lenders loss payee endorsement in form reasonably acceptable to GC.
Upon receipt of the proceeds of any such insurance, GC shall apply such proceeds
in reduction of the Obligations as GC shall determine in its sole discretion,
except that, provided no Default or Event of Default has occurred and is
continuing, GC shall release to Debtor* insurance proceeds with respect to
Equipment totaling less than $100,000, which shall be utilized by Debtor for the
replacement of the Equipment with respect to which the insurance proceeds were
paid**. GC may require reasonable assurance that the insurance proceeds so
released will be so used. If Debtor fails to provide or pay for any insurance,
GC may, but is not obligated to, obtain the same at Debtor's expense. Debtor
shall promptly deliver to GC copies of all*** reports made to insurance
companies.
*(I)
**AND (II) INSURANCE PROCEEDS WITH RESPECT TO INVENTORY TOTALING LESS THAN
$100,000, WHICH SHALL BE UTILIZED BY DEBTOR FOR THE REPLACEMENT OF THE INVENTORY
WITH RESPECT TO WHICH THE INSURANCE PROCEEDS WERE PAID.
*** MATERIAL
3.2 REPORTS. At its expense, Debtor shall report, in form satisfactory to GC,
such information as GC may from time to time reasonably specify regarding Debtor
or the Collateral; such reports shall be rendered with such frequency as GC may
reasonably specify. All reports furnished GC shall be complete and accurate in
all respects.
3.3 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on one
business day's notice, GC, or its agents, shall have the right to inspect the
Collateral, and the right to audit and copy Debtor's books and records. GC
shall take reasonable steps to keep confidential all information obtained in any
such inspection or audit, but GC shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant to
any subpoena or other legal process. The foregoing inspections and audits shall
be at Debtor's expense. Debtor will not enter into any agreement with any
accounting firm, service bureau or third party to store Debtor's books or
records at any location other than Debtor's Address, without first obtaining
GC's written consent, which may be conditioned upon such accounting firm,
service bureau or other third party agreeing to give GC the same rights with
respect to access to books and records and related rights as GC has under this
Agreement.
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<PAGE>
3.4 REMITTANCE OF PROCEEDS. Except as otherwise provided in the Schedule to
the Loan Agreement, all proceeds arising from the sale or other disposition of
any Collateral shall be delivered, in kind, by Debtor to GC* in the original
form in which received by Debtor not later than the following business day after
receipt by Debtor**, to be applied to the Obligations in such order as GC shall
determine; provided that, if no Default or Event of Default has occurred and is
continuing, and if no term loan is outstanding hereunder, then Debtor shall not
be obligated to remit to GC the proceeds of the sale of Equipment which is sold
in the ordinary course of business, in a good-faith arm's-length transaction***.
Except for the proceeds of the sale of Equipment as set forth above and except
as provided in the Schedule to the Loan Agreement, Debtor shall not commingle
proceeds of Collateral with any of Debtor's other funds or property, and shall
hold such proceeds separate and apart from such other funds and property and in
an express trust for GC. Nothing in this Section limits the restrictions on
disposition of Collateral set forth elsewhere in this Agreement.
*(OR, AT GC'S REQUEST, INTO A LOCKBOX ACCOUNT, OR OTHER BLOCKED ACCOUNT,
ESTABLISHED PURSUANT TO AN AGREEMENT ACCEPTABLE TO GC, AND WITH A BANK SELECTED
BY DEBTOR WHICH IS ACCEPTABLE TO GC)
**(EXCEPT WIRE TRANSFER REMITTANCES RECEIVED BY DEBTOR SHALL BE TRANSMITTED TO
GC IN TOTAL THE DAY FOLLOWING POSTING TO DEBTOR'S BANK ACCOUNT)
***NOR SHALL DEBTOR BE OBLIGATED TO REMIT TO GC ANY SUCH PROCEEDS UNLESS THE
AGGREGATE AMOUNT THEREOF RECEIVED AND HELD BY THE DEBTOR EQUALS OR EXCEEDS
$25,000
3.5 PROHIBITED TRANSACTIONS. Debtor shall not without GC's prior written
consent *: merge, consolidate, dissolve, or acquire any other corporation or
entity; guarantee or otherwise become in any way liable with respect to the
obligations of another party or entity (except by endorsements of instruments or
items of payment for deposit to the general account of Debtor or which are
transmitted or turned over to GC on account of the Obligations); pay or declare
any dividends upon Debtor's stock; redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of Debtor's stock; make any change in
Debtor's capital structure which would have a material adverse effect on Debtor
or on the prospect of payment of the Obligations; sell or transfer any
Collateral, except for the sale of finished Inventory or Equipment in the
ordinary course of Debtor's business, and licenses and sublicenses of
intellectual property on a non-exclusive basis in the ordinary course of
Debtor's business, in good-faith arm's length transactions, provided that, in
each case, no Event of Default has occurred and is continuing; lend or
distribute any of Debtor's property or assets, or incur any debts, outside of
the ordinary course of Debtor's business.
* EXCEPT AS PERMITTED BY THE LOAN AGREEMENT
3.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against GC with respect to any Collateral or in any manner
relating to Debtor, Debtor shall, without expense to GC, make available Debtor
and its officers, employees and agents, and Debtor's books and records to the
extent that GC may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
3.7 NOTIFICATION OF CHANGES. Debtor will promptly notify GC in writing of any
change in its *, the opening of any new bank account or other deposit account,
the opening of any new securities account, and any material adverse change in
the business or financial affairs of Debtor.
*EXECUTIVE OFFICERS
3.8 FURTHER ASSURANCES. Debtor agrees, at its expense, on request by GC, to
execute all documents and take all actions, as GC may deem reasonably necessary
or useful in order to perfect and maintain GC's perfected security interest in
the Collateral, and in order to fully consummate the transactions contemplated
by this Agreement.
3.9 INDEMNITY. Debtor hereby agrees to indemnify GC and hold GC harmless from
and against any and all claims, debts, liabilities, demands, obligations,
actions, causes of action, penalties, costs and expenses (including attorneys'
fees), of every nature, character and description, which GC may sustain or incur
based upon or arising out of any of the Obligations, any actual or alleged
failure to collect and pay over any withholding or other tax relating to Debtor
or its employees, any relationship or
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<PAGE>
agreement between GC and Debtor, any actual or alleged failure of GC to comply
with any writ of attachment or other legal process relating to Debtor or any of
its property, or any other matter, cause or thing whatsoever occurred, done,
omitted or suffered to be done by GC relating to Debtor or the Obligations
(except any such amounts sustained or incurred as the result of the gross
negligence or willful misconduct of GC or any of its directors, officers,
employees, agents, attorneys, or any other person affiliated with or
representing GC). Notwithstanding any provision in this Agreement to the
contrary, the indemnity agreement set forth in this Section shall survive any
termination of this Agreement and shall for all purposes continue in full force
and effect.
4. EVENTS OF DEFAULT AND REMEDIES.
4.1 EVENTS OF DEFAULT. If any of the following events shall occur, such an
occurrence shall constitute an "Event of Default" and Debtor shall provide GC
with immediate written notice thereof: (a) Debtor shall fail to perform when
due any term or condition contained in this Agreement or any other agreement
between GC and Debtor; or (b) any levy, assessment, attachment, seizure, lien or
encumbrance (other than a Permitted Lien) for any cause or reason whatsoever,
upon all or any part of the Collateral (unless discharged by payment, release or
fully bonded against not more than * days after such event has occurred); or
(c) the occurrence of any "Event of Default" as defined in that certain Loan and
Security Agreement dated October 28, 1999, between GC and Borrower.
* THIRTY (30)
4.2 REMEDIES. Upon the occurrence of any Event of Default, and at any time
thereafter, GC, at its option, and without notice or demand of any kind (all of
which are hereby expressly waived by Debtor), may do any one or more of the
following: (a) Accelerate and declare all or any part of the Obligations to be
immediately due, payable, and performable notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation; (b) Take possession of any or all of the Collateral wherever it may
be found, and for that purpose Debtor hereby authorizes GC without judicial
process to enter onto any of the Debtor's premises without hindrance to search
for, take possession of, keep, store, or remove any of the Collateral and remain
on such premises or cause a custodian to remain thereon in exclusive control
thereof without charge for so long as GC deems necessary in order to complete
the enforcement of its rights under this Agreement or any other agreement;
provided, however, that should GC seek to take possession of any or all of the
Collateral by Court process, Debtor hereby irrevocably waives: (i) any bond and
any surety or security relating thereto required by any statute, court rule or
otherwise as an incident to such possession; (ii) any demand for possession
prior to the commencement of any suit or action to recover possession thereof;
and (iii) any requirement that GC retain possession of and not dispose of any
such Collateral until after trial or final judgment; (c) Require Debtor to
assemble any or all of the Collateral and make it available to GC at a place or
places to be designated by GC which are reasonably convenient to GC and Debtor,
and to remove the Collateral to such locations as GC may deem advisable; (d)
Complete processing, manufacturing or repair of all or any portion of the
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, GC shall have the right to use Debtor's premises, vehicles,
hoists, lifts, cranes, equipment and all other property without charge. Without
limiting any security interest granted GC in other provisions of this Agreement
or any other agreement, for the purpose of completing manufacturing, processing
or repair of Collateral and the disposition thereof, GC is hereby granted a
security interest in, and GC and any purchaser from GC may use without charge,
all of the Debtor's plant, machinery, equipment, labels, licenses, processes,
patents, patent applications, copyrights, names, trade names, trademarks, trade
secrets, logos, advertising material and all other assets, and may also utilize
all of Debtor's rights under any license or franchise agreement; (e) Sell, ship,
reclaim, lease or otherwise dispose of all or any portion of the Collateral in
its condition at the time GC obtains possession or after further manufacturing,
processing or repair, at any one or more public and/or private sales (including
execution sales), in lots or in bulk, for cash, exchange or other property or on
credit and to adjourn any such sale from time to time without notice other than
oral announcement at the time scheduled for sale. GC shall have the right to
conduct such disposition on Debtor's premises without charge for such time or
times as GC deems fit, or on GC's premises, or
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<PAGE>
elsewhere and the Collateral need not be located at the place of disposition. GC
may directly or through any affiliated company purchase or lease any Collateral
at any such public disposition and, if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not
relieve Debtor of any liability Debtor may have if any Collateral is defective
as to title or physical condition or otherwise at the time of sale; (f) Demand
payment of, and collect any Receivables and General Intangibles comprising part
or all of the Collateral and, in connection therewith, Debtor irrevocably
authorizes GC to endorse or sign Debtor's name on all collections, receipts,
instruments and other documents, to take possession of and open mail addressed
to Debtor and remove therefrom payments made with respect to any item of the
Collateral or proceeds thereof, and, in GC's sole discretion, to grant
extensions of time to pay, compromise claims and settle Receivables, General
Intangibles and the like for less than face value; (g) Collect, receive, dispose
of and realize upon any Investment Property, including withdrawal of any and all
funds from any securities accounts; and (h) Demand and receive possession of any
of Debtor's federal and state income tax returns and the Records utilized in the
preparation thereof or referring thereto. All reasonable attorneys' fees,
expenses, costs, liabilities and obligations incurred by GC with respect to the
foregoing shall be added to and become part of the Obligations, shall be due on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations.
4.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Debtor and GC agree
that a sale or other disposition (collectively, "sale") of any Collateral which
complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Debtor at least
seven days prior to the sale, and, in the case of a public sale, notice of the
sale is published at least seven days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, non-specific terms; (iii) The sale is
conducted at a place designated by GC, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m;
(v) Payment of the purchase price in cash or by cashier's check or wire transfer
is required; (vi) With respect to any sale of any of the Collateral, GC may (but
is not obligated to) direct any prospective purchaser to ascertain directly from
Debtor any and all information concerning the same. GC shall be free to employ
other methods of noticing and selling the Collateral, in its discretion, if they
are commercially reasonable. Without limiting the generality of the foregoing,
Debtor recognizes that GC may be unable to make a public sale of any or all of
the Investment Property, by reason of prohibitions contained in applicable
securities laws or otherwise, and expressly agrees that a private sale to a
restricted group of purchasers for investment and not with a view to any
distribution thereof shall be considered a commercially reasonable sale.
4.4 APPLICATION OF PROCEEDS. All proceeds realized as the result of any sale
or other disposition of the Collateral shall be applied by GC first to the
reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by GC in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as GC shall determine in its sole discretion. Any
surplus shall be paid to Debtor or other persons legally entitled thereto;
Debtor shall remain liable to GC for any deficiency. If GC, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, GC shall have
the option, exercisable at any time, in its sole discretion, of either reducing
the Obligations by the principal amount of purchase price or deferring the
reduction of the Obligations until the actual receipt by GC of the cash
therefor.
4.5 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth in
this Agreement, GC shall have all the other rights and remedies accorded a
secured party under the Code and under any and all other applicable laws and in
any other instrument or agreement now or hereafter entered into between GC and
Debtor and all of such rights and remedies are cumulative and none is exclusive.
Exercise or partial exercise by GC of one or more of its rights or remedies
shall not be deemed an election, nor bar GC from subsequent exercise or partial
exercise of any other rights or remedies. The failure or delay of GC to
exercise any rights or remedies shall not operate as a waiver thereof, but all
rights and remedies shall continue in full force and effect until all of the
Obligations have been fully paid and performed.
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<PAGE>
5. POWER OF ATTORNEY.
Upon the occurrence of any Event of Default, without limiting GC's other
rights and remedies, Debtor grants to GC an irrevocable power of attorney
coupled with an interest, authorizing and permitting GC (acting through any of
its employees, attorneys or agents) at any time*, at its option, but without
obligation, with or without notice to Debtor, and at Debtor's expense, to do any
or all of the following, in Debtor's name or otherwise, but GC agrees to
exercise the following powers in a commercially reasonable manner: (a) Execute
on behalf of Debtor any documents that GC may, in its sole discretion, deem
advisable in order to perfect and maintain GC's security interest in the
Collateral, or in order to exercise a right of Debtor or GC, or in order to
fully consummate all the transactions contemplated under this Agreement, and all
other present and future agreements; (b) Execute on behalf of Debtor any
document exercising, transferring or assigning any option to purchase, sell or
otherwise dispose of or to lease (as lessor or lessee) any real or personal
property which is part of GC's Collateral or in which GC has an interest; (c)
Execute on behalf of Debtor, any invoices relating to any Receivables, any draft
against any Account Debtor and any notice to any Account Debtor, any proof of
claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or
other lien, or assignment or satisfaction of mechanic's, materialman's or other
lien; (d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Debtor upon any instruments, or
documents, evidence of payment or Collateral that may come into GC's possession;
(e) Endorse all checks and other forms of remittances received by GC; (f) Pay,
contest or settle any lien, charge, encumbrance, security interest and adverse
claim in or to any of the Collateral, or any judgment based thereon, or
otherwise take any action to terminate or discharge the same; (g) Grant
extensions of time to pay, compromise claims and settle Receivables and General
Intangibles for less than face value and execute all releases and other
documents in connection therewith; (h) Pay any sums required on account of
Debtor's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Debtor to give GC the same rights of access and other rights with respect
thereto as GC has under this Agreement; and (k) Execute and deliver to any
securities intermediary or other Person any entitlement order, account control
agreement or other notice, document or instrument with respect to any Investment
Property; and (l) Take any action or pay any sum required of Debtor pursuant to
this Agreement and any other present or future agreements. Any and all
reasonable sums paid and any and all reasonable costs, expenses, liabilities,
obligations and reasonable attorneys' fees incurred by GC with respect to the
foregoing shall be added to and become part of the Obligations, shall be payable
on demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. In no event shall GC's rights under the
foregoing power of attorney or any of GC's other rights under this Agreement be
deemed to indicate that GC is in control of the business, management or
properties of Debtor.
*DURING THE CONTINUANCE OF SUCH EVENT OF DEFAULT
6. TERM.
This Agreement shall continue in effect until all of the Obligations have been
paid and performed in full and all agreements between GC and Debtor have been
terminated.
7. GENERAL WAIVERS.
The failure of GC at any time or times hereafter to require Debtor to strictly
comply with any of the provisions of this Agreement or any other present or
future agreement between Debtor and GC shall not waive or diminish any right of
GC thereafter to demand and receive strict compliance therewith. Any waiver of
any default shall not waive or affect any other default, whether prior or
subsequent thereto. None of the provisions of this Agreement or other agreement
now or hereafter executed by Debtor and delivered to GC shall be deemed to have
been waived by any act or knowledge of GC or its agents or employees, but only
by a specific written waiver signed by an officer of GC and delivered to Debtor.
Debtor waives the benefit of all statute(s) of limitations in any action or
proceeding based upon or arising out of this Agreement or any other present or
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future instrument or agreement between GC and Debtor. Debtor waives any and all
notices or demands which Debtor might be entitled to receive with respect to
this Agreement, or any other agreement by virtue of any applicable law*. Debtor
hereby waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, Receivables, General
Intangible, document or guaranty at any time held by GC on which Debtor is or
may in any way be liable, and notice of any action taken by GC unless expressly
required by this Agreement.
*(EXCEPT THAT, PRIOR TO OR CONCURRENTLY WITH THE TAKING OF THE FIRST OF ANY OF
THE FOLLOWING ACTIONS, GC SHALL GIVE DEBTOR ONE GENERAL WRITTEN NOTICE STATING
THAT GC IS "PROCEEDING TO EXERCISE ITS RIGHTS AND REMEDIES" OR WORDS TO THAT
EFFECT)
8. ATTACHMENT WAIVERS.
To the extent that GC, in its sole and absolute discretion, determines, prior
to the disposition of all of the Collateral, that the amount to be realized by
GC from the disposition of all of the Collateral may be less than the amount of
the Obligations, and to the full extent of any such anticipated deficiency,
Debtor waives the benefit of Section 483.010(b) of the California Code of Civil
Procedure and of any and all other statutes requiring GC to first resort to and
exhaust all of the Collateral before seeking or obtaining any attachment remedy
against Debtor, and Debtor expressly agrees that, to the extent of such
anticipated deficiency, GC shall have all of the rights of an unsecured
creditor, including, but not limited to, the right of GC, prior to the
disposition of all of the Collateral, to obtain a temporary protective order and
writ of attachment or other available remedy. GC shall have no liability to
Debtor if the actual deficiency realized by GC is less than the anticipated
deficiency on the basis of which GC obtained a temporary protective order or
writ of attachment. In the event GC should seek a temporary protective order,
or writ of attachment, or both, Debtor hereby irrevocably waives any bond and
any surety or security relating thereto required by any statute, court rule or
otherwise as an incident or condition precedent to the issuance of any temporary
protective order or writ of attachment.
9. DEFINITIONS
As used in this Agreement, the following terms have the following meanings:
"Account Debtor" means the obligor on a Receivable.
--------------
"Agreement" and "this Agreement" means this Security Agreement and all
--------- --------------
modifications and amendments thereto, extensions thereof, and replacements
therefor.
"Code" means the Uniform Commercial Code as adopted and in effect in the State
----
of California from time to time.
"Collateral" has the meaning set forth in Section 1.2 of this Agreement.
----------
"Default" means any event which with notice or passage of time or both, would
-------
constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
---------------
"Equipment" means all of Debtor's present and hereafter acquired machinery,
---------
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible
personal property (other than Inventory) of every kind and description used in
Debtor's operations or owned by Debtor and any interest in any of the foregoing,
and all attachments, accessories, accessions, replacements, substitutions,
additions or improvements to any of the foregoing, wherever located.
"Event of Default" means any of the events set forth in Section 4.1 of this
----------------
Agreement.
"General Intangibles" means all general intangibles of Debtor, whether now
-------------------
owned or hereafter created or acquired by Debtor, including, without limitation,
all choses in action, causes of action, corporate or other business records,
Deposit Accounts, inventions, designs, drawings, blueprints, patents, patent
applications, trademarks and the goodwill of the business symbolized thereby,
names, trade names, trade secrets, goodwill, copyrights,
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registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Debtor against GC, rights to purchase
or sell real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including life insurance, key man insurance,
credit insurance, liability insurance, property insurance and other insurance),
tax refunds and claims, computer programs, discs, tapes and tape files, claims
under guaranties, security interests or other security held by or granted to
Debtor, all rights to indemnification and all other intangible property of every
kind and nature (other than Receivables).
"Inventory" means all of Debtor's now owned and hereafter acquired goods,
---------
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including all raw materials,
work in process, finished goods and goods in transit), and all materials and
supplies of every kind, nature and description which are or might be used or
consumed in Debtor's business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods, merchandise
or other personal property, and all warehouse receipts, documents of title and
other documents representing any of the foregoing.
"Investment Property" means any and all investment property of Debtor,
-------------------
including all securities, whether certificated or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or otherwise, wherever
located, and whether now existing or hereafter acquired or arising.
"Obligations" has the meaning set forth in Section 1.1 of this Agreement.
-----------
"Permitted Liens" means the following: (i) purchase money security interests
---------------
in specific items of Equipment; (ii) leases of specific items of Equipment;
(iii) liens for taxes *; (iv) additional security interests and liens which are
subordinate to the security interest in favor of GC and are consented to in
writing by GC (which consent shall not be unreasonably withheld); (v) security
interests being terminated substantially concurrently with this Agreement;
(vi) liens of materialmen, mechanics, warehousemen, carriers, or other similar
liens arising in the ordinary course of business and securing obligations which
are not delinquent**; (vii) liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by liens of the type
described above in clauses (i) or (ii) above, provided that any extension,
renewal or replacement lien is limited to the property encumbered by the
existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; (viii) Liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with
the importation of goods***. GC will have the right to require, as a condition
to its consent under subparagraph (iv) above, that the holder of the additional
security interest or lien sign an intercreditor agreement on GC's then standard
form, acknowledge that the security interest is subordinate to the security
interest in favor of GC, and agree not to take any action to enforce its
subordinate security interest so long as any Obligations remain outstanding, and
that Debtor agree that any uncured default in any obligation secured by the
subordinate security interest shall also constitute an Event of Default under
this Agreement.
*, OR GOVERNMENTAL FEES, ASSESSMENTS OR OTHER GOVERNMENTAL CHARGES OR LEVIES,
EITHER NOT DELINQUENT OR BEING CONTESTED IN GOOD FAITH BY APPROPRIATE
PROCEEDINGS, PROVIDED THE SAME HAVE NO PRIORITY OVER ANY OF GC'S SECURITY
INTERESTS AND THE DEBTOR MAINTAINS ADEQUATE RESERVES THEREFOR IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, CONSISTENTLY APPLIED.
**MORE THAN 45 DAYS, OR ARE BEING CONTESTED IN GOOD FAITH (PROVIDED SUCH LIEN
IS NOT FORECLOSED)
***;(IX) ANY JUDGMENT, ATTACHMENT OR SIMILAR LIEN, UNLESS THE JUDGMENT IT
SECURES IS NOT FULLY COVERED BY INSURANCE AND HAS NOT BEEN DISCHARGED OR
EXECUTION THEREOF EFFECTIVELY STAYED AND BONDED AGAINST PENDING APPEAL WITHIN 45
DAYS OF THE ENTRY THEREOF PROVIDED THAT, IF THE JUDGMENT IS NOT FULLY COVERED BY
INSURANCE OR EXECUTION THEREOF HAS NOT BEEN SO STAYED AND BONDED, GC SHALL NOT
BE REQUIRED TO MAKE ANY LOANS OR OTHERWISE EXTEND
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<PAGE>
CREDIT TO OR FOR THE BENEFIT OF DEBTOR; (X) LICENSES OR SUBLICENSES GRANTED TO
OTHERS NOT INTERFERING IN ANY MATERIAL RESPECT WITH THE BUSINESS OF DEBTOR; AND
(XI) LIENS WHICH CONSTITUTE RIGHTS OF SET-OFF OF A CUSTOMARY NATURE OR BANKER'S
LIENS ON AMOUNTS ON DEPOSIT, WHETHER ARISING BY CONTRACT OR BY OPERATION OF LAW,
IN CONNECTION WITH ARRANGEMENTS ENTERED INTO WITH DEPOSITORY INSTITUTIONS IN THE
ORDINARY COURSE OF BUSINESS
"Person" means any individual, sole proprietorship, partnership, joint
------
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Debtor's now owned and hereafter acquired accounts
-----------
(whether or not earned by performance), letters of credit, contract rights,
chattel paper, instruments, documents and all other forms of obligations at any
time owing to Debtor, all guaranties and other security therefor, all
merchandise returned to or repossessed by Debtor, and all rights of stoppage in
transit and all other rights or remedies of an unpaid vendor, lienor or secured
party.
Other Terms. All accounting terms used in this Agreement, unless otherwise
-----------
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
10. GENERAL PROVISIONS.
10.1 NOTICES. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service,
or by facsimile, or by regular first-class mail, or certified mail return
receipt requested, addressed to GC or Debtor at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, or at the expiration of
one business day following delivery to the private delivery service, or one day
after the date sent by facsimile, or two business days following the deposit
thereof in the United States mail, with postage prepaid.
10.2 SEVERABILITY. Should any provision, clause or condition of this Agreement
be held by any court of competent jurisdiction to be void or unenforceable, such
defect shall not affect the remainder of this Agreement.
10.3 INTEGRATION. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith shall be construed as
the entire and complete agreement between Debtor and GC and shall supersede all
prior negotiations, all of which are merged and integrated herein. There are no
------------
oral understandings, representations or agreements between the parties which are
- --------------------------------------------------------------------------------
not set forth in this Agreement or in other written agreements signed by the
- ----------------------------------------------------------------------------
parties in connection herewith.
- ------------------------------
10.4 AMENDMENT. The terms and provisions of this Agreement may not be waived
or amended except in a writing executed by Debtor and a duly authorized officer
of GC.
10.5 TIME OF ESSENCE. Time is of the essence in the performance by Debtor of
each and every obligation under this Agreement.
10.6 ATTORNEYS' FEES AND COSTS. Debtor shall reimburse GC for all reasonable
attorneys' fees and all filing, recording, search, title insurance, appraisal,
audit, and other reasonable costs incurred by GC, pursuant to, or in connection
with, or relating to this Agreement (whether or not a lawsuit is filed),
including, but not limited to, any reasonable attorneys' fees and costs GC
incurs in order to do the following: prepare and negotiate this Agreement and
the documents relating to this Agreement; obtain legal advice in connection with
this Agreement or Debtor; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, Account Debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of Debtor's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce GC's
security interest
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<PAGE>
in, the Collateral; and otherwise represent GC in any litigation relating to
Debtor. If either GC or Debtor files any lawsuit against the other predicated on
a breach of this Agreement, the prevailing party in such action shall be
entitled to recover its reasonable costs and attorneys' fees, including (but not
limited to) reasonable attorneys' fees and costs incurred in the enforcement of,
execution upon or defense of any order, decree, award or judgment. All
attorneys' fees and costs to which GC may be entitled pursuant to this Paragraph
shall immediately become part of Debtor's Obligations, shall be due on demand,
and shall bear interest at a rate equal to the highest interest rate applicable
to any of the Obligations.
10.7 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of the parties hereto; provided, however, that
Debtor may not assign or transfer any of its rights under this Agreement without
the prior written consent of GC, and any prohibited assignment shall be void.
No consent by GC to any assignment shall relieve Debtor or any guarantor from
its liability for the Obligations.
10.8 JOINT AND SEVERAL LIABILITY. If Debtor consists of more than one Person,
the liability of each Debtor shall be joint and several and the compromise of
any claim with, or the release of, any Debtor shall not constitute a compromise
with, or a release of, any other Debtor.
10.9 LIMITATION OF ACTIONS. Any claim or cause of action by Debtor against GC,
its directors, officers, employees, agents, accountants or attorneys, based
upon, arising from, or relating to this Agreement, or any other present or
future document or agreement, or any other transaction contemplated hereby or
thereby or relating hereto or thereto, or any other matter, cause or thing
whatsoever, occurred, done, omitted or suffered to be done by GC, its directors,
officers, employees, agents, accountants or attorneys, shall be barred unless
asserted by Debtor by the commencement of an action or proceeding in a court of
competent jurisdiction by the filing of a complaint within one year after* the
act, occurrence or omission upon which such claim or cause of action, or any
part thereof, is based, and the service of a summons and complaint on an officer
of GC, or on any other person authorized to accept service on behalf of GC,
within thirty (30) days thereafter. Debtor agrees that such one-year period is a
reasonable and sufficient time for Debtor to investigate and act upon any such
claim or cause of action. The one-year period provided herein shall not be
waived, tolled, or extended except by the written consent of GC in its sole
discretion. This provision shall survive any termination of this Agreement or
any other present or future agreement.
*DEBTOR LEARNS OF, OR IN THE EXERCISE OF REASONABLE DILIGENCE SHOULD HAVE
LEARNED OF,
10.10 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are used herein for
convenience only. Debtor acknowledges that the same may not describe completely
the subject matter of the applicable paragraph, and the same shall not be used
in any manner to construe, limit, define or interpret any term or provision
hereof. This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against GC or Debtor under any rule of
construction or otherwise.
10.11 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of GC and Debtor shall be
governed by and in accordance with the laws of the State of California. As a
material part of the consideration to GC to enter into this Agreement, Debtor
(i) agrees that all actions and proceedings relating directly or indirectly
hereto shall, at GC's option, be litigated in courts located within California,
and that the exclusive venue therefor shall be Los Angeles County; (ii) consents
to the jurisdiction and venue of any such court and consents to service of
process in any such action or proceeding by personal delivery or any other
method permitted by law; and (iii) waives any and all rights Debtor may have to
object to the jurisdiction of any such court, or to transfer or change the venue
of any such action or proceeding.
10.12 MUTUAL WAIVER OF JURY TRIAL. DEBTOR AND GC EACH HEREBY WAIVE THE RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO, THIS AGREEMENT OR ANY
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<PAGE>
OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN GC AND DEBTOR, OR ANY
CONDUCT, ACTS OR OMISSIONS OF GC OR DEBTOR, ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GC OR DEBTOR,
IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
(remainder of page intentionally left blank)
-15-
<PAGE>
DEBTOR:
Prime Response Group, Inc.
By: /s/ Jamie Gunn
---------------------------------
Title: Vice President
------------------------------
GC:
GREYROCK CAPITAL,
A DIVISION OF BANC OF AMERICA
COMMERCIAL FINANCE CORPORATION
By: /s/ Lisa Nagano
---------------------------------
Title: Senior Vice President
------------------------------
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<PAGE>
[LOGO OF GREYLOCK CAPITAL APPEARS HERE]
Exhibit 10.32
CONTINUING GUARANTY
Borrower: Prime Response, Inc.
Guarantor(s): Prime Response Group, Inc.
Date: October 28, 1999
This Continuing Guaranty is executed by the above-named guarantor(s) (jointly
and severally, the "Guarantor"), as of the above date, in favor of GREYROCK
CAPITAL, A DIVISION OF BANC OF AMERICA COMMERCIAL FINANCE CORPORATION ("GC"),
whose address is 10880 Wilshire Boulevard, Suite 1850, Los Angeles, California
90024, with respect to the Indebtedness of the above-named borrower
("Borrower").
1. CONTINUING GUARANTY. Guarantor hereby unconditionally guarantees and promises
to pay on demand to GC, at the address indicated above, or at such other address
as GC may direct, in lawful money of the United States, and to perform for the
benefit of GC, all Indebtedness of Borrower now or hereafter owing to or held by
GC. As used herein, the term "Indebtedness" is used in its most comprehensive
sense and shall mean and include without limitation: (a) any and all debts,
duties, obligations, liabilities, representations, warranties and guaranties of
Borrower or any one or more of them, heretofore, now, or hereafter made,
incurred, or created, however arising, whether voluntary or involuntary, due or
not due, absolute or contingent, liquidated or unliquidated, certain or
uncertain, determined or undetermined, monetary or nonmonetary, written or oral,
and whether Borrower may be liable individually or jointly with others, and
regardless of whether recovery thereon may be or hereafter become barred by any
statute of limitations, discharged or uncollectible in any bankruptcy,
insolvency or other proceeding, or otherwise unenforceable; and (b) any and all
amendments, modifications, renewals and extensions of any or all of the
foregoing, including without limitation amendments, modifications, renewals and
extensions which are evidenced by any new or additional instrument, document or
agreement; and (c) any and all attorneys' fees, court costs, and collection
charges incurred in endeavoring to collect or enforce any of the foregoing
against Borrower, Guarantor, or any other person liable thereon (whether or not
suit be brought) and any other expenses of, for or incidental to collection
thereof. As used herein, the term "Borrower" shall include any successor to the
business and assets of Borrower, and shall also include Borrower in its capacity
as a debtor or debtor in possession under the federal Bankruptcy Code, and any
trustee, custodian or receiver for Borrower or any of its assets, should
Borrower hereafter become the subject of any bankruptcy or insolvency
proceeding, voluntary or involuntary; and all indebtedness, liabilities and
obligations incurred by any such person shall be included in the Indebtedness
guaranteed hereby. This Guaranty is given in consideration for credit and other
financial accommodations which may, from time to time, be given by GC to
Borrower in GC's sole discretion, but Guarantor acknowledges and agrees that
acceptance by GC of this Guaranty shall not constitute a commitment of any kind
by GC to extend such credit or other financial accommodation to Borrower or to
permit Borrower to incur Indebtedness to GC. All sums due under this Guaranty
shall bear interest from the date due until the date paid at the highest rate
charged with respect to any of the Indebtedness.
2. WAIVERS. Guarantor hereby waives: (a) presentment for payment, notice of
dishonor, demand, protest, and notice thereof as to any instrument, and all
other notices and demands to which Guarantor might be entitled, including
without limitation notice of all of the following: the acceptance hereof; the
creation, existence, or acquisition of any Indebtedness; the amount of the
Indebtedness from time to time outstanding; any
<PAGE>
foreclosure sale or other disposition of any property which secures any or all
of the Indebtedness or which secures the obligations of any other guarantor of
any or all of the Indebtedness; any adverse change in Borrower's financial
position; any other fact which might increase Guarantor's risk; any default,
partial payment or non-payment of all or any part of the Indebtedness; the
occurrence of any other Event of Default (as hereinafter defined); any and all
agreements and arrangements between GC and Borrower and any changes,
modifications, or extensions thereof, and any revocation, modification or
release of any guaranty of any or all of the Indebtedness by any person
(including without limitation any other person signing this Guaranty); (b) any
right to require GC to institute suit against, or to exhaust its rights and
remedies against, Borrower or any other person, or to proceed against any
property of any kind which secures all or any part of the Indebtedness, or to
exercise any right of offset or other right with respect to any reserves,
credits or deposit accounts held by or maintained with GC or any indebtedness of
GC to Borrower, or to exercise any other right or power, or pursue any other
remedy GC may have; (c) any defense arising by reason of any disability or other
defense of Borrower or any other guarantor or any endorser, co-maker or other
person, or by reason of the cessation from any cause whatsoever of any liability
of Borrower or any other guarantor or any endorser, co-maker or other person,
with respect to all or any part of the Indebtedness, or by reason of any act or
omission of GC or others which directly or indirectly results in the discharge
or release of Borrower or any other guarantor or any other person or any
Indebtedness or any security therefor, whether by operation of law or otherwise;
(d) any defense arising by reason of any failure of GC to obtain, perfect,
maintain or keep in force any security interest in, or lien or encumbrance upon,
any property of Borrower or any other person; (e) any defense based upon any
failure of GC to give Guarantor notice of any sale or other disposition of any
property securing any or all of the Indebtedness, or any defects in any such
notice that may be given, or any failure of GC to comply with any provision of
applicable law in enforcing any security interest in or lien upon any property
securing any or all of the Indebtedness including, but not limited to, any
failure by GC to dispose of any property securing any or all of the Indebtedness
in a commercially reasonable manner; (f) any defense based upon or arising out
of any bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt, liquidation or dissolution proceeding commenced by or against Borrower or
any other guarantor or any endorser, co-maker or other person, including without
limitation any discharge of, or bar against collecting, any of the Indebtedness
(including without limitation any interest thereon), in or as a result of any
such proceeding; and (g) the benefit of any and all statutes of limitation with
respect to any action based upon, arising out of or related to this Guaranty.
Until all of the Indebtedness has been paid, performed, and discharged in full,
nothing shall discharge or satisfy the liability of Guarantor hereunder except
the full performance and payment of all of the Indebtedness. If any claim is
ever made upon GC for repayment or recovery of any amount or amounts received by
GC in payment of or on account of any of the Indebtedness, because of any claim
that any such payment constituted a preferential transfer or fraudulent
conveyance, or for any other reason whatsoever, and GC repays all or part of
said amount by reason of any judgment, decree or order of any court or
administrative body having jurisdiction over GC or any of its property, or by
reason of any settlement or compromise of any such claim effected by GC with any
such claimant (including without limitation the Borrower), then and in any such
event, Guarantor agrees that any such judgment, decree, order, settlement and
compromise shall be binding upon Guarantor, notwithstanding any revocation or
release of this Guaranty or the cancellation of any note or other instrument
evidencing any of the Indebtedness, or any release of any of the Indebtedness,
and the Guarantor shall be and remain liable to GC under this Guaranty for the
amount so repaid or recovered, to the same extent as if such amount had never
originally been received by GC, and the provisions of this sentence shall
survive, and continue in effect, notwithstanding any revocation or release of
this Guaranty. Until all of the Indebtedness has been irrevocably paid and
performed in full, Guarantor hereby expressly and unconditionally waives all
rights of subrogation, reimbursement and indemnity of every kind against
Borrower, and all rights of recourse to any assets or property of Borrower, and
all rights to any collateral or security held for the payment and performance of
any Indebtedness, including (but not limited to) any of the foregoing rights
which Guarantor may have under any present or future document or agreement with
any Borrower or other person, and including (but not limited to) any of the
foregoing rights which Guarantor may have under any equitable doctrine of
subrogation, implied contract, or unjust enrichment, or any other equitable or
legal doctrine. Neither GC, nor any of its directors, officers, employees,
agents, attorneys or any other person affiliated with or representing GC shall
be liable for any claims, demands, losses or damages, of any kind whatsoever,
made, claimed, incurred or suffered by Guarantor or any other party through the
ordinary negligence of GC, or any of its
2
<PAGE>
directors, officers, employees, agents, attorneys or any other person affiliated
with or representing GC.
3. CONSENTS. Guarantor hereby consents and agrees that, without notice to or by
Guarantor and without affecting or impairing in any way the obligations or
liability of Guarantor hereunder, GC may, from time to time before or after
revocation of this Guaranty, do any one or more of the following in GC's sole
and absolute discretion: (a) accelerate, accept partial payments of, compromise
or settle, renew, extend the time for the payment, discharge, or performance of,
refuse to enforce, and release all or any parties to, any or all of the
Indebtedness; (b) grant any other indulgence to Borrower or any other person in
respect of any or all of the Indebtedness or any other matter; (c) accept,
release, waive, surrender, enforce, exchange, modify, impair, or extend the time
for the performance, discharge, or payment of, any and all property of any kind
securing any or all of the Indebtedness or any guaranty of any or all of the
Indebtedness, or on which GC at any time may have a lien, or refuse to enforce
its rights or make any compromise or settlement or agreement therefor in respect
of any or all of such property; (d) substitute or add, or take any action or
omit to take any action which results in the release of, any one or more
endorsers or guarantors of all or any part of the Indebtedness, including,
without limitation one or more parties to this Guaranty, regardless of any
destruction or impairment of any right of contribution or other right of
Guarantor; (e) amend, alter or change in any respect whatsoever any term or
provision relating to any or all of the Indebtedness, including the rate of
interest thereon; (f) apply any sums received from Borrower, any other
guarantor, endorser, or co-signer, or from the disposition of any collateral or
security, to any indebtedness whatsoever owing from such person or secured by
such collateral or security, in such manner and order as GC determines in its
sole discretion, and regardless of whether such indebtedness is part of the
Indebtedness, is secured, or is due and payable; (g) apply any sums received
from Guarantor or from the disposition of any collateral or security securing
the obligations of Guarantor, to any of the Indebtedness in such manner and
order as GC determines in its sole discretion, regardless of whether or not such
Indebtedness is secured or is due and payable. Guarantor consents and agrees
that GC shall be under no obligation to marshal any assets in favor of
Guarantor, or against or in payment of any or all of the Indebtedness. Guarantor
further consents and agrees that GC shall have no duties or responsibilities
whatsoever with respect to any property securing any or all of the Indebtedness.
Without limiting the generality of the foregoing, GC shall have no obligation to
monitor, verify, audit, examine, or obtain or maintain any insurance with
respect to, any property securing any or all of the Indebtedness.
4. ACCOUNT STATED. GC's books and records showing the account between it and the
Borrower shall be admissible in evidence in any action or proceeding as prima
facie proof of the items therein set forth.
5. EXERCISE OF RIGHTS AND REMEDIES; FORECLOSURE OF TRUST DEEDS. Guarantor
consents and agrees that, without notice to or by Guarantor and without
affecting or impairing in any way the obligations or liability of Guarantor
hereunder, GC may, from time to time, before or after revocation of this
Guaranty, exercise any right or remedy it may have with respect to any or all of
the Indebtedness or any property securing any or all of the Indebtedness or any
guaranty thereof, including without limitation judicial foreclosure, nonjudicial
foreclosure, exercise of a power of sale, and taking a deed, assignment or
transfer in lieu of foreclosure as to any such property, and Guarantor expressly
waives any defense based upon the exercise of any such right or remedy,
notwithstanding the effect thereof upon any of Guarantor's rights, including
without limitation, any destruction of Guarantor's right of subrogation against
Borrower and any destruction of Guarantor's right of contribution or other right
against any other guarantor of any or all of the Indebtedness or against any
other person, whether by operation of Sections 580a, 580d or 726 of the
California Code of Civil Procedure, or any comparable provisions of the laws of
any other jurisdiction, or any other statutes or rules of law now or hereafter
in effect, or otherwise. Without limiting the generality of the foregoing, (a)
Guarantor waives all rights and defenses arising out of an election of remedies
by GC, even though that election of remedies, such as a nonjudicial foreclosure
with respect to security for any of the Indebtedness, has destroyed the
guarantor's rights of subrogation and reimbursement against the principal by the
operation of Section 580d of the Code of Civil Procedure or otherwise. (b)
Guarantor further waives all rights and defenses arising out of an election of
remedies by GC, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for any of the Indebtedness, has destroyed
the guarantor's rights of subrogation, reimbursement and contribution against
any other guarantor of the guaranteed obligation, by the operation of Section
580d of the Code of Civil Procedure or otherwise. (c) Guarantor understands that
if GC forecloses any present or future trust deed, which secures any or all of
the Indebtedness or which secures any other
3
<PAGE>
guaranty of any or all of the Indebtedness, by nonjudicial foreclosure,
Guarantor may, as a result, have a complete defense to liability under this
Guaranty, based on the legal doctrine of estoppel and Sections 580a, 580d or 726
of the California Code of Civil Procedure, and Guarantor hereby expressly waives
-------------------------------
all such defenses. (d) Guarantor understands and agrees that, in the event GC in
- -----------------
its sole discretion forecloses any trust deed now or hereafter securing any or
all of the Indebtedness, by nonjudicial foreclosure, Guarantor will remain
liable to GC for any deficiency, even though Guarantor will lose its right of
subrogation against the Borrower, and even though Guarantor will be unable to
recover from the Borrower the amount of the deficiency for which Guarantor is
liable, and even though Guarantor may have retained its right of subrogation
against Borrower if GC had foreclosed said trust deed by judicial foreclosure as
opposed to nonjudicial foreclosure, and even though absent the waivers set forth
herein Guarantor may have had a complete defense to any liability for any
deficiency hereunder. (e) Guarantor understands and agrees that, in the event GC
in its sole discretion forecloses any trust deed now or hereafter securing any
other guaranty of any or all of the Indebtedness, by nonjudicial foreclosure,
Guarantor will remain liable to GC for any deficiency, even though Guarantor
will lose its right of subrogation or contribution against the other guarantor,
and even though Guarantor will be unable to recover from the other guarantor any
part of the deficiency for which Guarantor is liable, and even though Guarantor
may have retained its right of subrogation or contribution against the other
guarantor if GC had foreclosed said trust deed by judicial foreclosure as
opposed to nonjudicial foreclosure, and even though absent the waivers set forth
herein Guarantor may have had a complete defense to any liability for any
deficiency hereunder.
6. ACCELERATION. Notwithstanding the terms of all or any part of the
Indebtedness, the obligations of the Guarantor hereunder to pay and perform all
of the Indebtedness shall, at the option of GC, immediately become due and
payable, without notice, and without regard to the expressed maturity of any of
the Indebtedness, in the event: (a) Borrower shall fail to pay or perform when
due all or any part of the Indebtedness; or (b) Guarantor shall revoke this
Guaranty or contest or deny liability under this Guaranty. All of the foregoing
are hereinafter referred to as "Events of Default".
7. RIGHT TO ATTACHMENT REMEDY. Guarantor agrees that, notwithstanding the
existence of any property securing any or all of the Indebtedness, GC shall have
all of the rights of an unsecured creditor of Guarantor, including without
limitation the right to obtain a temporary protective order and writ of
attachment against Guarantor with respect to any sums due under this Guaranty.
Guarantor further agrees that in the event any property secures the obligations
of Guarantor under this Guaranty, to the extent that GC, in its sole and
absolute discretion, determines prior to the disposition of such property that
the amount to be realized by GC therefrom may be less than the indebtedness of
the Guarantor under this Guaranty, GC shall have all the rights of an unsecured
creditor against Guarantor, including without limitation the right of GC, prior
to the disposition of said property, to obtain a temporary protective order and
writ of attachment against Guarantor. Guarantor waives the benefit of Section
483.010(b) of the California Code of Civil Procedure and of any and all other
statutes and rules of law now or hereafter in effect requiring GC to first
resort to or exhaust all such collateral before seeking or obtaining any
attachment remedy against Guarantor. GC shall have no liability to Guarantor as
a result thereof, whether or not the actual deficiency realized by GC is less
than the anticipated deficiency on the basis of which GC obtains a temporary
protective order or writ of attachment.
8. INDEMNITY. Guarantor hereby agrees to indemnify GC and hold GC harmless from
and against any and all claims, debts, liabilities, demands, obligations,
actions, causes of action, penalties, costs and expenses (including without
limitation attorneys' fees), of every nature, character and description, which
GC may sustain or incur based upon or arising out of any of the Indebtedness,
any actual or alleged failure to collect and pay over any withholding or other
tax relating to Borrower or its employees, any relationship or agreement between
GC and Borrower, any actual or alleged failure of GC to comply with any writ of
attachment or other legal process relating to Borrower or any of its property,
or any other matter, cause or thing whatsoever occurred, done, omitted or
suffered to be done by GC relating in any way to Borrower or the Indebtedness
(except any such amounts sustained or incurred as the result of the gross
negligence or willful misconduct of GC or any of its directors, officers,
employees, agents, attorneys, or any other person affiliated with or
representing GC). Notwithstanding any provision in this Guaranty to the
contrary, the indemnity agreement set forth in this Section shall survive any
termination or revocation of this Guaranty and shall for all purposes continue
in full force and effect.
9. SUBORDINATION. Any and all rights of Guarantor under any and all
debts, liabilities and obligations owing
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from Borrower to Guarantor, including any security for and guaranties of any
such obligations, whether now existing or hereafter arising, are hereby
subordinated in right of payment to the prior payment in full of all of the
Indebtedness. No payment in respect of any such subordinated obligations shall
at any time be made to or accepted by Guarantor if at the time of such payment
any Indebtedness is outstanding. If any Event of Default has occurred, Borrower
and any assignee, trustee in bankruptcy, receiver, or any other person having
custody or control over any or all of Borrower's property are hereby authorized
and directed to pay to GC the entire unpaid balance of the Indebtedness before
making any payments whatsoever to Guarantor, whether as a creditor, shareholder,
or otherwise; and insofar as may be necessary for that purpose, Guarantor hereby
assigns and transfers to GC all rights to any and all debts, liabilities and
obligations owing from Borrower to Guarantor, including any security for and
guaranties of any such obligations, whether now existing or hereafter arising,
including without limitation any payments, dividends or distributions out of the
business or assets of Borrower. Any amounts received by Guarantor in violation
of the foregoing provisions shall be received and held as trustee for the
benefit of GC and shall forthwith be paid over to GC to be applied to the
Indebtedness in such order and sequence as GC shall in its sole discretion
determine, without limiting or affecting any other right or remedy which GC may
have hereunder or otherwise and without otherwise affecting the liability of
Guarantor hereunder. Guarantor hereby expressly waives any right to set-off or
assert any counterclaim against Borrower.
10. REVOCATION. This is a Continuing Guaranty relating to all of the
Indebtedness, including Indebtedness arising under successive transactions which
from time to time continue the Indebtedness or renew it after it has been
satisfied. Guarantor waives all benefits of California Civil Code Section 2815,
and agrees that the obligations of Guarantor hereunder may not be terminated or
revoked in any manner except by giving 90 days' advance written notice of
revocation to GC at its address above by registered first-class U.S. mail,
postage prepaid, return receipt requested, and only as to new loans made by GC
to Borrower more than 90 days after actual receipt of such written notice by GC.
No termination or revocation of this Guaranty shall be effective until 90 days
following the date of actual receipt of said written notice of revocation by GC.
Notwithstanding such written notice of revocation or any other act of Guarantor
or any other event or circumstance, Guarantor agrees that this Guaranty and all
consents, waivers and other provisions hereof shall continue in full force and
effect as to any and all Indebtedness which is outstanding on or before the 90th
day following actual receipt of said written notice of revocation by GC, and all
extensions, renewals and modifications of said Indebtedness (including without
limitation amendments, extensions, renewals and modifications which are
evidenced by new or additional instruments, documents or agreements executed
before or after expiration of said 90-day period), and all interest thereon,
accruing before or after expiration of said 90-day period, and all attorneys'
fees, court costs and collection charges, incurred before or after expiration of
said 90-day period, in endeavoring to collect or enforce any of the foregoing
against Borrower, Guarantor or any other person liable thereon (whether or not
suit be brought) and any other expenses of, for or incidental to collection
thereof.
11. INDEPENDENT LIABILITY. Guarantor hereby agrees that one or more successive
or concurrent actions may be brought hereon against Guarantor, in the same
action in which Borrower may be sued or in separate actions, as often as deemed
advisable by GC. The liability of Guarantor hereunder is exclusive and
independent of any other guaranty of any or all of the Indebtedness whether
executed by Guarantor or by any other guarantor (including without limitation
any other persons signing this Guaranty). The liability of Guarantor hereunder
shall not be affected, revoked, impaired, or reduced by any one or more of the
following: (a) the fact that the Indebtedness exceeds the maximum amount of
Guarantor's liability, if any, specified herein or elsewhere (and no agreement
specifying a maximum amount of Guarantor's liability shall be enforceable unless
set forth in a writing signed by GC or set forth in this Guaranty); or (b) any
direction as to the application of payment by Borrower or by any other party; or
(c) any other continuing or restrictive guaranty or undertaking or any
limitation on the liability of any other guarantor (whether under this Guaranty
or under any other agreement); or (d) any payment on or reduction of any such
other guaranty or undertaking; or (e) any revocation, amendment, modification or
release of any such other guaranty or undertaking; or (f) any dissolution or
termination of, or increase, decrease, or change in membership of any Guarantor
which is a partnership. Guarantor hereby expressly represents that it was not
induced to give this Guaranty by the fact that there are or may be other
guarantors either under this Guaranty or otherwise, and Guarantor agrees that
any release of any one or more of such other guarantors shall not release
Guarantor from its obligations hereunder either in full or to any lesser extent.
If Guarantor is a
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married person, Guarantor hereby expressly agrees that recourse may be had
against his or her separate property for all of his or her obligations
hereunder.
12. FINANCIAL CONDITION OF BORROWER. Guarantor is fully aware of the financial
condition of Borrower and is executing and delivering this Guaranty at
Borrower's request and based solely upon its own independent investigation of
all matters pertinent hereto, and Guarantor is not relying in any manner upon
any representation or statement of GC with respect thereto. Guarantor represents
and warrants that it is in a position to obtain, and Guarantor hereby assumes
full responsibility for obtaining, any additional information concerning
Borrower's financial condition and any other matter pertinent hereto as
Guarantor may desire, and Guarantor is not relying upon or expecting GC to
furnish to him any information now or hereafter in GC's possession concerning
the same or any other matter. By executing this Guaranty, Guarantor knowingly
accepts the full range of risks encompassed within a contract of continuing
guaranty, which risks Guarantor acknowledges include without limitation the
possibility that Borrower will incur additional Indebtedness for which Guarantor
will be liable hereunder after Borrower's financial condition or ability to pay
such Indebtedness has deteriorated and/or after bankruptcy or insolvency
proceedings have been commenced by or against Borrower. Guarantor shall have no
right to require GC to obtain or disclose any information with respect to the
Indebtedness, the financial condition or character of Borrower, the existence of
any collateral or security for any or all of the Indebtedness, the filing by or
against Borrower of any bankruptcy or insolvency proceeding, the existence of
any other guaranties of all or any part of the Indebtedness, any action or non-
action on the part of GC, Borrower, or any other person, or any other matter,
fact, or occurrence.
13. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and warrants
that (i) it is in Guarantor's direct interest to assist Borrower in procuring
credit, because Borrower is an affiliate of Guarantor, furnishes goods or
services to Guarantor, purchases or acquires goods or services from Guarantor,
and/or otherwise has a direct or indirect corporate or business relationship
with Guarantor, (ii) this Guaranty has been duly and validly authorized,
executed and delivered and constitutes the valid and binding obligation of
Guarantor, enforceable in accordance with its terms, and (iii) the execution and
delivery of this Guaranty does not violate or constitute a default under (with
or without the giving of notice, the passage of time, or both) any order,
judgment, decree, instrument or agreement to which Guarantor is a party or by
which it or its assets are affected or bound.
14. COSTS. Whether or not suit be instituted, Guarantor agrees to reimburse GC
on demand for all reasonable attorneys' fees and all other reasonable costs and
expenses incurred by GC in enforcing this Guaranty, or arising out of or
relating in any way to this Guaranty, or in enforcing any of the Indebtedness
against Borrower, Guarantor, or any other person, or in connection with any
property of any kind securing all or any part of the Indebtedness. Without
limiting the generality of the foregoing, and in addition thereto, Guarantor
shall reimburse GC on demand for all reasonable attorneys' fees and costs GC
incurs in any way relating to Guarantor, Borrower or the Indebtedness, in order
to: obtain legal advice; enforce or seek to enforce any of its rights; commence,
intervene in, respond to, or defend any action or proceeding; file, prosecute or
defend any claim or cause of action in any action or proceeding (including
without limitation any probate claim, bankruptcy claim, third-party claim,
secured creditor claim, reclamation complaint, and complaint for relief from any
stay under the Bankruptcy Code or otherwise); protect, obtain possession of,
sell, lease, dispose of or otherwise enforce any security interest in or lien on
any property of any kind securing any or all of the Indebtedness; or represent
GC in any litigation with respect to Borrower's or Guarantor's affairs. In the
event either GC or Guarantor files any lawsuit against the other predicated on a
breach of this Guaranty, the prevailing party in such action shall be entitled
to recover its attorneys' fees and costs of suit from the non-prevailing party.
15. NOTICES. Any notice which a party shall be required or shall desire to give
to the other hereunder (except for notice of revocation, which shall be governed
by Section 10 of this Guaranty) shall be given by personal delivery or by
facsimile or by depositing the same in the United States mail, first class
postage pre-paid, addressed to GC at its address set forth in the heading of
this Guaranty and to Guarantor at its address set forth under its signature
hereon, and such notices shall be deemed duly given on the date of personal
delivery or one day after the date sent by facsimile or two business days after
the date of mailing as aforesaid. GC and Guarantor may change their address for
purposes of receiving notices hereunder by giving written notice thereof to the
other party in accordance herewith. Guarantor shall give GC immediate written
notice of any change in its address.
6
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16. CLAIMS. Guarantor agrees that any claim or cause of action by Guarantor
against GC, or any of GC's directors, officers, employees, agents, accountants
or attorneys, based upon, arising from, or relating to this Guaranty, or any
other present or future agreement between GC and Guarantor or between GC and
Borrower, or any other transaction contemplated hereby or thereby or relating
hereto or thereto, or any other matter, cause or thing whatsoever, whether or
not relating hereto or thereto, occurred, done, omitted or suffered to be done
by GC, or by GC's directors, officers, employees, agents, accountants or
attorneys, whether sounding in contract or in tort or otherwise, shall be barred
unless asserted by Guarantor by the commencement of an action or proceeding in a
court of competent jurisdiction within Los Angeles County, California, by the
filing of a complaint within one year after the first act, occurrence or
omission upon which such claim or cause of action, or any part thereof, is based
and service of a summons and complaint on an officer of GC or any other person
authorized to accept service of process on behalf of GC, within 30 days
thereafter. Guarantor agrees that such one year period is a reasonable and
sufficient time for Guarantor to investigate and act upon any such claim or
cause of action. The one year period provided herein shall not be waived,
tolled, or extended except by a specific written agreement of GC. This provision
shall survive any termination of this Guaranty or any other agreement.
17. CONSTRUCTION; SEVERABILITY. If more than one person has executed this
Guaranty, the term "Guarantor" as used herein shall be deemed to refer to all
and any one or more such persons and their obligations hereunder shall be joint
and several. Without limiting the generality of the foregoing, if more than one
person has executed this Guaranty, this Guaranty shall in all respects be
interpreted as though each person signing this Guaranty had signed a separate
Guaranty, and references herein to "other guarantors" or words of similar effect
shall include without limitation other persons signing this Guaranty. As used in
this Guaranty, the term "property" is used in its most comprehensive sense and
shall mean all property of every kind and nature whatsoever, including without
limitation real property, personal property, mixed property, tangible property
and intangible property. Words used herein in the masculine gender shall include
the neuter and feminine gender, words used herein in the neuter gender shall
include the masculine and feminine, words used herein in the singular shall
include the plural and words used in the plural shall include the singular,
wherever the context so reasonably requires. If any provision of this Guaranty
or the application thereof to any party or circumstance is held invalid, void,
inoperative or unenforceable, the remainder of this Guaranty and the application
of such provision to other parties or circumstances shall not be affected
thereby, the provisions of this Guaranty being severable in any such instance.
18. GENERAL PROVISIONS. GC shall have the right to seek recourse against
Guarantor to the full extent provided for herein and in any other instrument or
agreement evidencing obligations of Guarantor to GC, and against Borrower to the
full extent of the Indebtedness. No election in one form of action or
proceeding, or against any party, or on any obligation, shall constitute a
waiver of GC's right to proceed in any other form of action or proceeding or
against any other party. The failure of GC to enforce any of the provisions of
this Guaranty at any time or for any period of time shall not be construed to be
a waiver of any such provision or the right thereafter to enforce the same. All
remedies hereunder shall be cumulative and shall be in addition to all rights,
powers and remedies given to GC by law or under any other instrument or
agreement. Time is of the essence in the performance by Guarantor of each and
every obligation under this Guaranty. If Borrower is a corporation, partnership
or other entity, Guarantor hereby agrees that GC shall have no obligation to
inquire into the power or authority of Borrower or any of its officers,
directors, partners, or agents acting or purporting to act on its behalf, and
any Indebtedness made or created in reliance upon the professed exercise of any
such power or authority shall be included in the Indebtedness guaranteed hereby.
This Guaranty is the entire and only agreement between Guarantor and GC with
respect to the guaranty of the Indebtedness of Borrower by Guarantor, and all
representations, warranties, agreements, or undertakings heretofore or
contemporaneously made, which are not set forth herein, are superseded hereby.
No course of dealings between the parties, no usage of the trade, and no parol
or extrinsic evidence of any nature shall be used or be relevant to supplement
or explain or modify any term or provision of this Guaranty. There are no
conditions to the full effectiveness of this Guaranty. The terms and provisions
hereof may not be waived, altered, modified, or amended except in a writing
executed by Guarantor and a duly authorized officer of GC. All rights, benefits
and privileges hereunder shall inure to the benefit of and be enforceable by GC
and its successors and assigns and shall be binding upon Guarantor and its
heirs, executors, administrators, personal representatives, successors and
assigns. Neither the death of Guarantor nor notice thereof to GC shall terminate
this Guaranty as to its
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estate, and, notwithstanding the death of Guarantor or notice thereof to GC,
this Guaranty shall continue in full force and effect with respect to all
Indebtedness, including without limitation Indebtedness incurred or created
after the death of Guarantor and notice thereof to GC. Section headings are used
herein for convenience only. Guarantor acknowledges that the same may not
describe completely the subject matter of the applicable Section, and the same
shall not be used in any manner to construe, limit, define or interpret any term
or provision hereof.
19. GOVERNING LAW; VENUE AND JURISDICTION. This instrument and all acts and
transactions pursuant or relating hereto and all rights and obligations of the
parties hereto shall be governed, construed, and interpreted in accordance with
the internal laws of the State of California. In order to induce GC to accept
this Guaranty, and as a material part of the consideration therefor, Guarantor
(i) agrees that all actions or proceedings relating directly or indirectly
hereto shall, at the option of GC, be litigated in courts located within Los
Angeles County, California, (ii) consents to the jurisdiction of any such court
and consents to the service of process in any such action or proceeding by
personal delivery or any other method permitted by law; and (iii) waives any and
all rights Guarantor may have to transfer or change the venue of any such action
or proceeding.
20. MUTUAL WAIVER OF RIGHT TO JURY TRIAL. GC AND GUARANTOR HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUIT OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS GUARANTEE OR ANY SUPPLEMENT
OR AMENDMENT THERETO; OR (II) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR
AGREEMENT BETWEEN GC AND GUARANTOR ; OR (III) ANY BREACH, CONDUCT, ACTS OR
OMISSIONS OF GC OR GUARANTOR OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON AFFILIATED WITH OR REPRESENTING
GC OR GUARANTOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE.
21. RECEIPT OF COPY. Guarantor acknowledges receipt of a copy of this Guaranty:
Guarantor Signature
Prime Response Group, Inc.
By: /s/ Jamie Gunn
-----------------------------------
Address:
150 Cambridge Park Drive
Cambridge, Massachusetts 02140
8
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Exhibit 10.33
- --------------------------------------------------------------------------------
[LOGO OF GREYROCK CAPITAL APPEARS HERE]
STREAMLINED FACILITY AGREEMENT
October 28, 1999
Prime Response, Inc.
150 Cambridge Park Drive
Cambridge, Massachusetts 02140
Gentlemen:
This Streamlined Facility Agreement (this "Agreement") is entered into
between GREYROCK CAPITAL, a Division of Banc of America Commercial Finance
Corporation ("GC"), and Prime Response, Inc. ("Borrower"), in connection with
the Loan and Security between GC and Borrower dated October 28, 1999 (the "Loan
Agreement"). (This Agreement, the Loan Agreement, and all other written
documents and agreements between GC and Borrower are referred to herein
collectively as the "Loan Documents". Capitalized terms used but not defined in
this Agreement, shall have the meanings set forth in the Loan Agreement.)
This will confirm our agreement that the following provisions (the
"Streamlined Provisions") shall apply, effective on the date hereof, until
terminated as provided below:
1. Daily reporting of transactions and daily schedules and assignments
of Receivables and schedules of collections, called for by Section 4.3 of the
Loan Agreement, will not be required. Instead, Borrower will provide GC with a
monthly Borrowing Base Certificate, in such form as GC shall from time to time
specify, within 10 days after the end of each month. In the event, as of the end
of any month, the total of all Loans and all other Obligations exceeds the
Credit Limit, Borrower shall immediately pay the amount of the excess to GC.
2. Delivery of the proceeds of Receivables and other Collateral within
one Business Day after receipt, as called for by Sections 4.4 and 5.4 of the
Loan Agreement, will not be required.
Upon notice to Borrower, the Streamlined Provisions shall terminate if
any Default or Event of Default occurs and is continuing.
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Upon any termination of the Streamlined Provisions, Borrower shall,
then and thereafter, provide GC with the daily reporting of transactions and
daily schedules and assignments of Receivables and schedules of collections, as
called for by Section 4.3 of the Loan Agreement, and Borrower shall deliver all
proceeds of Receivables and other Collateral to GC, within one Business Day
after receipt, as called for by Sections 4.4 and 5.4 of the Loan Agreement.
Please confirm your agreement to the foregoing by signing the enclosed
copy of this Agreement and returning it to us.
Sincerely yours,
GREYROCK CAPITAL,
a Division of Banc of America
Commercial Corporation
By /s/ Lisa Nagano
--------------------------
Title: Senior Vice President
-----------------------
Accepted and agreed:
Prime Response, Inc.
By /s/ Jamie Gunn
---------------------------
President or Vice President
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Exhibit 10.34
- --------------------------------------------------------------------------------
[LOGO OF GREYROCK CAPITAL APPEARS HERE]
LETTER OF CREDIT AGREEMENT
BORROWER: PRIME RESPONSE U.S., INC.
(FORMERLY KNOWN AS PRIME RESPONSE, INC.)
ADDRESS: 150 CAMBRIDGE PARK DRIVE
CAMBRIDGE, MASSACHUSETTS 02140
DATE: NOVEMBER 24, 1999
THIS LETTER OF CREDIT AGREEMENT ("Agreement"), dated the above date, is
entered into between GREYROCK CAPITAL, a Division of Banc of America Commercial
Finance Corporation ("GC") and the borrower named above ("Borrower"), in
connection with the Loan and Security Agreement ("Loan Agreement") between GC
and Borrower dated October 28, 1999. This Agreement is an integral part of the
Loan Agreement, and all of the terms and provisions of the Loan Agreement are
incorporated herein by this reference. (Capitalized terms used in this
Agreement, which are not defined in this Agreement, shall have the meanings set
forth in the Loan Agreement. This Agreement, the Loan Agreement and all other
present and future documents instruments and agreements between GC and the
Borrower are referred to herein collectively as the "Loan Documents."
1. LETTERS OF CREDIT. From time to time, in order to assist Borrower in
establishing or opening Letters of Credit (the "LCs") with a bank, trust company
or other issuer ("Bank") to cover the purchase of goods or for other purposes,
including the provision of overdraft facilities, Borrower may request that GC
join in the applications for the LCs, and/or provide guarantees of, and/or
indemnities with respect to, payment or performance of the LCs and/or any drafts
or acceptances thereunder and/or Borrower's obligations in connection therewith
(collectively, "Guarantees"). The decision to do so shall be a matter of GC's
sole discretion. In the event GC joins in such applications and/or provides
Guarantees, the transactions shall be subject to the terms and conditions of
this Agreement. The amount, extent, terms and conditions of the LCs and any
drafts or acceptance relating thereto, shall in all respects be determined
solely by GC and shall be subject to change, modification and revision by GC at
any time and from time to time, in its discretion.
2. INDEMNITY. Borrower unconditionally agrees to indemnify, defend and hold
GC harmless from any and all indebtedness, liabilities, obligations, losses and
claims, of every sort whatsoever, however arising, whether present or future,
fixed or contingent, due or to become due, paid or incurred, arising, incurred
in connection with, or relating to, any LCs, applications for LCs, Guarantees,
drafts or acceptances thereunder or LC Collateral (as defined below), including
without limitation (i) any and all losses and claims due to any action or
omission by any Bank, any errors or omissions of GC or any Bank, or otherwise,
(ii) all amounts due or which may become due under LCs, or any drafts or
acceptances thereunder, (iii) all liabilities and obligations under any
steamship or airway guarantees or releases or any Guarantees, (iv) all amounts
charged or chargeable to Borrower or to GC by any Bank, any other financial
institution or any correspondent bank which opens, issues or is involved with
the LCs, (v) all other bank charges, and (vi) all fees, commissions, duties,
taxes, costs of insurance, and all such other charges and expenses which may
pertain either directly or indirectly to any LC, draft, acceptance, or Guarantee
or to the goods or documents relating thereto (except any such amounts sustained
or incurred as the result of the gross negligence or willful misconduct of GC or
any of its
<PAGE>
directors, officers, employees, agents, attorneys, or any other person
affiliated with or representing GC). Borrower's obligation to indemnify GC under
this Agreement and Borrower's other obligations under this Agreement are
referred to herein as the "LC Obligations" (which shall include, without
limitation, the aggregate face amounts of all LCs and Guarantees). Borrower's LC
Obligations shall not be modified or diminished for any reason or in any manner
whatsoever, shall be included in the "Obligations" (as defined in the Loan
Agreement), and shall survive termination of the Loan Agreement and any other
Loan Document. Without limiting the generality of the foregoing, Borrower agrees
that any charges made to GC by any Bank for Borrower's account or relating to
any LC shall be conclusive on Borrower and may be charged to any of Borrower's
Loan accounts with GC. GC shall have the right, at any time and without notice
to Borrower, to charge any of Borrower's Loan accounts with GC with the amount
of any and all sums due from Borrower to GC under this Agreement, and the same
shall constitute Loans for all purposes of the Loan Documents and shall bear
interest at the rate provided in the Loan Agreement. All sums payable by
Borrower to GC under this Agreement shall be paid solely in United States
dollars.
3. LC LIMITS. Without limiting the fact that GC's decisions to join in
an application for an LC or issue a Guarantee are a matter of its sole
discretion, the total amount of all outstanding LC Obligations shall not at any
time exceed $1,000,000 in the aggregate, and if for any reason they do, Borrower
shall provide cash collateral to GC in an amount equal to the excess, to secure
all of the Obligations, and Borrower shall execute and deliver to GC a pledge
agreement with respect thereto on GC's standard form. In addition, the total
amount of all LC Obligations and all outstanding "Loans" and other "Obligations"
(as defined in the Loan Agreement) shall not at any time exceed the maximum
amount of all Loans and other Obligations specified in Section 1.1 of the Loan
Agreement, and if for any reason they do, Borrower shall immediately pay the
excess to GC to be applied to the Obligations in such order and manner as GC
shall determine in its sole discretion.
4. LOAN AVAILABILITY RESERVE. The amount of Loans which would otherwise
be available to Borrower from time to time under the lending formulas set forth
in the Loan Agreement and the other Loan Documents shall be reduced by 100% of
the total amount of all LC Obligations from time to time outstanding.
5. CHARGES. In addition to any charges, fees or expenses of any Bank or
other person in connection with any LC (all of which shall be charged to
Borrower's Loan account), GC shall be entitled to charge Borrower's Loan account
with a fee in an amount equal to three percent (3%) per annum of the amount of
all LC Obligations from time to time outstanding, calculated on the basis of a
360-day year for the actual number of days elapsed.
6. SECURITY. Without limiting the security interests granted in the Loan
Documents, Borrower hereby grants GC a security interest in the following (the
"LC Collateral"), whether now owned or hereafter acquired by Borrower, wherever
located, whether in transit or not, to secure all of the Obligations: all bills
of lading, shipping documents, documents of title, chattel paper, invoices,
cash, checks, drafts, notes, documents, warehouse, shipping and dock receipts,
and other title, payment, or other instruments, and instruments, whether
negotiable or not, relating to any LC, and all goods and inventory relating
thereto in all stages of manufacture, process or production, and all cash and
non-cash proceeds and insurance proceeds thereof of whatever sort and however
arising. All references in the Loan Agreement to "Collateral" shall, for all
purposes, include without limitation the LC Collateral, and all terms and
provisions of the Loan Agreement applicable to Collateral shall also apply to
the LC Collateral.
7. NON-RESPONSIBILITY. GC shall not be responsible for: the existence,
character, quality, quantity, condition, packing, value or delivery of the goods
purporting to be represented by any documents; any difference or variation in
the character, quality, quantity, condition, packing, value or delivery of the
goods from that expressed in the documents; the validity, sufficiency or
genuineness of any documents or of any endorsements thereon, even if such
documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; the time, place, manner or order in which
shipment is made; partial or incomplete shipment, or failure or omission to ship
any or all of the goods referred to in the LCs or documents; any deviation from
instructions, delay, default, or fraud by the shipper and/or anyone else in
connection with the LC Collateral or the shipping thereof; or any breach of
contract between the shipper or vendors and Borrower. Furthermore, without being
limited by the foregoing, GC shall not be responsible for any act or omission
with respect to or in connection with any LC Collateral.
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<PAGE>
8. GC'S AUTHORITY. Borrower agrees that any action taken by GC, if taken in
good faith, or any action taken by any Bank, under or in connection with the
LCs, the Guarantees, the drafts or acceptances, or the LC Collateral, shall be
binding on Borrower and shall not result in any liability of GC to Borrower. In
furtherance thereof, GC shall have the full right and authority to clear and
resolve any questions of non-compliance of documents; to give any instructions
as to acceptance or rejection of any documents or goods; to execute any and all
applications for steamship or airway guarantees, indemnities or delivery orders;
to grant any extensions of the maturity of, time or payment for, or time of
presentation of, any drafts, acceptances, or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, LCs, drafts or
acceptances; all in GC's sole name, and the Bank shall be entitled to comply
with and honor any and all such documents or instruments executed by or received
solely from GC, all without any notice to or any consent from Borrower.
9. GC'S RIGHTS. Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any Bank in any application for LCs, or any standing
agreement relating to LCs or otherwise, shall be deemed to have been granted to
GC and apply in all respects to GC and shall be in addition to any rights,
remedies, duties or obligations contained herein. Borrower hereby agrees that
prior to the payment of all Obligations to GC, GC may be deemed to be the
absolute owner of, with unqualified rights to possession and disposition of, all
LC Collateral, all of which may be held by GC as security as herein provided.
Should possession of any LC Collateral be transferred to Borrower, said LC
Collateral shall continue to serve as security as herein provided, and any goods
or inventory covered hereby may be sold, transferred or disposed of only as
permitted by the Loan Documents.
10. NEGATIVE COVENANTS. Without GC's prior written approval, Borrower agrees
not to clear or resolve any questions of non-compliance of documents; not to
give any instructions as to acceptance or rejection of any documents or goods;
not to execute any applications for steamship or airway guarantees, indemnities
or delivery orders; not to grant any extensions of the maturity of, time of
payment for, or time of presentation of, any drafts, acceptances or documents;
and not to agree to any amendments, renewals, extensions, modifications, changes
or cancellations of any of the terms or conditions of any of the applications,
LCs, drafts or acceptances.
11. AFFIRMATIVE COVENANTS. Borrower shall cause: all necessary import,
export or other licenses or certificates for the import or handling of the LC
Collateral to be promptly procured; all foreign and domestic governmental laws
and regulations in regard to the shipment and importation of the LC Collateral,
or the financing thereof to be promptly and fully complied with; and any
certificates in that regard that GC may at any time request to be promptly
furnished. In this connection, Borrower warrants and represents to GC that all
shipments made under the LCs are and shall be in accordance with the
governmental laws and regulations of the countries in which the shipments
originate and terminate, and shall not be prohibited by any such laws or
regulations. Borrower assumes all risk, liability and responsibility for, and
agrees to pay and discharge, all present and future local, state, federal or
foreign taxes, duties, and levies. Any embargo, restriction, laws, customs or
regulations of any country, state, city, or other political subdivision, where
the Collateral is or may be located, or wherein payments are to be made, or
wherein drafts may be drawn, negotiated, accepted, or paid, shall be solely
Borrower's risk, liability and responsibility.
12. TERMINATION. Without limiting any of the terms of the Loan Agreement,
on the effective date of termination of the Loan Agreement, in addition to
paying and performing in full all other Obligations, Borrower shall provide cash
collateral to GC in an amount equal to 110% of the amount of all LC Obligations,
to secure all of the Obligations, and Borrower shall execute and deliver to GC a
pledge agreement with respect thereto on GC's standard form. (If the Loan
Agreement provides for a lesser amount of cash collateral, this Agreement shall
control.)
13. DEFAULT. On any failure to pay or perform any Obligation when due, or
the occurrence of any other "Event of Default" (as defined in the Loan
Agreement), GC shall have all of the rights and remedies set forth in the Loan
Documents and which it otherwise has under applicable law, and without limiting
the generality of the foregoing, GC shall have the right to require Borrower to
deposit cash collateral with GC in an amount equal to 110% of the amount of all
LC Obligations, to secure all of the Obligations, and Borrower shall execute and
deliver to GC a pledge agreement with respect thereto on GC's standard form.
-3-
<PAGE>
14. POWER OF ATTORNEY. Without limiting the terms of any of the Loan
Documents, Borrower hereby appoints each employee, attorney or agent of GC as
Borrower's attorney-in-fact, with full power and authority in each of them, at
GC's option, but without obligation, with or without notice to Borrower, in
connection with any LC and any purchase agreement or other document or agreement
entered into, or goods delivered, in connection therewith, at Borrower's
expense, to do any or all of the following in Borrower's name or otherwise: (i)
to sign or endorse all warehouse, shipping, dock or other receipts, letters of
credit, notes, acceptances, checks, drafts, money orders and all other evidence
of indebtedness, and all financing statements, invoices, trust receipts, bills
of lading and other title documents; (ii) to complete any transaction in
connection with, arising out of, or which is the subject of any LC or Guarantee,
to obtain, execute and deliver all necessary or proper documents in connection
therewith and to collect the proceeds thereof; (iii) upon any Event of Default
under the Loan Agreement, or this Agreement, to cancel, rescind, terminate,
modify, amend, or adjust, in any other way, in whole or in part, any transaction
in connection with, arising out of, or which is the subject of any LC or
Guarantee; and (iv) to do any and all other acts and things which may be
necessary or appropriate in connection with this Agreement or any LC, or any
transaction relating thereto, or to enable GC to obtain payment of any
Obligations. The power of attorney granted hereunder is coupled with an
interest and shall be irrevocable until all Obligations have been paid in full.
15. GENERAL. Without limiting any of the other provisions of this
Agreement, all of the General Provisions of Section 9 of the Loan Agreement, as
well as all other provisions of the Loan Agreement, are hereby incorporated
herein by this reference.
16. MUTUAL WAIVER OF JURY TRIAL. BORROWER AND GC EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN GC AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF GC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GC OR BORROWER, IN ALL OF
THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
PRIME RESPONSE U.S., INC.
BY /s/ Jamie Gunn
----------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ Jamie Gunn
----------------------------------
SECRETARY OR ASS'T SECRETARY
GC:
GREYROCK CAPITAL,
A DIVISION OF BANC OF AMERICA
COMMERCIAL FINANCE CORPORATION
BY: /s/ Lisa Nagano
---------------------------------
TITLE Senior Vice President
------------------------------
-4-
<PAGE>
Exhibit 10.36
[PRIME RESPONSE LETTERHEAD APPEARS HERE]
Prime Response, Inc.
150 CambridgePark Drive
Cambridge, MA 02140
ph: 617-876-8300
fax: 617-876-8383
www.primeresponse.com
November 10, 1999
Mr. James Carling
291 Nahanton Street
Newton, MA 02459
- --------------------------------------------------------------------------------
Re: Chief Technology Officer Compensation in U.S. Dollars
-----------------------------------------------------
Dear James:
Now that you have relocated to the United States, based in our new
corporate headquarters in Cambridge, Massachusetts, your compensation as Chief
Technology Officer will be paid in U.S. dollars and all medical and other
benefits and holidays received will be those given to United States employees.
To summarize:
Base Salary: $250,000 per year
Bonus Opportunity: Up to 30% of base salary ($75,000)
Auto allowance: $10,000 per year
Benefits: Health and life insurance
401k Retirement Plan
Four weeks vacation
It is exciting to have the primary visionary of Prime Response relocated to
the United States. I am looking forward to our continued partnership.
Sincerely,
/s/ Peter J. Boni
Peter J. Boni
President and Chief Executive Officer
PJB:jc
<PAGE>
[PRIME RESPONSE LOGO APPEARS HERE]
Exhibit 10.37
PRINCIPAL STATEMENT OF TERMS AND CONDITIONS OF
EMPLOYMENT BETWEEN
PRIME RESPONSE LIMITED
AND
ALLEN SWANN
COMMENCEMENT DATE: February 2, 1998
JOB TITLE: General Manager
DEPARTMENT: Administration
REPORTING TO: James Carling
ANNUAL SALARY: (Pounds) 140,000
I am pleased to confirm Prime Response Limited's offer on the following terms
and conditions. In this document, "Company" shall refer to Prime Response
Limited:
1. COMMENCEMENT DATE:
------------------
Your commencing date of employment is as set out above, and is the first
day of your period of continuous employment with the Company.
2. LOCATION:
---------
You will be based at the Company's offices at Goat Wharf, Brentford
travelling to other locations as reasonably required in the performance of
your duties. The Company expects you to be flexible, and may during the
course of your employment require you to work at such other locations as
may be reasonable, given the nature and status of your job.
3. SALARY:
-------
3.1 Your salary is set out above, and is payable monthly in arrears in 12 equal
instalments on the 28th of each month.
3.2 The Company may withhold the payment of any money owed or due to be paid to
you if you are in breach of the terms of this contract and may withhold or
deduct any money owing or due to be paid by it to you under this contract
or otherwise from any money owing or due to be paid to you.
3.3 The Company operates a discretionary bonus scheme, based on company
results, and revenue recognisable under the US Generally Accepted
Accounting Principles.
3.4 Any sales targets, and commission scheme for which you may be eligible, are
detailed in a separate attachment to this letter.
1
<PAGE>
[PRIME RESPONSE LOGO APPEARS HERE]
3.5 Any petrol expenses incurred, whether business or private, will be
reimbursed in accordance with the Company's expense policy, and will be
taxed in accordance with current Inland Revenue guidelines.
3.6 The Company's expenses policy, benefits package and stock option scheme are
described in the Company Handbook, which is attached to this Agreement.
4. HOURS OF WORK:
--------------
Your normal hours of work will be 37.5 hours per week from 9.00 a.m. to
5.30 p.m. on each day from Monday to Friday with one hour for lunch each
day to be taken between 12 noon and 2 p.m., except where agreed with your
departmental head. Overtime is only paid in exceptional circumstances and
at the sole discretion of a director or your departmental head, who has
approved such overtime in advance.
5. HOLIDAY:
--------
5.1 Your entitlement to paid holiday is 25 working days each calendar year of
which not more than two weeks and two days may be taken consecutively
unless by prior arrangement in writing from the Company. If you join the
Company during the year, your holiday entitlement is calculated on a pro
rata basis. No more than five days entitlement to holiday not taken in a
given calendar year may be carried forward into the next calendar year
without the prior permission in writing of the Company and no additional
payment will be made in respect of holidays not taken. All holidays carried
over must be taken by 31st March of the following year.
5.2 In addition to the above, you are entitled to all statutory holidays with
pay. A compensatory day's holiday will be given when any of these days fall
on a Saturday or Sunday.
5.3 In the event of you leaving the Company, you will be paid in lieu of any
outstanding holiday entitlement on a pro-rata basis.
5.4 One day's pay (whether for the purposes of holiday or where you work for
part of a month) will be calculated at the rate of annual salary.
-------------
252
5.5 In the event that at your date of termination, you have already taken more
holiday than you are entitled to, the Company will have the right to
recover from you payment in respect for the excess.
6. TERMS AND CONDITIONS RELATING TO INABILITY TO WORK DUE TO ILLNESS:
------------------------------------------------------------------
6.1 If you are unable to attend the office through illness, you must telephone
(or have someone telephone on your behalf) before 10.00 a.m. on the morning
of your illness. Appropriate medical certificates must be received by the
Company to cover all periods of illness in excess of five working days or
the Company reserves the right to
<PAGE>
withhold payment of salary in respect of those days. Any payments of salary
for periods of sickness will always be at the discretion of the Board of
Directors. If payment of salary is withheld during periods of sickness and
providing you are appropriately qualified and have complied with this
clause, then statutory sick pay will be paid.
6.2 In the event that you are absent from work for more than five working days,
you may be requested to submit yourself to a medical examination at the
Company's expense by a suitably qualified person of the Company's choice if
you are unable to perform your duties for the Company as a result of ill
health or injury. If that person is unable to confirm that you are fit to
perform your duties, you will co-operate in ensuring the prompt delivery of
all relevant medical reports to the Company and will allow the Company
access to any relevant medical report which has been prepared by a medical
practitioner responsible for your care.
7. TERMINATION OF EMPLOYMENT:
--------------------------
7.1 Your employment is subject to notice on either side of six months. The
Company may elect to pay you in lieu of any notice period.
7.2 No accrued holiday entitlement calculated in accordance with Clause 5 above
may be treated as counting towards the period of notice which you are
required to give to the Company.
7.3 Notwithstanding any other provision to the contrary in this Agreement, the
Company may, during your notice period, place you on "gardening leave",
whereby you will be required to not perform any duties on behalf of the
Company, and you will be required to not attend the Company's premises, or
those of its customers, except as required by the Company. During this
period, you will remain an employee of the Company, and therefore you may
not undertake any other employment or engagement, and you remain bound by
this contract of employment.
8. GRIEVANCE PROCEDURE:
-------------------
8.1 If you have any grievance relating to your employment, you should raise it
with your line manager either orally or in writing. If in your view the
grievance remains unresolved, you should raise it with your departmental
head. If in your view the grievance remains unresolved, you should raise
it with the General Manager for EMEA, who will make the final decision
together with the Personnel Officer. In the event that you departmental
head is the General Manager for EMEA, the final decision shall be taken by
the Chairman of the Company.
8.2 The Company's grievance procedure is set out more fully in the Company
Handbook
9. PENSION SCHEME:
---------------
The Company does not operate a Pension Scheme.
<PAGE>
10. SECURITY OF CONFIDENTIAL INFORMATION:
-------------------------------------
10.1 During your employment you will have access to and will be entrusted with
confidential information and trade secrets relating to the business of the
Company, which may include information entrusted to the Company by its
clients. You may not during your employment, otherwise than in the proper
performance of your duties (and then only to those who need to know such
information or secrets) or afterwards (otherwise than with the prior
written consent of the your department head or a director or as required by
law) use or disclose any confidential information or trade secrets
concerning the business of the Company or in respect of which the Company
may be bound by an obligation of confidence to a third party and you should
also use your best endeavors to prevent the publication or disclosure of
such information or secrets. All notes, memoranda and other records
(including those stored on computer software) made during your employment
and relating to the business of the Company belong to the Company and
should promptly be handed over to the Company on request, or on termination
of your employment for whatever reason.
10.2 Any documents or equipment provided for you by the Company remain the
property of the Company and must be returned when your employment ceases.
10.3 Any discovery, invention, secret process or improvement in procedure
discovered, invented, developed or devised by you during your employment
with the Company (and whether or not in conjunction with a third party) and
in the course of your duties affecting or relating to the business of the
Company or capable of being used or adapted for use in it, should
immediately be disclosed to the Company and subject to such rights as you
may have under the Patents Act 1977 will belong to the Company.
10.4 Any other works created by you in the course of your employment, or using
Company property or equipment, shall belong to the Company, and you will,
where necessary, assign all rights in such works to the Company on request.
You may not use such works, other than in the course of your employment.
10.5 Any breach of security will be treated as in accordance with the Company's
disciplinary procedure, and may, result in instant dismissal and could make
you liable to prosecution.
11. DISCIPLINE:
-----------
The Company's disciplinary procedure is set out in the Company Handbook, a
copy of which is supplied with this contract.
12. JOB DESCRIPTION & DUTIES
- --- ------------------------
Your detailed job description will be separately notified to you by your
line manager, who will also have responsibility for determining your
duties.
<PAGE>
[PRIME RESPONSE LOGO APPEARS HERE]
13. COMPANY HANDBOOK
----------------
The Company Handbook, which is supplied with these terms and conditions and
as the same shall be amended from time to time, forms part of your contract
of employment.
14. DATA PROTECTION
- --- ---------------
From time to time the Company will gather personal data from you which may
be subject to the Data Protection Act 1984, and any successor legislation.
By signing this contract, you authorize the Company to disclose this data
to certain third parties for the purposes of, inter alia, assessing you
eligibility to health and other benefits the Company may from time to time
consider. In the event that you do not wish any personal data to be
disclosed, you may notify your line manager at any time.
This agreement supersedes any previous agreement between the parties whether
written, oral or implied.
If you accept the above terms and conditions, please sign and return one copy of
this form.
<TABLE>
<CAPTION>
PRIME RESPONSE LIMITED EMPLOYEE
<S> <C> <C>
Signed by: /s/ Michelle Rose
------------------ --------------------
Name (in Capitals): MICHELLE ROSE
------------------ --------------------
Date: 1 July 98
------------------ --------------------
Title: Personnel
------------------
</TABLE>
<PAGE>
Company Copy
PRIME RESPONSE GROUP, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Prime Response Group, Inc. (the
"Corporation"):
Optionee: Allen Swann
--------
Grant Date: 26th October 1998
----------
Vesting Commencement Date: February 1, 1998
-------------------------
Exercise Price: $2.56 per share
--------------
Number of Option Shares: 140,000 shares of Common Stock
-----------------------
Expiration Date: 25th October 2008
---------------
Type of Option: Incentive Stock Option
-------------- -----
X Non-Statutory Stock Option
---
Date Exercisable: Immediately Exercisable
----------------
Vesting Schedule: The Option Shares shall initially be unvested and
----------------
subject to repurchase by the Corporation at the Exercise Price paid
per share. Optionee shall acquire a vested interest in, and the
Corporation's repurchase right shall accordingly lapse with respect
to, (i) twenty-five percent (25%) of the Option Shares upon Optionee's
completion of 1 year of Service measured from the Vesting Commencement
Date and (ii) the balance of the Option Shares in a series of thirty-
six (36) successive equal monthly installments upon Optionee's
completion of each additional month of Service over the thirty-six
(36)-month period measured from the first anniversary of the Vesting
Commencement Date. In no event shall any additional Option Shares
vest after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted subject to and
in accordance with the terms of the Prime Response Group, Inc. 1998 Stock
Option/Stock Issuance Plan (the "Plan"). Optionee further agrees to be bound by
the terms of the Plan and the terms of the Option as set forth in the Stock
Option Agreement attached hereto as Exhibit A.
<PAGE>
Optionee understands that any Option Shares purchased under the Option will
be subject to the terms set forth in the Stock Purchase Agreement attached
hereto as Exhibit B. Optionee hereby acknowledges receipt of a copy of the Plan
in the form attached hereto as Exhibit C.
REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
-----------------
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN REPURCHASE
RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS
ASSIGNS. THE TERMS OF SUCH RIGHTS ARE SPECIFIED IN THE ATTACHED STOCK PURCHASE
AGREEMENT.
No Employment or Service Contract. Nothing in this Notice or in the
---------------------------------
attached Stock Option Agreement or Plan shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the meaning
-----------
assigned to them in this Notice or in the attached Stock Option Agreement.
DATED: 26TH OCTOBER, 1998
PRIME RESPONSE GROUP, INC.
By: /s/ Peter J. Boni
--------------------------------
Title: President
/s/ Allen Swann
________________________________
ALLEN SWANN
ATTACHMENTS:
- ------------
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - STOCK PURCHASE AGREEMENT
EXHIBIT C - 1998 STOCK OPTION/STOCK ISSUANCE PLAN
<PAGE>
[PRIME RESPONSE LOGO APPEARS HERE]
Prime Response Inc.
1099 18th Street
Suite 500
Denver, CO 80202-1908
ph: 303-382-4380
fax: 303-296-7726
www.prime-response.com
CONFIDENTIAL LETTER TO:
ALLEN SWANN
SENIOR VICE PRESIDENT OF INTERNATIONAL OPERATIONS
Dear Allen,
As we discussed, the following represents your 1999 compensation plan as Senior
Vice President of International Operations.
BASE SALARY (Pounds) 140,000.00
-----------
INCENTIVE POTENTIAL (Pounds) 100,000.00
-------------------
<TABLE>
<CAPTION>
This incentive potential has three components:
<S> <C>
1. REVENUE (Pounds) 40,000 for the year, paid
quarterly against budgeted targets.
2. CONTRIBUTION MARGIN (Pounds)35,000 for the year, paid quarterly
against budgeted targets.
3. OVERALL COMPANY (Pounds)25,000 for the year, paid annually
against budgeted targets.
</TABLE>
Budgeted targets are as follows:
1. REVENUE
<TABLE>
<CAPTION>
($ MILLIONS)
QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4 1999
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SOFTWARE
LICENSE 3.0 4.0 4.0 2.0 13.0
MAINTENANCE .5 .7 .9 1.1 3.2
PROFESSIONAL
SERVICES
(CONSULTING &
EDUCATION) .5 .8 1.2 1.3 3.8
OUTSOURCING .9 1.0 1.0 1.1 4.0
TOTAL
REVENUE 4.9 6.5 7.1 5.5 24.0
</TABLE>
<PAGE>
[PRIME RESPONSE LOGO APPEARS HERE]
CONFIDENTIAL LETTER TO:
ALLEN SWANN
SENIOR VICE PRESIDENT, INTERNATIONAL OPERATIONS
PAGE 2
<TABLE>
<CAPTION>
($ MILLIONS)
QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4 1999
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SERVICES &
SUPPORT .47 .41 .40 .40 1.68
OUTSOURCING .64 .74 .72 .74 2.84
MAINTENANCE .11 .13 .12 .12 .48
SALES &
MARKETING 1.61 1.90 2.2 2.1 7.81
TOTAL COSTS 3.03 3.21 3.01 2.99 12.24
- --------------------------------------------------------------------
CONTRIBUTION
MARGIN 1.87 3.29 4.09 2.51 11.76
</TABLE>
3. OVERALL COMPANY PERFORMANCE:
<TABLE>
<CAPTION>
($ MILLIONS)
QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4 1999
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE 8.0 9.8 11.7 8.5 38.0
EXPENSE 7.5 8.2 8.3 8.0 32.0
PROFIT .5 1.6 3.4 .5 6.0
</TABLE>
<PAGE>
[PRIME RESPONSE LOGO APPEARS HERE]
CONFIDENTIAL LETTER TO:
ALLEN SWANN
<TABLE>
<CAPTION>
SENIOR VICE PRESIDENT, INTERNATIONAL OPERATIONS
PAGE 3
PAYMENT PLANS ARE AS FOLLOWS: (PERCENTAGE OF OVERRIDE X $ MILLIONS = POUNDS OF
INCENTIVE PAYMENTS).
<S> <C>
1. REVENUE:
--------
SOFTWARE LICENSE & .075 % to $ 10 million
MAINTENANCE.
. .125 % $10 million to $16 million
.25 % $16 million to $20 million
.5 % over $20 million
SERVICES & OUTSOURCING:
.1% to $5 million
.15% to $8 million
.3% to $10 million
.4% over $10 million
OVERALL REVENUE:
(Pounds) 4,000 for each quarter that
overall revenue targets are achieved.
2. CONTRIBUTION MARGINS:
---------------------
.25% to $7 million
.4% to $12 million
.8% to $15 million
1.0% over $15 million
</TABLE>
3. OVERALL COMPANY PERFORMANCE:
---------------------------
(Pounds) 25,000 paid at the year-end audit, based upon achievement vs. budget.
<PAGE>
[PRIME RESPONSE LOGO APPEARS HERE]
CONFIDENTIAL LETTER TO:
ALLEN SWANN
SENIOR VICE PRESIDENT, INTERNATIONAL OPERATIONS
PAGE 4
Above and beyond this compensation plan, you will be granted a one-time bonus of
$50,000.00 for achieving Q1 revenue targets.
I look forward to working with you towards a rewarding and successful 1999.
Sincerely,
Peter J. Boni
President & CEO
Prime Response Group, Inc.
Accepted: /s/ Allen Swann
------------------------
Allen Swann
<PAGE>
Exhibit 10.38
[PRIME RESPONSE LOGO APPEARS HERE]
PRINCIPAL STATEMENT OF TERMS AND CONDITIONS OF
EMPLOYMENT BETWEEN
PRIME RESPONSE LIMITED
AND
GARY DANIELS
COMMENCEMENT DATE: 30 November, 1998
JOB TITLE: VP Product Development
DEPARTMENT: Development
REPORTING TO: Terry Osborne, CEO - Group
ANNUAL SALARY: (Pounds)140,000
I am pleased to confirm Prime Response Limited's offer on the following terms
and conditions. In this document, "Company" shall refer to Prime Response
Limited:
1. COMMENCEMENT DATE:
-----------------
Your commencing date of employment is as set out above, and is the first
day of your period of continuous employment with the Company.
2. LOCATION:
--------
You will be based at the Company's offices at Goat Wharf, Brentford
travelling to other locations as reasonably required in the performance of
your duties. The Company expects you to be flexible, and may during the
course of your employment require you to work at such other locations as
may be reasonable, given the nature and status of your job.
3. SALARY:
------
3.1 Your salary is set out above, and is payable monthly in arrears in 12 equal
instalments on the 28th of each month.
3.2 The Company may withhold the payment of any money owed or due to be paid to
you if you are in breach of the terms of this contract and may withhold or
deduct any money owing or due to be paid by it to you under this contract
or otherwise from any money owing or due to be paid to you.
3.3 The Company operates a discretionary bonus scheme, based on company
results, and revenue recognisable under the US Generally Accepted
Accounting Principles.
3.4 Any sales targets, and commission scheme for which you may be eligible, are
detailed in a separate attachment to this letter.
<PAGE>
[PRIME RESPONSE LOGO APPEARS HERE]
3.5 Any petrol expenses incurred, whether business or private, will be
reimbursed in accordance with the Company's expense policy, and will be
taxed in accordance with current Inland Revenue guidelines.
3.6 The Company's expenses policy, benefits package and stock option scheme are
described in the Company Handbook, which is attached to this Agreement.
4. HOURS OF WORK:
-------------
Your normal hours of work will be 37.5 hours per week from 9:00 a.m. to
5:30 p.m. on each day from Monday to Friday with one hour for lunch each
day to be taken between 12 noon and 2 p.m., except where agreed with your
departmental head. Overtime is only paid in exceptional circumstances and
at the sole discretion of a director or your departmental head, who has
approved such overtime in advance.
5. HOLIDAY:
-------
5.1 Your entitlement to paid holiday is 25 working days each calendar year of
which not more than two weeks and two days may be taken consecutively
unless by prior arrangement in writing from the Company. If you join the
Company during the year, your holiday entitlement is calculated on a pro
rata basis. No more than five days entitlement to holiday not taken in a
given calendar year may be carried forward into the next calendar year
without the prior permission in writing of the Company and no additional
payment will be made in respect of holidays not taken. All holidays carried
over must be taken by 31st March of the following year.
5.2 In addition to the above, you are entitled to all statutory holidays with
pay. A compensatory day's holiday will be given when any of these days fall
on a Saturday or Sunday.
5.3 In the event of you leaving the Company, you will be paid in lieu of any
outstanding holiday entitlement on a pro rata basis.
5.4 One day's pay (whether for the purposes of holiday or where you work for
part of a month) will be calculated at the rate of annual salary.
-------------
5.5 In the event that at your date of termination, you have already taken more
holiday than you are entitled to, the Company will have the right to
recover from you payment in respect for the excess.
6. TERMS AND CONDITIONS RELATING TO INABILITY TO WORK DUE TO ILLNESS:
-----------------------------------------------------------------
6.1 If you are unable to attend the office through illness, you must telephone
(or have someone telephone on your behalf) before 10.00 a.m. on the morning
of your illness. Appropriate medical certificates must be received by the
Company to cover all periods of illness in excess of five working days or
the Company reserves the right to
<PAGE>
[PRIME RESPONSE LOGO APPEARS HERE]
withhold payment of salary in respect of those days. Any payments of salary
for periods of sickness will always be at the discretion of the Board of
Directors. If payment of salary is withheld during periods of sickness and
providing you are appropriately qualified and have complied with this
clause, then statutory sick pay will be paid.
6.2 In the event that you are absent from work for more than five working days,
you may be requested to submit yourself to a medical examination at the
Company's expense by a suitably qualified person of the Company's choice if
you are unable to perform your duties for the Company as a result of ill
health or injury. If that person is unable to confirm that you are fit to
perform your duties, you will co-operate in ensuring the prompt delivery of
all relevant medical reports to the Company and will allow the Company
access to any relevant medical report which has been prepared by a medical
practitioner responsible for your care.
7. TERMINATION OF EMPLOYMENT:
-------------------------
7.1 Your employment is subject to a notice period of six months on either side
after a three months probationary period, but in the event of a hostile
take-over bid this will be increased to 12 months. The Company may elect to
pay you in lieu of any notice period.
7.2 No accrued holiday entitlement calculated in accordance with Clause 5 above
may be treated as counting towards the period of notice which you are
required to give to the Company.
7.3 Notwithstanding any other provision to the contrary in this Agreement, the
Company may, during your notice period, place you on "gardening leave",
whereby you will be required to not perform any duties on behalf of the
Company, and you will be required to not attend the Company's premises, or
those of its customers, except as required by the Company. During this
period, you will remain an employee of the Company, and therefore you may
not undertake any other employment or engagement, and you remain bound by
this contract of employment.
8. GRIEVANCE PROCEDURE:
-------------------
8.1 If you have any grievance relating to your employment, you should raise it
with your line manager either orally or in writing. If in your view the
grievance remains unresolved, you should raise it with your departmental
head. If in your view the grievance remains unresolved, you should raise it
with the General Manager for EMEA, who will make the final decision
together with the Personnel Officer. In the event that you departmental
head is the General Manager for EMEA, the final decision shall be taken by
the Chairman of the Company.
8.2 The Company's grievance procedure is set out more fully in the Company
Handbook.
9. PENSION SCHEME:
--------------
The Company does not operate a Pension Scheme.
<PAGE>
[PRIME RESPONSE LOGO APPEARS HERE]
10. SECURITY OF CONFIDENTIAL INFORMATION:
------------------------------------
10.1 During your employment you will have access to and will be entrusted with
confidential information and trade secrets relating to the business of the
Company, which may include information entrusted to the Company by its
clients. You may not during your employment, otherwise than in the proper
performance of your duties (and then only to those who need to know such
information or secrets) or afterwards (otherwise than with the prior
written consent of the your department head or a director or as required by
law) use or disclose any confidential information or trade secrets
concerning the business of the Company or in respect of which the Company
may be bound by an obligation of confidence to a third party and you should
also use your best endeavors to prevent the publication or disclosure of
such information or secrets. All notes, memoranda and other records
(including those stored on computer software) made during your employment
and relating to the business of the Company belong to the Company and
should promptly be handed over to the Company on request, or on termination
of your employment for whatever reason..
10.2 Any documents or equipment provided for you by the Company remain the
property of the Company and must be returned when your employment ceases.
10.3 Any discovery, invention, secret process or improvement in procedure
discovered, invented, developed or devised by you during your employment
with the Company (and whether or not in conjunction with a third party) and
in the course of your duties affecting or relating to the business of the
Company or capable of being used or adapted for use in it, should
immediately be disclosed to the Company and subject to such rights as you
may have under the Patents Act 1977 will belong to the Company.
10.4 Any other works created by you in the course of your employment, or using
Company property or equipment, shall belong to the Company, and you will,
where necessary, assign all rights in such works to the Company on request.
You may not use such works, other than in the course of your employment.
10.5 Any breach of security will be treated as in accordance with the Company's
disciplinary procedure, and may, result in instant dismissal and could make
you liable to prosecution.
11. DISCIPLINE:
----------
The Company's disciplinary procedure is set out in the Company Handbook, a
copy of which is supplied with this contract.
12. JOB DESCRIPTION & DUTIES:
------------------------
Your detailed job description will be separately notified to you by your
line manager, who will also have responsibility for determining your
duties.
<PAGE>
[PRIME RESPONSE LOGO APPEARS HERE]
13. COMPANY HANDBOOK:
----------------
The Company Handbook, which is supplied with these terms and conditions and
as the same shall be amended from time to time, forms part of your contract
of employment.
14. DATA PROTECTION:
---------------
From time to time the Company will gather personal data from you which may
be subject to the Data Protection Act 1984, and any successor legislation.
By signing this contract, you authorise the Company to disclose this data
to certain third parties for the purposes of, inter alia, assessing you
eligibility to health and other benefits the Company may from time to time
consider. In the event that you do not wish any personal data to be
disclosed, you may notify your line manager at any time.
This agreement supersedes any previous agreement between the parties whether
written, oral or implied.
If you accept the above terms and conditions, please sign and return one copy of
this form.
PRIME RESPONSE LIMITED EMPLOYEE
Signed by: /s/ Michelle Rose /s/ Gary Daniels
----------------------- --------------------------
Name (in Capitals): MICHELLE ROSE GARY DANIELS
----------------------- --------------------------
Date: 30/11/98 17/th/ October 98
----------------------- --------------------------
Title: PERSONNEL
-----------------------
<PAGE>
[PRIME RESPONSE BRENTFORD, U.K. LETTERHEAD APPEARS HERE]
Prime Response Ltd.
Gary Daniels
Garden Cottage
Holmbury Hill Road
Holmbury St. Mary
Near Dorking
Surrey RH5 6NR
6/th/ October 98
Dear Gary,
I am delighted to offer you the position of Vice President Product Development
reporting to the CEO based in Brentford. Your responsibilities will include
bringing together existing product maintenance and support into a single code
stream, developing now product versions with a variety of front end
architectures including NT and web. You will also be responsible for porting the
product to different architectures maintaining version control and consistency
and improving the productivity and quality within the development function
through the implementation of control, quality and testing processes.
Your remuneration will consist of a basic salary of (Pounds)140,000 which
includes car allowance, plus a performance bonus of 50% or (Pounds)70,000.
As discussed we will jointly agree the components of the bonus.
In addition you will be granted on joining 35,000 options of pre flotation
stock. It is our intent to float the Company in the US during the next 24 month
period. The full details of the stock grant scheme are currently being produced
and you will receive information at the appropriate time. As discussed in the
event of a take-over either pre or post IPO, all shares will be accelerated.
Your notice period will be 6 months on either side after a three month
probationary period, but in the event of a hostile take-over it will be
increased to 12 months. You will be entitled to 25 days holiday per annum, with
pro rata entitlement.
This offer is subject to satisfactory references, which are currently being
sought and assumes a start date to be agreed. I know that you will be discussing
notice period, we would obviously want you on board as soon as possible in 1998.
This is a very exciting opportunity to join an organization in its formative
stages that has a great product and a very desirable blue chip client base.
We can build a formidable team that will lead this company to great success and
I know you will play a major role. I very much look forward to your joining.
Best Regards,
/s/ James Carling
James Carling
Chairman
I accept the terms of this offer.
Signed /s/ Gary Daniels Date: 6/th/ October 98
<PAGE>
Exhibit 10.39
October 22, 1999
Paul Lavallee
442 Carpenter Road
Whitinsville, MA 01588
Dear Paul:
I am pleased to offer you the position of President of the Americas for Prime
Response, Inc. (the "Company"), reporting directly to me. In that role, you
will have complete revenue and P&L responsibility for all sales, professional
services and customer support activities throughout the United States, Canada
and Latin America.
Compensation for the position includes a base salary of $250,000 per year and an
annual incentive compensation equal to 50% of your base salary ($125,000). You
will be eligible to earn one fourth of that incentive for the remainder of 1999
($31,250). Half of that ($15,620) will be guaranteed. Over achievement of $2
million in license revenue for the fourth quarter of 1999 will result in
additional earnings.
In addition, a stock option to purchase 200,000 shares of the Company's common
stock at $5.00 per share will be granted. As we reviewed, since Prime Response
is legally considered to be in registration, pricing on stock options is to be
calculated at a 10% discount to the low end of the filing range. The Company is
expected to file for a public listing during the week of November 1. Final IPO
pricing has yet to be determined and trading pricing is unknown. With regard to
the pricing difference that we have discussed, we are prepared to price your
stock options at $5.00 per share.
Twenty percent of these stock options (40,000 shares) will be vested
immediately. The remaining shares (160,000) will be vested according to the
Company stock option standards over a four-year period of time.
General Atlantic Partners, a principal investor and holder of a company board
seat, has agreed to allow your purchase of up to $150,000 of Prime Response
common stock owned by them for $3.00 per share. This transaction must be
concluded with General Atlantic not later than October 31, 1999.
Furthermore, you will have the opportunity to participate in Prime Response
benefits which include 3 weeks of vacation annually, health and life insurance
and a 401K retirement plan, which includes Company contribution.
<PAGE>
Paul Lavallee
October 22, 1999
Page 2
Should you be terminated without cause, your cash compensation of base salary
and incentive potential (not less than $375,000 as described above) shall
continue for one year. In addition, the Company will allow you to become vested
in an additional year's worth of stock options to be exercised within one year
of termination. The same terms shall apply if you elect to terminate in the
event that your position is eliminated, you are offered a position of lesser
responsibility, or if you are not selected for a promotion should a higher
position be created or vacated.
Should you be terminated without cause at a change of control or should you be
offered a position at a change of control that is of lesser responsibility than
the position being offered in this letter, these stock options shall be 100%
vested. In that event, you will be offered a severance program that continues
your cash compensation of base salary band incentive potential (not less than
$375,000 as described above), as well as all Company paid health and life
insurance for one year.
For purposes of this offer, "cause" condition only occurs if the Company
terminates you after you: (a) shall have been convicted of any felony
including, but not limited to, a felony involving fraud, theft,
misappropriation, dishonesty, or embezzlement; (b) shall have committed
intentional acts of gross misconduct that materially impairs the goodwill or
business of the Company or cause material damage to its property, goodwill, or
business; or (c) shall have refused to, or willfully failed to, perform his
material duties, provided, however, that no termination under this subparagraph
shall be effective unless you do not cure such refusal or failure to the
Company's satisfaction as soon as practicable after the Company gives you
written notice identifying such refusal or failure (and, in any event, within
thirty (30) calendar days after receipt of such written notice). No act or
failure to act on the part of you shall be considered "willful" unless it is
done, or omitted to be done, by you in bad faith or without reasonable belief
that this action or omission was in the best interests of the Company.
Should your termination result from your death or disability, you or your estate
can exercise the vested portion of your stock options within the life of the
stock option.
The Company will promptly reimburse you for all reasonable business expenses
incurred by you in connection with and commensurate with the performance of your
duties for the Company, upon substantiation of such business expenses in
accordance with the policies of the Company in effect from time to time.
In recognition of your large physical stature, airline travel one step up from
coach will be provided for all flights over one hour in duration. Should there
be the opportunity to purchase full fare coach tickets and then participate in
airline upgrade programs in order to secure that step up from coach, you agree
to take every opportunity to do so.
It is recognized that you currently participate in a variety of outside boards
and advisory boards and receive compensation from these activities. This may
continue providing that it does not interfere with your duties in the Company
and is not considered to be in conflict with the
<PAGE>
Exhibit 10.40
October 21, 1999
Frederick H. Phillips
7 Fox Run
Middleton, MA 01949
Dear Fred:
I am pleased to offer you the position of Senior Vice President and Chief
Financial Officer of Prime Response, Inc. (the "Company"), reporting directly to
me. In that role you will have responsibility for all control, treasury,
management information and administrative activities of the Company.
Compensation for that position includes a base salary of $180,000 per year
and an annual incentive bonus of 35% of that base salary ($63,000). You will be
eligible to earn one fourth of that incentive ($15,750), based upon achievement
of the Company's fourth quarter goals (revenue of over $8.5 million).
In addition, you will receive a stock option grant to purchase 125,000
shares of the Company's stock at $5.00 per share. Since the Company is now
considered to be legally in registration, pricing on stock options is to be
calculated at a 10% discount to the low end of the filing range. The Company is
expected to file for a public listing during the week of November 1. Final IPO
pricing has yet to be determined and trading pricing is unknown. However, the
Company is prepared to price your stock options at $5.00 per share.
These shares will be vested according to the Company stock option standards
over a four-year period of time.
Furthermore, you will have the opportunity to participate in Prime Response
benefits which include 3 weeks of vacation annually, health and life insurance
and a 401K retirement plan, which includes Company contribution.
In the event that your employment is terminated without cause, you will
receive a severance that includes the continuation of all base salary and
benefits programs for one year. Should you be terminated without cause
resulting from a change of control, all stock options granted will be 100%
vested.
<PAGE>
Frederick H. Phillips
October 21, 1999
Page Two
This offer and compensation plan is dependent on your execution of the
standard Prime Response Employment Agreement. Also, your employment with Prime
Response is contingent on the successful completion of the Company's standard
employment practices, including background investigation.
Your background, experience and achievements to date will be put to
invaluable use as we work together to build a world class company. I'm excited
by the opportunity to work with you toward that end as you continue to build
your career with Prime Response.
It is anticipated that you will begin your employment with Prime Response
on Monday, October 25. Among our first initiatives will be the recruitment of
an equally world class corporate controller.
Sincerely,
/s/ Peter J. Boni
Peter J. Boni
President and Chief Executive Officer
Accepted and agreed to:
/s/ Frederick H. Phillips
- -------------------------
Frederick H. Phillips
<PAGE>
Exhibit 10.41
August 10, 1999
Mr. James P. Plantan
9511 Oxborough Curve
Bloomington, MN 55437
Dear Jim,
I am pleased to offer you the position of Vice President, Business Development,
reporting directly to me. In that role, you will have revenue responsibility
while directing, developing and coordinating the company's global partnerships,
alliances and alternate channels of distribution, to include all web related and
services firms, systems integrators and other industry vendors. Seeing to the
direction and training of the company's global direct sales organization to use
these resources to their fullest will also be in your charge. In addition, as
my direct report, you will participate in all corporate management activities as
a member of the company's executive staff.
Compensation for the position includes a base salary of $125,000 per year and an
incentive bonus of 30% of that base salary ($37,500). You will be eligible to
earn one half of that for the remainder of 1999 ($18,750), based upon the
achievement of company goals. $10,000 of that will be guaranteed for 1999. Over
achievement of goals will result in additional earnings.
In addition, a stock option to purchase 35,000 shares of common stock at the
prevailing price per share (currently $3.00 per share) will be recommended for
approval and submitted to the board of directors' compensation committee upon
their next scheduled meeting.
As discussed, your office will be located at your home site. In addition, Prime
Response will provide you with administrative support at any Prime Response
field office as well as the corporate office located in Cambridge, MA.
Furthermore, you will have the opportunity to participate in Prime Response
benefits, which includes 3 weeks of vacation annually. Please note that due to
your start date, your vacation allotment for the balance of 1999 will be (1
week) of the annual benefit.
In the event your employment is terminated without cause, Prime Response will
pay you six months severance as well as continue your medical benefits for the
six-month period.
- -----
The offer letter and compensation plans are dependent upon your execution of the
standard Prime Response Inc. Employment Agreement. Also, your employment with
Prime Response is contingent on the successful completion of the company's
standard employment practices, including background investigation.
<PAGE>
This offer shall supercede any other offer of employment on behalf of Prime
Response Inc., either verbal or written, and will expire on August 12, 1999.
Your background, experience and achievements to date will be put to invaluable
use as we work together to build a world class company. I'm excited for the
opportunity to work with you to that end as you continue to build your career
with Prime Response.
Sincerely,
Peter J. Boni
President & CEO
Accepted:
/s/ James P. Plantan
- --------------------
James P. Plantan
Date: 8/11/99
-------
<PAGE>
Exhibit 10.42
August 5, 1999
Mr. Brad Braddock
927 San Antonio Avenue
Alameda, CA 94501
Dear Brad:
Confirming our discussions, I am pleased to offer you the position of Vice
President, Product Marketing, reporting directly to me. Your compensation in
this new role is at a base salary of $125,000, effective August 1, plus an
incentive bonus of 30% of that base pay ($37,500). Any special incentive bonus
that you were offered for your role as Director of Business Development will
remain in effect through December 31, 1999.
In addition, at the next meeting of the Compensation Committee, a stock
option package of 22,500 shares will be submitted and recommended for approval.
This will allot you a grant total of 35,000 shares, to include those that you
already hold.
Among your responsibilities as Vice President of Product marketing are the
following:
. Competitive analysis, positioning and strategy
. Vertical marketing and penetration strategy for old and new products
and services alike
. Analyst relations
. White paper content, construction and distribution
. Pricing and discounts
. Sales tools, presentation and training aids
. Web marketing Liaison and coordination with others both inside and
outside the company, regarding product-related issues to insure the
company has maximized its market penetration opportunities
. Branding, market awareness, lead flow in coordination with and
direction of the global marketing communications
Marketing Communication will be expected to deliver the company's advertising,
public relations and promotional events, to include trade shows, conferences,
seminars and "webinars," and partner events. In addition, it will develop
consistent customer and sales collateral and enhance/update the company web site
and customer/prospect database. With a successful
<PAGE>
branding effort should come a cost effective and qualified lead flow, which will
lead to increased sales and market penetration.
In addition, you will be expected to work closely with the Business
Development effort in support of expanding the company's partnerships and
alternate channels of distribution.
Your background and experience, plus your performance to date have given you
a great deal of organizational support as you embark upon your new role. I am
excited for you to continue your achievements with Prime Response and am looking
forward to working with you to build a world class company.
Sincerely,
/s/ Peter J. Boni
Peter J. Boni
President and CEO
PJB:jc
Accepted by: /s/ Brad Braddock
-----------------
Brad Braddock
Dated: 8/10/99
-------
<PAGE>
Exhibit 10.43
DENVER PLACE PLAZA TOWER
AGREEMENT OF LEASE
BETWEEN
DENVER-STELLAR ASSOCIATES LIMITED PARTNERSHIP, LANDLORD
AND
PRIME RESPONSE, INC., TENANT
<PAGE>
DENVER PLACE PLAZA TOWER
AGREEMENT OF LEASE
BETWEEN
DENVER-STELLAR ASSOCIATES LIMITED PARTNERSHIP, LANDLORD
PRIME RESPONSE, INC., TENANT
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Term................................................................. 1
2. Base Rent............................................................ 1
3. Completion of Improvements........................................... 2
4. Additional Rent...................................................... 2
(a) Definitions..................................................... 2
(b) Expense Adjustment.............................................. 4
(c) Adjustment for Services Not Rendered............................ 4
(d) Tax Adjustment.................................................. 4
(e) Partial Year.................................................... 5
(f) Disputes........................................................ 5
(g) Place of Payment................................................ 5
(h) Tenant Taxes.................................................... 5
(i) Delay in Computation............................................ 6
5. Use of Premises...................................................... 6
6. Condition of Premises................................................ 6
7. Services............................................................. 7
(a) List of Services................................................ 7
(b) Billing for Electricity......................................... 9
(i) Landlord's Payment for Normal Service..................... 9
(ii) Measured Usage............................................ 9
(iii) Estimated Usage........................................... 9
(c) Interruption of Services........................................ 9
8. Alterations.......................................................... 10
9. Liens................................................................ 11
10. Insurance and Waiver of Subrogation.................................. 11
11. Fire or Casualty..................................................... 12
12. Waiver of Claims - Indemnification................................... 12
13. Nonwaiver............................................................ 13
14. Condemnation......................................................... 14
15. Assignment and Subletting............................................ 14
16. Holdover............................................................. 16
17. Estoppel Certificate................................................. 17
18. Subordination........................................................ 17
19. Certain Rights Reserved By Landlord.................................. 18
20. Rules and Regulations................................................ 19
21. Remedies............................................................. 19
22. Expenses of Enforcement.............................................. 21
23. Covenant of Quiet Enjoyment.......................................... 21
24. Security Deposit..................................................... 22
25. Real Estate Broker................................................... 22
26. Miscellaneous........................................................ 23
(a) Rights Cumulative............................................... 23
(b) Captions and Usage.............................................. 23
(c) Binding Effect.................................................. 23
(d) Lease Contains All Terms........................................ 23
(e) Submission of Lease............................................. 23
(f) No Air Rights................................................... 23
(g) Modification of Lease........................................... 23
(h) Substitution of Other Premises.................................. 23
(i) Transfer of Landlord's Interest................................. 24
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(j) Recording; Short Form Memo...................................... 24
(k) Covenants and Conditions........................................ 24
(l) Application of Payments......................................... 25
(m) Security Interest and Tenant's Deposit.......................... 25
(n) Governing Law; Partial Invalidity............................... 25
(o) Hazardous Materials............................................. 25
27. Telephone and Telecommunications Service............................. 26
28. Notices.............................................................. 28
29. Time is of the Essence............................................... 28
</TABLE>
Addendum
Exhibit A - Plan
Exhibit B - Rules and Regulations
Exhibit C - Lease Term Agreement
Exhibit D - Parking Agreement
Exhibit E - Workletter
ii
<PAGE>
OFFICE LEASE
------------
DENVER PLACE PLAZA TOWER
DENVER, COLORADO
AGREEMENT OF LEASE made as of the 20th day of January, 1998 (hereinafter
referred to as the "Lease") between DENVER-STELLAR ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership (hereinafter referred to as
"Landlord") and PRIME RESPONSE, INC., a Delaware corporation whose present
address is 1065 East Hillsdale Boulevard, Suite 310, Foster City, California
94404 (hereinafter referred to as "Tenant").
W I T N E S S E T H:
Landlord hereby leases to Tenant, and Tenant hereby accepts from Landlord,
the premises (hereinafter referred to as the "Premises") containing
approximately 8,264 square feet of rentable area and designated on the plan
attached hereto as Exhibit "A" and further described as Suite 500 in the
building known as Denver Place Plaza Tower (hereinafter referred to as the
"Building") located at 1099 18th Street, Denver, Colorado, 80202, subject to the
covenants, terms, provisions and conditions of this Lease. The Building, the
land upon which it is situated, all surrounding improvements, any garage or
other related improvements and all common areas appurtenant to, associated with
or servicing the Building are hereinafter called the "Real Property" or the
"Property".
In consideration thereof, Landlord and Tenant covenant and agree as
follows:
1. Term. The term of this Lease (the "Term") shall commence on that date
(the "Commencement Date") which is the later of (i) June 1, 1998 (the "Scheduled
Commencement Date") and (ii) three (3) months from the date that portion of the
Premises consisting of approximately 6,437 square feet of rentable area and
depicted as Phase One (the "Phase One Premises") are Ready for Occupancy
(hereinafter defined) and, unless sooner terminated as provided herein, shall
end, absolutely and without the need for notice from either party to the other,
on November 30, 2003 (the "Termination Date") subject to extension pursuant to
the provision of Paragraph 30 below.
2. Base Rent. Subject to adjustment as herein provided, the Base Rent to
be paid hereunder shall be as follows:
(a) June 1, 1998 through May 31, 2000 (months 1 through 24):
Phase One Premises $102,992.04 per annum/$8,582.67 per month
Phase Two Premises $29,232.00 per annum/$2,436.00 per month
TOTAL $132,224.04 per annum/$11,018.67 per month
(b) June 1, 2000 through May 31, 2001 (months 25 through 36):
Phase One Premises $109,428.36 per annum/$9,119.03 per month
Phase Two Premises $31,059.00 per annum/$2,588.25 per month
TOTAL $140,487.36 per annum/$11,707.28 per month
(c) June 1, 2001 through November 30, 2003 (months 37 through 66):
Phase One Premises $115,866.00 per annum/$9,655.50 per month
Phase Two Premises $32,886.00 per annum/$2,740.50 per month
TOTAL $148,752.00 per annum/$12,396.00 per month
which shall be paid in advance on or before the first day of each calendar month
during the Term, in equal monthly installments, provided, however, that Tenant
shall pay the first full monthly installment at the time of execution of this
Lease. If the Term commences other than on the first day of a month
<PAGE>
or ends other than on the last day of a month, the Base Rent for such month
shall be prorated. The Base Rent for the portion of the month in which the Term
commences shall be paid on the first day of the first full month of the Term.
3. Completion of Improvements. INTENTIONALLY DELETED.
4. Additional Rent. In addition to paying the Base Rent specified in
Paragraph 2 hereof, Tenant shall pay as "additional rent", the amounts
determined as hereinafter set forth in this Paragraph 4. The Base Rent and
additional rent are sometimes herein collectively referred to as the "rent".
All amounts due under this Lease as additional rent shall be payable in the
sarne manner and at the same place as the Base Rent.
(a) Definitions. As used in this Paragraph 4, the terms:
-----------
i. "Operating Expense Base Amount" shall mean $5.54 per rentable
square foot per annum.
ii. "Tax Base Amount" shall mean $1.11 per rentable square foot
per annum.
iii "Calendar Year" shall mean each calendar year in which any
part of the Term falls, through and including the year in which the
Term expires.
iv. "Tenant's Proportionate Share" shall mean [A] 1.25% during
that portion of the Term that the Premises consists only of the Phase
One Premises being the percentage calculated by dividing 6,437 square
feet (being the rentable area of the Phase One Premises) by 512,995
square feet (being 95% of the rentable area of the office space in the
Building) and [B] 1.611% during that portion of the Term that the
Premises consists of the Phase One Premises and that portion of the
Premises consisting of approximately 1,827 square feet of rentable
area and depicted as the Phase Two Premises on Exhibit A hereto (the
---------
"Phase Two Premises") being the percentage calculated by dividing
8,264 square feet (being the rentable area of the Premises including
the Phase One Premises and Phase Two Premises) by 512,995 square feet.
The rentable area of the Premises has been calculated according to a
method pursuant to which a portion of the common areas has been deemed
included in the Premises.
v. "Taxes" for any Calendar Year shall mean the Building's
Proportionate Tax Share of all real estate taxes and assessments,
special or otherwise, levied or assessed upon that parcel of land
known as Lots 1 through 32 inclusive and adjacent vacated alley, block
95, East Denver Subdivision (the "Land") and/or the building during
such Calendar Year; provided, however, that if Landlord subdivides the
Land so that the Building is located on its own tax lot (i.e., there
are no other buildings on such tax lot), then (1) such separate tax
lot shall be referred to as the "Building Tax Lot", and (2) for each
year that the Building Tax Lot is taxed separately from the remainder
of the Land, the term "Taxes" shall mean all real estate taxes and
assessments, special or otherwise, levied or assessed upon the
Building Tax Lot and/or the Building during such Calendar Year. For
purposes of this subparagraph "Buildings Proportionate Tax Share" for
any Calendar Year shall mean the fraction the numerator of which is
equal to the assessed valuation for the Building only for such
Calendar Year and the denominator of which is equal to the sum of the
assessed valuations for all buildings and improvements on the Land
(including the Building) for such Calendar Year. Should the State of
Colorado, or any political subdivision thereof, or any other
governmental authority, impose a tax, assessment, charge or fee, which
Landlord shall be required to pay, wholly or partially in substitution
of any of the above Taxes, all such taxes, assessments fees or
charges shall be deemed to constitute Taxes hereunder but shall be
computed as if the Real Property and any other shared use real
property referred to in this subparagraph was the only real property
of Landlord. "Taxes" shall also include all fees and costs, including
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reasonable attorneys' fees, appraisals and consultants' fees, incurred
by Landlord in seeking to obtain a reduction of, or a limit on, any
increase in any Taxes (regardless of whether any reduction or
limitation is obtained). In the event that the Real Property shall be
for any taxes or assessments assessed under the same assessment as
other real property, the amount of such taxes or assessment to be
included within Taxes shall be such portion thereof as Landlord fairly
and equitably shall deem attributable thereto. Notwithstanding
anything in this paragraph to the contrary, Taxes shall specifically
exclude inheritance taxes, gift taxes, transfer taxes, franchise
taxes, excise taxes, income taxes, and profit taxes.
vi. "Operating Expenses" shall mean all expenses, costs and
disbursements (other than Taxes) of every kind and nature paid or
incurred by or on behalf of Landlord in connection with the ownership,
management, operation, maintenance and repair of the Property (and, as
allocated by Landlord, those paid or incurred in connection with the
ownership, operation, maintenance, management and repair of any garage
or other improvements the use of which is shared by the Building and
one or more other buildings) except the following:
[A] Costs of alterations of any tenant's premises;
[B] Principal or interest payments on loans secured by
mortgages or trust deeds on the Real Property;
[C] Costs of capital improvements, except that Operating
Expenses shall include the costs as amortized over such number of
years as Landlord may reasonably determine, with interest at the
rate of 12% per annum on the unamortized amount, of any capital
improvements which, (1) in Landlord's reasonable opinion, will
have the effect of reducing any component cost included within
Operating Expenses, (2) are made or installed to assure
compliance with all governmental rules and regulations applicable
from time to time, or (3) under generally applied real estate
accounting practices may be expensed or treated as deferred
expenses (and the amortization and interest so determined for
each Calendar Year shall be included in Operating Expenses for
that Calendar Year);
[D] Leasing commissions for space in the Building;
[E] Advertising and promotional expenses except the
reasonable costs incurred (x) for distributing a newsletter to
tenants and occupants of the Complex (as hereinafter defined),
(y) for one (1) holiday party per calendar year that is held for
all of the tenants and occupants of the Complex and (z) for one
(1) health fair per calendar year that is held for all tenants
and occupants of the Complex;
[F] Expenses for correcting structural defects except that
condition resulting from ordinary wear and tear shall not be
deemed defects for purposes of this subparagraph;
[G] Costs and expenses incurred by Landlord in the
enforcement of the terms of any other tenant lease;
[H] Depreciation of the Building;
[I] Costs for which Landlord receives reimbursement from
others;
[J] Any expense, other than property management fees,
representing an amount paid to a related corporation, entity, or
person which is in excess of the amount which would be paid in
the absence of such relationship (provided, however, that Tenant
acknowledges that Operating Expenses for
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any calendar year may include a management fee equal to five
percent (5%) of the gross revenue collected during such calendar
year for the Building and the Parking Garage (as hereinafter
defined), even though such fee may exceed the management fee
which would be incurred on a fair market basis if Landlord and
the managing agent were not affiliated); and
[K] Property management fees in excess of the greater of
(y) five percent (5%) of the gross revenue collected during any
calendar year for the Building and the Parking Garage and (z) the
then prevailing fair market management fees payable in the
central business district of Denver, Colorado for first class
office buildings similar in age and quality to the Building
("Comparable Buildings") under management contracts similar to
the then current management contract for the Building.
(b) Expense Adjustment.
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(i) Tenant shall pay as additional rent for each Calendar Year,
that amount ("Expense Adjustment Amount") which is Tenant's
Proportionate Share of the amount by which the Operating Expenses
incurred with respect to such Calendar Year exceed the Operating
Expense Base Amount; provided, however, that in determining the amount
of Operating Expenses for each Calendar Year, if less than 95% of the
rentable office area of the Building shall have been occupied at any
time during such Calendar Year, Operating Expenses shall be deemed for
such Calendar Year to be in the amount reasonably determined by
Landlord to be equal to that amount of like expenses which normally
would be expected to be incurred had such occupancy been 95%
throughout such Calendar Year.
(ii) The Expense Adjustment Amount with respect to each Calendar
Year shall be paid in monthly installments, in advance on the first
day of each calendar month during the course of such year, in amounts
estimated from time to time by Landlord and communicated by written
notice to Tenant. Landlord shall cause to be kept books and records
showing Operating Expenses in accordance with generally accepted
accounting principles. Following the close of each Calendar Year,
Landlord shall cause the amount of the Expense Adjustment Amount for
such Calendar Year to be computed based on Operating Expenses for such
Calendar Year, and Landlord shall deliver to Tenant a statement of
such amount; thereupon Tenant shall pay any deficiency as shown by
such statement to Landlord within 30 days after receipt of such
statement. If the total of the estimated monthly installments paid by
Tenant during any Calendar Year exceed the actual Expense Adjustment
Amount due from Tenant for such Calendar Year, then, at Landlord's
option, such excess shall be either credited against payments next due
hereunder or refunded by Landlord, provided Tenant is not then in
default hereunder.
(c) Adjustment for Services Not Rendered. If Landlord shall not be
------------------------------------
furnishing any particular work or service (the cost of which, if furnished by
Landlord would be included in Operating Expenses) to a tenant who undertakes to
itself perform or obtain such work or service in lieu of the furnishing thereof
by Landlord, Operating Expenses shall be deemed for purposes of this Paragraph 4
to be increased by an amount equal to the additional Operating Expenses, as
reasonably determined by Landlord, which would have been incurred during such
period if Landlord had at its own expense furnished such work or service to such
tenant.
(d) Tax Adjustment. Tenant shall pay as additional rent for each
--------------
Calendar Year that amount (the "Tax Adjustment Amount") which is Tenant's
Proportionate Share of the amount by which the Taxes incurred with respect to
such Calendar Year exceed the Tax Base Amount. The Tax Adjustment Amount with
respect to each Calendar Year shall be paid in monthly installments, in an
amount estimated from time to time by Landlord and communicated by written
notice to Tenant. Following the close of each Calendar Year, Landlord shall
cause the amount of the Tax Adjustment Amount for such Calendar Year to be
computed based on Taxes for such Calendar Year and Landlord shall deliver to
Tenant a
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statement of such amount and Tenant shall pay any deficiency as shown by such
statement to Landlord within 30 days after receipt of such statement. If the
total of the estimated monthly installments paid by Tenant during any Calendar
Year exceeds the actual Tax Adjustment Amount due from Tenant for such Calendar
Year, then, at Landlord's option such excess shall be either credited against
payments next due hereunder or refunded by Landlord, provided Tenant is not then
in default hereunder. The amount of any refund of Taxes received by Landlord
shall be credited against Taxes for the year in which such refund is received.
In determining the amount of Taxes for any year, the amount of special
assessments to be included shall be limited to the amount of the installment
(plus any interest payable thereon) of such special assessment required to be
paid during such year as if the Landlord had elected to have such special
assessment paid over the maximum period of time permitted by law; if the
authority to whom such assessment is to be paid shall not permit such assessment
to be paid in installments, the amount of such assessment shall be treated as
being amortized over such number of calendar years, beginning with the Calendar
Year in which the assessment is payable, as Landlord shall reasonably determine,
with interest at the rate of 15% per annum on the unamortized amount, and such
amortization and interest for each Calendar Year shall be included in Taxes for
that Calendar Year.
(e) Partial Year. If only part of any Calendar Year shall fall
------------
within the Term, the amounts computed as additional rent, with respect to such
Calendar Year under the foregoing provisions of this Paragraph 4 shall be
prorated in proportion to the portion of such Calendar Year falling within the
Term, but the expiration or termination of this Lease prior to the end of such
Calendar Year shall not impair the Tenant's obligation hereunder to pay such
prorated portion of such additional rent with respect to that portion of such
year falling within the Term.
(f) Disputes. Any statement furnished to Tenant by Landlord under
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the provisions of this Paragraph 4 shall constitute a final determination as
between Landlord and Tenant as to the rent set forth therein due from Tenant for
the period represented thereby, unless Tenant, within 60 days after such
statement is furnished, shall give a notice to Landlord that it disputes the
correctness thereof, specifying in detail the basis for such assertion. Pending
resolution of such dispute, Tenant shall pay all disputed amounts in accordance
with the statement furnished by Landlord. Landlord agrees, upon prior written
request during normal business hours to make available for Tenant's inspection
and audit, at Landlord's offices, Landlord's books and records which are
relevant to any items in dispute, provided Tenant has paid all amounts billed
to Tenant on account of the Expense Adjustment Amount and the Tax Adjustment
Amount and all installments thereof and all other rents and sums then and
previously due under this Lease. If the audit of such records shows that as to
such operating period, Landlord has overstated the amount of the Expense
Adjustment Amount or Tax Adjustment Amount payable by Tenant, Landlord shall
promptly credit to Tenant the amount of such overpayment(s). If Tenant's audit
of the books and records shows that Landlord overstated the actual Operating
Expenses and Taxes by an amount equal to 3% or more, then Landlord shall
reimburse Tenant for all reasonable out-of-pocket costs incurred by Tenant in
conducting the audit.
(g) Place of Payment. Tenant shall, without any demand therefore and
----------------
without set-off, pay to DENVER-STELLAR ASSOCIATES LTD. PARTNERSHIP, A/R
DEPARTMENT, DENVER, COLORADO 80256-0170, or to such other person and/or at such
other place as Landlord may from time to time direct by notice given to Tenant,
the Base Rent as well as all other sums which may become due by Tenant under
this Lease. All such other sums shall be payable as additional rent.
(h) Tenant Taxes.
------------
(i) Any provision hereof to the contrary notwithstanding, Tenant
shall, upon demand from time to time, as additional rent, pay to Agent
or, as Landlord may direct, to Landlord or to the tax collecting
authority, the full amount of all taxes, levies, charges and
assessments legally required or authorized to be collected by Landlord
from Tenant or any subtenant or occupant of the Premises and all
taxes,
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levies, charges and assessments required to be paid by Landlord
(or imposed upon the Property) if not paid by or collected from Tenant
or a subtenant or occupant of the Premises. Tenant hereby agrees to
defend, indemnify and hold harmless Landlord from and against all
loss, cost, liability and expenses (including counsel fees and costs
of litigation) which Landlord may suffer, incur or be exposed to as a
result of any assertion against Landlord of liability for any of the
taxes referred to in this subparagraph (h), and from and against any
penalties or interest relating thereto, which Tenant fails to pay
pursuant hereto.
(ii) Tenant shall timely pay when due all taxes, levies, charges
and assessments which are required to be paid by Tenant with respect
to Tenant's use or occupancy of the Premises or which are or could
become a lien upon the personal property, trade fixtures, furniture or
facilities of Tenant on the Premises. Tenant hereby agrees to defend,
indemnify and hold harmless Landlord from and against all loss, cost,
liability and expense (including, without limitation, counsel fees and
costs of litigation) which Landlord may suffer or incur, or to which
Landlord may be exposed, as a result of Tenant's failure to pay any of
the foregoing.
(iii) Within 15 days after Tenant's receipt of written request
from Landlord or an authorized taxing entity having jurisdiction,
Tenant shall deliver to Landlord official receipts for the payment of
all taxes due with respect to the personal property, trade fixtures,
furniture or facilities of Tenant on the Premises. In addition, within
15 days after written notice from Landlord to do so, Tenant shall
deliver to Landlord official receipts for the payment of all other
taxes, levies, charges and assessments within the scope of
subparagraph (ii) above that were due and payable in the calendar year
in which such notice is given and in the preceding calendar year. If
Tenant shall fail to present any of the receipts referred to in this
subparagraph within the times set forth herein, Landlord shall have
the right to pay the amounts of the taxes which Landlord reasonably
determines would have been covered thereby, together with the full
interest and penalties chargeable thereon in accordance with law, and
Landlord shall, upon demand, be entitled to reimbursement for all of
such payments together with interest at the "Lease Interest Rate"
(defined in Paragraph 21 hereof).
(iv) Tenant shall cause all of the personal property, trade
fixtures, furniture and facilities of Tenant on the Premises, and all
alterations, additions and improvements made by Tenant to the Premises
which for purposes of personal property taxes are treated as personal
property (such as built-in cabinets, counters and partitions) to be
assessed separately from Landlord's property, and, if they are not so
separately assessed, Landlord shall be entitled to reimbursement,
within 10 days after demand made from time to time, for any tax
payable by Landlord which is attributable to any of such items taxable
as personal property.
(i) Delay in Computation. Delay in computation of the Expense
--------------------
Adjustment Amount or Tax Adjustment Amount shall not be deemed a default
hereunder or a waiver of Landlord's right to collect any of such amounts.
5. Use of Premises. Tenant shall use and occupy the Premises solely as a
general business office for the purpose of developing computer software
(including, but not limited to research, development and training) and any other
legally permitted uses related thereto and for no other purpose.
6. Condition of Premises. The Tenant's taking possession of the Premises
or any portion thereof shall be conclusive evidence that the Premises or any
such portion was in good order and satisfactory condition when the Tenant took
possession. At the expiration or other termination of this Lease or of Tenant's
right of possession, Tenant shall leave the Premises, and during the Term will
keep the same, in good order and condition, ordinary wear and tear, damage by
fire or other casualty (which fire or other casualty has not occurred through
the negligence of Tenant or those claiming under Tenant or their employees or
invitees respectively) alone excepted; and for that purpose, Tenant shall make
all necessary repairs and replacements. Tenant shall give Landlord
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prompt notice of any damage to or accident upon the Premises and of any breakage
or defects in the window glass, wiring or plumbing, heating, ventilating or
cooling or electrical apparatus or systems on or serving the Premises. Tenant
shall at the expiration or termination of this Lease or of Tenant's right of
possession, also have had removed from the Premises all furniture, trade
fixtures, office equipment and all other items of Tenant's property (including,
without limitation, the items Tenant is required to remove pursuant to Paragraph
8(b) hereof) so that Landlord may again have and repossess the Premises. All
such items not removed from the Premises at such expiration or termination,
shall conclusively be deemed to have been abandoned and may be appropriated,
sold, stored, destroyed or otherwise disposed of by Landlord without notice to
Tenant or any other party with an interest in such property and without any
obligation to account therefore. Tenant shall pay Landlord all expenses incurred
in connection with the disposition of such property, and if Landlord shall
choose to store any such items, Landlord shall have no liability for the
safekeeping thereof and such items may not be retrieved by Tenant or any other
person except upon payment of such charges as may be imposed for the removal and
storage. Tenant shall comply with all laws, rules, orders, ordinances and
regulations at any time issued or in force by any lawful authority, applicable
to Tenant or any other occupant of the Premises, or to the Premises, or to the
use or occupancy of the Premises; provided, however, that Tenant shall not be
required to make structural changes to the Building. Tenant shall, upon demand,
pay to Landlord the amount of any damages suffered or incurred by Landlord as a
result of any injury to any part of the Property other than the Premises, done
by Tenant or any subtenant or any agent, employee, contractor or invitee of
Tenant, including, without limitation, damage done by the bringing or removal of
furniture and other property. Tenant shall forthwith repair all damage done to
the Premises by installation or removal of furniture and property by Tenant or
any subtenant or by any agent, employee, contractor or invitee of Tenant or of
any subtenant or, if Landlord shall so request, pay to Landlord the cost of such
repair. Tenant shall not do or commit, or suffer or permit to be done or
committed, any act or thing as a result of which any policy of insurance of any
kind on or in connection with the Property shall become void or suspended, or
any insurance risk on or in connection with the Building or any other portion of
the Property shall (in the opinion of the insurer or any insurance organization)
be rendered more hazardous or require payment of a greater premium; without
limitation of any other rights and remedies of Landlord, Tenant shall pay as
additional rent the amount of any increase of premiums for such insurance,
resulting from any breach of this provision. Tenant shall leave the Premises in
a reasonably tidy condition on all days upon which janitorial services are to be
provided by Landlord. Landlord shall, at Landlord's expense, replace any glass
broken in the Premises windows in the exterior walls of the Building, unless
such glass is broken by Tenant, its servants, employees, agents, invitees,
licensees or contractors, in which case Tenant shall, upon demand, pay the cost
of replacement by Landlord. Tenant shall replace and pay for any other glass
broken in or about the Premises.
7. Services.
(a) List of Services. Landlord shall provide the following services
----------------
on all days during the Term, except Sundays and holidays, unless otherwise
stated:
(i) Heating, ventilation and air conditioning (collectively
"HVAC"), as deemed appropriate by Landlord (which shall be comparable
with that provided in the Comparable Buildings), from Monday through
Friday within the period from 6:00 a.m. to 6:00 p.m. and on Saturday
within the period from 8:00 a.m. to 1:00 p.m., holidays excepted.
Landlord shall furnish HVAC service to the Premises at other times
upon written request of Tenant (which, at Tenant's election, may be
delivered to Landlord by facsimile transmission at (303) (312-394 1),
or such other number that Landlord notifies Tenant of from time to
time during the Term, made no later than 3:00 p.m. on the business day
on which after hours HVAC service is required or 3:00 p.m. on the next
preceding business day for after hours HVAC service required on any
non-business day. Tenant, within ten days after its receive of each
bill therefore, will pay for all HVAC service requested and furnished
at other times, at rates to be established from time to time by
Landlord. At the time of the execution of this Lease the Tenant
acknowledges that the charge for such after hours services is $65.00
per hour. Landlord shall not be responsible for the failure of the
HVAC system to provide normal comfort if such failure results from
occupancy of the Premises by more than an average of one person for
each 200 square feet of floor area or if Tenant
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uses heat-producing equipment or equipment the electrical load of
which, when combined with the load of all lighting fixtures, exceeds
2.5 watts per square foot of floor area in any one room or area.
Unless otherwise consented to by Landlord, window coverings shall be
uniform in the Building and shall be closed when exterior office
windows are exposed to the sun without regard to Tenant's specific use
of the space or to the installation of any computers or data
processing equipment. In addition, if the Premises are used in a
manner exceeding the aforementioned occupancy and electric load
criteria or if such window covering requirement shall not be observed
or if heat-producing or controlled climate equipment is used, Tenant
shall pay to Landlord, promptly upon billing, Landlord's additional
costs of supplying air conditioning resulting from such causes, at
such rates as Landlord shall establish therefore. If due to use of the
Premises in a manner exceeding the aforementioned occupancy and
electrical load criteria, or due to the arrangement of partitioning,
or the use of heat-producing or controlled climate equipment, or the
distribution system within the Premises, impairment of normal
operation of the HVAC system in the Premises results, necessitating
changes in HVAC distribution system within the Premises, such changes
may be made by Landlord upon request by Tenant at Tenant's sole cost
and expense, provided that they can be accommodated by Landlord's
systems. Tenant agrees at all times to cooperate fully with Landlord
and to abide by all the regulations and requirements which Landlord
may prescribe for the proper functioning and protection of the HVAC
system. After Landlord has balanced the air-conditioning system for
Tenant, if Tenant installs partitions, equipment, or fixtures
requiring re-balancing of the system, Landlord, at Tenant's request
and at Tenant's expense (which shall be charged as additional rent
payable upon demand) shall endeavor to do such re-balancing. Landlord
shall not charge Tenant for the initial balancing of the HVAC system.
(ii) Subject to subparagraph 7(b) hereof, electrical energy for
standard building lighting fixtures provided by Landlord and for the
operation of desk-top office equipment, provided that (A) the
connected electrical load of such equipment does not exceed an average
of 1.5 watts per square foot of the Premises and (B) the electricity
so furnished for equipment uses will be at a nominal 120 volts and no
electrical circuit for the supply of such use need have a current
capacity exceeding 20 amperes. If Tenant's requirements for
electricity are in excess of those set forth in the preceding
sentence, and if, in Landlord's sole judgment, Landlord's facilities
are inadequate for such additional requirements and if electrical
energy for such additional requirements is available to Landlord,
Landlord upon written request and at the sole cost and expense of
Tenant, will furnish and install, or, at Landlord's sole discretion,
permit Tenant to furnish and install, such additional wires, risers,
conduits, feeders and switchboards as reasonably may be required to
supply such additional requirements of Tenant provided (1) that the
same shall be permitted by applicable laws and insurance regulations,
(2) that, in Landlord's sole judgment, the same are necessary and will
not cause permanent damage or injury to the Building or the Premises
or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations or repairs or interfere with or
disturb other tenants or occupants of the Building, (3) that, in
Landlord's sole judgment, the same will not in any way diminish or
adversely affect the electricity which Landlord deems should remain
available for other tenants, and (4) that Tenant, at Tenant's expense,
shall, concurrently with the making of such written request, execute
and deliver to Landlord, Tenant's written undertaking, in form and
substance satisfactory to Landlord, obligating Tenant to fully and
promptly pay the entire cost and expense of so furnishing and
installing any additional wires, risers, conduits, feeders and/or
switchboards.
(iii) Ordinary water from the regular Building outlets for
drinking, lavatory and toilet purposes.
(iv) Janitorial services Monday through Friday in and about the
Premises (except holidays). If any material use made of the Premises
after 6:00 p.m. shall by
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reason of work force scheduling or security, overtime, union rules or
otherwise cause any increase in Landlord's cost for providing
janitorial services, Tenant shall, as additional rent, pay all bills
for reimbursement of Landlord for such increase attributable to
Tenant's use of the Premises, within ten days after Tenant's receipt
of such bill. All janitorial services shall be performed solely at
Landlord's direction without interference from Tenant.
(v) Automatic passenger elevator service at all times.
(vi) Freight elevator services subject to reasonable scheduling
by Landlord.
(b) Billing for Electricity.
-----------------------
i. Landlord's Payment for Normal Service. Landlord shall
provide electric service on a twenty-four (24) hour basis and pay for
electric service as described in the first sentence of subparagraph
7(a)(ii) during the period from 6:00 a.m. to 6:00 p.m. from Monday
through Friday, and during the period from 8:00 a.m. to 1:00 p.m. on
Saturday, holidays excepted. In the event that Landlord, in Landlord's
sole discretion, determines that Tenant's use of electricity exceeds
the service to be provided under the first sentence of subparagraph
7(a)(ii) above or goes materially beyond the hours specified in this
subparagraph 7(b)(i), Tenant shall pay, as additional rent, such
amounts for such excess and/or other hours use as shall be required
under subparagraph 7(b)(ii) and (iii) below.
(ii) Measured Usage. In the event that Tenant's use of the
Premises includes the use of computers or other electrical equipment
or fixtures causing, in Landlord's reasonable determination, Tenant's
use of electric service to exceed the service to be provided under the
first sentence of subparagraph 7(a)(ii) above, or if there shall be at
the Premises any other hours (i.e. outside the hours specified in
subparagraph 7(b)(i)) use of electricity which Landlord believes may
be material, Landlord shall install in the Premises or elsewhere, if
Landlord shall so elect, or, if Tenant shall so request and if
feasible in Landlord's reasonable judgment, one or more meters or
other devices to measure the electricity used by such computers or
other equipment or fixtures and/or such other hours use; and Tenant
shall pay Landlord for such electricity within ten days after
submission of each bill by Landlord therefore, at such rates as shall
be from time to time determined by Landlord, provided that the rates
charged by Landlord shall not exceed Landlord's cost (including,
without limitation, taxes, fuel adjustment charges, and other like
charges regularly passed on to customers by public utility companies
and transformer costs) of supplying such electricity as determined by
Landlord using reasonable accounting methods; and the cost of
obtaining and installing such meters or other devices shall be paid by
Tenant to Landlord within ten days after submission of each bill by
Landlord to Tenant therefore.
(iii) Estimated Usage. For any other hours use of electricity
determined by Landlord to be material, and for any use of electricity
which is determined by Landlord to be in excess of the service to be
provided under the first sentence of subparagraph 7(a)(ii) above, and
which is not actually measured, Tenant shall pay to Landlord, in
monthly installments at the times prescribed for the monthly
installments of the Base Rent, amounts, as reasonably estimated by
Landlord from time to time, which Tenant would be required to pay for
such excess and/or other hours electrical service if the same were
actually measured as provided in subparagraph (b)(ii) above.
(c) Interruption of Services. Tenant agrees that Landlord shall not
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be liable for damages (by abatement of rent or otherwise, except for abatement
of Base Rent specifically provided for under this Paragraph 7(c)) for failure to
furnish or delay in furnishing any service, or for any diminution in the quality
or quantity thereof, when such failure or delay or diminution is occasioned, in
whole or in part, by repairs, renewals, or improvements, by any strike, lockout
or other labor trouble, by inability to secure fuel, by governmental laws,
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regulations or orders by Landlord's compliance, in whole or in part with any
government promulgated program (whether voluntary or mandatory), for
conservation of energy by any accident or casualty whatsoever, by act or default
of Tenant or other parties, or by any cause beyond Landlord's reasonable
control; and such failures or delays or diminution shall never be deemed to
constitute an eviction or disturbance of the Tenant's use and possession of the
Premises or relieve the Tenant from paying rent or performing any of its
obligations under this Lease. Landlord's obligation to furnish services shall
also be further conditioned upon the availability of adequate energy sources
from the public utility companies then servicing the downtown Denver area.
Notwithstanding the foregoing provisions of this Paragraph 7(c), Base Rent shall
be abated in the event of the disruption of services in accordance with the
following provisions: (i) in the case of interruption of electrical power to the
Premises resulting in a shutdown of Tenant's computers, antennas, telephones, or
other office equipment, if such interruption continues for seven consecutive
days and as a result Tenant is not using the Premises (or the affected portion),
then the Base Rent for the Premises (or, if only a portion of the Premises is
affected, prorated for such portion) shall be abated commencing on the first day
following the seventh continuous day of such disruption until the service in
question has been restored; (ii) in the case of the substantial failure of the
water supply to the restroom or substantial failure of the HVAC system to the
Premises or of any portion of the life safety system, and if such interruption
continues for seven consecutive days without Landlord having provided reasonable
substitute temporary services, and as a result Tenant is not using the Premises
(or portion affected) then Base Rent for the Premises (or, if only a portion of
the Premises is affected, for such portion) shall be abated commencing on the
first day following the seventh consecutive day of such disruption until the
service in question has been restored.
8. Alterations.
(a) Tenant shall not, without the prior written consent of Landlord
(which consent shall not be unreasonably withheld, conditioned or delayed), make
any alterations, improvements or additions to the Premises; provided, however,
Tenant shall be permitted to replace carpeting and repaint walls within the
Premises on the condition that Tenant notifies Landlord in writing not less than
three (3) days prior to the commencement of such work and Tenant otherwise
complies with the provisions of this Paragraph 8. If Landlord consents to any
alterations, improvements or additions, it may impose such conditions with
respect thereto as Landlord reasonably deems appropriate, including, without
limitation, Landlord's approval of plans and specifications for the work (but
Tenant shall not be entitled to rely upon such approval as evidencing that the
plans and specifications are proper in any respect), use of Landlord's approved
contractors to perform the work, insurance against liabilities which may arise
out of such work, permits necessary for such work and as-built drawings upon
completion of such work and the furnishing to Landlord of such security as is
determined by Landlord to be appropriate for the proper completion of such work
and its completion free of mechanics', materialmen's and similar liens or claims
thereof. Landlord shall concurrently with the granting of a consent to Tenant
under this Paragraph 8(a) notify Tenant of whether or not such alterations,
improvements or additions are required to be removed by Tenant upon the
expiration of this Lease and in the absence of the delivery of such notification
it shall be presumed that Landlord has elected not to require the removal of
such alterations, improvements or additions upon the expiration of this Lease.
All work done by Tenant or its contractors shall be done in a first-class
workmanlike manner, using only good grades of materials and without disturbing
other tenants and shall comply with all insurance requirements and all
applicable laws or ordinances and rules and regulations of governmental
departments or agencies. Before proceeding with any such work, Tenant shall
reimburse Landlord for Landlord's costs of Landlord's architects' review of
Tenant's plans and specifications. Any work performed by or for Tenant shall be
performed by competent workmen whose labor union affiliations are compatible
with those of the workmen who may be employed in the Building by Landlord, its
contractors or subcontractors, and Landlord shall have the right, at its option,
to directly supervise the work, which supervision shall be for the protection of
Landlord's interest only.
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(b) All alterations, additions or improvements made by Tenant and all
fixtures attached to the Premises (other than Tenant's trade fixtures)
shall become the property of Landlord and remain at the Premises or, at
Landlord's option (as shall be indicated to Tenant at the time of the
installation of such alterations, improvements or fixtures), any or all of
the foregoing shall be removed at the cost of Tenant before the expiration
or sooner termination of this Lease and in such event Tenant shall repair
all damage to the Premises caused by the installation and/or removal
thereof. Tenant shall not permit or suffer any signs advertisements or
notices to be displayed, inscribed upon or affixed on any part of the
outside or inside of the Premises, or in the Building, except on the
entrance doors of the Premises, and then only of such size, color and style
as Landlord may approve. Landlord shall have the right to remove
unauthorized signs at Tenant's expense.
9. Liens.
(a) Tenant shall not permit there to be filed against the Property or
Landlord's interest therein or any part of either, and shall within ten
days after Tenant has notice of the claim or lien, remove or have removed,
any mechanics', or materialmen's or other lien, or claim thereof, filed by
reason of work, labor, services or materials provided for or at the request
of Tenant (other than work, labor, services or materials provided by the
Landlord) or any subtenant or occupant or for any contractor or
subcontractor employed by Tenant or any subtenant or occupant, and shall
exonerate, protect, defend and hold free and harmless Landlord against and
from any and all such claims or liens. Without limitation of the
foregoing, if any such claim or lien be filed, Landlord may, but shall not
be obligated to, discharge it either by paying the amount claimed to be due
in the claim or lien or by procuring the discharge of such lien or claim by
deposit or by bonding proceedings. Any amount so paid by Landlord and all
costs and expenses, including, without limitation, reasonable attorney's
fees, in connection therewith, together with interest thereon at the Lease
Interest Rate (hereinafter defined) from the respective dates of Landlord's
making of the payments and incurring of the costs and expenses, shall
constitute additional rent payable by Tenant under this Lease and shall be
paid by Tenant to Landlord on demand.
(b) At least ten days before the commencement of any work ordered by
Tenant on the Premises, Tenant shall notify Landlord of the proposed work
and of the names and addresses of the persons supplying labor and materials
for the proposed work so that Landlord may avail itself of the provisions
of statutes such as C.R.S. (S)38-22-105(2). During any such work on the
Premises, Landlord, or its representatives, shall have the right to go upon
and inspect the Leased Premises at all reasonable times, and shall have the
right to post and keep posted thereon notices such as those provided for by
C.R.S. (S)38-22-105(2) or to take any action that Landlord may deem
advisable to protect Landlord's interest in the Premises.
10. Insurance and Waiver of Subrogation.
(a) Tenant, at its sole cost, shall maintain with responsible
insurance companies acceptable to Landlord and qualified to do business in
Colorado, general comprehensive public liability insurance against claims
for personal injury (including death) and property damage, arising from
occurrences in, on and about the Premises, with coverage on an occurrence
basis in all cases of not less than a combined single limit of
$3,000,000.00 per occurrence. Landlord shall be designated a named insured
in the policies for such insurance, which shall contain endorsements
providing that the naming of more than one insured shall not operate to
limit or void the coverage of any named insured relating to claims by
another named insured.
(b) Tenant, at its sole cost, shall maintain with responsible
insurance companies acceptable to Landlord and qualified to do business in
Colorado, "All Risk" or equivalent insurance upon all personal property
upon the Premises and all equipment, fixtures, additions, alterations and
improvements and betterments installed by or for Tenant upon the Premises,
including, without limitation, anything in the nature of a leasehold
improvement, if an amount which is at least 80% of the full replacement
cost thereof, which insurance shall name
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Landlord as a named insured and Landlord's mortgagees as mortgagees under
a standard mortgagee clause. In the event of damage or destruction to any
leasehold improvements, Tenant shall use the proceeds of such insurance to
repair or restore such leasehold improvements. If this Lease shall be
terminated pursuant to Paragraph 11(a) on account of damage by fire or
other casualty to the Building or the Premises, Landlord shall be entitled
to all of the insurance proceeds payable under the aforesaid insurance
relating to the leasehold improvements and the Premises.
(c) Tenant shall, prior to the commencement of the Term, and at least
30 days prior to the expiration date of each policy, furnish to Landlord
certificates evidencing the coverage required hereinabove in this Paragraph
and the renewal thereof, which certificates shall state that such insurance
coverage may not be materially changed or cancelled without at least ten
days prior written notice to Landlord and Landlord's mortgagee.
(d) Notwithstanding anything herein to the contrary, Landlord and
Tenant each hereby release the other, its officers, directors, partners,
agents and employees (and Tenant hereby also releases Agent, its partners,
officers, directors, agents and employees), to the extent of the releasing
party's coverage under its insurance policies, from any and all liability
for any loss or damage which may be inflicted upon the property of such
party, notwithstanding that such loss or damage shall have arisen out of
the negligence of the other party, its partners, officers, directors,
agents or employees; provided, however, that this release shall be
effective only with respect to occurrences occurring during such time as
the appropriate policy of insurance of the party so releasing shall contain
a clause to the effect that such release shall not affect the said policy
or the right of the insured to recover thereunder.
11. Fire or Casualty.
(a) If the Premises or the Building (including machinery or equipment
used in the operation of the Building) shall be damaged by fire or other
casualty and if such damage does not render all or a substantial portion of
the Premises or Building untenantable, then Landlord shall repair and
restore the same with reasonable promptness, subject to reasonable delays
for insurance adjustments and delays caused by matters beyond Landlord's
reasonable control. If any such damage renders all or a substantial
portion of the Premises or Building untenantable, Landlord shall have the
right to terminate this Lease (with appropriate prorations of rent being
made for Tenant's possession subsequent to the date of such damage of those
tenantable portions of the Premises) upon giving written notice to the
Tenant at any time within 120 days after the date of such damage; and if
such notice is given Landlord shall have no obligation to repair or
restore. Landlord shall have no liability to Tenant, and Tenant shall not
be entitled to terminate this Lease by virtue of any delays in completion
of such repairs and restoration. Rent, however, shall abate on those
portions of the Premise as are, from time to time, untenantable as a result
of such damage.
(b) Notwithstanding anything to the contrary herein set forth,
Landlord shall have no duty pursuant to this Paragraph 11 to repair or
restore any portion of any alterations, additions or improvements in the
Premises or the decorations thereto except to the extent that such
alterations, additions, improvements and decorations were provided by
Landlord at the beginning of the Term.
(c) Within 120 days after any casualty to the Premises or the
Building, Landlord shall give written notice to Tenant of the determination
by Landlord's architect of the reasonably estimated period for completion
of repairs. If it is estimated such repairs will take longer than 180 days
and such damage has been to the Premises or to a portion of the Building
which materially interferes with Tenant's access to or use of the Premises,
Tenant shall have the right to terminate this Lease by written notice
delivered to Landlord within 15 days following receipt of Landlord's
notice.
12. Waiver of Claims - Indemnification. To the extent not prohibited by
law, Landlord, Amerimar Realty Management Co.-Colorado (herein "Agent"), Agent
and their respective officers,
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directors, partners, agents, servants and employees shall not be liable for, and
it and they are hereby released by Tenant from all liability for, any damage
either to person or property or resulting from the loss of use thereof or any
other loss, or any death, sustained by Tenant or by other persons claiming
through Tenant due to the Property or any part thereof or any appurtenances
thereof becoming out of repair, or due to the happening of any accident or event
in, on or about the Property or due to any act or neglect of any tenant or
occupant of the Building or of any other person. This provision shall apply
particularly, but not exclusively, to damage caused by gas, electricity, snow,
frost, steam, sewage, sewer gas or odors, fire, water or by the bursting or
leaking of pipes, faucets, sprinklers, plumbing fixtures and windows, and shall
apply without distinction as to the person (whether Landlord, Agent or other)
whose act or neglect was responsible for the damage and whether or not such act
or neglect occurred before, at or after the execution of this Lease, and whether
the damage was due to any of the causes specifically enumerated above or to some
other cause of an entirely different kind. Tenant further agrees that all
personal property of Tenant upon the Premises, or upon loading docks, receiving
and holding areas, or elsewhere in, on or about the Property, shall be at the
risk of Tenant only, and that neither Landlord nor Agent, nor their partners,
directors or officers, shall be liable for any loss or damage thereto or theft
thereof, except to the extent caused by the gross negligence or willful
misconduct of Landlord, Agent and/or their respective partners, directors,
officers or employees. Without limitation of any other provisions hereof, Tenant
agrees to defend, protect, indemnify and save harmless Landlord and Agent, and
their respective partners, officers, directors and employees, from and against
all liability to third parties arising out of the acts or omissions of Tenant
or any subtenant or the servants, agents, employees, contractors, suppliers,
workmen and invitees of Tenant or any subtenant.
Except to the extent caused by the gross negligence or willful misconduct
of Landlord, Agent and/or their respective partners, directors, officers or
employees, Tenant agrees to indemnify and save harmless, and upon request,
defend, Landlord, Agent, and their respective partners, directors, officers and
employees (herein called "indemnitees") against and from any and all claims by
or oil behalf of any person, arising out of or related to:
(a) Tenant's use or occupancy of the Premises or the conduct of its
business, or any activity, work, or thing, permitted or Suffered by Tenant,
in, on or about the Premises or the Property;
(b) any occurrence in, on or about the Premises;
(c) any breach or default on Tenant's part in the performance or
observance of, or compliance with, any term, covenant or condition on
Tenant's part to be performed pursuant to the terms of this Lease; or
(d) any act or negligence of Tenant or any subtenant, or any of their
respective agents, contractors, servants, employees, invitees or licensees,
whether or not the fault or negligence of Landlord, or of any other indemnitee
or of the agents, contractors, servants, employees, invitees or licensees of
Landlord or any indemnitee, (whether or not occurring before or after the
execution of this Lease), contributed thereto or was the cause thereof, and from
and against all costs, counsel fees, expenses, penalties, fines and liabilities
which Landlord or any other indemnitee may suffer or incur in connection with
any such claim and any action or proceeding brought with respect thereto. In
the event that any action or proceeding shall be brought by reason of any such
claim, against any party to be indemnified hereunder, Tenant covenants that
Tenant, upon notice from such party and at Tenant's expense, shall resist and
defend such action or proceeding by counsel reasonably satisfactory to such
party.
13. Nonwaiver. No waiver of any provision of this Lease shall be implied
by any failure of Landlord to enforce any remedy on account of the violation for
such provision, even if such violation be continued or repeated subsequently,
and no express waiver shall affect any provision other than the one specified in
such waiver and that one only for the time and in the manner specifically
stated. No receipt of moneys by Landlord or its agents from tenant after the
termination of this Lease shall in any way alter the length of the Term or of
Tenant's right of possession hereunder or after the giving of any notice shall
reinstate, continue or extend the Term or affect any notice given
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Tenant prior to the receipt of such moneys, it being agreed that after the
service of notice or the commencement of a suit or after final judgment for
possession of the Premises, Landlord may receive and collect any rent due, and
the payment and acceptance of payment of rent shall not waive or affect said
notice, suit or judgment.
14. Condemnation. In the event that the whole event that the whole of the
Premises shall be lawfully condemned or taken for a public or quasi-public use,
this Lease shall terminate as of the date that possession is to be surrendered
to the condemnor or taking authority. In the event that there shall be a lawful
condemnation or taking for any public or quasi-public use of any part of the
Building, without there being condemned or taken all of the Premises, then, at
the option of Landlord, exercisable by notice given to Tenant not later than 90
days after the date upon which Landlord receives notice of the taking or
condemnation, this Lease shall terminate as of the date that possession of the
Premises taken is required to be surrendered to the condemnor or taking
authority. In the event of any such taking or condemnation of all or any part of
the Premises or of all or any part of the Property, Tenant shall have no claim
against Landlord and shall not have any claim or right to any portion of the
amount that may be awarded as damages or paid as a result of such taking or
condemnation; and all rights of Tenant to damages therefore are hereby assigned
by Tenant to Landlord and Tenant shall have no claim against Landlord or the
condemner for the value of the unexpired term of this Lease. However, the
foregoing provisions of this section shall not be construed to deprive Tenant of
the right to claim and receive payment from the condemner or taking authority
for moving and related expenses as long as such claim or the payment thereof
does not reduce the award which Landlord would otherwise be entitled to receive.
In the event of any such taking or condemnation of part of the Premises, the
Base Rent, the Tax Adjustment and the Operating Expense Adjustment shall be
proportionately reduced from the date that possession is required to be
surrendered to the condemnor or taking authority.
15. Assignment and Subletting.
(a) Tenant shall not, without the prior written consent of Landlord
(which shall not be unreasonably withheld, conditioned or delayed in the
case of an assignment or subletting), (i) assign, convey or mortgage this
Lease or any interest hereunder except to an Affiliate (hereinafter
defined) who is not a Prohibited Entity (hereinafter defined); (ii) suffer
to occur or permit to exist any assignment of this Lease to an entity which
is not an Affiliate ("Non-Affiliate"), or any lien upon Tenant's interest
hereunder, whether voluntarily, involuntarily or by operation of law; (iii)
sublet the Premises or any part thereof to a Non-Affiliate, (iv) permit the
use of the Premises by any parties other than Tenant, its Affiliates and
their respective employees. Any such action on the part of Tenant without
Landlord's consent, shall be void and of no effect. Landlord's consent to
any assignment, subletting or transfer or any assignment, subletting or
transfer permitted in this Paragraph 15, or Landlord's election to accept
any assignee, subtenant or transferee as the tenant hereunder and to
collect rent from such assignee, subtenant or transferee shall not release
Tenant or any subsequent tenant from any covenant or obligation under this
Lease. Landlord's consent to any assignment, subletting or other act or
occurrence requiring Landlord's consent shall not constitute a waiver of
Landlord's right to withhold its consent to any future assignment,
subletting or act or occurrence requiring Landlord's consent. Without
limitation of the circumstances in which Landlord's withholding of consent
to an assignment or subletting shall not be unreasonable, it shall not be
unreasonable for Landlord to withhold its consent if the reputation,
financial responsibility, or business of the proposed assignee or subtenant
is unsatisfactory to Landlord, or if Landlord deems such business to be not
consonant with that of other tenants in the Building, or if the intended
use by the proposed assignee or subtenant conflicts with any commitment
made by landlord to any other tenant in the Building, or if in Landlord's
reasonable judgment the assignment or subletting will have financial
consequences adverse to Landlord's interest, or if the proposed assignee or
subtenant is a Prohibited Entity.
(b) At least forty-five (45) days prior to any proposed subletting or
assignment to a Non-Affiliate, Tenant shall submit to Landlord a statement
seeking Landlord's consent and containing the name and address of the
proposed subtenant or assignee, the terms of the proposed sublease or
assignment (including, without limitation, the date upon which the assignee
or subtenant is the take possession) and such financial and other
information with
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respect to the proposed assignee or subtenant as Landlord reasonably may
request. Landlord shall indicate its consent or non-consent within six (6)
business days of its receipt of said statement. Tenant shall notify
Landlord in writing of any subletting or assignment to an Affiliate, Tenant
shall submit to Landlord a statement containing the name, address and
affiliation of the proposed subtenant or assignee to the Tenant, the terms
of the proposed sublease or assignment and financial and other information
with respect to the proposed assignee or subtenant as Landlord may
reasonably request.
(c) Contemporaneously with any request or proposal by tenant to sublet
or assign any part of this Lease, Tenant shall pay all costs, including
reasonable attorneys' fees, incurred by Landlord or anticipated to be
incurred by Landlord, in connection with Landlord's investigation of any
financial or other information of the proposed assignee or subtenant all of
such costs will in no event exceed $750. Landlord may require that all or
a portion of the costs or anticipated costs be paid in advance by Tenant.
The payment of such costs shall not obligate Landlord in any way to consent
to any proposed assignment or subletting nor shall the amount of costs paid
by Tenant be applied or used as a set-off to any amounts due or to become
due by Tenant to Landlord.
(d) In addition to withholding its consent, Landlord shall have the
additional right, exercisable within such 30 day period, to terminate this
Lease in its entirety (where Tenant seeks to assign this Lease or sublet
the entire Premises to a Non-Affiliate) or as to that portion of the
Premises which Tenant seeks to sublet (where Tenant seeks to sublet only a
portion of the Premises to a Non-Affiliate for a term exceeding two (2)
years at a time when the remaining Term of the Lease is three (3) years or
more). Landlord may exercise such right to terminate by giving written
notice to Tenant at any time prior to Landlord's written consent to such
assignment or sublease. In the event that Landlord exercises such right to
terminate, (i) the termination shall be effective as of such date as
Landlord may specify in its notice which shall not be later than the later
of [A] the proposed date for possession by such Non-Affiliate assignee or
subtenant, or [B] ninety (90) days after the date of Landlord's notice of
termination to Tenant and (ii) as of the effective date of such termination
Tenant shall have no further liability under this Lease with respect to
that portion of the Premises which is the subject of such termination:
(e) If Landlord fails to exercise its termination right and its right
to withhold its consent as set forth in the preceding subsections, Tenant
shall pay to Landlord fifty percent (50%) of all profit derived by Tenant
from the assignment or sublease ("Sublease Profit"). The Tenant shall not
be required to pay any Sublease Profit derived by Tenant from an assignment
or sublease with an Affiliate. In determining Sublease Profit the Tenant
shall only be permitted to deduct (i) leasing commissions and brokerage
fees paid by Tenant and (ii) any other reasonable out-of-pocket costs paid
by Tenant and which are directly attributable to such assignment or
sublease. Whenever requested by Landlord, Tenant shall furnish Landlord
with a statement, certified by an authorized officer of Tenant as true,
correct and complete, setting forth in detail the computation of profit
(which computation shall be based upon generally accepted accounting
principles), and Landlord, or its representatives, shall have access to the
books, records and papers of Tenant in relation thereto, and to make copies
thereof. Any rent in excess of that paid by Tenant hereunder realized by
reason of such assignment or sublease less the costs described above shall
be deemed all item of such profit. Such percentage of Tenant's profits
shall be paid to Landlord promptly by Tenant upon Tenant's receipt from
time to time of periodic payments from such assignee or subtenant or at
such other earlier time as Tenant shall realize its profits from such
assignment or sublease.
(f) Landlord and Tenant further agree that Tenant shall not publish or
otherwise disseminate any written advertising material in connection with
any proposed assignment or sublease of all or any portion for the Premises
(the "Advertising") without Landlord's prior written approval for the same,
which approval shall not unreasonably withheld; provided, however, that no
Advertising shall contain any reference to the price to be charged in
connection with any proposed assignment or sublease.
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(g) For the purposes of this Lease, the following terms shall have the
following meanings:
(i) "Affiliate" shall mean [A] any person or entity which,
directly or indirectly, controls Tenant or is controlled by Tenant or
is under common control with Tenant, [B] any successor to Tenant by
merger, consolidation or other operation of law, [C] any person or
entity to whom all or substantially all of the assets of Tenant are
conveyed or [D] any person or entity purchasing the business which
Tenant conducts at the Premises.
(ii) "Prohibited Entity", unless otherwise agreed in writing by
Landlord, shall mean [A] a governmental or a governmental subdivision,
instrumentality or agency, [B] a school, college or university, [C] an
employment, recruitment or temporary help service or agency, [D] a
collection agency, [E] any entity or an affiliate thereof which has
previously defaulted in the performance of its obligations under a
lease concerning any portion of the Building or any building located
within the Denver Place complex known and numbered as 999 - 18th
Street, Denver, Colorado 80202 (collectively the "Complex"), or [F]
any person, entity or affiliate of Landlord, is either currently
negotiating or, within the six month period preceding Tenant's request
for the assignment or sublease, with whom Landlord, or any affiliate
of Landlord, has negotiated to lease space in the Complex. An
insurance agency (other than Alexander & Alexander, Inc.) shall be
deemed to be a Prohibited Entity if such insurance agency (x)
subleases or occupies any floor of the Building leased to or occupied
by Alexander & Alexander Inc., (y) subleases or occupies any portion
of the 29th through 31st floors of the Building or (z) subleases or
occupies more than 12,000 square feet of rentable area in the
Building.
16. Holdover. If the Tenant or any person claiming through the Tenant
shall retain possession of the Premises or any part thereof after the expiration
or earlier termination of the Term and if Landlord shall consent to such
continuation of possession, such possession shall be (unless the parties hereto
shall otherwise have agreed in writing) deemed to be under a month-to-month
tenancy which shall continue until either party shall notify the other in
writing, at least 30 days prior to the end of any calendar month, that the party
giving such notice elects to terminate such tenancy at the end of such calendar
month, in which event such tenancy shall so terminate. Anything contained in the
foregoing provisions of this paragraph to the contrary notwithstanding, the
rental payable with respect to each such monthly period shall be 150% of the
monthly Base Rent and 150% of the monthly Tax Adjustment Amount and of the
monthly Expense Adjustment Amount (both calculated in accordance with the
provisions of Paragraph 4 hereof) which would have been payable had this Lease
been renewed until the end of the calendar year which includes such month on the
terms and conditions in effect immediately prior to the expiration or
termination of the Term for the first three (3) months of Tenant's holdover and
150% of the monthly Base Rent and 200% of the monthly Tax Adjustment Amount and
of the monthly Expense Adjustment Amount (both calculated in accordance with the
provisions of Paragraph 4 hereof) which would have been payable had this Lease
been renewed until the end of the calendar year which includes each month on the
terms and conditions in effect immediately prior to the expiration or
termination of the Term for any period after the first three (3) months of
Tenant's holdover; and such month-to-month tenancy with Landlord's consent shall
be upon the same terms and subject to the same conditions as those which are set
forth in this Lease except as aforesaid. If Tenant or any person claiming
through Tenant shall retain possession of the Premises or any part thereof,
after the expiration or earlier termination of the term or of Tenant's right of
possession, and if such retention shall be without Landlord's consent, Tenant
shall pay Landlord (a) for each month or portion thereof during which such
possession continues, an amount equal to the rental to be paid for each month
pursuant to the foregoing provisions of this Paragraph when such possession is
with Landlord's consent, plus all other sums which would have been payable
hereunder had the term continued during such retention of possession and (b) all
other damages sustained by Landlord, whether direct or consequential, by reason
of such retention of possession. During any such retention of possession
without Landlord's consent, all of Tenant's obligations with respect to the use,
occupancy and maintenance of the Premises shall continue. The provisions of
this paragraph shall not be deemed to limit or constitute a waiver of any other
rights or remedies of Landlord provided herein or at law or in equity and
applicable to unlawful retention of possession or otherwise.
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17. Estoppel Certificate. Tenant shall from time to time, within ten days
after Tenant's receipt of Landlord's written request therefore, execute,
acknowledge and deliver to Landlord a written instrument in recordable form (a)
certifying (i) that this Lease is in full force and effect and has not been
modified, supplemented or amended in any way (or, if there have been
modifications, supplements or amendments thereto, that it is in full force and
effect as modified, supplemented or amended, and stating such modifications,
supplements and amendments) and that this Lease (as modified, supplemented or
amended, as aforesaid) represents the entire agreement among Landlord and Tenant
as to the Premises and the leasehold, (ii) the dates to which the Base Rent,
additional rent and other charges arising hereunder have been paid, (iii) the
amount of any prepaid rents or credits due to Tenant, if any; and (iv) that if
applicable, Tenant has entered into occupancy of the Premises; and (b) stating,
to the best knowledge of Tenant, whether or not all conditions under the Lease
to be performed by Landlord prior to the date of such certificate have been
satisfied and whether or not Landlord is then in default in the performance of
any covenant, agreement or condition contained in this Lease and specifying, if
any, each such unsatisfied condition and each such default; and (c) stating any
other fact or certifying any other condition reasonably requested by Landlord or
by any mortgagee or prospective mortgagee or purchaser of the Property or of any
interest therein.
18. Subordination.
(a) This Lease shall be subject and subordinate at all times to the
lien of any mortgage or deed of trust, heretofore or hereafter placed by
Landlord on the Property or any part thereof and of all renewals,
modifications, consolidations, replacements and extensions thereof (all of
which are hereinafter referred to collectively as a "mortgage"), all
automatically and without the necessity of any further act on the part of
Tenant to effectuate such subordination. Tenant shall, at the request of
the holder of any such mortgage, upon foreclosure thereof attorn to such
holder. Tenant shall also execute, acknowledge and deliver, within 15 days
after Tenant's receipt of demand from Landlord or such holder, such other
instrument or instruments evidencing such subordination of Tenant's right,
title and interest under this Lease to the lien of any such mortgage, and
such other instrument or instruments of attornment, as shall be desired by
such holder. Notwithstanding the foregoing provisions of this Paragraph
18(a) as a condition precedent to Tenant's attornment and subordination to
the lien of any mortgage or deed of trust hereafter placed by Landlord on
the Property or any portion thereof, provided the Premises then consist of
a rentable area of not less than 10,000 square feet, the holder of any such
mortgage or deed of trust shall agree in writing not to disturb Tenant's
rights under this Lease provided Tenant is not in default in the
performance of its obligations hereunder. In the event the Premises
consist of a rentable area of less than 10,000 square feet at the time of a
request for subordination to the lien of any mortgage or deed of trust
hereafter placed by Landlord on the Property or any portion thereof,
Landlord agrees to use reasonable efforts to obtain such holder's agreement
not to disturb Tenant's rights under this Lease provided Tenant is not in
default in the performance of its obligations hereunder on the condition
that Tenant shall be solely responsible for all fees, costs and expenses
charged by such holder(s) for the preparation and negotiation of the terms
and conditions of the nondisturbance.
(b) Anything contained in the foregoing provisions of this Paragraph
to the contrary notwithstanding, any such holder may at any time
subordinate its mortgage to this Lease, without the necessity of obtaining
Tenant's consent, by giving notice of the same in writing to Tenant, and
thereupon this Lease shall be deemed to be prior to such mortgage without
regard to their respective dates or execution, delivery or recordation
and/or the date of commencement of Tenant's possession, and in that event
such holder shall have the same rights with respect to this Lease as though
this Lease shall have been executed, delivered and recorded prior to the
execution and delivery of such mortgage.
(c) If Landlord is or becomes lessee of premises of which the Premises
are a part, Tenant agrees that, automatically and without the necessity of
any further act, Tenant's possession shall be as a subtenant and shall be
subordinate to the interest of Landlord's lessor, its heirs, personal
representatives, successors and assigns (which lessor, its heirs, personal
representatives, successors and assigns, or any of them, is hereinafter
called "Paramount Lessor"), but notwithstanding the foregoing, if
Landlord's tenancy shall terminate by
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expiration, by forfeiture or otherwise, then Tenant hereby agrees, upon
request of Paramount Lessor, to attorn to Paramount Lessor, and to
recognize such lessor as Tenant's landlord for the balance of the term of
this lease and any extensions or renewals hereof. Tenant shall execute,
acknowledge and deliver, upon demand by Landlord or Paramount Lessor, such
other instrument or instruments evidencing such subordination of Tenant's
right, title and interest under this Lease to the interest of such lessor,
and such other instrument or instruments of attornment, as shall be
prescribed by such lessor.
19. Certain Rights Reserved By Landlord. Landlord shall have the
following rights, each of which Landlord may exercise without notice to Tenant
and without liability to Tenant for damage or injury to property, person or
business on account of the exercise thereof, and the exercise of any such
rights shall not be deemed to constitute an eviction or disturbance of Tenant's
use or possession of the Premises and shall not give rise to any claim for set-
off or abatement of rent or any other claim:
(a) to change the Building's name or street address;
(b) to install, affix and maintain any and all signs on the exterior
and on the interior of the Building;
(c) to decorate or to make changes, repairs, alterations, additions,
or improvements, whether structural or otherwise (including alterations in
the configuration of, and elimination of, any common areas), in and about
the Building and Property or any part thereof, and for such purposes to
enter upon the Premises, and during the continuance of any of said work, to
temporarily close doors, entry ways, public space and corridors in the
Building and to interrupt or temporarily suspend services or use of
facilities; but Landlord shall endeavor to perform any such work in or
about the Premises so as to cause the minimum inconvenience to Tenant
practicable under the circumstances;
(d) to designate and approve all window coverings used in the
Building;
(e) to approve, disapprove or restrict the weight, size and location
of safes, vaults and other heavy equipment and articles in and about the
Premises and the Building so as not to exceed the live load per square foot
designated by the structural engineers for the Building, and to require all
such items and furniture and similar items to be moved into or out of the
Building and Premises only at such times and in such manner as Landlord
shall direct in writing. Tenant shall not install or operate machinery or
any mechanical devices of a nature not directly related to Tenant's
ordinary use of the Premises without the prior written consent of Landlord.
Tenant's movements of property into or out of the Building or Premises and
within the Building are entirely at the risk and responsibility of Tenant,
and Landlord reserves the right to require permits before allowing any
property to be moved into or out of the Building or Premises;
(f) to establish controls for the purpose of regulating all property
and packages, both personal and otherwise, to be moved into or out of the
Building and Premises and all persons using the Building after normal
office hours;
(g) to regulate delivery and service of supplies in order to insure
the cleanliness and security of the Premises and to avoid congestion of the
loading docks, receiving areas and freight elevators;
(h) to show the Premises to prospective tenants at reasonable hours
upon reasonable prior oral notice to Tenant during the last twelve months
of the Term and, if vacated or abandoned, to show the Premises at any time
and to prepare the Premises for re-occupancy;
(i) to erect, use and maintain pipes, ducts, wiring and conduits, and
appurtenances thereto, in and through the Premises at reasonable locations,
provided Landlord takes
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reasonable efforts to minimize the interference with Tenant's use and
enjoyment of the Premises; and
(j) to enter the Premises at any reasonable time upon reasonable
prior oral notice (except in an emergency when no notice shall be required)
to inspect the Premises.
20. Rules and Regulations. Tenant shall, and shall cause all of its
subtenants and occupants, its and their agents, employees, invitees and
licensees to, observe faithfully, and comply strictly with, the rules and
regulations attached to this Lease as Exhibit "B", as they may be supplemented
and revised by Landlord from time to time, and such other rules and regulations
promulgated from time to time by Landlord, as in the Landlord's judgment may be
desirable for the safety, care and cleanliness of the Building and the Premises,
or for the preservation of good order therein. Landlord shall not be liable to
Tenant for violation of such rules and regulations by, or for Landlord's failure
to enforce the same against, any other tenant, its subtenants and occupants and
its and their agents, employees, invitees or licensees, nor shall any such
violation or failure constitute, or be treated as contributing to, an eviction,
actual or constructive, or affect Tenant's covenants and obligations hereunder,
or allow Tenant to reduce, abate or offset the payment of any rent under this
Lease.
21. Remedies.
(a) If default shall be made in the payment of any rent or any
installment thereof or in the payment of any other sum required to be paid
by Tenant under this Lease or under the terms of any other agreement
between Landlord and Tenant and such default shall continue for ten days,
or if default shall be made in the observance or performance of any of the
other agreements, covenants or conditions in this Lease (or in any other
agreement between Landlord and Tenant) which Tenant is required to observe
and perform and such default shall continue for fifteen (15) days after
written notice to Tenant unless such default is not reasonably capable of
being cured within such fifteen (15) day period, in which event there shall
be a default if Tenant fails to commence such cure within fifteen (15) days
or thereafter fails to diligently pursue such cure to completion which
shall in no event exceed sixty (60) days, or if the interest of Tenant in
this Lease shall be levied on under execution or other legal process, or
(b) if Tenant becomes the subject of commencement of an involuntary
case under the federal bankruptcy law as now or hereafter constituted, or
there is filed a petition against Tenant seeking reorganization,
arrangement, adjustment or composition of or in respect of Tenant under the
federal bankruptcy law as now or hereafter constituted, or under any other
applicable federal or state bankruptcy, insolvency, reorganization or other
similar law, or seeking the appointment of a receiver, liquidator or
assignee, custodian, trustee, sequestrator (or similar official) of Tenant
or any substantial part of its property, or seeking the winding-up or
liquidation of its affairs and such involuntary case or petition is not
dismissed within 60 days after the filing thereof, or if Tenant commences a
voluntary case or institutes proceedings to be adjudicated a bankrupt or
insolvent, or consents to the institution of bankruptcy or insolvency
proceedings against it, under the Federal bankruptcy laws as now or
hereafter constituted, or any other applicable Federal or state bankruptcy
or insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver or liquidator or assignee, trustee,
custodian, sequestrator (or other similar official) of Tenant or of any
substantial part of its property, or makes any assignment for the benefit
of creditors or admits in writing its inability to pay its debts generally
as they become due or fails to generally pay its debts as they become due
or if Tenant or its stockholders or board of directors or any committee
thereof takes any corporate action in contemplation, preparation or
furtherance of or for any of the occurrences, steps, procedures,
proceedings or other items mentioned in this Paragraph 21(b) or
(c) if Tenant shall vacate and abandon the Premises for a period of
seven consecutive days during the Term, Landlord may treat the occurrence
of any one or more of the foregoing events as a breach of this Lease, and
thereupon at its option may, without notice or demand of any kind to Tenant
or any other person, have any one or more of the
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following described remedies in addition to all other rights and remedies
provided at law or in equity or elsewhere herein:
(i) At the option of Landlord, the whole balance of rent,
charges and all other sums payable hereunder, whether or not payable
as rent, for the entire balance of the Term, and any renewal or
extension thereof, herein reserved or agreed to be paid by Tenant, or
any part of such rent, charges and other sums, and also all or any
costs and sheriffs, marshall's, constable's or other official's fees
and charges, whether chargeable to Landlord or Tenant, shall be taken
to be due and payable from Tenant and in arrears as if by the terms of
this Lease said balance of rent, charges and other sums and expenses
were on that date payable in advance; and/or
(ii) Landlord, by giving written notice to Tenant, may terminate
this Lease and the Term, in which event Landlord may immediately
repossess the premises by legal proceedings, force or otherwise;
and/or
(iii) Landlord, by giving written notice to Tenant, may terminate
Tenant's right of possession and may immediately repossess the
Premises by legal proceedings, force or otherwise, without terminating
this Lease.
(iv) After reentry, retaking, repossessing or recovering of the
Premises, whether or not Landlord has terminated this Lease, Landlord
may, but shall be under no obligation to, relet the same or any
portion thereof for such rent and upon such terms as shall be deemed
advisable by Landlord; and whether or not the Premises are relet,
Tenant shall be liable for any loss of rent for such period as would
be the balance of the term of this Lease and any renewals thereof plus
the costs and expenses of reentry, retaking, repossession and
recovering, and of reletting and of redecorating, remodeling and
making repairs and alterations to the Premises for the purpose of
reletting, the amount of such liability to be computed monthly and
paid by Tenant to Landlord at the end of each month. Landlord shall in
no event have any duty to relet the Premises, nor shall any damages or
other sums to be paid by Tenant to Landlord be reduced by any failure
to relet the Premises or failure to collect the rent from any
reletting. Tenant shall not be entitled to any rents received by
Landlord in excess of the rents provided for in this Lease. Tenant
agrees that Landlord may file suit to recover any sums falling due
under the terms of this Paragraph 21 from time to time and that no
suit or recovery of any portion due Landlord hereunder shall be any
defense to any subsequent action brought for any amount not
theretofore reduced to judgment in favor of Landlord. If Landlord
relets the Premises, such reletting shall not be considered a
termination of this Lease unless Landlord has given Tenant a notice
wherein Landlord expressly states that this Lease is terminated.
(v) If Landlord shall terminate this Lease as provided in
subparagraph (b) above, Landlord, at its option, shall be entitled to
recover as damages the excess, if any, at the time of such
termination, of the amount of the Base Rent payable under this lease
for the balance of the term of this Lease (including, any extension
options which have been exercised) over the then fair rental value of
the Premises for the same period, plus all costs and expenses of
Landlord caused by Tenant's default, including, but not limited to,
reasonable attorney's fees.
(vi) If any payment of rent or any other sum, or any part of any
such payment to be made by Tenant under the terms of this Lease shall
become overdue for a period in excess of five days Tenant shall pay to
Landlord (x) a "late charge" of $.05 for each dollar so overdue, for
the purpose of defraying the expense incident to handling such overdue
or delinquent payment, and (y) interest on the overdue amount at the
Least Interest Rate (defined below) from the date when such payment
was due until the date paid, but in no event more than the amount or
rate which is the maximum amount or rate Landlord may lawfully charge
in respect of Tenant in such circumstances under applicable law. The
"Lease Interest Rate" shall mean the greater of 18% per annum or such
variable rate which is from time to time equal to 3% above
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the prime rate as stated by Colorado National Bank, Denver, Colorado
or its successor, or, in the absence of there being a successor to
Colorado National Bank, by such other bank having an office in the
City of Denver, as Landlord may from time to time select. Nothing
herein shall be construed as waiving any rights of Landlord arising
out of any default of Tenant by reason of Landlord's accepting any
such late charge or interest; the right to collect a late charge and
interest is separate and apart from any other rights or remedies of
Landlord after default by Tenant.
(vii) Without limiting the generality of the foregoing, if
Tenant shall be in default in the performance of any of its
obligations hereunder, Landlord may (but shall not be obligated to),
in addition to any other rights it may have in law or in equity, cure
such default on behalf of Tenant, and Tenant shall reimburse Landlord
upon demand for any sums paid or costs incurred by Landlord in curing
such default, including reasonable attorneys' fees and other legal
expenses, together with interest at the Lease Interest Rate from the
dates of Landlord's incurring of costs or expenses.
(viii) All remedies available to Landlord hereunder and
otherwise available at law or in equity shall be cumulative and
concurrent. No termination of this Lease nor taking or recovering
possession of the Premises shall deprive Landlord of any remedies or
actions against Tenant for rent, for charges, or for damages for the
breach of any term, covenant or condition herein contained, nor shall
the bringing of any such action for rent, charges or breach of term,
covenant or condition, nor the resort to any other remedy or right for
the recovery of rent, charges or damages for such breach be construed
as a waiver or release of the right to insist upon the forfeiture and
to obtain possession. The failure of Landlord to insist upon strict
and/or prompt performance of the terms, agreements, covenants and
conditions of this Lease or any of them, and/or the acceptance of such
performance thereafter shall not constitute or be construed as a
waiver of Landlord's right to thereafter enforce the same strictly
according to the tenor thereof in the event of a continuing or
subsequent default.
(ix) Notwithstanding anything in this Paragraph 21 or any other
provision of this Lease to the contrary, this Lease shall not be
terminated by service upon Tenant of a notice from Landlord demanding
payment of rent or possession of the Premises following default by
Tenant, or by any action of Tenant to vacate the Premises following
receipt of such a notice, unless the notice served by Landlord
includes a statement expressly terminating this Lease. Further,
Landlord reserves the right to receive payment of all unaccrued rent
for the balance of the Term originally contemplated under Paragraph 1
of this Lease (and any extensions or renewals thereof to which Tenant
shall have become bound) following service of such a notice for
payment or possession, or a notice terminating this Lease for Tenant's
default.
22. Expenses of Enforcement. Tenant shall pay upon demand all Landlord's
costs, charges and expenses, including the fees and out-of-pocket expenses of
counsel, agents and others retained by Landlord, incurred by Landlord, whether
or not suit is brought, in enforcing Tenant's obligations hereunder or in
collecting any amounts due from Tenant or any subtenant or assignee hereof or in
enforcing any provision of this Lease or in any litigation, negotiation or
transaction in which Tenant causes Landlord without the Landlord's fault to
become involved or concerned or in reletting the Premises or any portion thereof
after default by Tenant. Landlord and Tenant further agree that in the event
any legal action or proceeding is commenced to enforce the obligations set forth
in this Lease, the prevailing party shall be entitled to an award of all
reasonable costs and expenses including, but not limited to, reasonable
attorneys' fees.
23. Covenant of Quiet Enjoyment. Landlord covenants that Tenant, on
paying the rent, charges for services and other payments herein reserved or
required and on keeping, observing and performing all the other terms,
covenants, conditions, provisions and agreements herein contained on the part of
the Tenant to be kept, observed and performed, shall, during the Term, peaceably
and quietly have, hold and enjoy the Premises free from interference by Landlord
or any person claiming by, from or under Landlord, subject, however, to the
terms, covenants, conditions, provisions and agreements hereof.
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24. Security Deposit. Upon the execution of this Lease, Tenant shall
deposit with Landlord the sum of $11,018.67 (hereinafter referred to as
"Collateral"), as security for the prompt, full and faithful performance by
Tenant of each and every provision of this Lease and of all obligations of
Tenant hereunder. No interest shall be paid to Tenant on the Collateral and
Landlord may commingle the collateral with any other funds of Landlord.
If Tenant fails to perform any of its obligations hereunder, Landlord may
use, apply or retain the whole or any part of the Collateral for the payment of
(a) any rent or other sums of money which Tenant may not have paid when due, (b)
any sum expended by Landlord on Tenant's behalf in accordance with the
provisions of this Lease, and/or (c) any damages which Landlord may sustain or
sums which Landlord may expend or be required to expend by reason of Tenant's
default, including, without limitation, any damage or deficiency in or from the
reletting of the Premises as provided in Paragraph 21. The use, application or
retention of the Collateral, or any portion thereof, by Landlord shall not
prevent Landlord from exercising any other right or remedy provided by this
Lease or by law (it being intended that Landlord shall not first be required to
proceed against the Collateral) and shall not operate as a limitation on any
recovery to which Landlord may otherwise be entitled. If any portion of the
Collateral is used, applied or retained by Landlord for the purposes set forth
above, Tenant agrees, within ten days after the written demand therefore is made
by Landlord, to deposit cash with the Landlord in an amount sufficient to
restore the Collateral to its original amount.
If Tenant shall fully and faithfully comply with all of the provisions of
this Lease, the Collateral, or any balance thereof, shall be returned to Tenant
without interest within 30 days after the expiration of the Term or within 30
days after the date Tenant has vacated the Premises. In the absence of evidence
satisfactory to Landlord of any permitted assignment of the right to receive the
Collateral, or of the remaining balance thereof, Landlord may return the same to
the original Tenant, regardless of one or more assignments of Tenant's interest
in this Lease or the Collateral. In such event, upon the return of the
Collateral, or the remaining balance thereof to the original Tenant, Landlord
shall be completely relieved of liability under this Paragraph 24 or otherwise
with respect to the Collateral.
Tenant acknowledges that Landlord has the right to transfer or mortgage its
interest in the Property and in this Lease and Tenant agrees that in the event
of any such transfer or mortgage, Landlord shall have the right to transfer or
assign the Collateral to the transferee or mortgagee. Upon written
acknowledgment of transferee's or mortgagee's receipt of such Collateral,
Landlord shall thereby be released by Tenant from all liability or obligation
for the return of such Collateral and Tenant shall look solely to such
transferee or mortgagee for the return of the Collateral.
The Collateral shall not be mortgaged, assigned or encumbered in any manner
whatsoever by Tenant.
25. Real Estate Broker. Landlord and Tenant acknowledge and agree that:
(i) Landlord has been represented in connection with this Lease by the Agent as
Landlord's agent and by Garth R. D. Tait, Broker, Ltd. ("Tait") as Landlord's
subagent, and (ii) Tenant has been represented in connection with this Lease by
Liberty Partners Inc. (Bruce Johnson and Alex Hammerstein) ("Liberty Partners")
as Tenant's agent. Tenant agrees to indemnify, defend and hold Landlord harmless
from and against any claims, for a commission or other compensation in
connection with this Lease, made by any broker or finder (other than Agent, Tait
and Liberty Partners) who claim to have dealt with or communicated to Tenant in
connection with this Lease provided that Landlord has not in fact retained such
broker or finder. Landlord agrees to pay Agent, Tait and Liberty Partners
pursuant to the terms of separate agreements, for their services rendered in
connection with this Lease, and agrees to indemnify, defend and hold Tenant
harmless from and against any claims, for a commission or other compensation in
connection with this Lease, made by any broker or finder who claim to have dealt
with or communicated to Landlord in connection with this Lease provided that
Tenant has not in fact retained such broker or finder.
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26. Miscellaneous.
(a) Rights Cumulative. All rights and remedies of Landlord under this
-----------------
Lease shall be cumulative and none shall exclude any other rights or remedies
allowed by law, in equity or otherwise.
(b) Captions and Usage. The titles appearing in connection with the
------------------
various sections and paragraphs of this lease are for convenience only; they are
not intended to indicate all of the subject matter in the text and they are not
to be used in interpreting this Lease nor for any other purpose in the event of
any controversy. As used herein (i) the term "person" shall be deemed to
include a natural person, a trustee, a corporation, a partnership, a
governmental unit and any other form of legal entity; (ii) all usages in the
singular or plural number shall be deemed to have been made, respectively, in
the plural or singular number as well; the use of any gender includes all
genders.
(c) Binding Effect. Each of the provisions of this Lease shall extend
--------------
to and shall, as the case may require, bind or inure to the benefit not only of
the Landlord and of Tenant, but also of their respective successors or assigns,
provided this clause shall not permit any assignment by Tenant contrary to the
provisions of Paragraph 15 hereof.
(d) Lease Contains All Terms. There are no promises, representations,
------------------------
warranties or undertakings by, or binding upon, Landlord with respect to the
Building, the Premises or the Real Property, including, but not limited to, any
with regard to alteration, remodeling, redecorating or installation of equipment
or fixtures in the Premises, except those, if any, that are expressly set forth
in this Lease. No modification, waiver or amendment of this Lease or of any of
its conditions or provisions shall be binding upon the Landlord unless in
writing signed by Landlord or by a duly authorized agent of Landlord empowered
by a written authority signed by Landlord.
(e) Submission of Lease. Submission of this Lease by Landlord for
-------------------
execution by Tenant, or Tenant's execution hereof without Landlord's prior or
simultaneous execution, shall not bind Landlord in any manner, and no binding
Lease or obligation of the Landlord shall arise until Lease is signed by both
Landlord and Tenant and delivery is made to each.
(f) No Air Rights. No rights to any view or to light or air over any
-------------
property whether belonging to Landlord or any other person, are granted to
Tenant by this Lease.
(g) Modification of Lease. If any lender requires, as a condition to
---------------------
its lending funds, the repayment of which is to be secured by a mortgage or
trust deed on the Property or any part thereof, that certain modifications be
made to this Lease, which modifications will not require Tenant to pay any
additional amounts or otherwise change materially the rights or obligations of
Tenant hereunder, Tenant shall, upon Landlord's request, execute appropriate
instruments effecting such modifications.
(h) Substitution of Other Premises.
------------------------------
(i) In the event Tenant exercises the Renewal Option
(hereinafter defined) and Tenant occupies less than all the rentable
area located on the fifth (5th) floor of the Building, Landlord shall
have the right during the Renewal Term to substitute for the premises
then being leased or to be leased hereunder (the "Existing Premises")
other premises within the Building (herein referred to as the "New
Premises") provided that the New Premises shall be of at least
substantially the same size and shall either have substantially the
same perimeter configuration or a perimeter configuration
substantially as usable for the purposes for which the Existing
premises were being used by tenant.
(ii) Tenant shall vacate and surrender the Existing Premises not
later than the later of the 30th day after the date that Landlord
shall notify Tenant of Landlord's intent to make the substitution in
question or the 15th day after landlord shall have
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substantially completed the work to be done by Landlord in the New
Premises pursuant to this subparagraph (ii). As of the sooner of such
15th day or the date of such surrender and vacation, the New Premises
shall be the Premises leased under this Lease and the Existing
Premises shall cease to be the Premises leased under this Lease.
Landlord shall (A) pay the actual and reasonable out-of-pocket
expenses of Tenant's moving of its property from the Existing Premises
to the New Premises, including but not limited to, Tenant fixtures,
furniture, filing systems, movable partitions, modules, computer and
telephone cabling, and equipment, (B) pay the cost and expense of
reprinting reasonable quantities of stationery, business cards,
advertising and promotional materials, and (C) shall improve the New
Premises so that they are substantially similar to the Existing
Premises and promptly reimburse Tenant for its actual and reasonable
out-of-pocket costs in connection with the relocation of any telephone
or other communications equipment from the Existing Premises to the
New Premises. However, instead of only paying the expenses of Tenant's
moving of its property, Landlord may elect to either move Tenant's
property or provide personnel to do so under Tenant's direction, in
which event such move may not be made except during evenings, weekends
or holidays, so as to incur the least inconvenience to Tenant.
(iv) Tenant shall not be entitled to any compensation for any
inconvenience or interference with Tenant's business, nor to any
abatement or reduction in rent, nor shall Tenant's obligations under
this Lease be otherwise affected, as a result of the substitution
except as otherwise provided in this subparagraph (h). Tenant agrees
to cooperate with Landlord so as to facilitate the prompt completion
by Landlord of, its obligations under this subparagraph (h). Without
limiting the generality of the preceding sentence, Tenant agrees to
provide to Landlord promptly such approvals, instructions, plans,
specifications or other information, as may be reasonably requested by
Landlord.
(i) Transfer of Landlord's Interest. Notwithstanding anything
-------------------------------
contained herein to the contrary, Tenant agrees that neither Landlord nor any
partner in Landlord, nor any other person having any interest, direct or
indirect, immediate or more removed than immediate, in Landlord, shall have any
personal liability with respect to any of the provisions of this Lease and
Tenant shall look solely to the estate and property of Landlord in the Property
for the satisfaction of Tenant's remedies, including without limitation, the
collection of any judgment or the enforcement of other judicial process
requiring the payment or expenditure of money by Landlord, subject, however, to
the prior rights of any holder of any mortgage covering all or part of the
Property, and no other assets of Landlord or its partners, or of any other
aforesaid person having an interest in Landlord, shall be subject to levy,
execution or other judicial process for the satisfaction of Tenant's claims.
Without limitation of the foregoing, upon each transfer of the Building and the
Landlord's interest in this Lease, the transferor shall automatically be
released from all liability and obligations under this Lease.
(j) Recording; Short Form Memo. This Lease shall not be recorded by
--------------------------
Tenant. If it is recorded by Tenant, Landlord shall have the right to terminate
this Lease as of the date of recording or thereafter and Landlord shall have all
rights and remedies provided in the case of default by Tenant hereunder. If
requested by Landlord, Tenant shall execute, in recordable form, a short form
memorandum of lease that may, at Landlord's option, be placed of record. In
addition, if requested by Landlord, Tenant shall execute a memorandum of lease
to be filed with the Colorado Department of Revenue, on such form as may be
prescribed by said Department, within ten days after the execution of this
Lease, or any other such memorandum, so that the Landlord may avail itself of
the provision of statutes such as C.R.S. 1973 39-22-604(7)(c).
(k) Covenants and Conditions. All of the covenants of Tenant
------------------------
hereunder shall be deemed and construed to also be "conditions", if Landlord so
elects, as well as "covenants" as though the words specifically expressing or
importing covenants and conditions were used in each separate instance. Tenant's
covenants to pay rent are independent of any other covenant, agreement, term or
condition of this Lease.
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(l) Application of Payments. Landlord shall have the right to apply
-----------------------
payments received from Tenant pursuant to this Lease (regardless of Tenant's
designation of such payments) to satisfy any obligations of Tenant hereunder, in
such order and amounts as Landlord in its sole discretion, may elect.
(m) Security Interest and Tenant's Deposit.
--------------------------------------
(i) As security for the payment of all rent and other sums
becoming due under this Lease and the performance of all of Tenant's
obligations under this Lease, Tenant hereby grants to Landlord a
security interest in all improvements, equipment and other personal
property of Tenant situated on or in the Premises excluding computer
software and Tenant's business records. Such security interest shall
at all times be subordinate to (i) any currently existing or future
purchase money finance relating to such improvements, equipment and
other personal property and (ii) any currently existing or future
security interest granted for the benefit of any lender providing
financing to the Tenant or other entity with an ownership interest in
the equipment. Tenant within 15 days after request therefore made from
time to time by Landlord shall execute such documents as Landlord may
reasonably request in order to evidence and perfect Landlord's
security interest; provided, however, Landlord agrees that no
financing statement shall be filed if prohibited by the holder of a
permitted prior security interest. If Tenant is in default under this
Lease, such improvements, equipment and other personal property shall
not be removed from the Premises without the prior written consent of
Landlord. Upon any default by Tenant under this Lease, Landlord may
exercise any and all rights of a secured party under the Colorado
Uniform Commercial Code.
(ii) Tenant represents that from the expiration of the third
month of the Term of this Lease throughout the Term of this Lease,
Tenant and its parent company, Prime Response Group, Inc. ("Prime
Response Group") shall collectively maintain, at all times during the
Term of this Lease, banking deposits (the "Deposits") in federal or
state chartered United States financial institutions in an aggregate
amount of not less than One Million and No/100 Dollars ($1,000,000.00)
(the "Minimum Deposit"). Provided that Tenant timely performs all of
its obligations under this Lease arising through and including the
eighteenth (18th) month of the Term the amount of the required Minimum
Deposit shall be reduced to an aggregate amount of not less than Five
Hundred Thousand and No/100 Dollars ($500,000.00) Tenant shall provide
Landlord during the Term of the Lease within ten (10) days after
receipt of such request from Landlord, with such documentation
reasonably required by Landlord to evidence that Tenant and Prime
Response Group are maintaining the Deposits required under this
subparagraph. The Deposits shall not be pledged as collateral for
additional security hereunder; provided, however, that notwithstanding
the foregoing, it shall constitute a default under the Lease if the
Deposits fall below the Minimum Deposit at any time during the Term of
this Lease.
(n) Governing Law; Partial Invalidity. This Lease shall be governed
---------------------------------
and construed in accordance with the law of the state in which the Premises is
located. If any term, provision or condition contained in this Lease shall, to
any extent, be invalid or unenforceable, the remainder of this Lease (or the
application of such term, provision or condition to persons or circumstances
other than those in respect of which it is invalid or unenforceable) shall not
be affected thereby, and each and every other term, provision and condition of
this Lease shall be valid and enforceable to the fullest extent possible
permitted by law.
(o) Hazardous Materials. Tenant shall not store highly flammable
-------------------
materials or goods, explosives, perishable foodstuffs, contraband, live animals,
materials or goods which emit odors in or upon the Premises. The Tenant
covenants that it shall not store, use or posses nor permit the storage, use or
possession of any Hazardous Substance (hereinafter defined) upon the Premises,
except of the kind and in the quantities customarily used in commercial office
buildings provided that Tenant complies with all Environmental Laws (hereinafter
defined). Hazardous Substance for purposes of this Lease shall mean, without
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limitation, any flammable explosives, radon, radioactive materials,
asbestos, urea-formaldehyde foam insulation, polychlorinated biphenyls,
petroleum and petroleum based products, methane, hazardous materials,
hazardous wastes, hazardous or toxic substances or related materials, as
defined in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Sections 9601 et seq.), the
------
Hazardous Materials Transportation Act, as amended (49 U. S.C. Section
1801, et seq.), Sections 6901, et seq.), the Toxic Substances Control Act,
------ ------
as amended (15 U.S.C. Sections 2601 et seq. or any other similar law,
------
rules, regulation or statute concerning the protection of the environment
(collectively "Environment Laws"). Tenant hereby covenants and agrees, at
its sole cost and expense, to indemnify, protect and defend and save
harmless the Landlord and any of its partners, employees and agents from
and against any all damages, losses, liabilities, obligations, penalties,
claims, litigation, demands, defenses, judgments, suites, actions,
proceedings, costs, disbursements and/or expenses (including, without
limitation, attorneys' and experts' fees, expenses and disbursements) of
any kind or nature whatsoever which may at any time impose upon, incurred
by or asserted or awarded against the Landlord, its partners, agents or
employees to the extent it relates to, results from or arises out of
Tenant's failure to comply with its obligations under the foregoing
paragraph or Tenant's violation of any Environmental Law with respect to
its use of the Premises. Notwithstanding any provision contained in this
Lease to the contrary, the indemnification provisions set forth in this
paragraph shall survive any expiration and/or termination of this Lease.
27. Telephone and Telecommunications Service.
(a) Tenant acknowledges and agrees that all telephone and
telecommunications services ("Telecommunications Services") desired by
Tenant shall be ordered and utilized at the sole expense of Tenant. Unless
Landlord otherwise requests or consents in writing, all equipment,
apparatus and devices, including without limitation wiring and cables, for
the provisions of Telecommunications Services (the "Telecommunications
Equipment") shall be and remain solely in the Leased Premises. Unless
otherwise specifically agreed in writing, Landlord shall have no
responsibility for the maintenance of Tenant's Telecommunications
Equipment, nor for any wiring or other infrastructure to which Tenant's
Telecommunications Equipment may be connected. Tenant agrees that, to the
extent any Telecommunications Services are interrupted, curtailed or
discontinued, Landlord shall have no obligation or liability with respect
thereto and it shall be the sole obligation of Tenant, at its sole expense,
to obtain substitute service.
(b) Landlord shall have the right, upon such notice as is practicable
in the case of emergencies, and otherwise upon reasonable prior notice to
Tenant, to interrupt or turn off telecommunications facilities in the event
of emergency or as necessary in connection with repairs to the Building or
installation of telecommunications equipment for other tenants of the
Building.
(c) Any and all Telecommunications Equipment installed in the
Premises, or elsewhere in the Building by or on behalf of Tenant, including
wiring and other facilities for the provision of Telecommunications
Services, shall be removed by Tenant upon the expiration or earlier
termination of the Term of this Lease, by Tenant at its sole expense or, at
Landlord's election, by Landlord at Tenant's sole expense, with the cost
thereof to be paid as Additional Rent under this Lease.
(d) If the Telecommunications Equipment is not removed within thirty
(30) days of the termination or expiration of this Lease, the
Telecommunications Equipment shall conclusively be deemed to have been
abandoned and may be removed, appropriated, sold, stored, destroyed,
otherwise disposed of, or retained and used, by landlord without notice to
Tenant, without obligation to account therefor, and without payment to
Tenant or credit against any amount due from Tenant to Landlord pursuant to
this Lease. Tenant shall pay to Landlord upon demand all costs of any such
removal, disposition and storage of the Telecommunications Equipment, as
well as all costs to repair any damage to the Building caused by such
removal.
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(e) In the event that Tenant wishes at any time to utilize the
services of a telephone or telecommunications provider whose equipment is
not then servicing the Building (a "New Provider"), no such New Provider
shall be permitted to install its lines or other equipment within the
Building without first securing the prior written approval of the Landlord,
which approval may be withheld in Landlord's sole and absolute discretion.
Landlord's approval shall not be deemed any kind of warranty or
representation by Landlord, including, without limitation, any warranty or
representation as to the suitability, competence or financial strength of
the New Provider. Without limitation of Landlord's right to withhold
consent in its sole and absolute discretion, Landlord may refuse to give
its approval unless all of the following conditions are satisfied: (i)
Landlord shall incur no expense whatsoever with respect to any aspect of
the New Provider's provision of its services, including, without
limitation, the costs of installation, materials and services; (ii) prior
to commencement of any work in or about the Building by the New Provider,
the New Provider shall supply Landlord with such written indemnities,
insurance, financial statements, and such other items as Landlord, in its
sole and absolute discretion, determines to be necessary to protect its
financial interests and the interests of the Building related to the
proposed activities of the New Provider; (iii) the New Provider agrees in
writing to abide by such rules and regulations, building and other codes,
job site rules and such other requirements as are determined by Landlord,
in its sole and absolute discretion, to be necessary to protect the
interest of the Building, the tenants in the Building and Landlord; (iv)
Landlord determines, in its sole and absolute discretion, that there is
sufficient space in the Building for the placement of all of the New
Provider's equipment and materials; (v) Landlord receives from the New
Provider such compensation as is determined by the Landlord, in its sole
and absolute discretion, to compensate it for space used in the Building
for the storage and maintenance of the New Provider's equipment, for the
fair market value of the New Provider's access to the Building, and any
costs which may be expected to be incurred by Landlord; and (vi) all of the
foregoing matters are documented in a written agreement between Landlord
and the New Provider, the form and content of which are satisfactory to
Landlord in its sole and absolute discretion.
(f) Notwithstanding any provision of the preceding subsection to the
contrary, the refusal of Landlord to grant its approval to any New Provider
shall not be deemed a default or breach by Landlord of its obligation under
this Lease, and in no event shall Tenant have the right to terminate this
Lease or claim entitlement to rent abatement for Landlord's refusal to
grant Tenant's request for approval of a New Provider. The provisions of
this Section 27 may be enforced solely by Tenant and Landlord and are not
for the benefit of any other party. Specifically, but without limitation,
no telephone or telecommunications provider is intended to be, nor shall be
deemed, a third party beneficiary of this Lease.
(g) Tenant shall not utilize any wireless communications equipment
(other than usual and customary cellular telephones), including antenna and
satellite receiver dishes, within the Leased Premises or the Building,
without Landlord' prior written consent. Such consent shall be granted only
in the sole and absolute discretion of the Landlord, and shall be
conditioned in such a manner, in Landlord's sole and absolute discretion,
so as to protect Landlord's financial interests and the interests of the
Building, and the other tenants therein. Notwithstanding the foregoing
provisions of this paragraph 27(g), Landlord agrees not to unreasonably
withhold its consent to Tenant's use of wireless communications equipment
for the purpose of communicating between Tenant's equipment located within
the Premises provided the use of such wireless communications equipment (i)
does not create a risk to the health and safety of Tenant's employees or
any other occupants of the Building and (ii) does not interfere with any
other tenant's use and enjoyment of their premises within the Building. In
the event Landlord determines that any wireless communications equipment
used by Tenant in the Premises which was previously consented to by
Landlord either (i) poses a risk to the health or safety of Landlord's
employees or any other occupants of the Building or (ii) interferes with
some other tenant's use of its premises. Tenant shall immediately, upon
receipt of notice from Landlord, cease the operation of such wireless
communications equipment and promptly thereafter remove the same from the
Premises.
27
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28. Notices. All notices to be given under this Lease shall be in writing
and delivered personally or deposited in the United States mail, certified or
registered mail with return receipt requested, postage prepaid, addressed as
follows:
If to Landlord:
Amerimar Realty Management Co.-Colorado
999 - 18th Street, Suite 1000
Denver, Colorado 80202
or to such other person or such other address designed by notice sent by
Landlord or Tenant.
If to Tenant:
At the address set forth at the beginning of this Lease,
and after occupancy of the Premises by Tenant, at the Premises, or to such other
address as is designated by Tenant in a notice to Landlord; it being agreed that
if Tenant shall vacate the Premises, notices to Tenant thereafter shall
nevertheless be properly given if addressed to Tenant at the Premises unless and
until another address is designated by Tenant by notice to Landlord.
Notice by mail shall be deemed to have been given when deposited in the
United States mail as aforesaid.
29. Time is of the Essence. Time is of the essence hereof.
IN WITNESS WHEREOF, Landlord and Tenant, intending to be legally bound
hereby, have executed this Agreement of lease as of the day and year first above
written.
LANDLORD:
DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP, a Delaware
limited partnership
By: Amerimar Realty Management Co.-
Colorado
By: Amerimar Realty Management-
Pennsylvania, its general partner
By: ARC-Management
Company, its general
partner,
By: /s/ David G. Marshall
--------------------------------------
David G. Marshall, President
TENANT:
PRIME RESPONSE, INC., a Delaware
corporation
By: /s/ [ILLEGIBLE] CEO
----------------------------------------
Authorized Signature (Title)
28
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ADDENDUM
THIS ADDENDUM, made as of the 20th day of January, 1998, is between DENVER-
STELLAR ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership
("Landlord") and PRIME RESPONSE, INC., a Delaware corporation ("Tenant").
Landlord and Tenant have executed simultaneously with this Addendum that certain
Denver Place Office Lease (the "Lease") pertaining to certain space in the
building commonly known as Denver Place and located at 1099 Eighteenth Street,
Denver, Colorado. In the event of any conflict between the provisions of this
Addendum and the provisions of the other portions of the lease, the provisions
of this Addendum shall control. The capitalized terms used herein and not
defined herein shall have the same meanings used in the other portions of the
Lease. Landlord and Tenant hereby agree that the Lease is amended and
supplemented as follows:
30. Completion of Premises.
(a) Phase One Premises:
-------------------
(i) Landlord shall, at its own cost and expense, in a good and
workmanlike manner, cause the Phase One Premises to be improved and
completed in accordance with those certain construction drawings
prepared by burkettdesign, inc. dated December 15, 1997 and revised
December 19, 1997 consisting of pages 5AO, 5AI, 5A2, 5A3, 5A4, 5A61,
5A62, E 1.0, E2.0, E3.0, M 1.1, P 1.0 and FP 1.0 (collectively the
"Phase One Final Layout Plans") attached as Exhibit A (such work being
---------
herein called "Phase One Landlord's Work"). Landlord reserves the
right, however: [A] to make substitutions of material or components of
equivalent grade and quality when and if any specified material or
component shall not be readily or reasonably available, and [B] to
make changes necessitated by conditions met in the course
of construction, provided that Tenant's approval of any substantial
change shall first be obtained (which approval shall not be
unreasonably withheld or delayed so long as there shall be general
conformity with the substance and quality contemplated by the Phase
One Final Layout Plans). The provisions of the Workletter attached
hereto as Exhibit E are incorporated herein by this reference.
---------
(ii) If Landlord shall, for any reason (including, without
limitation, failure to complete the work, if any, required to be done
by Landlord under this Lease) fail to make available to Tenant
possession of the Phase One Premises on or before the Scheduled
Commencement Date or any other date, Landlord shall not be subject to
any liability for such failure nor for any failure to timely complete
any work. Under such circumstances, Tenant's obligations to pay Base
Rent, the Expense Adjustment Amount and Tax Adjustment Amount shall
not commence until the date Tenant is permitted to occupy the Phase
One Premises for the operation of its business by the City and County
of Denver ("Ready for Occupancy") and such failure to cause the Phase
One Premises to be made Ready for Occupancy on or before the Scheduled
Commencement Date or any other date or to timely complete any work,
shall not in any other way affect the validity or continuance of this
Lease, nor the Term or the obligations of Tenant hereunder. Such
deferral of rent shall be Tenant's sole and exclusive right and remedy
with respect to any such failure; provided, however, that in the event
the Phase One Premises are not Ready for Occupancy on or before May 1,
1998, Tenant shall have the right to terminate this Lease provided
Tenant delivers written notice to Landlord exercising such right on or
before May 10, 1998 or the date the Phase One Premises are Ready for
Occupancy, whichever occurs first. Notwithstanding the foregoing,
there shall be no deferral of rent and Tenant shall not have the right
to terminate this Lease, however, if any such failure is caused in
whole or part by any act or omission of Tenant, its agency, servants,
employees or contractors, which has the effect of hindering or
delaying Landlords' delivery of possession or the timely completion of
any work to be done by Landlord (hereinafter a "Phase One Tenant
Delay") including, without limitation, [A] any delay which is caused
by changes in the work to be performed by Landlord in readying the
Phase One Premises for Tenant's occupancy, [B] any delay, not caused
by Landlord, in
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furnishing materials or procuring labor required to be furnished or
procured for the completion of the Phase One Premises, or [C] any
delay which is caused by any failure by Tenant, without regard to any
grace period applicable thereto, promptly to furnish to Landlord any
required information, approval or consent or caused by any good faith
reluctance on the part of Landlord to approve any information required
to be submitted by Tenant and approved by Landlord, or [D] any delay
which is caused by the performance of any work or activity in the
Phase One Premises by Tenant or any of its employees, agents or
contractors. Tenant also shall pay to Landlord, within 10 days after
receipt of demand made from time to time (accompanied by documentation
evidencing such costs and expenses), a sum equal to any reasonable
additional costs and expenses incurred by Landlord in completing the
Phase One Premises resulting from any Phase One Tenant Delay.
(iii) Landlord shall provide an allowance (the "Phase One
Construction Allowance") for the payment of the costs and expenses of
completing the Phase One Landlord's Work in an amount up to One
Hundred Twenty-Eight Thousand Seven Hundred Forty and No/100 Dollars
($128,740.00). The Phase One Construction Allowance shall include but
not be limited to all architectural and engineering fees, all costs of
Phase One Landlord's Work (from slab to slab), permit fees, Landlord
supervision fee of 3% and contractor overhead costs. Tenant shall be
responsible for the payment of all Phase One Landlord's Work in excess
of the Phase One Construction Allowance (the "Excess Phase One Tenant
Costs") which excess shall be payable within thirty (30) days after
Tenant's receipt of a written request from Landlord which request
shall be accompanied by a calculation of the Phase One Excess Tenant
Costs in reasonable detail. If the cost of completing the Phase One
Landlord's Work is less than Phase One Construction Allowance, the
portion of the Phase One Construction Allowance not used (the "Phase
One Construction Allowance Remainder") shall be paid, at Landlord's
sole discretion, in one of the following manners: [A] the entire Phase
One Construction Allowance Remainder shall be paid directly to Tenant
on or before the last day of the fifteenth (15th) month of the Term of
the Lease, or [B] Tenant shall receive a credit upon the monthly Base
Rent payable by Tenant in accordance with the provisions of Paragraph
2 in an amount equal to the quotient of the amount of the Phase One
Construction Allowance Remainder divided by sixty-six (66) (66 being
the number of months in the Term).
(b) Phase Two Premises:
-------------------
(i) Landlord has heretofore delivered to Tenant for use of
such plans and other information with respect to the Phase Two
Premises and the Building as Tenant may reasonably require for the
proper and expeditious preparation of Tenant's plans and
specifications for the improvement of the Phase Two Premises.
(ii) Tenant shall cause its architect and M-E Engineering to
prepare and, not later than February 6, 1998, shall deliver to
Landlord complete construction drawings of Tenant's desired
improvements to the Phase Two Premises signed and sealed by Tenant's
architect including one mylar and two black line copies (which shall
be 1/8" scale) together with a non-copyrighted CADD disc (collectively
"Phase Two Premises Plans"). Landlord shall have until the expiration
of six (6) business days after its receipt of the Phase Two Premises
Plans to either approve such plans or to make reasonable modifications
thereto, and the Phase Two Premises Plans shall be deemed modified to
take account of any changes timely and reasonably required by
Landlord.
(iii) Landlord shall, at its own cost and expense, in a good and
workmanlike manner, cause the Phase Two Premises Plans to be improved
and completed in accordance with the Phase Two Premise Plans (such
work being herein called "Phase Two Landlord's Work"). Landlord
reserves the right, however: [A] to make substitutions of material or
components of equivalent grade and quality when and if any specified
material or component shall not be readily or reasonably available,
and, [B] to make changes necessitated by conditions met in the course
of construction,
30
<PAGE>
provided that Tenant's approval of any substantial change shall first
be obtained (which approval shall not be unreasonably withheld or
delayed so long as there shall be general conformity with the
substance and quality contemplated by the Phase Two Premises Plans).
Landlord shall use reasonable efforts to cause the Phase Two Premises
to be Ready for Occupancy on or before June 1, 1998 (the "Phase Two
Scheduled Commencement Date").
(iv) If Landlord shall, for any reason (including, without
limitation, failure to complete the Phase Two Landlord's Work) fail to
make available to Tenant possession of the Phase Two Premises on or
before the Phase Two Scheduled Commencement Date or any other date,
Landlord shall not be subject to any liability for such failure nor
for any failure to timely complete any work. Under such circumstances,
Tenant's obligations to pay Base Rent, the Expense Adjustment Amount
and Tax Adjustment Amount with respect to the Phase Two Premises shall
not commence until the date the Phase Two Premises are Ready for
Occupancy and such failure to cause the Phase Two Premises to be made
Ready for Occupancy on or before the Phase Two Scheduled Commencement
Date or any other date or to timely complete any work, shall not in
any other way affect the validity or continuance of this Lease, nor
the Term or the obligations of Tenant hereunder. Such deferral of rent
shall be Tenant's sole and exclusive right and remedy with respect to
any such failure. Notwithstanding the foregoing, there shall be no
deferral of rent and Tenant, however, if any such failure is caused in
whole or part by any act or omission of Tenant, its agents, servants,
employees or contractors, which has the effect of hindering or
delaying Landlord's delivery of possession or the timely completion of
any work to be done by Landlord (hereinafter a "Phase Two Tenant
Delay") including, without limitation, [A] any delay which is caused
by Tenant's failure to deliver the Phase Two Premises Plans to
Landlord on or before February 6, 1998, [B] any delay which is caused
by changes in the work to be performed by Landlord in readying the
Phase Two Premises for Tenant's occupancy, [C] any delay, not caused
by Landlord, in furnishing materials or procuring labor required to be
furnished or procured for the completion of the Phase Two Premises, or
[D] any delay which is caused by any failure by Tenant, without regard
to any grace period applicable thereto, promptly to furnish to
Landlord any required information, approval or consent or caused by
any good faith reluctance on the part of Landlord to approve any
information required to be submitted by Tenant and approved by
Landlord, or [E] any delay which is caused by the performance of any
work or activity in the Phase Two Premises by Tenant or any of its
employees, agents or contractors. Tenant also shall pay to Landlord,
within 10 days after receipt of demand made from time to time
(accompanied by documentation evidencing such costs and expenses), a
sum equal to any reasonable additional costs and expenses incurred by
Landlord in completing the Phase Two Premises resulting from any Phase
Two Tenant Delay.
(v) Landlord shall provide an allowance (the "Phase Two
Construction Allowance") for the payment of the costs and expenses of
completing the Phase Two Landlord's Work in an amount up to Thirty-Two
Thousand Eight Hundred Eighty-Six and No/100 Dollars ($32,886.00). The
Phase Two Construction Allowance shall include but not be limited to
all architectural and engineering fees, all costs of Phase Two
Landlord's Work (from slab to slab), permit fees, Landlord supervision
fee of 3% and contractor overhead costs. Tenant shall be responsible
for the payment of all Phase Two Landlord's Work in excess of the
Phase Two Construction Allowance (the "Excess Phase Two Tenant Costs")
which excess shall be payable within thirty (30) days after Tenant's
receipt of a written request from Landlord which request shall be
accompanied by a calculation of the Phase Two Excess Tenant Costs in
reasonable detail. If the cost of completing the Phase Two Landlord's
Work is less than Phase Two Construction Allowance, the portion of the
Phase Two Construction Allowance not used (the "Phase Two Construction
Allowance Remainder") shall be paid, at Landlord's sole discretion, in
one of the following manners: [A] the entire Phase Two Construction
Allowance Remainder shall be paid directly to Tenant on or before the
last day of the fifteenth (15th) month of the Term of the Lease, or
[B] Tenant shall receive a credit upon the monthly Base Rent payable
by Tenant in accordance with
31
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the provisions of Paragraph 2 in an amount equal to the quotient of
the amount of the Phase Two Construction Allowance Remainder divided
by sixty-six (66) (66 being the number of months in the Term).
31. Renewal Option.
(a) Tenant shall have the option to renew ("Renewal Option") the term
of the Lease for one (1) additional term of five (5) years ("Renewal Term")
on the condition that Tenant is not in default under this Lease at the
time Tenant gives notice of exercise of its renewal option or at the time
of commencement of the renewal term. Such renewal shall be on all of the
terms, covenants and conditions of this Lease, except: (i) Tenant shall not
have any right to further renewal beyond such additional five-year term;
and (ii) the annual Base Rent for the Premises for the Renewal Term shall
be the Fair Market Rental Rate ("FMRR") as defined in paragraph 31 (b)
below; provided, however, in no event shall the Base Rent payable during
the Renewal Term be less than $18.00 per square foot of rentable area
comprising the Premises. Tenant's Renewal Option shall be exercised only
by Tenant giving Landlord six (6) months prior written notice of Tenant's
election to renew, time being of the essence with respect to such notice.
As of the date the Renewal Term begins, this Lease shall be deemed modified
in the manner set forth above, without the necessity of any further
agreement or document; provided, however, that either party to this Lease
shall, upon request of the other party, execute, acknowledge, and deliver
an instrument evidencing such renewal and modification of this Lease.
(b) Fair Market Rental Rate.
------------------------
(i) For the purposes of this Lease, the term "Fair Market
Rental Rate" or "FMRR" shall mean an amount per square foot of the
rentable area of the Premises per annum, reasonably determined by
Landlord by reference to the market for comparable space (including
the extent and condition of the build-out) in the Comparable
Buildings, that a willing landlord would offer and a willing tenant
would accept in an arms length transaction for the lease of such
office space
[A] commencing on the commencement date of the Renewal
Term,
[B] providing for no free rent, a tenant finish allowance
equal to the value of the tenant improvements in place upon the
Premises to a prospective tenant as of the commencement date of
the Renewal Term, and
[C] otherwise on all of the terms and conditions of this
Lease, including the Tenant's obligation to pay the Expense
Adjustment Amount and Tax Adjustment Amount in accordance with
the provisions of Paragraph 4 using an Operating Expense Base
Amount in the amount of $5.54 per rentable square foot per
rentable and a Tax Base Amount of $ 1.11 per rentable square foot
per annum.
(ii) Landlord shall deliver to Tenant its proposed FMRR for the
Renewal Term within thirty (30) days after Landlord's receipt of
notice of Tenant's election to exercise the Renewal Option ("Renewal
Notice"). Landlord and Tenant shall use reasonable good faith efforts
to mutually agree upon the FMRR within sixty (60) days after Tenant's
delivery of the Renewal Notice.
(iii) In the event Landlord and Tenant cannot agree upon the
FMRR for the Renewal Term within the sixty (60) days after Tenant's
delivery of the Renewal Notice the FMRR shall be determined by
appraisal, said appraisal shall be conducted in accordance with the
following procedures:
[A] Within twenty (20) days after receipt of a notice to
appraise given by either party, Landlord and Tenant shall each
select a real estate appraiser, who shall be a member of the
American Institute of Real Estate Appraisers, and who shall have
at least five (5) years appraisal experience with
32
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respect to commercial and office rental properties in the
central business district of Denver, Colorado . If one of the
parties hereto fails to appoint an appraiser within the time
period prescribed, then the single appraiser appointed shall be
the sole appraiser and shall determine the FMRR at issue. If two
appraisers are appointed, they shall have thirty (30) days from
the date the second appraiser is appointed (the "30-day Appraisal
Period") within which to agree upon the FMMR at issue. The
appraiser(s) shall be advised that the determination of the FMRR
at issue shall be governed by the definitions of same set forth
in this Lease. The determination by the two appraisers of the
FMRR at issue shall be binding on Landlord and Tenant.
[B] the two appraisers appointed by the parties hereto
are unable to agree upon the FMRR at issue within the 30-day
Appraisal Period, then said appraisers shall attempt within ten
(10) days after the expiration of the 30-day Appraisal Period, to
elect a third appraiser (the "Third Appraiser"). If the first two
appraisers are unable to agree on the Third Appraiser within the
ten (10) day period prescribed in the immediately preceding
sentence, either Landlord or Tenant, by giving ten (10) days
notice to the other party hereto, shall request that the
presiding judge of the District Court for the City and County of
Denver, State of Colorado select the Third Appraiser. The Third
Appraiser, however, selected, shall meet the qualifications set
forth in subparagraph 31 (b)(ii)[A] above, and shall be a person
who has not previously acted in any capacity for either Landlord
or Tenant.
[C] On or before the tenth (10th) day after the Third
Appraiser is appointed or selected, the first two appraisers
shall each simultaneously submit in sealed envelopes his/her
opinion of the fair market base rent at issue, together with any
written arguments or data in support of said opinion(s), to the
Third Appraiser. Within thirty (30) days after he/she is
appointed or selected, the Third Appraiser shall determine the
FMRR at issue by selecting one of the opinions submitted by the
first two appraisers. The selection of the Third Appraiser shall
be binding on Landlord and Tenant.
[D] Each party hereto shall pay the fees and expenses of
the appraiser selected by such party, and the fees and expenses
of the Third Appraiser shall be borne equally by Landlord and
Tenant.
32. Expansion Option.
(a) Landlord hereby grants Tenant an option (the "Expansion Option")
to lease approximately 3,301 rentable square feet of office space (the
"Expansion Space") located on the fifth (5/th/) floor of the Building, as
reflected on Exhibit A-1 attached hereto and made a part hereof, subject to
-----------
and upon the terms and provisions of this Paragraph 32. Tenant shall
exercise the Expansion Option if at all, prior to June 30, 1999, by giving
Landlord written notice ("Expansion Notice") of exercise prior to June 30,
1999. If the Expansion Notice is not received by Landlord prior to June
30, 1999, Tenant shall be deemed to have declined to exercise the Expansion
Option and the Expansion Option shall be of no further force or effect.
Tenant's Expansion Notice shall specify the date on which Tenant desires to
occupy the Expansion Space which date shall not be less than one (1) month
nor more than three (3) months from the date of Tenant's notice. If no
date is specified in the Expansion Notice, it shall be deemed that Tenant
desires to occupy the Expansion Space at the earliest date possible.
Notwithstanding the forgoing, the Tenant shall have no right to exercise
the Expansion Option if Tenant is in default under this Lease (after the
expiration of any applicable cure period) at any time when it attempts to
exercise the Expansion Option or at any time thereafter until the Expansion
Space has been added to the Premises.
(b) Upon the notice referred to in paragraph 32(a) above being given
and within such time as Landlord reasonably determines is necessary to
complete the Expansion Space for occupancy by no later than the date
specified in Tenant's notice of exercise, Landlord
33
<PAGE>
shall cause the Expansion Space to be improved and completed in a manner
comparable to the original completion of the initial Premises (the
"Landlord's Expansion Space Work").
(c) Landlord shall provide an allowance (the "Expansion Space
Construction Allowance") for the payment of the costs and expenses of
completing the Landlord's Expansion Space Work in an amount up to Sixty
Thousand Six Hundred Eighteen and No/100 Dollars ($60,618.00). The
Expansion Space Construction Allowance shall include but not be limited to
all architectural and engineering fees, all costs of Landlord's Expansion
Space Work (from slab to slab), permit fees, Landlord supervision fee of 3%
and contractor overhead costs. Tenant shall be responsible for the payment
of all Landlord's Expansion Space Work in excess of the Expansion Space
Construction Allowance (the "Excess Expansion Space Tenant Costs") which
excess shall be payable within thirty (30) days after Tenant's receipt of a
written request from Landlord which request shall be accompanied by a
calculation of the Excess Expansion Space Tenant Costs in reasonable
detail. If the cost of completing the Landlord's Expansion Space Work is
less than Expansion Space Construction Allowance, the portion of the
Expansion Space Construction Allowance not used shall be paid by Landlord
to Tenant on or before the later of the (i) last day of the fifteenth
(15/th/) month of the Term of the Lease, and (ii) the ninetieth (90th) day
after the Expansion Space has been added to the Premises.
(d) The Expansion Space shall be added to the Premises, for all
purposes, as of the date such space is completed for Tenant's occupancy,
but not earlier than the date, if any, specified in the Expansion Notice as
the date the Expansion Space is ready for Tenant's occupancy, for the
balance of the Term of this Lease and subject to and upon the following
economic terms and all of the other terms, covenants and conditions of this
Lease, provided that the Base Rent for the Expansion Space shall be as
follows:
Base Rent Per Square
Period Foot of Rentable Area
------ ---------------------
For Months 1-24 of the Term: $52,815.96 per annum/$4,401.33 per
month (based on $16.00 per square
foot of rentable area per annum)
For Months 25-36 of the Term: $56,117.04 per annum/$4,676.42 per
month (based on $17.00 per square
foot of rentable area per annum)
For Months 37-66 of the Term: $59,418.00 per annum/$4,951.50 per
month (based on $18.00 per square
foot of rentable area per annum)
The annual Base Rent shall be payable in equal monthly installments, in
advance, on the first day of each month, without any demand or setoff.
Tenant's Proportionate Share shall be increased to 2.254% calculated by
dividing 11,565 square feet, the rentable area of the Premises (including
the Expansion Space), by 512,995 square feet. Upon addition of the
Expansion Space to the Premises, this Lease shall be deemed modified in the
manner set forth above without the necessity of any further agreement or
document; provided, however, that either party shall, upon request of the
other party, execute, acknowledge and deliver an instrument evidencing such
modification of this Lease.
33. Right of First Offer. Upon and subject to all the terms and
conditions set forth in this Paragraph 33, Landlord hereby grants to Tenant is a
right of first offer (the "Right of First Offer") pertaining to the office space
located upon the fifth (5th) floor of the Building which is not part of the
original Premises, the Expansion Space and which may become available from time
to time for lease during the Term of the Lease (the "Offer Space"). The Right
of First Offer shall be on the following terms and conditions:
(a) If Landlord shall desire to lease all or any portion of the Offer
Space, as evidenced by the initiation of formal negotiations with or the
issuance of a proposal to a third
34
<PAGE>
party by or on behalf of Landlord covering any portion of the Offer Space,
or Landlord's acceptance of a proposal from a third party, Landlord shall
first offer to lease such part of the Offer Space (the "Designated Offer
Space") to Tenant, by giving written notice to Tenant. Such notice shall
specify the date on which the Designated Offer Space is expected to be
available for Tenant's lease (the "Scheduled Designated Offer Space
Commencement Date"). Within five (5) business days after Landlord gives
Tenant such notice, Tenant shall, by written notice to Landlord (the "Offer
Notice"), elect or decline to exercise its Right of First Offer. If Tenant
fails to deliver the Offer Notice to Landlord within such period of five
(5) business days, Tenant shall be deemed to have declined to exercise its
Right of First Offer. If Tenant declines or is deemed to have declined to
exercise its Right of First Offer, Landlord thereafter shall have the right
to lease such Designated Offer Space to any party upon such terms and
conditions and for such period or successive period of time as Landlord, in
its sole discretion, shall determine. Notwithstanding the foregoing, Tenant
shall have no right to exercise the Right of First Offer (and, at
Landlord's option, any previous exercise of the Right of First Offer shall
be null and void) if at the time Tenant first attempts to exercise the
Right of First Offer, or at any time thereafter until the Designated Offer
Space has been added to the Premises, Tenant is in default under this
Lease.
(b) In the event Tenant exercises the Right of First Offer, Tenant
shall deliver to Landlord the Tenant's proposed layout plans and
specifications for such Designated Offer Space within ten (10) business
days after delivery of the Offer Notice. Upon the Offer Notice being given
and within such time as Landlord reasonably determines is necessary to
complete such Designated Offer Space for occupancy, Landlord shall cause
such Designated Offer Space to be improved and completed in a manner
consistent with the Tenant's layout plans and specifications for such
Designated Offer Space (the "Designated Offer Space Improvements"). The
"Commencement Date" with respect to the Designated Offer Space ("Designated
Offer Space Commencement Date") shall be deemed to be that date which is
the later of the Scheduled Designated Offer Space Commencement Date or the
first business day after the substantial completion of the Designated Offer
Space Improvements.
(c) The Designated Offer Space shall be added to the Premises, for
all purposes, as of the Designated Offer Space Commencement Date for the
balance of the Term of this Lease and subject to and upon the following
economic terms and all of the other terms, covenants and conditions of this
Lease, except that:
(i) the annual Base Rent for the Designated Offer Space shall
be at the prevailing market rates for office space in the Building
comparable to the Designated Offer Space at the time of the Designated
Offer Space Commencement Date; provided, however, in no event shall
the Base Rent for the Designated Offer Space be less than the Base
Rent provided for the Expansion Space in paragraph 32(c) above on a
per square foot of rentable area basis.
(ii) Tenant's Proportionate Share shall be increased to a new
percentage, calculated in accordance with the provisions of Paragraph
4 above by increasing the rentable area of the Premises by the number
of square feet comprising the rentable area of the Designated Offer
Space. Tenant's obligation to pay Base Rent, Expense Adjustment Amount
and Tax Adjustment Amounts for the Designated Offer Space shall
commence on the Designated Offer Space Commencement Date. Upon
addition of the Designated Offer Space to the Premises, the Lease
shall be deemed modified in the manner set forth above without the
necessity of any further agreement or document; provided, however,
Landlord and Tenant agree to execute, acknowledge and deliver an
instrument evidencing such modification of the Lease to be prepared by
Landlord.
34. Parking. Tenant shall have the right to rent up to ten (10) parking
spaces in accordance with the provisions of Exhibit D attached hereto and
---------
incorporated herein by this reference.
35
<PAGE>
All of the terms and provisions of the Lease, as herein amended and
supplemented, are hereby ratified and confirmed, and shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be duly
executed as of the day and year first above written.
LANDLORD:
DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP, a Delaware
limited partnership
By: Amerimar Realty Management Co.-
Colorado
By: Amerimar Realty Management-
Pennsylvania, its general partner
By: /s/ David G. Marshall
-----------------------------------------
David G. Marshall, President
TENANT:
PRIME RESPONSE, INC., a Delaware
corporation
By: /s/ Robert Fetter CEO
-----------------------------------------
Authorized Signature (Title)
36
<PAGE>
EXHIBIT B
---------
RULES AND REGULATIONS
Rules and Regulations, to Lease between DENVER-STELLAR ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership, as Landlord ("Landlord") and PRIME
RESPONSE, INC., a Delaware corporation as tenant ("Tenant"), pertaining to
certain space in Denver Place Plaza Tower, 1099 18th Street, Denver, Colorado
80202.
(a) Any sign, lettering, picture, notice, or advertisement installed
within Tenant's Premises which is visible to the public from within the
Building shall be installed at Tenant's cost and in such manner, character
and style as Landlord may approve in writing. No sign, lettering, picture,
notice or advertisement shall be placed on any outside window or in any
position so as to be visible from outside the Building.
(b) The use of the name of the Building or of pictures or
illustrations of the Building in advertising or other publicity, without
prior written consent of Landlord, is prohibited.
(c) Tenant, its subtenants and its and their customers, invitees,
licensees, and guests
(i) shall not obstruct and shall not use for any purpose other
than ingress and egress, the sidewalks, entrances, passages, courts,
corridors, vestibules, halls, elevators and stairways in and about the
Building;
(ii) shall not place objects against glass partitions or doors
or windows or adjacent to any open common space which would be
unsightly from the Building corridors or from the exterior of the
Building, and will promptly remove the same upon notice from Landlord;
(iii) shall not make noises, cause disturbances, create
vibrations, odors or noxious fumes or use or operate any electrical or
electronic devices or other devices that emit sound waves or are
dangerous to other tenants and occupants of the Building or that would
interfere with the operation of any device or equipment or radio or
television broadcasting or reception from or within the Building or
elsewhere, and shall not place or install any projections, antennae,
aerials or similar devices inside or outside of the Premises;
(iv) shall not make any room-to-room canvass to solicit business
from other tenants in the Building, and shall not exhibit, sell or
offer to sell, use, rent or exchange any item or services in or from
the Premises unless ordinarily embraced within the Tenant's use of the
Premises as specified in its lease;
(v) shall refrain from attempting to adjust any controls;
(vi) shall not waste, and shall not suffer or permit to be
wasted, electricity or water and shall cooperate fully with Landlord
to assure the most effective operation of the Building's heating and
air conditioning;
(vii) shall keep public corridor doors closed;
(viii) shall neither install nor operate machinery or any
mechanical devices of a nature not directly related to Tenant's
ordinary use of the Premises without the written permission of the
Landlord;
(ix) shall not use rest rooms or water fixtures for any purpose
other than that for which they are designed;
37
<PAGE>
(x) shall not mark upon, paint, cut, drill into, drive nails or
screws into, or in any way deface the walls, ceiling partitions
or floors of the leased Premises or of the Building;
(xi) shall not unduly obstruct any pipes, conduits and ducts in
the Premises; and
(xii) shall use chair pads, to be furnished by Tenant, under all
rolling and ordinary desk chairs in the carpeted areas.
(d) Tenant assumes full responsibility for protecting its space from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed and secured.
(e) Peddlers, solicitors and beggars shall be reported to the office
of the Building or as Landlord otherwise requests.
(f) No person or contractor not employed by Landlord shall be used to
perform window washing, cleaning, or other work in the Premises.
(g) Unless Landlord so consents, Tenant shall not, and Tenant shall.
not permit or suffer anyone to:
(i) Cook in the premises;
(ii) Place vending or dispensing machines of any kind in the
Premises; or
(iii) At any time sell, purchase or give away, or permit the
sale, purchase or gift of, food in any form.
(iv) Use the Premises for lodging or for any immoral or illegal
purposes.
(v) Use the Premises to engage in the manufacture or sale of,
or permit the use of, any spirituous, fermented, intoxicating or
alcoholic beverages on the Premises.
(vi) Use the Premises to engage in the manufacture or sale of,
or permit the use of, any illegal drugs.
(h) No furniture shall be placed in front of the building or in any
lobby or corridor, without the prior written consent of Landlord. Landlord
shall have the right to remove all non-permitted signs and furniture,
without notice to Tenant, at Tenant's expense.
(i) No animals are allowed in the Building.
(j) No lock or other security device shall be placed by Tenant on any
door in the Building without the Building manager being kept furnished with
two of the keys, cards or other means of access therefore. At the
termination of its tenancy, Tenant shall promptly deliver to Landlord all
keys, entry cards and other means of access to offices, rest rooms and
vaults.
(k) The use of oil, gas or inflammable liquids for heating, lighting,
or any other purpose is expressly prohibited. Explosives or other
hazardous articles shall not be brought into the Building.
(l) Electric floor space heaters, humidifiers or A/C fans are not
permitted.
(m) Landlord shall have the right to approve or disapprove the movers
or moving company employed by Tenant. Tenant shall cause said movers to
use only the loading facilities and elevator designated by Landlord. In
the event Tenant's movers damage the elevator or any part of the Building,
Tenant shall forthwith pay to Landlord the amount required to repair said
damage.
38
<PAGE>
(n) If any Tenant desires telegraphic, telephonic, computer or other
electric connections, Landlord, or its agents, will direct the electricians
as to where and how the wires may be introduced, and without such
directions, no boring or cutting for wires will be permitted. Any such
installation and connection shall be made at Tenant's expenses, and, at
Landlord's option, shall be removed at Tenant's expense at the expiration
or termination of its Lease.
(o) Except for the following smoking areas specifically designated by
Landlord, the outdoor Plaza level of 1099 - 18th Street, the outdoor areas
at the corner of 18th and Champa and 19th and Curtis and the Smoke Haus in
the mall, all common areas of the building, including all sidewalks,
entries, passages, stairways, elevators, restrooms, lobbies and hallways,
shall be non-smoking areas. Tenant shall be responsible to prevent its
employees, agents, visitors, customers and guests from smoking in such
common areas.
(p) During the normal office hours of 6:00 a.m. to 6:00 p.m., Monday
through Friday, Tenant and its employees and agents shall observe the
building dress code, which requires a neat and clean appearance and
prohibits the wearing of cutoffs and ragged, torn, ripped, rent or holey
apparel.
(q) The Landlord reserves the right to modify and make such other and
further reasonable rules and regulations as in its judgment may, from time
to time, be needful and desirable for the safety, security, care and
cleanliness of the Premises and preservation of good order and therein.
39
<PAGE>
EXHIBIT C
---------
LEASE TERM AGREEMENT
THIS AGREEMENT, made as of the 20th day of January, 1998, between DENVER-
STELLAR ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership
(hereinafter referred to as "Landlord") and PRIME RESPONSE, INC., a Delaware
corporation (hereinafter referred to as "Tenant").
WITNESSETH
WHEREAS, by Lease (hereinafter called "Lease") made as of the 20th day of
January, 1 1998, Landlord leased unto Tenant certain premises known as Suite
Number 500, located at 1099 Eighteenth Street, Denver, Colorado, for a term of
five (5) years, three (3) months and zero (0) days commencing on June 1, 1998,
unless sooner terminated or extended as provided therein, and
WHEREAS, Landlord and Tenant now desire to set forth the correct
Commencement Date of the term and to adjust the Expiration Date of the Term to
provide for a full term of the Lease of _________ years, _______ months and
_________ days.
NOW, THEREFORE, Landlord and Tenant do hereby agree as follows:
1. The Term of the Lease commenced __________ 1998, and shall continue
until _____________, 2002 unless sooner terminated or extended as
provided therein.
2. Except as hereby amended, the Lease shall continue in full force and
effect.
3. This Agreement shall be binding on the parties hereto, their heirs,
executors, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LANDLORD:
DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP, a Delaware
limited partnership
By: Amerimar Realty Management Co.-
Colorado
By: Amerimar Realty Management-
Pennsylvania, its general partner
By: ARC-Management
Company, its general
partner
By: /s/ David G. Marshall
------------------------------------
David G. Marshall, President
TENANT:
PRIME RESPONSE, INC., a Delaware
corporation
By: /s/ Robert Fetter CEO
------------------------------------
Authorized Signature (Title)
40
<PAGE>
EXHIBIT D
---------
PARKING AGREEMENT
DENVER-STELLAR ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited
partnership a Landlord, and PRIME RESPONSE, INC., a Delaware corporation, as
Tenant, have executed simultaneously with this Agreement a Lease (hereinafter
called "Lease") pertaining to certain space at 1099 Eighteenth Street to be
occupied by Tenant. In consideration of die mutual covenants herein contained,
Landlord and Tenant further agree as follows:
The Building in which the Premises are located contains a parking
garage for the benefit of Tenants and the general public (hereinafter called
"Parking Garage"), and Landlord's affiliate owns that commercial office complex
known as Denver Place located at 999 - 18th Street which contains a parking
garage for the benefit of tenants and the general public (the "Complex Parking
Garage"). Landlord and its affiliates do not operate or manage the Parking
Garage and Complex Parking Garage, respectively, but maintain a management
agreement with an independent contractor (hereinafter called "Operator") for the
management and operation of the Parking Garage and Complex Parking Garage. In
order to rent parking spaces in the Parking Garage or Complex Parking Garage,
Tenant must contract separately with the Operator for such rentals. Landlord
shall make available for Tenant and Tenant shall have a non-assignable option to
rent from the Operator up to ten (10) unreserved parking spaces located, at
Landlord's election, in either the Parking Garage or Complex Parking Garage
beginning April 1, 1998 at the monthly rates announced from time to time
throughout the Term of the Lease by the Operator. Tenant must exercise its
option to take such parking spaces by delivery of not less than thirty (30)
days' prior written notice to Landlord on or before May 31, 1998 or Tenant's
right to lease the parking spaces will expire. In the event Tenant does not
exercise its Expansion Option in accordance with Paragraph 32 of the Lease,
Landlord shall have die option to terminate Tenant's right to lease four (4) of
the ten (10) parking spaces at any time thereafter upon thirty (30) days'
written notice to Tenant.
The terms and conditions of Tenant's rental shall be governed and
fixed solely by the rental agreement between Tenant and Operator, however,
Tenant's failure to comply with any term of any such rental agreement shall
constitute a default under the Lease. In the event that Tenant chooses to rent
parking spaces from the Operator as provided for herein, Tenant shall be
responsible for payment to the Operator of a refundable security deposit for
each parking card issued by the Operator in connection with Tenant's rental of
the parking spaces (the "Security Deposit"). The Security Deposit shall be in an
amount to be determined by the Operator in its sole discretion. Notwithstanding
anything in this Agreement or the Lease to the contrary, in no event shall
Landlord be responsible for payment of the Security Deposit to the Operator on
behalf of Tenant. Payment and refund of the Security Deposit shall be governed
and fixed solely by the rental agreement between Tenant and Operator. Landlord's
holding of parking spaces shall not constitute any assumption of and Tenant
hereby releases Landlord from any and all liability with respect to such
rentals, and any and all damage, loss or injury with respect to such rentals
shall be at the sole risk of Tenant unless otherwise provided by Operator under
the rental agreement.
The provisions of this Agreement supplement but are subject to all
provisions of the Lease. Capitalized terms not otherwise defined in this
Agreement have the same meaning as the same terms have in the Lease.
LANDLORD:
DENVER-STELLAR ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Amerimar Realty Management Co.- Colorado
By: Amerimar Realty Management-
Pennsylvania, its general partner
By: ARC-Management Company,
its general partner
By: /s/ David G. Marshall
-----------------------------------------
David G. Marshall, President
TENANT:
PRIME RESPONSE, INC., a Delaware corporation
By: /s/ Robert Fetter CEO
----------------------------------------
41
<PAGE>
EXHIBIT E
---------
WORKLETTER
1. Tenant Inspection. Tenant shall be permitted to designate a representative
-----------------
to make periodic inspections of the Premise during construction during
reasonable business hours, provided such representative is accompanied by a
representative of Landlord which representative shall be reasonably
available to accompany Tenant's representative.
2. Acceptance of Premises. Upon the Substantial Completion (as hereinafter
----------------------
defined) of the Landlord's Work, Tenant, Landlord, Landlord's architect and
Landlord's contractor shall make an inspection of the Premises to determine
that the construction and installation of the Landlord's Work has been
completed in accordance with Filial Layout Plans and to prepare a "Punch
List" of work requiring correction or completion by Landlord. Subject to
Unavoidable Delays, Landlord shall correct or complete all "Punch List"
items within sixty (60) days after the inspection. The term "Unavoidable
Delays" means delays caused by strikes, acts of God, lockouts, riots,
explosions, sabotage accident governmental restrictions, enemy action,
civil commotion, fire or other casualty or similar causes beyond the
reasonable control of Landlord.
3. Access. It is understood that Landlord and Landlord's contractors will
------
cooperate with Tenant's cabling, phone and moving contractors and other
vendors, including early access before the Commencement Date as long as
such access does not interfere with the completion of Landlord's Work.
4. Substantial Completion. Substantial Completion shall mean (i) except for
----------------------
minor items which shall not prevent Tenant from making use of the Premises
as described under the terms of the Lease, the Premises have been improved
by Landlord in substantial conformity with the Filial Layout Plans, (ii)
any remaining work to be finished as identified in the Punch List can be
completed without significant interference to the conduct of Tenant's
business in the Premises, and (iii) all necessary governmental approvals
and permits required for Tenant's occupancy of the Premises have been
obtained.
42
<PAGE>
COMMENCEMENT AGREEMENT
EXPANSION SPACE
THIS AGREEMENT, made of the 15th day of October, 1998, between Amerimar
Realty Management Co.-Colorado, as agent for DENVER-STELLAR ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership (hereinafter referred to as
"Landlord") and PRIME RESPONSE, INC., (hereinafter referred to as "Tenant") now
desire to set forth the correct Commencement Date for the 3,301 rentable square
feet of expansion space as follows:
The Term for the 30,301 rentable square feet commenced on September 24,
1998, and shall continue until December 31, 2003, unless sooner terminated
or extended as provided for in the Lease.
Please indicate your acceptance of this agreement by signing two copies of the
Commencement Agreement and returning them to Landlord.
TENANT:
PRIME RESPONSE, INC.
By: /s/ Cathy Lewis
-----------------------------------------
Cathy Lewis
Date; 10/21/98 Vice President of Finance
-----------------------
<PAGE>
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE ("First Amendment") is made and entered
into this 22/nd/ day of June, 1998, by and between DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter called
"Landlord") and PRIME RESPONSE, INC. a Delaware corporation, (hereinafter called
"Tenant").
R E C I T A L S
A. Landlord and Tenant entered into that certain Denver Place Office
Lease dated January 20, 1998 (the "Original Lease"), pursuant to which Tenant
leased approximately 8,264 square feet of rentable area on the fifth (5/th/) for
(the "Original Premises'), known as Suite 500, of the office building known as
Denver Place Plaza Tower, located at 1099 18th Street, Denver, Colorado (the
"Building").
B. Tenant has requested and Landlord has agreed to lease to Tenant an
additional 3,301 rentable square feet of area on the fifth (5/th/) floor of the
Building.
C. Landlord and Tenant are the sole parties in interest under the Lease.
D. Landlord and Tenant now desire to amend the Lease in the manner and
form set forth herein.
A G R E E M E N T
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Landlord and Tenant hereby amend the Lease as follows:
1. First Added Premises. Effective September 1, 1998, or the date upon
which the Landlord notifies the Tenant that the expansion space (defined below)
is ready for occupancy, whichever first occurs (the "First Added Premises
Commencement Date") that certain space on the 5th floor of the Plaza Tower of
the Building, containing approximately 3,301 square feet of rentable area and
designated as the first added premises (the "First Added Premises"), as shown on
the floor plan attached as Exhibit A-1, shall be added to the Premises for the
-----------
balance of the Term, upon and subject to all of the terms, covenants and
conditions of the Lease, except as outlined in this First Amendment. Landlord
and Tenant agree that the area of the Original Premises and First Added Premises
is 11,565 rentable square feet.
2. Rent. Effective the First Added Premises Commencement Date, Tenant
shall pay to Landlord the following Base Rent:
(a) From July 1, 1998 through First Added Premises Commencement Date:
Original Premises: $132,224.04 per annum/$11,018.67 per month
(b) From First Added Premises Commencement Date through June 30, 2000:
Original Premises: $132,224.04 per annum/$11,018.67 per month
First Added Premises: $52,815.96 per annum/$4,401.33 per month
<PAGE>
(c) From July 1, 2000 through June 30, 2001:
Original Premises: $140,487.36 per annum/$11,707.28 per month
First Added Premises: $56,117.04 per annum/$4,676.42 per month
(d) From July 1, 2001 through December 31, 2003:
Original Premises: $148,752.00 per annum/$12,396.00 per month
First Added Premises: $59,418.00 per annum/$4,951.50 per month
3. Additional Rent. In addition to paying the Base Rent specified in
Paragraph 2 above, from the First Added Premises Commencement Date through and
including the Expiration Date, Tenant shall pay as additional rent the amounts
determined in accordance with the provisions of Paragraph 4 of the Lease,
provided that Tenant's Proportionate Share shall be 2.25% (being the percentage
calculated by dividing 11,565 square feet, the rentable are of the Original
Premises and the First Added Premises, by 512,995 being 95% of the rentable area
of the Building). The Base Rent and additional rent are sometimes herein
collectively referred to as the "rent". all amounts of additional rent shall by
payable in the same manner and at the same place as the Base Rent.
4. Improvements of First Added Premises.
(a) Landlord shall deliver to Tenant for use by Tenant and Tenant's
architect, such plan or plans and other information with respect to the
First Added Premises and the Building as Tenant may reasonably require for
proper and expeditious preparation of Tenant's layout plans. Landlord shall
upon reasonable prior request by Tenant, allow access to the First Added
Premises for Tenant and Tenant's architect as reasonably necessary in
connection with the preparation of such plans.
(b) Tenant shall, at Tenant's expense, cause to be prepared not later
than July 6, 1998, and delivered to Landlord, one conceptual space plan
("Tenant's Conceptual Space Plan") prepared by an architect, approved by
Landlord, ("Tenant's Architect") which approval shall not be unreasonably
withheld or delayed, for the construction and finishing of the First Added
Premises for Tenant's occupancy. Tenant's Conceptual Space Plan, when
finalized, shall be signed and sealed by Tenant's Architect and shall
conform to all applicable laws and requirements of public authorities.
Tenant's Conceptual Space Plan shall be subject to Landlord's review and
written approval, which approval shall not be unreasonably withheld, and
Tenant shall modify such plans to take account of any changes reasonably
required by Landlord. Landlord shall complete such review and respond to
Tenant within ten (10) business days after Landlord's receipt of such
Conceptual Space Plan. Unless Landlord shall have notified Tenant in
writing to the contrary within such 10-business day period stating
specifically any disapprovals, Tenant's Conceptual Space Plan shall be
deemed to have been approved by Landlord. Tenant's Conceptual Space Plan as
approved by Landlord and with the aforesaid modifications, if any, are
herein called the "First Added Premises Space Plans" with specifications
which shall be provided to Landlord in a hard copy and in electronic format
within seven (7) days of Landlord's approval. Concurrently with the
delivery of Tenant's First Added Premises Space Plans to Landlord, Landlord
and Tenant shall by notice to the other in writing designate a single
individual who shall be available to meet and consult at the Premises as
Landlord's and Tenant's representatives respecting the matters which are
the subject of this Paragraph 4 and who, as between Landlord and Tenant,
shall have the power to make day-to-day decisions on this construction
project.
(c) Landlord, at Tenant's sole cost and expense, shall have its
engineers prepare and not later than fifteen (15) business days after
Landlord's receipt of the First Added Premises Space Plans, shall deliver
to Tenant mechanical, electrical and fire protection engineering drawings
and specifications ("First Added Premises Engineering Plans"), based on the
First Added Premises Space Plans (and such pertinent additional information
as shall have been submitted by Tenant or requested by Landlord), as may be
required to
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complete the First Added Premises in accordance with the First Added
Premises Space Plans. Within six (6) business days after submission to
Tenant by Landlord of the First Added Premises Engineering Plans, Tenant
shall give its written approval thereof if they are a direct extension of
the First Added Premises Space Plans, otherwise such approval shall not be
unreasonably withheld, and Tenant must submit any reasonable modifications
to such plans within this same time period; however, the First Added
Premises Engineering Plans shall be deemed to have been approved by Tenant
unless Tenant shall have notified Landlord in writing to the contrary
within six (6) business days of their receipt by Tenant, stating in which
respects such plans fail to conform with the First Added Premises Space
Plans. The First Added Premises Engineering Plans shall be deemed to have
been approved by Tenant if they are returned by Tenant with specified
changes noted and such changes are made, whether or not approval is
thereafter specifically noted on the First Added Premises Engineering Plans
so changed.
(d) Landlord shall at Tenant's own cost and expense less the
"Construction Allowance" described in paragraph 4(f) hereof, cause the
First Added Premises to be improved and completed in accordance with the
First Added Premises Space Plans and First Added Premises Engineering Plans
("Construction Drawings"). Landlord reserves the right, however, (i) to
make substitutions of material or components of equivalent grade and
quality when and if any specified material or component shall not be
readily or reasonably available, and (ii) to make changes necessitated by
conditions met in the course of construction; provided, however that in all
such instances of substitutions or changes Tenant's approval of any change
shall first be obtained (which approval shall not be unreasonably withheld
or delayed so long as there shall be general conformity with the
Construction Drawings and the budget which had been previously approved by
Tenant).
(e) If Landlord shall, for any reason (including, without limitation,
failure to complete the work, if any, required to be done by Landlord under
this lease) fail to make available to Tenant possession of the First Added
Premises on or before September 1, 1998, or any other date, Landlord shall
not be subject to any liability for such failure nor for any failure to
timely complete any work. Under such circumstances, Tenant's obligations to
pay Base Rent and Tenant's Share of Operating Expenses with respect to the
First Added Premises shall not commence until Landlord makes possession
available; and such failure to make available to Tenant possession of the
First Added Premises on the September 1, 1998 or any other date or to
timely complete any work, shall not in any other way affect the validity or
continuance of this First Amendment, nor the Term or the obligations of
Tenant hereunder. Such deferral of rent shall be Tenant's sole and
exclusive right and remedy with respect to any such failure. There shall be
no deferral of rent, however, if such failure is caused in whole or part by
any act or omission of Tenant, its agents, servants, employees or
contractors, which has the effect of hindering or delaying Landlord's
delivery of possession or the timely completion of any work to be done by
Landlord (hereinafter a "Tenant Delay") which Tenant Delays are defined as:
(a) any delay which is caused by changes made by Tenant (other than as may
be subsequently required by any inspecting agency or for existing
conditions which were not evident on Landlord's original plans) in the work
to be performed by Landlord in readying the First Added Premises for
Tenant's occupancy, (b) any delay which is caused by any failure by Tenant,
without regard to any grace period applicable thereto, promptly to furnish
to Landlord any required information, approval or consent or caused by any
good faith reluctance on the part of Landlord to approve any information
required to be submitted by Tenant and approved by Landlord, or (c) any
delay which is caused by the performance of any work or activity in the
First Added Premises by Tenant or any of its employees, agents or
contractors. Tenant shall also pay to Landlord, within 10 days after
receipt of demand made from time to time, a sum equal to any additional
cost to Landlord in completing the First Added Premises resulting from any
Tenant Delay. Tenant may, upon agreement with the general contractor
performing such work, schedule Tenant's phone and cable contractor to
install Tenant's telephone, cabling and ancillary equipment at a mutually
agreeable time.
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(f) Landlord shall provide an allowance (the "Construction
Allowance") for the payment of the costs and expenses of completing the
Landlord's First Added Premises Work in an amount of Sixty Thousand Six
Hundred Eighteen and no/100 Dollars ($60,618.00). Tenant shall be
responsible for the payment of all Landlord's First Added Premises Work in
excess of the Construction Allowance (the "Excess Tenant Costs") which
excess shall be payable within thirty (30) days after Tenant's receipt of a
written request from Landlord which request shall be accompanied by a
calculation of the Excess Tenant Costs in reasonable detail. If the cost of
completing the Landlord's First Added Premises Work is less than
Construction Allowance, the portion of the Construction Allowance not used
shall be paid directly to Tenant on or before the later of the (i) last day
of the fifteenth (15/th/) month of the Term of the Lease, and (ii) the
ninetieth (90/th/) day after the First Added Premises has been added to the
Original Premises.
5. Parking. Beginning July 1, 1997, Exhibit "D" attached to the Original
lease (the "Parking Agreement') shall be amended to reflect that Landlord shall
reserve for Tenant an option to lease one (1) "reserved" and up to two (2)
"unreserved" parking spaces in the Parking Garage. The parking spaces shall be
provided at the monthly rates announced from time to time by the operator of the
Parking Garage. Tenant's failure to pay any rent due pertaining to any such
parking spaces shall constitute an event of default under the Lease as herein
amended.
6. Security Deposit. Tenant shall pay to Landlord the sum of Four
Thousand Four Hundred One and 33/100 Dollars ($4,401.33) to be held as
additional security deposit in accordance with paragraph 24 of the Original
Lease, which shall be paid to Landlord with the execution of this First
Amendment by Tenant.
7. Termination of Expansion Option. The Tenant's Expansion Option
provided in paragraph 32 of the Original Lease is terminated and null, void and
of no further effect.
8. Binding Effect. This First Amendment becomes effective only upon the
execution by Landlord and Tenant.
9. Conflict. If there is any conflict between the terms and provisions of
this First Amendment and the terms and provisions of the Lease, the terms and
provisions of this First Amendment shall govern. Except as herein specifically
set forth, all of the provisions of the Lease shall remain in full force and
effect and be binding upon the parties hereto.
10. Definitions. All capitalized terms used herein, but not defined
herein, shall have the same meanings given to such terms in the Lease unless
otherwise indicated.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this First
Amendment to Lease as of the day and year first above written.
LANDLORD:
DENVER-STELLAR ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Amerimar Realty Management
Co.-Colorado
By: Amerimar Realty Management-
Pennsylvania, its general partner
By: ARC-Management Company,
its general partner
By: /s/ David G. Marshall
--------------------------------------
David G. Marshall, President
Date: September 11, 1998
-----------------------
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TENANT:
PRIME RESPONSE, INC., a Delaware
corporation
By: /s/ Cathy Lewis
---------------------------------
Cathy Lewis
Vice President of Finance
Date: 8/6/98
----------
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[FIFTH FLOOR FINISH PLAN APPEARS HERE]
<PAGE>
EXHIBIT C
---------
LEASE TERM AGREEMENT
THIS AGREEMENT, made as of the 20th day of January, 1998, between DENVER-
STELLAR ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership
(hereinafter referred to as "Landlord") and PRIME RESPONSE, INC., a Delaware
corporation (hereinafter referred to as "Tenant").
WITNESSETH
WHEREAS, by Lease (hereinafter called "Lease") made as of the 20th day of
January, 1998, Landlord leased unto Tenant certain premises known as Suite
Number 500, located at 1099 Eighteenth Street, Denver, Colorado, for a term of
five (5) years, three (3) months and zero (0) days commencing on June 1, 1998,
unless sooner terminated or extended as provided therein, and
WHEREAS, Landlord and Tenant now desire to set forth the correct
Commencement Date of the term and to adjust the Expiration Date of the Term to
provide for a full term of the Lease of FIVE years, SIX months and ZERO days.
NOW, THEREFORE, Landlord and Tenant do hereby agree as follows:
1. The Term of the Lease commenced JULY 1, 1998, and shall continue
until DECEMBER 31, 2003 unless sooner terminated or extended as
provided therein.
2. Except as hereby amended, the Lease shall continue in full force and
effect.
3. This Agreement shall be binding on the parties hereto, their heirs,
executors, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LANDLORD:
DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP, a Delaware
limited partnership
By: Amerimar Realty Management Co.-
Colorado
By: Amerimar Realty Management-
Pennsylvania, its general partner
By: ARC-Management
Company, its general
partner
By: /s/ David G. Marshall
----------------------------------------
David G. Marshall, President
TENANT:
PRIME RESPONSE, INC., a Delaware
corporation
By: /s/ Robert Fetter CEO
----------------------------------------
Authorized Signature (Title)
<PAGE>
LICENSE AGREEMENT
(Use of Licensor's Security System and Equipment)
THIS LICENSE AGREEMENT ("Agreement") is executed as of the 1/st/ of
October, 1998, by and between DENVER-STELLAR ASSOCIATES LIMITED PARTNERSHIP, a
Delaware limited partnership ("Licensor"), and PRIME RESPONSE, INC., a Delaware
corporation ("Licensee").
RECITALS:
A. Licensor is the owner of a certain commercial office building located
at 1099 - 18th Street in Denver, Colorado, which is commonly known as Denver
Place Plaza Tower (the "Building").
B. Licensee has requested that Licensor grant to Licensee a license to
locate and install within the Building certain cables, wiring, transmission
lines, conduits, markers, signs and related facilities (collectively, the
"Equipment"). The Equipment will be used to provide certain electronic access
and security services to Licensee, its employees, licensees, and invitees at
those certain premises in the Building known as Suite 500 (the "Premises") and
leased by Licensee pursuant to that certain Office Lease between Licensor, as
landlord and Licensee, as tenant dated January 20, 1998 (the "Lease"). Licensor
has agreed to grant said license in accordance with and subject to the terms of
this Agreement.
GRANT OF LICENSE AND RELATED AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants set forth herein, Licensor and Licensee, intending to be legally
bound, covenant and agree as follows:
1. Grant of License. Licensor hereby grants to Licensee, in accordance
with and subject to all the other provisions of this Agreement, a non-exclusive
license on, under, across and through the License Area of the Building (defined
in paragraph 2(a) below), as it may be modified from time to time as provided
below, to construct, install, inspect, maintain, repair, reconstruct and replace
the Equipment subject to the terms of this Agreement (hereinafter the
"License"), at Licensee's sole cost and expense. All such activity associated
with the construction, installation, inspection, maintenance, repair and
replacement of the Equipment is sometimes referred to hereinafter collectively
as the "Work." The License shall inure to the benefit of Licensee and its
permitted successors and assigns (as set forth in paragraph 10 hereof), and
shall be binding upon Licensor and its successors-in-interest in and to the
Building. Nothing contained in this Agreement
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shall be construed as granting to Licensee any property, leasehold or ownership
rights in the Building or to create a partnership or joint venture between
Licensor and Licensee.
2. Conduct and Commencement of Work.
(a) Licensee, at its sole cost and expense, shall cause the
preparation of and submit to Licensor plans and specifications for the
Equipment, location of all components thereof, and all aspects of the Work
(the "Plans"). The Plans (including any proposed modifications thereto
after Licensor's initial approval, if any) shall be subject to Licensor's
approval before any Work may be commenced, which approval may be withheld
at Licensor's sole discretion. The space(s) identified in the Plans which
are approved by Licensor as the location of the Equipment is referred to as
the "License Area." Licensee and Licensor acknowledge that it is intended
that the License Area shall consist of approximately 11,565 square feet of
area located on the fifth floor of the Building (the "Primary Area"), plus
that area identified on the Plans necessary for the routing of cable from
the Primary Area to the Premises. It is understood and agreed that some or
all of the License Area may be the same area of the Building which houses
the wiring, cables, and related electronic facilities for Licensor's
security and access system for the Building and its tenants (such wiring,
cable and related materials being hereinafter sometimes referred to as the
"Licensor's Equipment" and such electronic security and access system being
hereinafter sometimes referred to as the "Licensor's Security System") and
that, subject to the terms of this Agreement, and as outlined on the Plans,
Licensee may utilize the Licensor's Equipment in connection with its
installation of the Equipment and use of its access and security system,
provided such use does not interfere in any way with the use of the
Licensor's Equipment or Licensor's Security System or the use of the same
by the Licensor or any other tenants in the Building.
(b) Licensee acknowledges and agrees that Licensor's review of the
Plans shall be solely for Licensor's own benefit and account; by conducting
such review and/or approving the Plans, Licensor shall not be regarded as
undertaking any obligation for the technical or legal sufficiency, adequacy
or safety of the Equipment or the Work, and Licensee waives and disclaims
any such responsibility of Licensor and hereby assumes all obligations and
duties related to such technical and legal sufficiency, adequacy and
safety. Licensor's approval of the Plans shall not be construed to limit or
abridge Licensee's obligations under this Agreement to any extent.
(c) Licensee, at its sole cost and expense, shall obtain and provide
copies to Licensor of all requisite building permits and other governmental
approvals prior to any and all consents that may be required therefor from
private parties undertaking any part or all of the Work. Without limitation
on the generality of the foregoing, Licensee acknowledges that Licensee
shall be solely responsible for securing all
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licenses and approvals, whether governmental, quasi-governmental or private
in nature, which are requisite to providing connections and related
facilities for the Equipment at any locations away from the Building
(including, without limitation, any public rights-of-way) or otherwise
required in connection with the Work. Furthermore, Licensee shall bear all
risks associated with any revocability of those licenses and approvals, and
Licensor shall have no obligation or duty to Licensee in connection
therewith. For purposes of interpreting Licensee's obligations hereunder,
the "Work" shall include the construction, installation, inspection,
maintenance, repair and replacement of any off-site connections and related
facilities required for Licensee's provision of access and security
services to the Building and/or its tenants.
(d) Licensee shall cause all Work to be undertaken and completed and
the Equipment maintained in a good, safe and workmanlike manner consistent
with the highest construction standards, in conformity with the approved
Plans, and in compliance with all applicable laws, rules and regulations
and any private restrictions applicable to the Work and the Owner's Rules
and Regulations attached hereto as Exhibit A and any future modifications
---------
thereof. Licensee shall not conduct the Work nor otherwise utilize the
License Area in any way so as to increase Licensor's insurance payments,
and at Licensor's option shall pay such increases. Licensee will perform
the Work in such a manner as to not unreasonably interrupt the Building's
normal operations (including the use of the Licensor's Security System) and
will repair any damage that the Work causes to the Building, the Licensor's
Equipment, the Licensor's Security System, or any other property located
therein such that the same is in as good or better condition than existed
immediately prior to the time of any damage. Furthermore, Licensee shall
schedule the Work at such times and take such other measures and
precautions as Licensor may require in order to avoid or minimize any
interference with Building operations that may be caused by the Work;
however, in the event of an emergency, Licensee shall have 24 hour a day, 7
day a week access to the License Area. In connection with the Work,
Licensee shall not enter the premises of any tenant or occupant of the
Building without that tenant's or occupant's prior written consent. If any
of the Work is not performed in accordance with the foregoing or any other
requirements of this Agreement, Licensor shall have the right, but not the
obligation, and without limiting Licensor's other remedies for such
failure, to correct any non-complying Work after sending ten (10) days'
notice and right to cure such nonconforming work, after which Licensee
shall reimburse Licensor for all costs and liabilities incurred in
connection therewith by Licensor, including attorneys' fees. No notice or
opportunity to cure need be given by Licensor if, in Licensor's reasonable
judgement, a hazardous condition exists or is about to exist.
(e) Licensee shall not disrupt, adversely affect or interfere with
other providers of services in the Building or with any occupant's use and
enjoyment of its leased or licensed premises or the common areas of the
Building. Licensee agrees
3
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to use all efforts to ensure that the Equipment, and the installation,
maintenance and operation thereof will in no way interfere with the use of
the Building, including but not limited to the Licensor's use of the
Licensor's Equipment and the Licensor's Security System, or the operation
of any other electronic devices by Licensor or by other lessees or
licensees of the Licensor (including but not limited to any communications
devices). If interference shown to be caused by Licensee's Equipment, or
the installation, operation, and maintenance thereof, shall occur, Licensor
shall give Licensee notice thereof, and Licensee shall take immediate
action to correct the same within twelve (12) hours of receipt of such
notice. Licensor reserves the right to disconnect power to the Equipment if
Licensee fails to correct such interference after proper notification and
the expiration of the twelve (12) hour cure period. Licensor agrees to
restore power to Licensee's Equipment after such disconnection if Licensee
corrects the cause of the interference thereafter.
(f) Licensee shall not store highly flammable materials or goods,
explosives, perishable foodstuffs, contraband, live animals, materials or
goods which emit odors in or upon the License Area. The Licensee covenants
that it shall not store, use or possess nor permit the storage, use or
possession of any Hazardous Substance (hereinafter defined) upon the
License Area. Hazardous Substance for purposes of this Agreement shall
mean, without limitation, any flammable explosives, radon, radioactive
materials, asbestos, urea-formaldehyde foam insulation, polychlorinated
biphenyls, petroleum and petroleum based products, methane, hazardous
materials, hazardous wastes, hazardous or toxic substances or related
materials, as defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601
et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C.
-- ---
Sections 1801, et seq.), Sections 6901, et seq.), the Toxic Substances
-- --- -- ----
Control Act, as amended (15 U.S.C. Sections 2601 et seq.), or any other
-- ---
similar law, rules, regulation or statute concerning the protection of the
environment (collectively "Environmental Laws"). Licensee hereby covenants
and agrees, at its sole cost and expense, to indemnify, protect and defend
and save harmless the Licensor and any of its partners, employees and
agents from and against any all damages, losses, liabilities, obligations,
penalties, claims, litigation, demands, defenses, judgments, suits,
actions, proceedings, costs, disbursements and/or expenses (including,
without limitation, attorneys' and experts' fees, expenses and
disbursements) of any kind or nature whatsoever which may at any time be
imposed upon, incurred by or asserted or awarded against the Licensor, its
partners, agents or employees relating to, resulting from or arising out of
Licensee's failure to comply with its obligations under the foregoing
paragraph or Licensee's violation of any Environmental Law with respect to
its use of the License Area. Notwithstanding any other provision of this
Agreement, the indemnification provisions set forth in this paragraph shall
survive the expiration or earlier termination of this Agreement.
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3. Cost of Work; Mechanic's Liens. All Work shall be at Licensee's sole
cost and expense, and Licensor shall not have any responsibility or liability
therefor. Licensee specifically acknowledges and agrees that Licensor has no and
will have no liability to compensate Licensee to any extent for any value that
the Equipment may add or provide to the Building, and Licensee hereby
irrevocably waives all rights that Licensee might otherwise have to claim any
mechanic's lien or similar encumbrance against the Building in connection with
the Work. Some aspects of the Work (including, without limitation, the
preparation of the Plans) may be undertaken by independent contractors of
Licensee. Before any independent contractor performs any services or labor in
connection with the Building or the Work, Licensee shall secure from each such
independent contractor a waiver of all lien rights. Each such original waiver
shall be promptly submitted to Licensor after execution.
4. License Fees. Licensee shall pay to Licensor the sum of Six-Thousand-
Three-Hundred Dollars ($6,300.00) for access to the License Area in 63 equal
monthly installments of $100.00 due on the 1/st/ day of each month commencing
October 1, 1998. If any payment or any part of any such payment to be made by
Licensee under the terms of this Agreement shall become overdue for a period in
excess of five days, Licensee shall pay to Licensor a "late charge" of $.05 for
each dollar so overdue for the purpose of defraying the expense incident to
handling such overdue or delinquent payment, plus interest on the overdue amount
at the rate of eighteen percent (18%) per annum from the date when such payment
was due until the date paid. Nothing herein shall be construed as waiving any
rights of Licensor arising out of any default of Licensee by reason of
Licensor's accepting any such late charge or interest; the right to collect a
late charge and interest is separate and apart from and in addition to any other
rights or remedies of Licensor. In the event Licensor brings any action against
Licensee and/or its successors or assigns as a result of any breach of this
Agreement, Licensor shall be entitled to collect reasonable attorneys' fees and
all costs incurred if Licensor prevails in said action. In addition to the
license fees as provided herein, Licensee shall pay Licensor a one-time non-
refundable administration fee (the "Administration Fee") for the administrative
costs incurred in connection with the review of the Plans and project logistics
in the amount of Five-Hundred Dollars ($500.00). Licensee shall pay the
Administration Fee at the time the first month's installment of license fees are
due under this Agreement.
5. Indemnity/and Hold Harmless. Licensee shall defend and indemnify
Licensor and hold Licensor harmless from any liabilities, mechanic's or other
similar types of liens, damages, penalties, fines, costs, theft, or other losses
of any nature (including consequential damages) including, without limitation,
any property damage suffered by Licensor (including but not limited to
Licensor's Equipment or Licensor's Security System), Licensee or any third
parties or any claims for personal injury and/or workmen's compensation by
Licensee or any third parties, including independent contractors and/or
employees of Licensee and/or Licensor, together with all related costs and
expenses, including reasonable attorneys' fees incurred by or claimed against
Licensor, that may arise in connection with (i) the Work or any part thereof
including any off-site connections and related facilities for the Equipment (as
referenced in subparagraph 2(c) above), (ii) any other aspects of the Work or
Licensee's use and enjoyment of the License and the Equipment including the
granting of the License by Licensor and electrical and HVAC costs attributable
to operation of the
5
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Equipment, and (iii) any breach or default by Licensee of its obligations under
this Agreement provided that such loss, liability or damage is not caused by
Licensor's gross negligence or willful misconduct. To the extent Licensor pays
any sum which falls within the foregoing indemnity, Licensee shall reimburse
Licensor for such sum within thirty (30) days after Licensor makes demand
therefor. Licensee specifically agrees that Licensor's approval of the Plans
shall not be construed to limit the foregoing indemnity. Without limitation on
the generality of the foregoing, the foregoing indemnity shall apply to any
structural damage suffered by the Building in connection with the Work, whether
or not the Work conforms to the Plans. The provisions of this paragraph 5 shall
survive termination and expiration of this Agreement.
6. Completion of Work. Upon completion of the Work, Licensee shall
provide Licensor with all certificates or other approvals that are legally
required to evidence that the Work has been completed in conformity with all
applicable laws. In addition, Licensee shall furnish Licensor with a certificate
that the Work has been completed in conformity with the approved Plans, which
certification must be rendered by a licensed engineer or similar party
satisfactory to Licensor and must be in form and substance satisfactory to
Licensor. Licensee shall also supply Licensor with a complete set of "as built"
construction documents related to the Work.
7. Licensee's Covenants. Licensee hereby covenants and agrees:
(a) to keep the License Area and Equipment in good order, repair and
condition throughout the Term of this Agreement and any renewals thereof
and promptly and adequately repair all damage to the Building, Licensor's
Equipment or Licensor's Security System caused by Licensee or the
Equipment;
(b) to comply and remain in compliance with all federal, state and
municipal laws, orders, rules and regulations applicable to Licensee, the
Work and Equipment, as well as the Owner's Rules and Regulations attached
hereto as Exhibit A and any future modifications thereof;
---------
(c) not to disrupt, adversely affect or interfere with other
providers of services in the Building or with any occupant's or tenant's
use and enjoyment of their leased premises or the common areas of the
Building.
8. Term; Removal. The License shall remain in full force and effect for a
term of Five (5) years and Three (3) months from the date the monthly license
fee is first payable (the "Term"), unless terminated pursuant to the mutual
written agreement of the parties hereto; provided, however, that Licensor may
terminate the License upon ten (10) days' written notice (and opportunity to
cure) in the event that Licensee does or permits any one of the following:
(a) fails to pay any installment or other amount when due pursuant to
this Agreement;
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(b) commits any material breach or default of its obligations
hereunder or under any other agreement, lease or license with Licensor
and/or any of its affiliates;
(c) abandons or deserts the Building or Equipment during the Term or
any renewal thereof or Licensee removes (and does not replace or substitute
equipment for) all or a substantial portion of the Equipment, including
equipment in the License Area, from the Building;
(d) fails to completely construct and install its Equipment in the
Building within 90 (ninety) days of the date of this Agreement; or
(e) voluntarily or involuntarily files bankruptcy or makes a general
assignment for the benefit of creditors.
No notice or opportunity to cure need be given by Licensor if, in its
reasonable judgment, a hazardous condition exists or is about to exist.
Licensor's right of termination shall be cumulative with and in addition to all
other rights and remedies afforded to Licensor at law or in equity for such
breach or default. Upon any termination of the License, Licensee shall remove
the Equipment and restore the License Area to its original condition. Licensee
shall be obligated to complete any such removal and restoration within sixty
(60) days after the termination or expiration of the License. If any Equipment
is not so removed in a timely manner, then the remaining Equipment shall, at
Licensor's election, become part of the improvements constituting the Building,
and all incidents of ownership of the Equipment shall immediately vest in
Licensor or, at Licensor's option, Licensor may remove the Equipment and restore
those portions of the Building impacted by the Work and the costs for such
removal shall be charged to Licensee as additional license fees. In connection
with any removal, Licensee shall simultaneously restore those portions of the
Building impacted by the Work to substantially the same condition existing
immediately prior to the commencement of the Work. For purposes of applying the
indemnity provisions of paragraph 5 above, all activity related to such removal
and restoration shall be regarded as part of the Work.
If Licensee exercises its option to renew the Lease pursuant to Paragraph
31 of the January 20, 1998 Addendum thereto (the "Addendum"), the Term of this
Agreement shall also be renewed for the Renewal Term, as defined in the
Addendum, without notice from Licensee to Licensor other than the notice
required to be given pursuant to Paragraph 31(a) of the Addendum. In the event
of such renewal, Licensor shall pay Licensee a monthly License Fee of $100.00
payable on the 1st day or each month during the Renewal Term. All other
provisions and conditions of this Agreement shall remain in full force and
effect throughout the Renewal Term.
9. Effect of Prior License or Easement Agreement(s); Priority.
(a) Licensee acknowledges that the Building is or may already be
subject to other licenses and license and/or easement agreements.
Licensee's rights
7
<PAGE>
hereunder to use and enjoy the License is subject to and qualified in all
respects by the obligations of Licensor under all Prior licenses, license
and easement agreements (including, without limitation, the obligation of
Licensor to grant additional licenses, license and easement rights
affecting the Building). Licensee agrees that, to the extent the Equipment
must be relocated or otherwise modified to accommodate preexisting rights
in favor of prior grantees of licenses/easements or future
licenses/easements as deemed reasonably necessary by Licensor, Licensee
shall undertake such relocation or modification at its sole cost and
expense and all such activity shall be considered a part of the Work. In
the event Licensee reasonably determines that the alternative location for
the License Area (or the Equipment pursuant to Paragraph 9(c) below) chosen
by Licensor is infeasible, Licensee may terminate this Agreement upon
giving Licensor thirty (30) days' written notice and opportunity to provide
alternatives.
(b) Licensee further acknowledges and agrees that, notwithstanding
any provisions of this Agreement that may indicate to the contrary, all
rights and interests of Licensee under this Agreement are and shall be
subject and subordinate to all pre-existing interests in the Building
having priority over the License including, without limitation, the
interest of all persons or entities which have a lien on the Building.
Licensee acknowledges and agrees that Licensor shall have no liability to
Licensee in connection with any exercise or enforcement of those pre-
existing interests which may affect Licensee's interests hereunder.
Licensee further acknowledges and agrees that it has no rights to any
common areas in the Building under this Agreement, none of such common
areas of the Building shall be considered any part of the License Area
under this Agreement, and no Equipment shall be installed in any of the
common areas of the Building, including but not limited to any
communications closets located in any of the common areas of the Building.
(c) In the event Licensor requests that the Equipment be relocated or
that the License Area otherwise be modified, such that the License Area
shall be moved to a different portion of the Building from its then current
location, Licensee shall undertake such relocation or modification at its
sole cost and expense, and the area to which the License Area is relocated
shall henceforth be referred to as the License Area.
10. Successors and Assigns.
(a) Licensor shall be permitted to assign its rights hereunder to any
of its successors in interest to the Building and to any mortgagee of
Licensor's interests in the Building. Licensee shall not be permitted to
assign or delegate any of its rights or obligations hereunder without the
prior express written consent of Licensor, which may be withheld in
Licensor's sole discretion; any assignment attempted by Licensee
8
<PAGE>
in violation of the foregoing shall be void and of no force or effect at
Licensor's option.
11. Insurance. Licensee shall obtain and maintain such insurance,
including through a blanket policy, as will fully protect both Licensee and
Licensor from claims by employees of Licensee under all applicable workers'
compensation and/or employers' liability laws, including any employers'
disability insurance laws, and from all claims for damage to property or for
personal injury, including death to anyone whomsoever, that may arise from the
Work, the Equipment or any operations in connection with the performance of the
services in the Premises by Licensee, or by anyone directly or indirectly
engaged or employed by Licensee. Licensee shall provide Licensor with
certificates evidencing the required coverage prior to Licensor commencing any
Work in the Building.
Notwithstanding the generality of the foregoing, Licensee's general
liability insurance shall be a minimum of $2 million per occurrence, which may
take the form of $1 million in primary coverage with $1 million in excess
coverage, which must include a provision preventing cancellation of such policy
except following 30 days' prior written notice to Licensor. Licensor shall be
listed as an "additional insured" on said general liability policy. Licensee's
insurance carrier shall have a Best Rating of at least B + or better.
12. Non-Recourse Liability. Licensor and each of its successors-in-
interest to the Building shall have liability (as further outlined below) only
for those obligations of Licensor under this Agreement, if any, which accrue
during the term of that party's ownership of the Building, and each such party
shall have no liability for any such obligation that accrues either before or
after the time of that party's ownership of the Building. Furthermore, in any
event, any mortgagee of Licensor or its successors-in-interest that acquires
Licensor's interest in the Building by foreclosure or any conveyance in lieu
thereof or otherwise shall not have any liability whatsoever for any obligations
of Licensor hereunder. Any liability for damages or breach or nonperformance by
Licensor, or arising out of the subject matter of this Agreement or the
relationship created hereby, shall be collectible only out of Licensor's
interest in the Building and no personal liability is assumed by, or shall at
any time be asserted against, Licensor, its partners, affiliates, agents,
attorneys, servants and employees, or any of its or their successors or assigns;
all such liability, if any, being hereby expressly waived and released by
Licensee.
13. Other Defaults. Any default by Licensee in discharging any of its
obligations under the Lease, including but not limited to the payment of Rent
thereunder, shall be a default of Licensee's obligations under this Agreement,
and Licensor may exercise any of the rights and remedies available to it as if
Licensee was in default hereunder. Any default by Licensee hereunder, including
but not limited payment of the License Fee, shall be a default of Licensee's
obligations under the Lease, and Licensor may exercise any of the rights and
remedies available to it under the Lease as if Licensee was in default
thereunder.
9
<PAGE>
14. Governing Law. This Agreement and all the provisions hereof shall be
governed by and construed in accordance with the laws of the State of Colorado.
15. Notices. All notices or demands pursuant to this Agreement shall be in
writing and sent by first class mail, postage prepaid or by commercial overnight
delivery, prepaid, to the parties at their addresses provided below, or to such
other address as a party may specify by notice to the other party:
LICENSEE:
Prime Response, Inc.
1099 18/th/ Street, Suite 500
Denver, CO 80202
LICENSOR:
Denver-Stellar Associates Limited Partnership
c/o Amerimar Realty Management Co.-Colorado
999 - 18th Street, Suite 1000
Denver, Colorado 80202
Attention: General Manager
with a copy to:
Slivka Robinson Waters & O'Dorisio, P.C.
1099 - 18th Street, Suite 2600
Denver, Colorado 80202
Attention: John W. O'Dorisio, Jr., Esq.
16. Security Deposit. The Licensee shall keep on deposit with the Licensor
at all times during the term of this Agreement, a security deposit (the
"Security Deposit") in the amount of One-Thousand-Two-Hundred Dollars
($1,200.00) as security for the payment by the Licensee of the rent, license
fees, or any other sums due under this Agreement and for the faithful
performance of all the terms, conditions and covenants of this Agreement. If at
any time during the term of this Agreement the Licensee shall be in default in
the performance of any provision of this Agreement, the Licensor may (but shall
not be required to) use any such deposit, or so much thereof as necessary, in
payment of any rent or any other sums due under this Agreement in default, in
reimbursement of any expense incurred by the Licensor and in payment of the
damages incurred by the Licensor by reason of the Licensee's default, or at the
option of the Licensor, the same may be retained by the Licensor as liquidated
damages. In such event, the Licensee shall, on written demand of the Licensor,
forthwith remit to the Licensor a sufficient amount in cash to restore such
deposit to its original amount. If such deposit has not been utilized as
aforesaid, such deposit, or as much thereof as has not been utilized for such
purposes, shall be refunded to the Licensee, without interest, upon full
performance of this
10
<PAGE>
Agreement by the Licensee. Licensor shall have the right to commingle such
deposit with other funds of the Licensor. Licensor shall deliver the funds
deposited herein by the Licensee to any purchaser of the Licensor's interest in
the License Area in the event such interest be sold, and thereupon, the Licensor
shall be discharged from further liability with respect to such deposit.
Notwithstanding the above provisions of this Section, if claims of the Licensor
exceed the deposit for therein, the Licensee shall remain liable for the balance
of such claims.
17. Miscellaneous.
(a) The paragraph headings contained herein are intended for
convenience and reference only and are not intended to define, limit, or
describe the scope or intent of any provision of this Agreement.
(b) Licensor makes no warranty or representation that the License
Area or any part or all of the Building is suitable for the use
contemplated by this Agreement, it being assumed that Licensee has
satisfied itself thereof. Licensee has inspected the anticipated License
Area and the Building; accepts the same "AS IS", and agrees that Licensor
is under no obligation to perform any Work or provide any labor or
materials to prepare, modify and/or alter the License Area or the Building
for Licensee.
(c) Except as otherwise stated herein, no waiver of any breach of
this Agreement or any of the terms hereof shall be effective unless such
waiver is in writing and signed by the party against whom such waiver is
claimed. No waiver of any breach shall be deemed to be a waiver of any
other or subsequent breach. All prior or contemporaneous understandings and
agreements between the parties which relate to this Agreement are merged
into this Agreement which alone fully and completely expresses their
agreement. Neither party is relying upon any statement or representation by
the other not embodied in this Agreement.
(d) Licensor and Licensee acknowledge that each has carefully
reviewed this Agreement and that the normal rules of construction whereby
ambiguities in a contract are to be construed against the drafter shall not
be employed in the interpretation of this Agreement.
(e) In the event that a court of competent jurisdiction enters an
order of judgment declaring any material provision of this Agreement to be
invalid and/or unenforceable, the remainder of this Agreement shall
continue in full force and effect, such remaining provisions being deemed
modified to the extent necessary to comply with any court order and/or
judgment and applicable law.
(f) Licensee shall not place signs on any of the doors or corridors
leading to the License Area. Licensor shall have the right, at its option,
at Licensee's own
11
<PAGE>
cost and expense, to remove any signs placed by Licensee without Licensor's
prior written consent, and to repair any damage caused by such signs.
(g) Licensor shall not be liable to Licensee for any loss or damage
to any property or person occasioned by theft, fire, act of God, public
enemy, injunction, riot, strike, insurrection, war, court order,
requisition, or order of governmental body or authority or by any other
cause. Nor shall Licensor be liable for any damage or inconvenience which
may arise through (a) the leasing or licensing of other space within the
Building to whomsoever Licensor chooses for whatever use is allowed by
Licensor; (b) repair or alteration of any part of the Building or License
Area or the construction of improvements for tenants or other licensees in
the Building, it being specifically acknowledged and agreed by Licensee
that Licensor will, as a part of Licensor's leasing and licensing of other
space within the Building, be conducting construction work in order to
prepare space in the Building, from time to time, for other tenants and
licensees; or (c) Licensee's use of the Licensor's Equipment or Licensor's
Security System as provided in the Plans and in this Agreement, it being
specifically acknowledged and agreed by Licensee that its use of the
Licensor's Equipment and/or Licensor's Security System is at its own risk,
and that Licensor makes no representations regarding the same.
(h) Licensee and Licensor agree not to record this Agreement or any
memorandum thereof unless required by governmental action or franchise
agreement. In the event that recordation is so required, the recording
party agrees to promptly provide the other party with a copy of this
Agreement so recorded and, promptly upon termination of this Agreement, to
join with the other party in executing and recording a notice of
termination in the appropriate real property records.
IN WITNESS WHEREOF, Licensor and Licensee have entered into this License
Agreement effective as of the date first above written.
LICENSEE:
PRIME RESPONSE, INC., a Delaware
corporation
By: /s/ Cathy Lewis
-------------------------------------
Name: Cathy Lewis
Title: Vice President, Finance
12
<PAGE>
LICENSOR:
DENVER-STELLAR ASSOCIATES
LIMITED PARTNERSHIP, a Delaware
limited partnership
By: Amerimar Realty Management Co.-
Colorado, a Colorado
By: Amerimar Realty Management-
Pennsylvania, its general partner
By: ARC - Management Company, its
general partner
By: /s/ David G. Marshall
--------------------------------
David G. Marshall, President
13
<PAGE>
EXHIBIT A
---------
RULES AND REGULATIONS
Rules and Regulations, to Lease between DENVER-STELLAR ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership, as Landlord ("Landlord")and PRIME
RESPONSE, INC., a Delaware corporation as tenant ("Tenant"), pertaining to
certain space in Denver Place Plaza Tower, 1099 18th Street, Denver, Colorado
80202.
(a) Any sign, lettering, picture, notice, or advertisement installed
within Tenant's Premises which is visible to the public from within the
Building shall be installed at Tenant's cost and in such manner, character
and style as Landlord may approve in writing. No sign, lettering, picture,
notice or advertisement shall be placed on any outside window or in any
position so as to be visible from outside the Building.
(b) The use of the name of the Building or of pictures or
illustrations of the Building in advertising or other publicity, without
prior written consent of Landlord, is prohibited.
(c) Tenant, its subtenants and its and their customers, invitees,
licensees, and guests
(i) shall not obstruct and shall not use for any purpose other
than ingress and egress, the sidewalks, entrances, passages, courts,
corridors, vestibules, halls, elevators and stairways in and about the
Building;
(ii) shall not place objects against glass partitions or doors
or windows or adjacent to any open common space which would be
unsightly from the Building corridors or from the exterior of the
Building, and will promptly remove the same upon notice from Landlord;
(iii) shall not make noises, cause disturbances, create
vibrations, odors or noxious fumes or use or operate any electrical or
electronic devices or other devices that emit sound waves or are
dangerous to other tenants and occupants of the Building or that would
interfere with the operation of any device or equipment or radio or
television broadcasting or reception from or within the Building or
elsewhere, and shall not place or install any projections, antennae,
aerials or similar devices inside or outside of the Premises;
(iv) shall not make any room-to-room canvass to solicit
business from other tenants in the Building, and shall not exhibit,
sell or offer to sell, use, rent or exchange any item or services in
or from the Premises unless ordinarily embraced within the Tenant's
use of the Premises as specified in its lease;
(v) shall refrain from attempting to adjust any controls;
(vi) shall not waste, and shall not suffer or permit to be
wasted, electricity or water and shall cooperate fully with Landlord
to assure the most effective operation of the Building's heating and
air conditioning;
(vii) shall keep public corridor doors closed;
(viii) shall neither install nor operate machinery or any
mechanical devices of a nature not directly related to Tenant's
ordinary use of the Premises without the written permission of the
Landlord;
(ix) shall not use rest rooms or water fixtures for any purpose
other than that for which they are designed;
<PAGE>
(x) shall not mark upon, paint, cut, drill into, drive nails
or screws into, or in any way deface the walls, ceiling partitions or
floors of the leased Premises or of the Building;
(xi) shall not unduly obstruct any pipes, conduits and ducts in
the Premises; and
(xii) shall use chair pads, to be furnished by Tenant, under all
rolling and ordinary desk chairs in the carpeted areas.
(d) Tenant assumes full responsibility for protecting its space from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed and secured.
(e) Peddlers, solicitors and beggars shall be reported to the office
of the Building or as Landlord otherwise requests.
(f) No person or contractor not employed by Landlord shall be used to
perform window washing, cleaning, or other work in the Premises.
(g) Unless Landlord so consents, Tenant shall not, and Tenant shall
not permit or suffer anyone to:
(i) Cook in the premises;
(ii) Place vending or dispensing machines of any kind in the
Premises; or
(iii) At any time sell, purchase or give away, or permit the
sale, purchase or gift of, food in any form.
(iv) Use the Premises for lodging or for any immoral or illegal
purposes.
(v) Use the Premises to engage in the manufacture or sale of,
or permit tile use of, any spirituous, fermented, intoxicating or
alcoholic beverages on the Premises.
(vi) Use the Premises to engage in the manufacture or sale of,
or permit the use of, any illegal drugs.
(h) No furniture shall be placed in front of the building or in any
lobby or corridor, without the prior written consent of Landlord. Landlord
shall have the right to remove all non-permitted signs and furniture,
without notice to Tenant, at Tenant's expense.
(i) No animals are allowed in the Building.
(j) No lock or other security device shall be placed by Tenant on any
door in the Building without the Building manager being kept furnished with
two of the keys, cards or other means of access therefore. At the
termination of its tenancy, Tenant shall promptly deliver to Landlord all
keys, entry cards and other means of access to offices, rest rooms and
vaults.
(k) The use of oil, gas or inflammable liquids for heating, lighting
or any other purpose is expressly prohibited. Explosives or other
hazardous articles shall not be brought into the Building.
(l) Electric floor space heaters, humidifiers or A/C fans are not
permitted.
(m) Landlord shall have the right to approve or disapprove the movers
or moving company employed by Tenant. Tenant shall cause said movers to
use only the loading facilities and elevator designated by Landlord. In
the event Tenant's movers damage the elevator or any part of the Building,
Tenant shall forthwith pay to Landlord the amount required to repair said
damage.
<PAGE>
(n) If any Tenant desires telegraphic, telephonic, computer or other
electric connections, Landlord, or its agents, will direct the electricians
as to where and how the wires may be introduced, and without such
directions, no boring or cutting for wires will be permitted. Any such
installation and connection shall be made at Tenant's expenses, and, at
Landlord's option, shall be removed at Tenant's expense at the expiration
or termination of its Lease.
(o) Except for the following smoking areas specifically designated by
Landlord, the outdoor Plaza level of 1099 - 18th Street, the outdoor areas
at the corner of 18th and Champa and 19th and Curtis and the Smoke Haus in
the mall, all common areas of the building, including all sidewalks,
entries, passages, stairways, elevators, restrooms, lobbies and hallways,
shall be non-smoking areas. Tenant shall be responsible to prevent its
employees, agents, visitors, customers and guests from smoking in such
common areas.
(p) During the normal office hours of 6:00 a.m. to 6:00 p.m., Monday
through Friday, Tenant and its employees and agents shall observe the
building dress code, which requires a neat and clean appearance and
prohibits the wearing of cutoffs and ragged, torn, ripped, rent or holey
apparel.
(q) The Landlord reserves the right to modify and make such other and
further reasonable rules and regulations as in its judgment may, from time
to time, be needful and desirable for the safety, security, care and
cleanliness of the Premises and preservation of good order and therein.
<PAGE>
EXHIBIT 10.44
OFFICE LEASE
------------
CHINA BASIN LANDING
-------------------
BRE/CBL, LLC
a Delaware limited liability company
as Landlord,
and
PRIME RESPONSE, INC.,
a Delaware corporation,
as Tenant.
<PAGE>
CHINA BASIN LANDING
-------------------
INDEX
-----
<TABLE>
<CAPTION>
ARTICLE SUBJECT MATTER PAGE
- ------- -------------- ----
<S> <C> <C>
ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON AREAS................. 3
ARTICLE 2 LEASE TERM.................................................... 4
ARTICLE 3 BASE RENT..................................................... 4
ARTICLE 4 ADDITIONAL RENT............................................... 4
ARTICLE 5 USE OF PREMISES............................................... 8
ARTICLE 6 SERVICES AND UTILITIES........................................ 9
ARTICLE 7 REPAIRS....................................................... 10
ARTICLE 8 ADDITIONS AND ALTERATIONS..................................... 11
ARTICLE 9 COVENANT AGAINST LIENS........................................ 12
ARTICLE 10 INSURANCE..................................................... 12
ARTICLE 11 DAMAGE AND DESTRUCTION........................................ 14
ARTICLE 12 NONWAIVER..................................................... 15
ARTICLE 13 CONDEMNATION.................................................. 16
ARTICLE 14 ASSIGNMENT AND SUBLETTING..................................... 16
ARTICLE 15 SURRENDER OF PREMISES; OWNERSHIP AND
REMOVAL OF TRADE FIXTURES..................................... 19
ARTICLE 16 HOLDING OVER.................................................. 20
ARTICLE 17 ESTOPPEL CERTIFICATES......................................... 20
ARTICLE 18 SUBORDINATION................................................. 20
ARTICLE 19 DEFAULTS; REMEDIES............................................ 21
ARTICLE 20 COVENANT OF QUIET ENJOYMENT................................... 23
ARTICLE 21 SECURITY DEPOSIT.............................................. 23
ARTICLE 22 SUBSTITUTION OF OTHER PREMISES................................ 23
ARTICLE 23 SIGNS......................................................... 24
ARTICLE 24 COMPLIANCE WITH LAW........................................... 24
ARTICLE 25 LATE CHARGES.................................................. 24
ARTICLE 26 LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT.......... 25
ARTICLE 27 ENTRY BY LANDLORD............................................. 25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 28 INTENTIONALLY DELETED......................................... 25
ARTICLE 29 MISCELLANEOUS PROVISIONS...................................... 26
</TABLE>
EXHIBITS
A OUTLINE OF PREMISES
B TENANT WORK LETTER
C FORM OF NOTICE OF LEASE TERM DATES
D RULES AND REGULATIONS
E FORM OF TENANT'S ESTOPPEL CERTIFICATE
ii
<PAGE>
CHINA BASIN LANDING
-------------------
INDEX OF MAJOR DEFINED TERMS
----------------------------
LOCATION OF
DEFINITION
DEFINED TERMS IN OFFICE LEASE
- ------------- ---------------
Additional Rent......................................................... 7
Alterations............................................................. 5
Base Building........................................................... 11
Base Rent............................................................... 6
Base Year............................................................... 7
Brokers................................................................. 38
Building................................................................ 4
Building Common Areas................................................... 5
Building Hours.......................................................... 9
China Basin Landing..................................................... 4
Common Areas............................................................ 5
Cost Pools.............................................................. 7
Direct Expenses......................................................... 7
Estimate................................................................ 8
Estimate Statement...................................................... 8
Estimated Excess........................................................ 8
Excess.................................................................. 7
Expense Year............................................................ 7
Force Majeure........................................................... 29
Holidays................................................................ 9
HVAC.................................................................... 9
Landlord................................................................ 1
Landlord Parties........................................................ 13
Landlord Repair Notice.................................................. 13
Lease................................................................... 1
Lease Commencement Date................................................. 6
Lease Expiration Date................................................... 6
Lease Term.............................................................. 6
Lease Year.............................................................. 4
Lines................................................................... 31
Mail.................................................................... 29
Notices................................................................. 29
Operating Expenses...................................................... 7
Original Improvements................................................... 12
Other Improvements...................................................... 32
Premises................................................................ 4
Project................................................................. 4
Project Common Areas.................................................... 5
Proposition 13.......................................................... 6
Renovations............................................................. 31
Rent.................................................................... 7
Security Deposit........................................................ 24
Statement............................................................... 7
Subject Space........................................................... 17
Summary................................................................. 1
Tax Expenses............................................................ 6
Tenant.................................................................. 1
Tenant Personal Property................................................ 20
Tenant Work Letter...................................................... 4
Tenant's Share.......................................................... 7
Transfer................................................................ 19
Transfer Notice......................................................... 17
iii
<PAGE>
Transfer Premium........................................................ 18
Transferee.............................................................. 17
Transfers............................................................... 17
iv
<PAGE>
CHINA BASIN LANDING
-------------------
OFFICE LEASE
------------
This Office Lease (the "Lease"), dated as of the date set forth in Section
1 of the Summary of Basic Lease Information (the "Summary"), below, is made by
and between BRE/CBL, LLC a Delaware limited liability company ("Landlord"), and
PRIME RESPONSE, INC., a Delaware Corp. ("Tenant").
SUMMARY OF BASIC LEASE INFORMATION
----------------------------------
TERMS OF LEASE DESCRIPTION
- -------------- -----------
1. Date: March 25, 1999
2. Premises
(Article 1).
2.1 Building: Wharfside Building, China Basin Landing,
185 Berry Street, San Francisco,
California 94107
2.2 Premises: Approximately 1,969 rentable square feet
of space located in Suite 4601 on the
fourth (4th) floor of the Building, as
further set forth in Exhibit A to the
---------
Office Lease.
3. Lease Term
(Article 2).
3.1 Length of Term: Two (2) years.
3.2 Lease Commencement
Date: Upon the vacation of the premises by the
existing tenant and completion of the
tenant improvements anticipated to no
later than June 1, 1999.
3.3 Lease Expiration Date: The date immediately preceding the 2nd
anniversary of the Lease Commencement
Date.
4. Base Rent (Article 3):
Annual
Monthly Rental Rate
Annual Installment per Rentable
Lease Year Base Rent of Base Rent Square Foot
---------- --------- ------------ ------------
1 - 2 $75,806.50 $6,317.21 $38.50
5. Base Year
(Article 4): Calendar year 1999.
6. Tenant's Share
(Article 4): Approximately 0.281%.
7. Permitted Use
(Article 5): General office use consistent with a
first-class office building
-1-
<PAGE>
8. Security Deposit
(Article 21): $6,317.21.
9. Address of Tenant Prime Response, Inc.
(Section 29.18): 1099 Eighteenth Street Suite 500
Denver, CO 80202
Attention: Cathy Lewis
(Prior to Lease Commencement Date)
and
185 Berry Street
Suite 4601
San Francisco, California 94107
Attention: Martin Muoto
(After Lease Commencement Date)
10. Address of Landlord
(Section 29.18): Jones Lang Wootton California, Inc.
China Basin Landing
185 Berry Street, Suite 140
San Francisco, California 94107
Attention: General Manager
with copies to:
McCarthy Cook & Co., LLC
5750 Wilshire Boulevard
Los Angeles, California 90036
Attention: Edward W. Cook III
and
Allen, Matkins, Leck, Gamble & Mallory
1999 Avenue of the Stars, Suite 1800
Los Angeles, California 90067
Attention: Anton N. Natsis, Esq.
11. Broker(s)
(Section 29.24): Jones Lang Wootton California, Inc.
185 Berry Street, Suite 140
San Francisco, California 94107
and
Arroyo & Coates Commercial Leasing Group
500 Washington Street
Suite 700
San Francisco, California 94111
-2-
<PAGE>
ARTICLE 1
PREMISES, BUILDING, PROJECT, AND COMMON AREAS
1.1 Premises, Building, Project and Common Areas.
--------------------------------------------
1.1.1 The Premises. Landlord hereby leases to Tenant and Tenant
------------
hereby leases from Landlord the premises set forth in Section 2.2 of the Summary
(the "Premises"). The outline of the Premises is set forth in Exhibit A
---------
attached hereto and each floor or floors of the Premises has the number of
rentable square feet as set forth in Section 2.2 of the Summary. The parties
hereto agree that the lease of the Premises is upon and subject to the terms,
covenants and conditions herein set forth, and Tenant covenants as a material
part of the consideration for this Lease to keep and perform each and all of
such terms, covenants and conditions by it to be kept and performed and that
this Lease is made upon the condition of such performance. The parties hereto
hereby acknowledge that the purpose of Exhibit A is to show the approximate
---------
location of the Premises in the "Building," as that term is defined in Section
1.1.2, below, only, and such Exhibit is not meant to constitute an agreement,
representation or warranty as to the construction of the Premises, the precise
area thereof or the specific location of the "Common Areas," as that term is
defined in Section 1.1.3, below, or the elements thereof or of the accessways to
the Premises or the "Project," as that term is defined in Section 1.1.2, below.
Except as specifically set forth in this Lease and in the Tenant Work Letter
attached hereto as Exhibit B (the "Tenant Work Letter"), Landlord shall not be
---------
obligated to provide or pay for any improvement work or services related to the
improvement of the Premises. Tenant also acknowledges that neither Landlord nor
any agent of Landlord has made any representation or warranty regarding the
condition of the Premises, the Building or the Project or with respect to the
suitability of any of the foregoing for the conduct of Tenant's business, except
as specifically set forth in this Lease and the Tenant Work Letter. The taking
of possession of the Premises by Tenant shall conclusively establish that the
Premises and the Building were at such time in good and sanitary order,
condition and repair.
1.1.2 The Building and The Project. The Premises are a part of the
----------------------------
building set forth in Section 2.1 of the Summary (the "Building"). The Building
is part of an office project known as "China Basin Landing." The term
"Project," as used in this Lease, shall mean (i) the Building and the Common
Areas, (ii) the land (which is improved with landscaping, subterranean parking
facilities and other improvements) upon which the Building and the Common Areas
are located, (iii) the other office building located adjacent to the Building
and the land upon which such adjacent office building is located, and (iv) at
Landlord's discretion, any additional real property, areas, land, buildings or
other improvements added thereto outside of the Project.
1.1.3 Common Areas. Tenant shall have the non-exclusive right to use
------------
in common with other tenants in the Project, and subject to the rules and
regulations referred to in Article 5 of this Lease, those portions of the
Project which are provided, from time to time, for use in common by Landlord,
Tenant and any other tenants of the Project (such areas, together with such
other portions of the Project designated by Landlord, in its discretion,
including certain areas designated for the exclusive use of certain tenants, or
to be shared by Landlord and certain tenants, are collectively referred to
herein as the "Common Areas"). The Common Areas shall consist of the "Project
Common Areas" and the "Building Common Areas." The term "Project Common Areas,"
as used in this Lease, shall mean the portion of the Project designated as such
by Landlord. The term "Building Common Areas," as used in this Lease, shall
mean the portions of the Common Areas located within the Building designated as
such by Landlord. The manner in which the Common Areas are maintained and
operated shall be at the sole discretion of Landlord and the use thereof shall
be subject to such rules, regulations and restrictions as Landlord may make from
time to time. Landlord reserves the right to make from time to time. Landlord
reserves the right to close temporarily, make alterations or additions to, or
change the location of elements of the Project and the Common Areas.
1.2 Verification of Rentable Square Feet of Premises, Building, and
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Project. In the event that the rentable area of the Premises, the Building
- -------
and/or the Project shall hereafter change due to subsequent alterations and/or
other modifications to the Premises, the Building and/or the Project, the
rentable area of the Premises, the Building and/or the Project, as the case may
be, shall be appropriately adjusted as of the date of such alteration and/or
other modification, based
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upon the written verification by Landlord's space planner of such revised
rentable areas. In the event of any such adjustment to the rentable area of the
Premises, the Building and/or the Project, all amounts, percentages and figures
appearing or referred to in this Lease based upon such rentable area (including,
without limitation, the amount of the "Rent" and any "Security Deposit," as
those terms are defined in Article 4 and Article 21 of this Lease, respectively)
shall be modified in accordance with such determination.
ARTICLE 2
LEASE TERM
The terms and provisions of this Lease shall be effective as of the date
of this Lease. The term of this Lease (the "Lease Term") shall be as set forth
in Section 3.1 of the Summary, shall commence on the date set forth in Section
3.2 of the Summary (the "Lease Commencement Date"), and shall terminate on the
date set forth in Section 3.3 of the Summary (the "Lease Expiration Date")
unless this Lease is sooner terminated as hereinafter provided. For purposes of
this Lease, the term "Lease Year" shall mean each consecutive twelve (12) month
period during the Lease Term; provided, however, that the first Lease Year shall
commence on the Lease Commencement Date and end on the last day of the eleventh
month thereafter and the second and each succeeding Lease Year shall commence on
the first day of the next calendar month; and further provided that the last
Lease Year shall end on the Lease Expiration Date. At any time during the Lease
Term, Landlord may deliver to Tenant a notice in the form as set forth in
Exhibit C, attached hereto, as a confirmation only of the information set forth
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therein, which Tenant shall execute and return to Landlord within five (5) days
of receipt thereof.
ARTICLE 3
BASE RENT
Tenant shall pay, without prior notice or demand, to Landlord or
Landlord's agent at the management office of the Project, or, at Landlord's
option, at such other place as Landlord may from time to time designate in
writing, by a check for currency which, at the time of payment, is legal tender
for private or public debts in the United States of America, base rent ("Base
Rent") as set forth in Section 4 of the Summary, payable in equal monthly
installments as set forth in Section 4 of the Summary in advance on or before
the first day of each and every calendar month during the Lease Term, without
any setoff or deduction whatsoever. The Base Rent for the first full month of
the Lease Term shall be paid at the time of Tenant's execution of this Lease.
If any Rent payment date (including the Lease Commencement Date) falls on a day
of the month other than the first day of such month or if any payment of Rent is
for a period which is shorter than one month, the Rent for any fractional month
shall accrue on a daily basis for the period from the date such payment is due
to the end of such calendar month or to the end of the Lease Term at a rate per
day which is equal to 1/365 of the applicable annual Rent. All other payments
or adjustments required to be made under the terms of this Lease that require
proration on a time basis shall be prorated on the same basis.
ARTICLE 4
ADDITIONAL RENT
4.1 General Terms. In addition to paying the Base Rent specified in
-------------
Article 3 of this Lease, Tenant shall pay, commencing after the expiration of
the "Base Year", "Tenant's Share" of the annual "Direct Expenses," as those
terms are defined in Sections 4.2.1, 4.2.6 and 4.2.2 of this Lease,
respectively, which are in excess of the amount of Direct Expenses applicable to
the Base Year; provided, however, that in no event shall any decrease in Direct
Expenses for any "Expense Year," as that term is defined in Section 4.2.6 below,
below Direct Expenses for the Base Year entitle Tenant to any decrease in Base
Rent or any credit against sums due under this Lease. Such payments by Tenant,
together with any and all other amounts payable by Tenant to Landlord pursuant
to the terms of this Lease, are hereinafter collectively referred to as the
"Additional Rent", and the Base Rent and the Additional Rent are herein
collectively referred to as "Rent." All amounts due under this Article 4 as
Additional Rent shall be payable for the same periods and in the same manner as
the Base Rent. Without limitation on other obligations of Tenant which survive
the expiration of the Lease Term, the obligations of Tenant to pay the
Additional Rent provided for in this Article 4 shall survive the expiration of
the Lease Term.
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4.2 Definitions of Key Terms Relating to Additional Rent. As used in
----------------------------------------------------
this Article 4, the following terms shall have the meanings hereinafter set
forth:
4.2.1 "Base Year" shall mean the period set forth in Section 5 of
the Summary.
4.2.2 "Direct Expenses" shall mean "Operating Expenses" and "Tax
Expenses."
4.2.3 "Expense Year" shall mean each calendar year in which any
portion of the Lease Tenn falls, through and including the calendar year in
which the Lease Term expires, provided that Landlord, upon notice to Tenant, may
change the Expense Year from time to time to any other twelve (12) consecutive
month period, and, in the event of any such change, Tenant's Share of Direct
Expenses shall be equitably adjusted for any Expense Year involved in any such
change.
4.2.4 "Operating Expenses" shall mean all expenses, costs and
amounts of every kind and nature which Landlord pays or accrues during any
Expense Year because of or in connection with the ownership, management,
maintenance, security, repair, replacement, restoration or operation of the
Project, or any portion thereof. Without limiting the generality of the
foregoing, Operating Expenses shall specifically include any and all of the
following: (i) the cost of supplying all utilities, the cost of operating,
repairing, maintaining, and renovating the utility, telephone, mechanical,
sanitary, storm drainage, and elevator systems, and the cost of maintenance and
service contracts in connection therewith; (ii) the cost of licenses,
certificates, permits and inspections and the cost of contesting any
governmental enactments which may affect Operating Expenses, and the costs
incurred in connection with a transportation system management program or
similar program; (iii) the cost of all insurance carried by Landlord in
connection with the Project; (iv) the cost of landscaping, relamping, and all
supplies, tools, equipment and materials used in the operation, repair and
maintenance of the Project, or any portion thereof; (v) costs incurred in
connection with the parking areas servicing the Building; (vi) fees and other
costs, including management fees, consulting fees, legal fees and accounting
fees, of all contractors and consultants in connection with the management,
operation, maintenance and repair of the Project; (vii) payments under any
equipment rental agreements and the fair rental value of any management office
space; (viii) wages, salaries and other compensation and benefits, including
taxes levied thereon, of all persons engaged in the operation, maintenance and
security of the Project; (ix) costs under any instrument pertaining to the
sharing of costs by the Project; (x) operation, repair, maintenance and
replacement of all systems and equipment and components thereof of the Building;
(xi) the cost of janitorial, alarm, security and other services, replacement of
wall and floor coverings, ceiling tiles and fixtures in common areas,
maintenance and replacement of curbs and walkways, exterior windows and walls,
repair to roofs and re-roofing, waterproofing and sealing of garage, foundation
and basement areas; (xii) amortization (including interest on the unamortized
cost) of the cost of acquiring or the rental expense of personal property used
in the maintenance, operation and repair of the Project, or any portion thereof;
(xiii) the cost of capital improvements or other costs incurred in connection
with the Project (A) which are intended to effect economies in the operation or
maintenance of the Project, or any portion thereof, (B) that are required to
comply with present or anticipated conservation programs, (C) which are
replacements or modifications of nonstructural items located in the Common Areas
required to keep the Common Areas in good order or condition, or (D) that are
required under any governmental law or regulation; provided, however, that any
capital expenditure shall be amortized with interest over its useful life as
Landlord shall reasonably determine; (xiv) costs, fees, charges or assessments
imposed by, or resulting from any mandate imposed on Landlord by, any federal,
state or local government for fire and police protection, trash removal,
community services, or other services which do not constitute "Tax Expenses" as
that term is defined in Section 4.2.5, below; and (xv) payments under any
easement, license, operating agreement, declaration, restrictive covenant, or
instrument pertaining to the sharing of costs by the Building. If Landlord is
not furnishing any particular work or service (the cost of which, if performed
by Landlord, would be included in Operating Expenses) to a tenant who has
undertaken to perform such work or service in lieu of the performance thereof by
Landlord, Operating Expenses shall be deemed to be increased by an amount equal
to the additional Operating Expenses which would reasonably have been incurred
during such period by Landlord if it had at its own expense furnished such work
or service to such tenant. If the Project is not at least ninety-five percent
(95%) occupied during all or a portion of the Base Year or any Expense Year,
Landlord may elect to make an appropriate adjustment to the components of
Operating Expenses for such year to determine the amount of
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completion thereof. In addition, Landlord may in its discretion, require Tenant
to obtain a lien and completion bond or some alteranate form of security
satisfactory to Landlord in an amount sufficient to ensure the lien-free
completion of such Alterations and naming Landlord as a co-obligee.
8.5 Landlord's Property. All Alterations, improvements, fixtures,
-------------------
equipment and/or appurtenances which may be installed or placed in or about the
Premises, from time to time, shall be at the sole cost of Tenant and shall be
and become the property of Landlord, except that Tenant may remove any
Alterations, improvements, fixtures and/or equipment which Tenant can
substantiate to Landlord have not been paid for with any Tenant improvement
allowance funds provided to Tenant by Landlord, provided Tenant repairs any
damage to the Premises and Building caused by such removal and returns the
affected portion of the Premises to a building standard tenant improved
condition as determined by Landlord. Furthermore, Landlord may, by written
notice to Tenant prior to the end of the Lease Term, or given following any
earlier termination of this Lease, require Tenant, at Tenant's expense, to
remove any Alterations or improvements in the Premises, and to repair any damage
to the Premises and Building caused by such removal and returns the affected
portion of the Premises to a building standard tenant improved condition as
determined by Landlord. If Tenant fails to complete such removal and/or to
repair any damage caused by the removal of any Alterations or improvements in
the Premises, and return the affected portion of the Premises to a building
standard tenant improved condition as determined by Landlord, Landlord may do so
and may charge the cost thereof to Tenant. Tenant hereby protects, defends,
indemnifies and holds Landlord harmless from any liability, cost, obligation,
expense or claim of lien in any manner relating to the installation, placement,
removal or financing of any such Alterations, improvements, fixtures and/or
equipment in, on or about the Premises, which obligations of Tenant shall
survive the expiration or earlier termination of this Lease.
ARTICLE 9
COVENANT AGAINST LIENS
Tenant shall keep the Project and Premises free from any liens or
encumbrances arising out of the work performed, materials furnished or
obligations incurred by or on behalf of Tenant, and shall protect, defend,
indemnify and hold Landlord harmless from and against any claims, liabilities,
judgments or costs (including, without limitation, reasonable attorneys' fees
and costs) arising out of same or in connection therewith. Tenant shall give
Landlord notice at least twenty (20) days prior to the commencement of any such
work on the Premises (or such additional time as may be necessary under
applicable laws) to afford Landlord the opportunity of posting and recording
appropriate notices of non-responsibility. Tenant shall remove any such lien or
encumbrance by bond or otherwise within five (5) days after notice by Landlord,
and if Tenant shall fail to do so, Landlord may pay the amount necessary to
remove such lien or encumbrance, without being responsible for investigating the
validity thereof. The amount so paid shall be deemed Additional Rent under this
Lease payable upon demand, without limitation as to other remedies available to
Landlord under this Lease. Nothing contained in this Lease shall authorize
Tenant to do any act which shall subject Landlord's title to the Building or
Premises to any liens or encumbrances whether claimed by operation of law or
express or implied contract. Any claim to a lien or encumbrance upon the
Building or Premises arising in connection with any such work or respecting the
Premises not performed by or at the request of Landlord shall be null and void,
or at Landlord's option shall attach only against Tenant's interest in the
Premises and shall in all respects be subordinate to Landlord's title to the
Project, Building and Premises.
ARTICLE 10
INSURANCE
10.1 Indemnification and Waiver. Tenant hereby assumes all risk of
--------------------------
damage to property or injury to persons in, upon or about the Premises from any
cause whatsoever and agrees that Landlord, its partners, subpartners and their
respective officers, agents, servants, employees, and independent contractors
(collectively, "Landlord Parties") shall not be liable for, and are hereby
released from any responsibility for, any damage either to person or property or
resulting from the loss of use thereof, which damage is sustained by Tenant or
by other persons claiming through Tenant. Tenant shall indemnify, defend,
protect, and hold harmless the
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Landlord Parties from any and all loss, cost, damage, expense and liability
(including without limitation court costs and reasonable attorneys' fees)
incurred in connection with or arising from any cause in, on or about the
Premises, any acts, omissions or negligence of Tenant or of any person claiming
by, through or under Tenant, or of the contractors, agents, servants, employees,
invitees, guests or licensees of Tenant or any such person, in, on or about the
Project or any breach of the terms of this Lease, either prior to, during, or
after the expiration of the Lease Term, provided that the terms of the foregoing
indemnity shall not apply to the negligence or willful misconduct of Landlord.
Should Landlord be named as a defendant in any suit brought against Tenant in
connection with or arising out of Tenant's occupancy of the Premises, Tenant
shall pay to Landlord its costs and expenses incurred in such suit, including
without limitation, its actual professional fees such as appraisers',
accountants' and attorneys' fees. Further, Tenant's agreement to indemnify
Landlord pursuant to this Section 10.1 is not intended and shall not relieve any
------------
insurance carrier of its obligations under policies required to be carried by
Tenant pursuant to the provisions of this Lease, to the extent such policies
cover the matters subject to Tenant's indemnification obligations; nor shall
they supersede any inconsistent agreement of the parties set forth in any other
provision of this Lease. The provisions of this Section 10.1 shall survive the
expiration or sooner termination of this Lease with respect to any claims or
liability arising in connection with any event occurring prior to such
expiration or termination.
10.2 Tenant's Compliance With Landlord's Fire and Casualty Insurance.
---------------------------------------------------------------
Tenant shall, at Tenant's expense, comply with all insurance company
requirements pertaining to the use of the Premises. If Tenant's conduct or use
of the Premises causes any increase in the premium for such insurance policies
then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant's
expense, shall comply with all rules, orders, regulations or requirements of the
American Insurance Association (formerly the National Board of Fire
Underwriters) and with any similar body.
10.3 Tenant's Insurance. Tenant shall maintain the following coverages in
------------------
the following amounts.
10.3.1 Commercial General Liability Insurance covering the insured
against claims of bodily injury, personal injury and property damage (including
loss of use thereof) arising out of Tenant's operation's, and contractual
liabilities (covering the performance by Tenant of its indemnity agreements)
including a Broad Form endorsement covering the insuring provisions of this
Lease and the performance by Tenant of the indemnity agreements set forth in
Section 10.1 of this Lease, for limits of liability not less than:
Bodily Injury and $5,000,000 each occurrence
Property Damage Liability $5,000,000 annual aggregate
Personal Injury Liability $5,000,000 each occurrence
$5,000,000 annual aggregate
0% Insured's participation
10.3.2 Physical Damage Insurance covering (i) all office furniture,
business and trade fixtures, office equipment, free-standing cabinet work,
movable partitions, merchandise and all other items of Tenant's property on the
Premises installed by, for, or at the expense of Tenant, (ii) the "Tenant
Improvements," as that term is defined in Section 2.1 of the Tenant Work Letter,
and any other improvements which exist in the Premises as of the Lease
Commencement Date (excluding the Base Building) (the "Original Improvements"),
and (iii) all other improvements, alterations and additions to the Premises.
Such insurance shall be written on an "all risks" of physical loss or damage
basis, for the full replacement cost value (subject to reasonable deductible
amounts) new without deduction for depreciation of the covered items and in
amounts that meet any co-insurance clauses of the policies of insurance and
shall include coverage for damage or other loss caused by fire or other peril
including, but not limited to, vandalism and malicious mischief, theft, water
damage of any type, including sprinkler leakage, bursting or stoppage of pipes,
and explosion, and providing business interruption coverage for a period of one
year.
10.3.3 Worker's Compensation and Employer's Liability or other
similar insurance pursuant to all applicable state and local statutes and
regulations.
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10.3.4 Business Interruption Insurance in the amount necessary to
insure payment of Tenant's obligations to pay Rent hereunder for a period of not
less than twelve (12) months.
10.4 Form of Policies. The minimum limits of policies of insurance
----------------
required of Tenant under this Lease shall in no event limit the liability of
Tenant under this Lease. Such insurance shall (i) name Landlord, and any other
party the Landlord so specifies, as an additional insured, including Landlord's
managing agent, if any; (ii) specifically cover the liability assumed by Tenant
under this Lease, including, but not limited to, Tenant's obligations under
Section 10.1 of this Lease; (iii) be issued by an insurance company having a
rating of not less than A-X in Best's Insurance Guide or which is otherwise
acceptable to Landlord and licensed to do business in the State of California;
(iv) be primary insurance as to all claims thereunder and provide that any
insurance carried by Landlord is excess and is non-contributing with any
insurance requirement of Tenant; (v) be in form and content reasonably
acceptable to Landlord; and (vi) provide that said insurance shall not be
canceled or coverage changed unless thirty (30) days' prior written notice shall
have been given to Landlord and any mortgagee of Landlord. Tenant shall deliver
said policy or policies or certificates (including endorsements) thereof to
Landlord on or before the Lease Commencement Date and at least thirty (30) days
before the expiration dates thereof. In the event Tenant shall fail to procure
such insurance, or to deliver such policies or certificate, Landlord may, at its
option, procure such policies for the account of Tenant, and the cost thereof
shall be paid to Landlord within five (5) days after delivery to Tenant of bills
therefor.
10.5 Subrogation. Landlord and Tenant intend that their respective
-----------
property loss risks shall be borne by reasonable insurance carriers to the
extent above provided, and Landlord and Tenant hereby agree to look solely to,
and seek recovery only from, their respective insurance carriers in the event of
a property loss to the extent that such coverage is agreed to be provided
hereunder. The parties each hereby waive all rights and claims against each
other for such losses, and waive all rights of subrogation of their respective
insurers, provided such waiver of subrogation shall not affect the right to the
insured to recover thereunder. The parties agree that their respective
insurance policies are now, or shall be, endorsed such that the waiver of
subrogation shall not affect the right of the insured to recover thereunder, so
long as no material additional premium is charged therefor.
10.6 Additional Insurance Obligations. Tenant shall carry and maintain
--------------------------------
during the entire Lease Term, as the same may be extended, at Tenant's sole cost
and expense, increased amounts of the insurance required to be carried by Tenant
pursuant to this Article 10 and such other reasonable types of insurance
coverage and in such reasonable amounts covering the Premises and Tenant's
operations therein, as may be reasonably requested by Landlord.
ARTICLE 11
DAMAGE AND DESTRUCTION
11.1 Repair of Damage to Premises by Landlord. Tenant shall promptly
----------------------------------------
notify Landlord of any damage to the Premises resulting from fire or any other
casualty. If the Premises or any Common Areas serving or providing access to
the Premises shall be damaged by fire or other casualty, Landlord shall promptly
and diligently, subject to reasonable delays for insurance adjustment or other
matters beyond Landlord's reasonable control, and subject to all other terms of
this Article 11, restore the Base Building and such Common Areas. Such
restoration shall be to substantially the same condition of the Base Building
and the Common Areas prior to the casualty, except for modifications required by
zoning and building codes and other laws or by the holder of a mortgage on the
Building or Project or any other modifications to the Common Areas deemed
desirable by Landlord, provided that access to the Premises and any common
restrooms serving the Premises, upon notice (the "Landlord Repair Notice") to
Tenant from Landlord, Tenant shall assign to Landlord (or to any party
designated by Landlord) all insurance proceeds payable to Tenant under Tenant's
insurance required under Section 10.3 of this Lease, and Landlord shall repair
any injury or damage to the Tenant Improvements and the Original Improvements
installed in the Premises and shall return such Tenant Improvements and Original
Improvements to their original condition; provided that if the cost of such
repair by Landlord exceeds the amount of insurance proceeds received by Landlord
from Tenant's insurance carrier, as assigned by Tenant, the cost of such repairs
shall be paid by Tenant to
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Landlord prior to Landlord's commencement of repair of the damage, or as soon as
such additional costs are known. In the event that Landlord does not deliver the
Landlord Repair Notice within sixty (60) days following the date the casualty
becomes known to Landlord, Tenant shall, at its sole cost and expense, repair
any injury or damage to the Tenant Improvements and the Original Improvements
installed in the Premises and shall return such Tenant Improvements and Original
Improvements to their original condition. Whether or not Landlord delivers a
Landlord Repair Notice, prior to the commencement of construction, Tenant shall
submit to Landlord, for Landlord's review and approval, all plans,
specifications and working drawings relating thereto, and Landlord shall select
the contractors to perform such improvement work. Landlord shall not be liable
for any inconvenience or annoyance to Tenant or its visitors, or injury to
Tenant's business resulting in any way from such damage or the repair thereof;
provided however, that if such fire or other casualty shall have damaged the
Premises or Common Areas necessary to Tenant's occupancy, Landlord shall allow
Tenant a proportionate abatement of Rent to the extent Landlord is reimbursed
from the proceeds of rental interruption insurance purchased by Landlord as part
of Operating Expenses, during the time and to the extent the Premises are unfit
for occupancy for the purposes permitted under this Lease, and not occupied by
Tenant as a result thereof; provided, further, however, that if the damage or
destruction is due to the negligence or wilful misconduct of Tenant or any of
its agents, employees, contractors, invitees or guests, Tenant shall be
responsible for any reasonable, applicable insurance deductible (which shall be
payable to Landlord upon demand) and there shall be no rent abatement. In the
event that Landlord shall not deliver the Landlord Repair Notice, Tenant's right
to rent abatement pursuant to the preceding sentence shall terminate as of the
date which is reasonably determined by Landlord to be the date Tenant should
have completed repairs to the Premises assuming Tenant used reasonable due
diligence in connection therewith.
11.2 Landlord's Option to Repair. Notwithstanding the terms of Section
---------------------------
11.1 of this Lease, Landlord may elect not to rebuild and/or restore the
Premises, Building and/or Project, and instead terminate this Lease, by
notifying Tenant in writing of such termination within sixty (60) days after the
date of damage, such notice to include a termination date giving Tenant sixty
(60) days to vacate the Premises, but Landlord may so elect only if the Building
or Project shall be damaged by fire or other casualty or cause, whether or not
the Premises are affected, and one or more of the following conditions is
present: (i) in Landlord's reasonable judgment, repairs cannot reasonably be
completed within ninety (90) days after the date of discovery of the damage
(when such repairs are made without the payment of overtime or other premiums);
(ii) the holder of any mortgage on the Building or Project or ground lessor with
respect to the Building or Project shall require that the insurance proceeds or
any portion thereof be used to retire the mortgage debt, or shall terminate the
ground lease, as the case may be; (iii) the damage is not fully covered by
Landlord's insurance policies; or (iv) Landlord decides to rebuild the Building
or Common Areas so that they will be substantially different structurally or
architecturally; (v) the damage occurs during the last eighteen (18) months of
the Lease Term; or (vi) any owner of any other portion of the Project, other
than Landlord, does not intend to repair the damage to such portion of the
Project
11.3 Waiver of Statutory Provisions. The provisions of this Lease,
------------------------------
including this Article 11, constitute an express agreement between Landlord and
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Building or the Project, and any statute or regulation of
the State of California, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code, with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any other statute or regulation, now or hereafter in effect,
shall have no application to this Lease or any damage or destruction to all or
any part of the Premises, the Building or the Project.
ARTICLE 12
NONWAIVER
No provision of this Lease shall be deemed waived by either party hereto
unless expressly waived in a writing signed thereby. The waiver by either party
hereto of any breach of any term, covenant or condition herein contained shall
not be deemed to be a waiver of any subsequent breach of same or any other term,
covenant or condition herein contained. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding
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breach by Tenant of any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular Rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
Rent. No acceptance of a lesser amount than the Rent herein stipulated shall be
deemed a waiver of Landlord's right to receive the full amount due, nor shall
any endorsement or statement on any check or payment or any letter accompanying
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the full amount due. No receipt of monies by Landlord from Tenant after the
termination of this Lease shall in any way alter the length of the Lease Term or
of Tenant's right of possession hereunder, or after the giving of any notice
shall reinstate, continue or extend the Lease Term or affect any notice given
Tenant prior to the receipt of such monies, it being agreed that after the
service of notice or the commencement of a suit, or after final judgment for
possession of the Premises, Landlord may receive and collect any Rent due, and
the payment of said Rent shall not waive or affect said notice, suit or
judgment.
ARTICLE 13
CONDEMNATION
If the whole or any part of the Premises, Building or Project shall be
taken by power of eminent domain or condemned by any competent authority for any
public or quasi-public use or purpose, or if any adjacent property or street
shall be so taken or condemned, or reconfigured or vacated by such authority in
such manner as to require the use, reconstruction or remodeling of any part of
the Premises, Building or Project, or if Landlord shall grant a deed or other
instrument in lieu of such taking by eminent domain or condemnation, Landlord
shall have the option to terminate this Lease effective as of the date
possession is required to be surrendered to the authority. If more than twenty-
five percent (25%) of the rentable square feet of the Premises is taken, or if
access to the Premises is substantially impaired, in each case for a period in
excess of one hundred eighty (180) days, Tenant shall have the option to
terminate this Lease effective as of the date possession is required to be
surrendered to the authority. Tenant shall not because of such taking assert
any claim against Landlord or the authority for any compensation because of such
taking and Landlord shall be entitled to the entire award or payment in
connection therewith, except that Tenant shall have the right to file any
separate claim available to Tenant for any taking of Tenant's personal property
and fixtures belonging to Tenant and removable by Tenant upon expiration of the
Lease Term pursuant to the terms of this Lease, and for moving expenses, so long
as such claims do not diminish the award available to Landlord, its ground
lessor with respect to the Building or Project or its mortgagee, and such claim
is payable separately to Tenant. All Rent shall be apportioned as of the date
of such termination. If any part of the Premises shall be taken, and this Lease
shall not be so terminated, the Rent shall be proportionately abated. Tenant
hereby waives any and all rights it might otherwise have pursuant to Section
1265.130 of The California Code of Civil Procedure. Notwithstanding anything to
the contrary contained in this Article 13, in the event of a temporary taking of
all or any portion of the Premises for a period of one hundred and eighty (180)
days or less, then this Lease shall not terminate but the Base Rent and the
Additional Rent shall be abated for the period of such taking in proportion to
the ratio that the amount of rentable square feet of the Premises taken bears to
the total rentable square feet of the Premises. Landlord shall be entitled to
receive the entire award made in connection with any such temporary taking.
ARTICLE 14
ASSIGNMENT AND SUBLETTING
14.1 Transfers. Tenant shall not, without the prior written consent of
---------
Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to
attach to, or otherwise transfer, this Lease or any interest hereunder, permit
any assignment, or other transfer of this Lease or any interest hereunder by
operation of law, sublet the Premises or any part thereof, or enter into any
license or concession agreements or otherwise permit the occupancy or use of the
Premises or any part thereof by any persons other than Tenant and its employees
and contractors (all of the foregoing are hereinafter sometimes referred to
collectively as "Transfers" and any person to whom any Transfer is made or
sought to be made is hereinafter sometimes referred to as a "Transferee"). If
Tenant desires Landlord's consent to any Transfer, Tenant shall notify Landlord
in writing, which notice (the "Transfer Notice") shall include (i) the proposed
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effective date of the Transfer, which shall not be less than thirty (30) days
nor more than one hundred eighty (180) days after the date of delivery of the
Transfer Notice, (ii) a description of the portion of the Premises to be
transferred (the "Subject Space"), (iii) all of the terms of the proposed
Transfer and the consideration therefor, including calculation of the "Transfer
Premium", as that term is defined in Section 14.3 below, in connection with such
Transfer, the name and address of the proposed Transferee, and a copy of all
existing executed and/or proposed documentation pertaining to the proposed
Transfer, including all existing operative documents to be executed to evidence
such Transfer or the agreements incidental or related to such Transfer, provided
that Landlord shall have the right to require Tenant to utilize Landlord's
standard Transfer documents in connection with the documentation of such
Transfer, (iv) current financial statements of the proposed Transferee certified
by an officer, partner or owner thereof, business credit and personal references
and history of the proposed Transferee and any other information required by
Landlord which will enable Landlord to determine the financial responsibility,
character, and reputation of the proposed Transferee, nature of such
Transferee's business and proposed use of the Subject Space, and (v) an executed
estoppel certificate from Tenant in the form attached hereto as Exhibit E. Any
---------
Transfer made without Landlord's prior written consent shall, at Landlord's
option, be null, void and of no effect, and shall, at Landlord's option,
constitute a default by Tenant under this Lease. Whether or not Landlord
consents to any proposed Transfer, Tenant shall pay Landlord's review and
processing fees, as well as any reasonable professional fees (including, without
limitation, attorneys', accountants', architects', engineers' and consultants'
fees) incurred by Landlord, within thirty (30) days after written request by
Landlord.
14.2 Landlord's Consent. Landlord shall not unreasonably withhold its
------------------
consent to any proposed Transfer of the Subject Space to the Transferee on the
terms specified in the Transfer Notice. Without limitation as to other
reasonable grounds for withholding consent, the parties hereby agree that it
shall be reasonable under this Lease and under any applicable law for Landlord
to withhold consent to any proposed Transfer where one or more of the following
apply:
14.2.1 The Transferee is of a character or reputation or engaged in
a business which is not consistent with the quality of the Building or the
Project;
14.2.2 The Transferee intends to use the Subject Space for purposes
which are not permitted under this Lease;
14.2.3 The Transferee is either a governmental agency or
instrumentality thereof;
14.2.4 The Transferee is not a party of reasonable financial worth
and/or financial stability in light of the responsibilities to be undertaken in
connection with the Transfer on the date consent is requested;
14.2.5 The proposed Transfer would cause a violation of another
lease for space in the Project, or would give an occupant of the Project a right
to cancel its lease;
14.2.6 The terms of the proposed Transfer will allow the Transferee
to exercise a right of renewal, right of expansion, right of first offer, or
other similar right held by Tenant (or will allow the Transferee to occupy space
leased by Tenant pursuant to any such right); or
14.2.7 Either the proposed Transferee, or any person or entity which
directly or indirectly, controls, is controlled by, or is under common control
with, the proposed Transferee, (i) occupies space in the Project at the time of
the request for consent, or (ii) is negotiating or has negotiated with Landlord
to lease space in the Project.
14.2.8 The Transferee does not intend to occupy the entire Premises
and conduct its business therefrom for a substantial portion of the term of the
Transfer.
If Landlord consents to any Transfer pursuant to the terms of this Section
14.2 (and does not exercise any recapture rights Landlord may have under Section
14.4 of this Lease), Tenant may within six (6) months after Landlord's consent,
but not later than the expiration of said six-month period, enter into such
Transfer of the Premises or portion thereof, upon substantially the same terms
and conditions as are set forth in the Transfer Notice furnished by Tenant to
Landlord pursuant to Section 14.1 of this Lease. Notwithstanding anything to the
contrary in the Lease, if
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Tenant or any proposed Transferee claims that Landlord has unreasonably withheld
or delayed its consent under Section 14.2 or otherwise has breached or acted
unreasonably under this Article 14, their sole remedies shall be a declaratory
judgment and an injunction for the relief sought without any monetary damages,
and Tenant hereby waives all other remedies, including, without limitation, any
right at law or equity to terminate this Lease, on its own behalf and, to the
extent permitted under all applicable laws, on behalf of the proposed
Transferee. Tenant shall indemnify, defend and hold harmless Landlord from any
and all liability, losses, claims, damages, costs, expenses, causes of action
and proceedings involving any third party or parties (including without
limitation Tenant's proposed subtenant or assignee) who claim they were damaged
by Landlord's wrongful withholding or conditioning of Landlord's consent.
14.3 Transfer Premium. If Landlord consents to a Transfer, as a condition
----------------
thereto which the parties hereby agree is reasonable, Tenant shall pay to
Landlord any "Transfer Premium," as that term is defined in this Section 14.3,
received by Tenant from such Transferee. "Transfer Premium" shall mean all
rent, additional rent or other consideration payable by such Transferee in
connection with the Transfer in excess of the Rent and Additional Rent payable
by Tenant under this Lease during the term of the Transfer on a per rentable
square foot basis if less than all of the Premises is transferred. "Transfer
Premium" shall also include, but not be limited to, key money, bonus money or
other cash consideration paid by Transferee to Tenant in connection with such
Transfer, and any payment in excess of fair market value for services rendered
by Tenant to Transferee or for assets, fixtures, inventory, equipment, or
furniture transferred by Tenant to Transferee in connection with such Transfer.
In the calculations of the Rent (as it relates to the Transfer Premium
calculated under this Section 14.3), the Rent paid during each annual period for
------------
the Subject Space, shall be computed after adjusting such rent to the actual
effective rent to be paid, taking into consideration any and all leasehold
concessions granted in connection therewith, including, but not limited to, any
rent credit and tenant improvement allowance. For purposes of calculating any
such effective rent all such concessions shall be amortized on a straight-line
basis over the relevant term.
14.4 Landlord's Option as to Subject Space. Notwithstanding anything to
-------------------------------------
the contrary contained in this Article 14, Landlord shall have the option, by
giving written notice to Tenant within thirty (30) days after receipt of any
Transfer Notice, to recapture the Subject Space. Such recapture notice shall
cancel and terminate this Lease with respect to the Subject Space as of the date
stated in the Transfer Notice as the effective date of the proposed Transfer
until the last day of the term of the Transfer as set forth in the Transfer
Notice (or at Landlord's option, shall cause the Transfer to be made to Landlord
or its agent, in which case the parties shall execute the Transfer documentation
promptly thereafter). In the event of a recapture by Landlord, if this Lease
shall be canceled with respect to less than the entire Premises, the Rent
reserved herein shall be prorated on the basis of the number of rentable square
feet retained by Tenant in proportion to the number of rentable square feet
contained in the Premises, and this Lease as so amended shall continue
thereafter in full force and effect, and upon request of either party, the
parties shall execute written confirmation of the same. If Landlord declines,
or fails to elect in a timely manner to recapture the Subject Space under this
Section 14.4, then, provided Landlord has consented to the proposed Transfer,
Tenant shall be entitled to proceed to transfer the Subject Space to the
proposed Transferee, subject to provisions of this Article 14.
14.5 Effect of Transfer. If Landlord consents to a Transfer, (i) the terms
------------------
and conditions of this Lease shall in no way be deemed to have been waived or
modified, (ii) such consent shall not be deemed consent to any further Transfer
by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord,
promptly after execution, an original executed copy of all documentation
pertaining to the Transfer in form reasonably acceptable to Landlord, (iv)
Tenant shall furnish upon Landlord's request a complete statement, certified by
an independent certified public accountant, or Tenant's chief financial officer,
setting forth in detail the computation of any Transfer Premium Tenant has
derived and shall derive from such Transfer, and (v) no Transfer relating to
this Lease or agreement entered into with respect thereto, whether with or
without Landlord's consent, shall relieve Tenant or any guarantor of the Lease
from any liability under this Lease, including, without limitation, in
connection with the Subject Space. Landlord or its authorized representatives
shall have the right at all reasonable times to audit the books, records and
papers of Tenant relating to any Transfer, and shall have the right to make
copies thereof. If the Transfer Premium respecting any Transfer shall be found
understated, Tenant shall, within thirty (30) days after demand, pay the
deficiency, and if understated by more than two percent (2%), Tenant shall pay
Landlord's costs of such audit.
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14.6 Additional Transfers. For purposes of this Lease, the term "Transfer"
--------------------
shall also include (i) if Tenant is a partnership, the withdrawal or change,
voluntary, involuntary or by operation of law, of fifty percent (50%) or more of
the partners, or transfer of fifty percent (50%) or more of partnership
interests, within a twelve (12)-month period, or the dissolution of the
partnership without immediate reconstitution thereof, and (ii) if Tenant is a
closely held corporation (i.e., whose stock is not publicly held and not traded
through an exchange or over the counter), (A) the dissolution, merger,
consolidation or other reorganization of Tenant or (B) the sale or other
transfer of an aggregate of fifty percent (50%) or more of the voting shares of
Tenant (other than to immediate family members by reason of gift or death),
within a twelve (12)-month period, or (C) the sale, mortgage, hypothecation or
pledge of an aggregate of fifty percent (50%) or more of the value of the
unencumbered assets of Tenant within a twelve (12)-month period.
14.7 Occurrence of Default. Any Transfer hereunder shall be subordinate
---------------------
and subject to the provisions of this Lease, and if this Lease shall be
terminated during the term of any Transfer, Landlord shall have the right to:
(i) treat such Transfer as cancelled and repossess the Subject Space by any
lawful means, or (ii) require that such Transferee attorn to and recognize
Landlord as its landlord under any such Transfer. If Tenant shall be in default
under this Lease, Landlord is hereby irrevocably authorized, as Tenant's agent
and attorney-in-fact, to direct any Transferee to make all payments under or in
connection with the Transfer directly to Landlord (which Landlord shall apply
towards Tenant's obligations under this Lease) until such default is cured.
Such Transferee shall rely on any representation by Landlord that Tenant is in
default hereunder, without any need for confirmation thereof by Tenant. Upon
any assignment, the assignee shall assume in writing all obligations and
covenants of Tenant thereafter to be performed or observed under this Lease. No
collection or acceptance of rent by Landlord from any Transferee shall be deemed
a waiver of any provision of this Article 14 or the approval of any Transferee
or a release of Tenant from any obligation under this Lease, whether theretofore
or thereafter accruing. In no event shall Landlord's enforcement of any
provision of this Lease against any Transferee be deemed a waiver of Landlord's
right to enforce any term of this Lease against Tenant or any other person. If
Tenant's obligations hereunder have been guaranteed, Landlord's consent to any
Transfer shall not be effective unless the guarantor also consents to such
Transfer.
ARTICLE 15
SURRENDER OF PREMISES; OWNERSHIP AND
REMOVAL OF TRADE FIXTURES
15.1 Surrender of Premises. No act or thing done by Landlord or any agent
---------------------
or employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in writing by Landlord. The delivery of keys to the
Premises to Landlord or any agent or employee of Landlord shall not constitute a
surrender of the Premises or effect a termination of this Lease, whether or not
the keys are thereafter retained by Landlord, and notwithstanding such delivery
Tenant shall be entitled to the return of such keys at any reasonable time upon
request until this Lease shall have been properly terminated. The voluntary or
other surrender of this Lease by Tenant, whether accepted by Landlord or not, or
a mutual termination hereof, shall not work a merger, and at the option of
Landlord shall operate as an assignment to Landlord of all subleases or
subtenancies affecting the Premises or terminate any or all such sublessees or
subtenancies.
15.2 Removal of Tenant Property by Tenant. Upon the expiration of the
------------------------------------
Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject
to the provisions of this Article 15, quit and surrender possession of the
Premises to Landlord in as good order and condition as when Tenant took
possession and as thereafter improved by Landlord and/or Tenant, reasonable wear
and tear and repairs which are specifically made the responsibility of Landlord
hereunder excepted. Upon such expiration or termination, Tenant shall, without
expense to Landlord, remove or cause to be removed from the Premises all debris
and rubbish, and such items of furniture, equipment, business and trade
fixtures, free-standing cabinet work, movable partitions and other articles of
personal property owned by Tenant or installed or placed by Tenant at its
expense in the Premises (the "Tenant Personal Property"), and such similar
articles of any other persons claiming under Tenant, as Landlord may, in its
sole discretion, require to be removed, and Tenant shall repair at is own
expense all damage to the Premises and
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Building resulting from such removal. Landlord shall have the right, at Tenant's
sole cost and expense, to dispose of any Tenant Personal Property remaining in
the Premises after Tenant's vacation of the same in any manner Landlord sees
fit.
ARTICLE 16
HOLDING OVER
If Tenant holds over after the expiration of the Lease Term or earlier
termination thereof, with or without the express or implied consent of Landlord,
such tenancy shall be from month-to-month only, and shall not constitute a
renewal hereof or an extension for any further term, and in such case Rent shall
be payable at a monthly rate equal to the product of (i) the Rent applicable
during the last rental period of the Lease Term under this Lease, and (ii) a
percentage equal to the sum of (A) 200% and (B) the percentage by which Rent was
increased at the time of the last increase of Rent during the Lease Term. Such
month-to-month tenancy shall be subject to every other applicable term, covenant
and agreement contained herein. Nothing contained in this Article 16 shall be
construed as consent by Landlord to any holding over by Tenant, and Landlord
expressly reserves the right to require Tenant to surrender possession of the
Premises to Landlord as provided in this Lease upon the expiration or other
termination of this Lease. The provisions of this Article 16 shall not be
deemed to limit or constitute a waiver of any other rights or remedies of
Landlord provided herein or at law. If Tenant fails to surrender the Premises
upon the termination or expiration of this Lease, in addition to any other
liabilities to Landlord accruing therefrom, Tenant shall protect, defend,
indemnify and hold Landlord harmless from all loss, costs (including reasonable
attorneys' fees) and liability resulting from such failure, including, without
limiting the generality of the foregoing, any claims made by any succeeding
tenant founded upon such failure to surrender and any lost profits to Landlord
resulting therefrom.
ARTICLE 17
ESTOPPEL CERTIFICATES
Within ten (10) days following a request in writing by Landlord, Tenant
shall execute, acknowledge and deliver to Landlord an estoppel certificate,
which, as submitted by Landlord, shall be substantially in the form of Exhibit
-------
E, attached hereto (or such other form as may be required by any prospective
- -
mortgagee or purchaser of the Project, or any portion thereof), indicating
therein any exceptions thereto that may exist at that time, and shall also
contain any other information reasonably requested by Landlord or Landlord's
mortgagee or prospective mortgagee. Any such certificate may be relied upon by
any prospective mortgagee or purchaser of all or any portion of the Project.
Tenant shall execute and deliver whatever other instruments may be reasonably
required for such purposes. At any time during the Lease Term, Landlord may
require Tenant to provide Landlord with a current financial statement and
financial statements of the two (2) years prior to the current financial
statement year. Such statements shall be prepared in accordance with generally
accepted accounting principles and, if such is the normal practice of Tenant,
shall be audited by an independent certified public accountant. Failure of
Tenant to timely execute, acknowledge and deliver such estoppel certificate or
other instruments shall constitute an acceptance of the Premises and an
acknowledgment by Tenant that statements included in the estoppel certificate
are true and correct, without exception.
ARTICLE 18
SUBORDINATION
This Lease shall be subject and subordinate to all present and future
ground or underlying leases of the Building or Project and to the lien of any
mortgage, trust deed or other encumbrances now or hereafter in force against the
Building or Project or any part thereof, if any, and to all renewals,
extensions, modifications, consolidations and replacements thereof, and to all
advances made or hereafter to be made upon the security of such mortgage or
trust deeds, unless the holders of such mortgages, trust deeds or other
encumbrances, or the lessors under such ground lease of underlying leases,
require in writing that this Lease be superior thereto. Tenant covenants and
agrees in the event any proceedings are brought for the foreclosure of any such
mortgage or deed in lieu thereof (or if any ground lease is terminated), to
attorn, without any deductions or set-offs whatsoever, to the lienholder or
purchaser or any successors thereto
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upon any such foreclosure sale or deed in lieu thereof (or to the ground
lessor), if so requested to do so by such purchaser or lienholder or ground
lessor, and to recognize such purchaser or lienholder or ground lessor as the
lessor under this Lease, provided such lienholder or purchaser or ground lessor
shall agree to accept this Lease and not disturb Tenant's occupancy, so long as
Tenant timely pays the rent and observes and performs the terms, covenants and
conditions of this Lease to be observed and performed by Tenant. Landlord's
interest herein may be assigned as security at any time to any lienholder.
Tenant shall, within five (5) days of request by Landlord, execute such further
instruments or assurances as Landlord may reasonably deem necessary to evidence
or confirm the subordination or superiority of this Lease to any such mortgages,
trust deeds, ground leases or underlying leases. Tenant waives the provisions of
any current or future statute, rule or law which may give or purport to give
Tenant any right or election to terminate or otherwise adversely affect this
Lease and the obligations of the Tenant hereunder in the event of any
foreclosure proceeding or sale. Tenant shall, within five (5) days of request by
Landlord from time to time, (i) execute a Nondisturbance and Attornment
Agreement in the form reasonably approved by Landlord's mortgagee in favor of
any mortgagee of the Building or Project, and (ii) execute any other form of
nondisturbance and attornment agreement (or subordination, nondisturbance and
attornment agreement, or subordination of the applicable mortgagee's lien)
reasonably required by any mortgagee of the Building or Project which provides
comparable nondisturbance protection to Tenant in the event of a foreclosure.
ARTICLE 19
DEFAULTS; REMEDIES
19.1 Events of Default. The occurrence of any of the following shall
-----------------
constitute a default of this Lease by Tenant:
19.1.1 Any failure by Tenant to pay any Rent or any other charge
required to be paid under this Lease, or any part thereof, when due unless such
failure is cured within three (3) days after notice; or
19.1.2 Except where a specific time period is otherwise set forth
for Tenant's performance in this Lease, in which event the failure to perform by
Tenant within such time period shall be a default by Tenant under this Section
19.1.2, any failure by Tenant to observe or perform any other provision,
covenant or condition of this Lease to be observed or performed by Tenant where
such failure continues for ten (10) days after written notice thereof from
Landlord to Tenant; provided that if the nature of such default is such that the
same cannot reasonably be cured within a ten (10) day period, Tenant shall not
be deemed to be in default if it diligently commences such cure within such
period and thereafter diligently proceeds to rectify and cure such default, but
in no event exceeding a period of time in excess of thirty (30) days after
written notice thereof from Landlord to Tenant; or
19.1.3 To the extent permitted by law, a general assignment by
Tenant or any guarantor of the Lease for the benefit of creditors, or the taking
of any corporate action in furtherance of bankruptcy or dissolution whether or
not there exists any proceeding under an insolvency or bankruptcy law, or the
filing by or against Tenant or any guarantor of any proceeding under an
insolvency or bankruptcy law, unless in the case of a proceeding filed against
Tenant or any guarantor the same is dismissed within sixty (60) days, or the
appointment of a trustee or receiver to take possession of all or substantially
all of the assets of Tenant or any guarantor, unless possession is restored to
Tenant or such guarantor within thirty (30) days, or any execution or other
judicially authorized seizure of all or substantially all of Tenant's assets
located upon the Premises or of Tenant's interest in this Lease, unless such
seizure is discharged within thirty (30) days; or
19.1.4 Abandonment or vacation of all or a substantial portion of
the Premises by Tenant; or
19.1.5 The failure by Tenant to observe or perform according to the
provisions of Articles 5, 14, 17 or 18 of this Lease where such failure
continues for more than two (2) business days after notice from Landlord; or
19.1.6 Tenant's failure to occupy the Premises within ten (10)
business days after the Lease Commencement Date.
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The notice periods provided herein are in lieu of, and not in addition to,
any notice periods provided by law.
19.2 Remedies Upon Default. Upon the occurrence of any event of default by
---------------------
Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity (all of which remedies shall be distinct, separate
and cumulative), the option to pursue any one or more of the following,
remedies, each and all of which shall be cumulative and nonexclusive, without
any notice or demand whatsoever.
19.2.1 Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying the Premises or any part
thereof, without being liable for prosecution or any claim or damages therefor;
and Landlord may recover from Tenant the following:
(i) The worth at the time of any unpaid rent which has been
earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that Tenant proves
could have been reasonably avoided; plus
(iii) The worth at the time of award of the amount by which
the unpaid rent for the balance of the Lease Term after the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(iv) Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, specifically including but not limited
to, brokerage commissions and advertising expenses incurred, expenses of
remodeling the Premises or any portion thereof for a new tenant, whether
for the same or a different use, and any special concessions made to obtain
a new tenant; and
(v) At Landlord's election, such other amounts in addition
to or in lieu of the foregoing as may be permitted from time to time by
applicable law.
The term "rent" as used in this Section 19.2 shall be deemed to be and to
mean all sums of every nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others. As used in Paragraphs
19.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by
allowing interest at the rate set forth in Article 25 of this Lease, but in no
case greater than the maximum amount of such interest permitted by law. As used
in Paragraph 19.2.1 (iii) above, the "worth at the time of award" shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).
19.2.2 Landlord shall have the remedy described in California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover rent as it becomes due, if lessee has the right to
sublet or assign, subject only to reasonable limitations). Accordingly, if
Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may, from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease, including the right to recover
all rent as it becomes due.
19.2.3 Landlord shall at all times have the rights and remedies
(which shall be cumulative with each other and cumulative and in addition to
those rights and remedies available under Sections 19.2.1 and 19.2.2, above, or
any law or other provision of this Lease), without prior demand or notice except
as required by applicable law, to seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease, or restrain or enjoin a
violation or breach of any provision hereof.
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19.3 Subleases of Tenant. Whether or not Landlord elects to terminate
-------------------
this Lease on account of any default by Tenant, as set forth in this Article
-------
19, Landlord shall have the right to terminate any and all subleases, licenses,
- --
concessions or other consensual arrangements for possession entered into by
Tenant and affecting the Premises within ten (10) days of notice from Landlord,
or may, in Landlord's sole discretion, succeed to Tenant's interest in such
subleases, licenses, concessions or arrangements. In the event of Landlord's
election to succeed to Tenant's interest in any such subleases, licenses,
concessions or arrangements, Tenant shall, as of the date of notice by Landlord
of such election, have no further right to or interest in the rent or other
consideration receivable thereunder.
19.4 Form of Payment After Default. Following the occurrence of an
-----------------------------
event of default by Tenant, Landlord shall have the right to require that any or
all subsequent amounts paid by Tenant to Landlord hereunder, whether to cure the
default in question or otherwise, be paid in the form of money order, cashier's
or certified check drawn on an institution acceptable to Landlord, or by other
means approved by Landlord, notwithstanding any prior practice of accepting
payments in any different form.
19.5 Efforts to Relet. No re-entry or repossession, repairs,
----------------
maintenance, changes, alterations and additions, reletting, appointment of a
receiver to protect Landlord's interests hereunder, or any other action or
omission by Landlord shall be construed as an election by Landlord to terminate
this Lease or Tenant's right to possession, or to accept a surrender of the
Premises, nor shall same operate to release Tenant in whole or in part from any
of Tenant's obligations hereunder, unless express written notice of such
intention is sent by Landlord to Tenant. Tenant hereby irrevocably waives any
right otherwise available under any law to redeem or reinstate this Lease.
ARTICLE 20
COVENANT OF QUIET ENJOYMENT
Landlord covenants that Tenant, on paying the Rent, charges for services
and other payments herein reserved and on keeping, observing and performing all
the other terms, covenants, conditions, provisions and agreements herein
contained on the part of Tenant to be kept, observed and performed, shall,
during the Lease Term, peaceably and quietly have, hold and enjoy the Premises
subject to the terms, covenants, conditions, provisions and agreements hereof
without interference by any persons lawfully claiming by or through Landlord.
The foregoing covenant is in lieu of any other covenant express or implied.
ARTICLE 21
SECURITY DEPOSIT
Concurrent with Tenant's execution of this Lease, Tenant shall deposit
with Landlord a security deposit (the "Security Deposit") in the amount set
forth in Section 8 of the Summary, as security for the faithful performance by
Tenant of all of its obligations under this Lease. If Tenant defaults with
respect to any provisions of this Lease, including, but not limited to, the
provisions relating to the payment of Rent, the removal of property and the
repair of resultant damage, Landlord may, without notice to Tenant, but shall
not be required to apply all or any part of the Security Deposit for the payment
of any Rent or any other sum in default and Tenant shall, upon demand therefor,
restore the Security Deposit to its original amount. Any unapplied portion of
the Security Deposit shall be returned to Tenant, or, at Landlord's option, to
the last assignee of Tenant's interest hereunder, within sixty (60) days
following the expiration of the Lease Term. Tenant shall not be entitled to any
interest on the Security Deposit. Tenant hereby waives the provisions of Section
1950.7 of the California Civil Code, or any successor statute.
ARTICLE 22
SUBSTITUTION OF OTHER PREMISES
Landlord shall have the right to move Tenant to other space in the Project
comparable to the Premises, and all terms hereof shall apply to the new space
with equal force. In such event, Landlord shall give Tenant prior notice, shall
provide Tenant, at Landlord's sole cost and expense, with tenant improvements at
least equal in quality to those in the Premises and shall
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move Tenant's effects to the new space at Landlord's sole cost and expense at
such time and in such manner as to inconvenience Tenant as little as reasonably
practicable. Simultaneously with such relocation of the Premises, the parties
shall immediately execute an amendment to this Lease stating the relocation of
the Premises.
ARTICLE 23
SIGNS
23.1 Full Floors. Subject to Landlord's prior written approval, in its
-----------
sole discretion, and provided all signs are in keeping with the quality, design
and style of the Building and Project, Tenant, if the Premises comprise an
entire floor of the Building, at its sole cost and expense, may install
identification signage anywhere in the Premises including in the elevator lobby
of the Premises, provided that such signs must not be visible from the exterior
of the Building.
23.2 Multi-Tenant Floors. If other tenants occupy space on the floor on
-------------------
which the Premises is located, Tenant's identifying signage shall be provided by
Landlord, at Tenant's cost, and such signage shall be comparable to that used by
Landlord for other similar floors in the Building and shall comply with
Landlord's Building standard signage program.
23.3 Prohibited Signage and Other Items. Any signs, notices, logos,
----------------------------------
pictures, names or advertisements which are installed and that have not been
separately approved by Landlord may be removed without notice by Landlord at the
sole expense of Tenant. Tenant may not install any signs on the exterior or
roof of the Project or the Common Areas. Any signs, window coverings, or blinds
(even if the same are located behind the Landlord-approved window coverings for
the Building), or other items visible from the exterior of the Premises or
Building, shall be subject to the prior approval of Landlord, in its sole
discretion.
23.4 Building Directory. Tenant shall be provided (1) line on the
------------------
Building directory, at Tenant's sole cost and expense to display Tenant's name
and location in the Building.
ARTICLE 24
COMPLIANCE WITH LAW
Tenant shall not do anything or suffer anything to be done in or about
the Premises or the Project which will in any way conflict with any law,
statute, ordinance or other governmental rule, regulation or requirement now in
force or which may hereafter be enacted or promulgated. At its sole cost and
expense, Tenant shall promptly comply with all such governmental measures.
Should any standard or regulation now or hereafter be imposed on Landlord or
Tenant by a state, federal or local governmental body charged with the
establishment, regulation and enforcement of occupational, health or safety
standards for employers, employees, landlords or tenants, then Tenant agrees, at
its sole cost and expense, to comply promptly with such standards or
regulations. Tenant shall be responsible, at its sole cost and expense, to make
all alterations to the Premises as are required to comply with the governmental
rules, regulations, requirements or standards described in this Article 24. 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, shall be conclusive of
that fact as between Landlord and Tenant.
ARTICLE 25
LATE CHARGES
If any installment of Rent or any other sum due from Tenant shall not be
received by Landlord or Landlord's designee within five (5) days after said
amount is due, then Tenant shall pay to Landlord a late charge equal to ten
percent (10%) of the overdue amount plus any attorneys' fees incurred by
Landlord by reason of Tenant's failure to pay Rent and/or other charges when due
hereunder. The late charge shall be deemed Additional Rent and the right to
require it shall be in addition to all of Landlord's other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner. In addition to the late charge
described above, any Rent or other amounts owing
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hereunder which are not paid within ten (10) days after the date they are due
shall bear interest from the date when due until paid at a rate per annum equal
to the highest rate permitted by applicable law.
ARTICLE 26
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT
26.1 Landlord's Cure. All covenants and agreements to be kept or
---------------
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense and without any reduction of Rent, except to the extent,
if any, otherwise expressly provided herein. If Tenant shall fail to perform any
obligation under this Lease, and such failure shall continue in excess of the
time allowed under Section 19.1.2, above, unless a specific time period is
otherwise stated in this Lease, Landlord may, but shall not be obligated to,
make any such payment or perform any such act on Tenant's part without waiving
its rights based upon any default of Tenant and without releasing Tenant from
any obligations hereunder.
26.2 Tenant's Reimbursement. Except as may be specifically provided to
----------------------
the contrary in this Lease, Tenant shall pay to Landlord, upon delivery by
Landlord to Tenant of statements therefor: (i) sums equal to expenditures
reasonably made and obligations incurred by Landlord in connection with the
remedying by Landlord of Tenant's defaults pursuant to the provisions of Section
26.1; (ii) sums equal to all losses, costs, liabilities, damages and expenses
referred to in Article 10 of this Lease; and (iii) sums equal to all
expenditures made and obligations incurred by Landlord in collecting or
attempting to collect the Rent or in enforcing or attempting to enforce any
rights of Landlord under this Lease or pursuant to law, including, without
limitation, all legal fees and other amounts so expended. Tenant's obligations
under this Section 26.2 shall survive the expiration or sooner termination of
the Lease Term.
ARTICLE 27
ENTRY BY LANDLORD
Landlord reserves the right at all reasonable times and upon reasonable
notice to Tenant (except in the case of an emergency) to enter the Premises to
(i) inspect them; (ii) show the Premises to prospective purchasers, mortgagees
or tenants, or to current or prospective mortgagees, ground or underlying
lessors or insurers; (iii) post notices of nonresponsibility; or (iv) alter,
improve or repair the Premises, the premises of other tenants in the Building,
or the Building, or for structural alterations, repairs, additions, or
improvements to the Building or the Building's systems and equipment.
Notwithstanding anything to the contrary contained in this Article 27, Landlord
may enter the Premises at any time to (A) perform services required of Landlord,
including janitorial service; (B) take possession due to any breach of this
Lease in the manner provided herein; and (C) perform any covenants of Tenant
which Tenant fails to perform. Landlord may make any such entries without the
abatement of Rent and may take such reasonable steps as required to accomplish
the stated purposes. Tenant hereby waives any claims for damages or for any
injuries or inconvenience to or interference with Tenant's business, lost
profits, any loss of occupancy or quiet enjoyment of the Premises, and any other
loss occasioned thereby. For each of the above purposes, Landlord shall at all
times have a key with which to unlock all the doors in the Premises, excluding
Tenant's vaults, safes and special security areas designated in advance by
Tenant. In an emergency, Landlord shall have the right to use any means that
Landlord may deem proper to open the doors in and to the Premises. Any entry
into the Premises by Landlord in the manner hereinbefore described shall not be
deemed to be a forcible or unlawful entry into, or a detainer of, the Premises,
or an actual or constructive eviction of Tenant from any portion of the
Premises. No provision of this Lease shall be construed as obligating Landlord
to perform any repairs, alterations or decorations except as otherwise expressly
agreed to be performed by Landlord herein.
ARTICLE 28
INTENTIONALLY DELETED
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ARTICLE 29
MISCELLANEOUS PROVISIONS
29.1 Terms; Captions. The words "Landlord" and "Tenant" as used herein
---------------
shall include the plural as well as the singular. The necessary grammatical
changes required to make the provisions hereof apply either to corporations or
partnerships or individuals, men or women, as the case may require, shall in all
cases be assumed as though in each case fully expressed. The captions of
Articles and Sections are for convenience only and shall not be deemed to limit,
construe, affect or alter the meaning of such Articles and Sections.
29.2 Binding Effect. Subject to all other provisions of this Lease, each
--------------
of the covenants, conditions and provisions of this Lease shall extend to and
shall, as the case may require, bind or inure to the benefit not only of
Landlord and of Tenant, but also of their respective heirs, personal
representatives, successors or assigns, provided this clause shall not permit
any assignment by Tenant contrary to the provisions of Article 14 of this Lease.
29.3 No Air Rights. No rights to any view or to light or air over any
-------------
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease. If at any time any windows of the Premises are
temporarily darkened or the light or view therefrom is obstructed by reason of
any repairs, improvements, maintenance or cleaning in or about the Project, the
same shall be without liability to Landlord and without any reduction or
diminution of Tenant's obligations under this Lease.
29.4 Modification of Lease. Should any current or prospective mortgagee
---------------------
or ground lessor for the Building or Project require a modification of this
Lease, which modification will not cause an increased cost or expense to Tenant
or in any other way materially and adversely change the rights and obligations
of Tenant hereunder, then and in such event, Tenant agrees that this Lease may
be so modified and agrees to execute whatever documents are reasonably required
therefor and to deliver the same to Landlord within ten (10) days following a
request therefor. At the request of Landlord or any mortgagee or ground lessor,
Tenant agrees to execute a short form of Lease and deliver the same to Landlord
within ten (10) days following the request therefor.
29.5 Transfer of Landlord's Interest. Tenant acknowledges that Landlord
-------------------------------
has the right to transfer all or any portion of its interest in the Project or
Building and in this Lease, and Tenant agrees that in the event of any such
transfer, Landlord shall automatically be released from all liability under this
Lease and Tenant agrees to look solely to such transferee for the performance of
Landlord's obligations hereunder after the date of transfer and such transferee
shall be deemed to have fully assumed and be liable for all obligations of this
Lease to be performed by Landlord, including the return of any Security Deposit,
and Tenant shall attorn to such transferee. Tenant further acknowledges that
Landlord may assign its interest in this Lease to a mortgage lender as
additional security and agrees that such an assignment shall not release
Landlord from its obligations hereunder and that Tenant shall continue to look
to Landlord for the performance of its obligations hereunder.
29.6 Prohibition Against Recording. Except as provided in Section 29.4
-----------------------------
of this Lease, neither this Lease, nor any memorandum, affidavit or other
writing with respect thereto, shall be recorded by Tenant or by anyone acting
through, under or on behalf of Tenant.
29.7 Landlord's Title. Landlord's title is and always shall be paramount
----------------
to the title of Tenant. Nothing herein contained shall empower Tenant to do any
act which can, shall or may encumber the title of Landlord.
29.8 Relationship of Parties. Nothing contained in this Lease shall be
-----------------------
deemed or construed by the parties hereto or by any third party to create the
relationship of principal and agent, partnership, joint venturer or any
association between Landlord and Tenant.
29.9 Application of Payments. Landlord shall have the right to apply
-----------------------
payments received from Tenant pursuant to this Lease, regardless of Tenant's
designation of such payments, to satisfy any obligations of Tenant hereunder, in
such order and amounts as Landlord, in its sole discretion, may elect.
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29.10 Time of Essence. Time is of the essence with respect to the
---------------
performance of every provision of this Lease in which time of performance is a
factor.
29.11 Partial Invalidity. If any term, provision or condition contained in
------------------
this Lease shall, to any extent, be invalid or unenforceable, the remainder of
this Lease, or the application of such term, provision or condition to persons
or circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.
29.12 No Warranty. In executing and delivering this Lease, Tenant has not
-----------
relied on any representations, including, but not limited to, any representation
as to the amount of any item comprising Additional Rent or the amount of the
Additional Rent in the aggregate or that Landlord is furnishing the same
services to other tenants, at all, on the same level or on the same basis, or
any warranty or any statement of Landlord which is not set forth herein or in
one or more of the exhibits attached hereto.
29.13 Landlord Exculpation. The liability of Landlord or the Landlord
--------------------
Parties to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord's operation, management, leasing, repair,
renovation, alteration or any other matter relating to the Project or the
Premises shall be limited solely and exclusively to an amount which is equal to
the lesser of (a) the interest of Landlord in the Building or (b) the equity
interest Landlord would have in the Building if the Building were encumbered by
third-party debt in an amount equal to eighty percent (80%) of the value of the
Building (as such value is determined by Landlord), provided that in no event
shall such liability extend to any sales or insurance proceeds received by
Landlord or the Landlord Parties in connection with the Project, Building or
Premises. Neither Landlord, nor any of the Landlord Parties shall have any
personal liability therefor, and Tenant hereby expressly waives and releases
such personal liability on behalf of itself and all persons claiming by, through
or under Tenant. The limitations of liability contained in this Section 29.13
shall inure to the benefit of Landlord's and the Landlord Parties' present and
future partners, beneficiaries, officers, directors, trustees, shareholders,
agents and employees, and their respective partners, heirs, successors and
assigns. Under no circumstances shall any present or future partner of Landlord
(if Landlord is a partnership), or trustee or beneficiary (if Landlord or any
partner of Landlord is a trust), have any liability for the performance of
Landlord's obligations under this Lease. Notwithstanding any contrary provision
herein, neither Landlord nor the Landlord Parties shall be liable under any
circumstances for injury or damage to, or interference with, Tenant's business,
including but not limited to, loss of profits, loss of rents or other revenues,
loss of business opportunity, loss of goodwill or loss of use, in each case,
however occurring.
29.14 Entire Agreement. It is understood and acknowledged that there are
----------------
no oral agreements between the parties hereto affecting this Lease and this
Lease constitutes the parties' entire agreement with respect to the leasing of
the Premises and supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Landlord to Tenant with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this
Lease. None of the terms, covenants, conditions or provisions of this Lease can
be modified, deleted or added to except in writing signed by the parties hereto.
29.15 Right to Lease. Landlord reserves the absolute right to effect such
--------------
other tenancies in the Project as Landlord in the exercise of its sole business
judgment shall determine to best promote the interests of the Building or
Project. Tenant does not rely on the fact, nor does Landlord represent, that
any specific tenant or type or number of tenants shall, during the Lease Term,
occupy any space in the Building or Project.
29.16 Force Majeure. Any prevention, delay or stoppage due to strikes,
-------------
lockouts, labor disputes, acts of God, inability to obtain services, labor or
materials or reasonable substitutes therefor, governmental actions, civil
commotions, fire or other casualty, and other causes beyond the reasonable
control of the party obligated to perform, except with respect to the
obligations imposed with regard to Rent and other charges to be paid by Tenant
pursuant to this Lease and except as to Tenant's obligations under Articles 5
----------
and 24 of this Lease (collectively, a "Force Majeure"), notwithstanding anything
- ------
to the contrary contained in this Lease, shall excuse the performance of such
party for a period equal to any such prevention, delay or stoppage and,
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therefore, if this Lease specifies a time period for performance of an
obligation of either party, that time period shall be extended by the period of
any delay in such party's performance caused by a Force Majeure.
29.17 Waiver of Redemption by Tenant. Tenant hereby waives, for Tenant and
------------------------------
for all those claiming under Tenant, any and all rights now or hereafter
existing to redeem by order or judgment of any court or by any legal process or
writ, Tenant's right of occupancy of the Premises after any termination of this
Lease.
29.18 Notices. All notices, demands, statements, designations, approvals
-------
or other communications (collectively, "Notices") given or required to be given
by either party to the other hereunder or by law shall be in writing, shall be
(A) sent by United States certified or registered mail, postage prepaid, return
receipt requested ("Mail"), (B) transmitted by telecopy, if such telecopy is
promptly followed by a Notice sent by Mail, (C) delivered by a nationally
recognized overnight courier, or (D) delivered personally. Any Notice shall be
sent, transmitted, or delivered, as the case may be, to Tenant or Landlord at
the appropriate address set forth in Section 9 or 10 of the Summary, as
appropriate, or to such other place as either party may from time to time
designate in a Notice to the other. Any Notice will be deemed given (i) three
(3) days after the date it is posted if sent by Mail, (ii) the date the telecopy
is transmitted, (iii) the date the overnight courier delivery is made, or (iv)
the date personal delivery is made or attempted to be made. If Tenant is
notified of the identity and address of Landlord's mortgagee or ground or
underlying lessor, Tenant shall give to such mortgagee or ground or underlying
lessor written notice of any default by Landlord under the terms of this Lease
by registered or certified mail, and such mortgagee or ground or underlying
lessor shall be given a reasonable opportunity to cure such default prior to
Tenant's exercising any remedy available to Tenant.
29.19 Joint and Several. If there is more than one Tenant, the obligations
-----------------
imposed upon Tenant under this Lease shall be joint and several.
29.20 Authority. If Tenant is a corporation, trust or partnership, each
---------
individual executing this Lease on behalf of Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in California and that Tenant has full right and authority to execute
and deliver this Lease and that each person signing on behalf of Tenant is
authorized to do so. In such event, Tenant shall, within ten (10) days after
execution of this Lease, deliver to Landlord satisfactory evidence of such
authority and, if a corporation, upon demand by Landlord, also deliver to
Landlord satisfactory evidence of (i) good standing in Tenant's state of
incorporation and (ii) qualification to do business in California.
29.21 Attorneys' Fees. In the event that either Landlord or Tenant should
---------------
bring suit for the possession of the Premises, for the recovery of any sum due
under this Lease, or because of the breach of any provision of this Lease or for
any other relief against the other, then all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued on the date of the commencement of such action and
shall be enforceable whether or not the action is prosecuted to judgment.
29.22 Governing Law; WAIVER OF TRIAL BY JURY. This Lease shall be
--------------------------------------
construed and enforced in accordance with the laws of the State of California.
IN ANY ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT
TO (I) THE JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA,
(II) SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN
THE INTEREST OF SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE
OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S
USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY
EMERGENCY OR STATUTORY REMEDY. IN THE EVENT LANDLORD COMMENCES ANY SUMMARY
PROCEEDINGS OR ACTION FOR NONPAYMENT OF BASE RENT OR ADDITIONAL RENT, TENANT
SHALL NOT INTERPOSE ANY COUNTERCLAIM OF ANY NATURE OR DESCRIPTION (UNLESS SUCH
COUNTERCLAIM SHALL BE MANDATORY) IN ANY SUCH PROCEEDING OR ACTION, BUT SHALL BE
RELEGATED TO AN INDEPENDENT ACTION AT LAW.
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29.23 Submission of Lease. Submission of this instrument for examination
-------------------
or signature by Tenant does not constitute a reservation of, option for or
option to lease, and it is not effective as a lease or otherwise until execution
and delivery by both Landlord and Tenant.
29.24 Brokers. Landlord and Tenant hereby warrant to each other that they
-------
have had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease, excepting only the real estate brokers or agents
specified in Section 11 of the Summary (the "Brokers"), and that they know of no
other real estate broker or agent who is entitled to a commission in connection
with this Lease. Each party agrees to indemnify and defend the other party
against and hold the other party harmless from any and all claims, demands,
losses, liabilities, lawsuits, judgments, costs and expenses (including without
limitation reasonable attorneys' fees) with respect to any leasing commission or
equivalent compensation alleged to be owing on account of any dealings with any
real estate broker or agent, other than the Brokers, occurring by, through, or
under the indemnifying party.
29.25 Independent Covenants. This Lease shall be construed as though the
---------------------
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not be entitled to make any repairs or perform any acts hereunder
at Landlord's expense or to any setoff of the Rent or other amounts owing
hereunder against Landlord.
29.26 Project or Building Name and Signage. Landlord shall have the right
------------------------------------
at any time to change the name of the Project or Building and to install, affix
and maintain any and all signs on the exterior and on the interior of the
Project or Building as Landlord may, in Landlord's sole discretion, desire.
Tenant shall not use the name of the Project or Building or use pictures or
illustrations of the Project or Building in advertising or other publicity or
for any purpose other than as the address of the business to be conducted by
Tenant in the Premises, without the prior written consent of Landlord.
29.27 Counterparts. This Lease may be executed in counterparts with the
------------
same effect as if both parties hereto had executed the same document. Both
counterparts shall be construed together and shall constitute a single lease.
29.28 Confidentiality. Tenant acknowledges that the content of this Lease
---------------
and any related documents are confidential information. Tenant shall keep such
confidential information strictly confidential and shall not disclose such
confidential information to any person or entity other than Tenant's financial,
legal, and space planning consultants.
29.29 Transportation Management. Landlord has entered into an agreement
-------------------------
with the Department of City Planning to implement a Transportation Management
Program ("TMP") for tenants and their employees, and to participate in a program
designed to coordinate commute alternatives, marketing, and brokerage for
greater downtown employees. During the term of the TMP, Landlord agrees to
provide transportation brokerage and commute assistance services to Tenant, and
to assist Tenant in meeting the transportation needs of its employees. Tenant
agrees to cooperate with and assist Landlord's TMP Coordinator ("Coordinator"),
through designation of a responsible employee, to distribute to Tenant's
employees written materials encouraging the use of public transit and
ridesharing, and to distribute and return to the Coordinator transportation
survey questionnaire forms.
29.30 Building Renovations. It is specifically understood and agreed that
--------------------
Landlord has made no representation or warranty to Tenant and has no obligation
and has made no promises to alter, remodel, improve, renovate, repair or
decorate the Premises, Building, or any part thereof and that no representations
respecting the condition of the Project, Premises or the Building, or the areas
in vicinity of the Project have been made by Landlord to Tenant except as
specifically set forth herein or in the Tenant Work Letter. However, Tenant
hereby acknowledges that Landlord is currently renovating or may during the
Lease Term renovate improve, alter, or modify (collectively, the "Renovations")
the Project, the Building and/or the Premises including without limitation the
parking structure, common areas, systems and equipment, roof, and structural
portions of the same, which Renovations may include, without limitation, (i)
installing sprinklers in the Building common areas and tenant spaces, (ii)
modifying the common areas and tenant spaces to comply with applicable laws and
regulations, including regulations relating to the physically disabled, seismic
conditions, and building safety
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and security, (iii) installing new floor covering, lighting, and wall coverings
in the Building common areas, and (iv) creating additional parking areas or
occupied space within the Project, and in connection with any Renovations,
Landlord may, among other things, erect scaffolding or other necessary
structures in the Building, limit or eliminate access to portions of the
Project, including portions of the common areas, or perform work in the
Building, which work may create noise, dust or leave debris in the Building.
Similarly, other properties in the vicinity of the Project may undergo
substantial construction or renovation during the Lease Term (the "Area
Renovations"), which may cause substantial disturbance to traffic and parking,
and may cause dust, noise and vibrations which may affect the Project. Tenant
hereby agrees that such Renovations or Area Renovations and Landlord's actions
in connection with such Renovations or Area Renovations shall in no way
constitute a constructive eviction of Tenant nor entitle Tenant to any abatement
of Rent. Landlord shall have no responsibility or for any reason be liable to
Tenant for any direct or indirect injury to or interference with Tenant's
business arising from the Renovations or Area Renovations, nor shall Tenant be
entitled to any compensation or damages from Landlord for loss of the use of the
whole or any part of the Premises or of Tenant's personal property or
improvements resulting from the Renovations or Area Renovations or Landlord's
actions in connection with such Renovations or Area Renovations, or for any
inconvenience or annoyance occasioned by such Renovations or Area Renovations or
Landlord's actions.
29.31 No Violation. Tenant hereby warrants and represents that neither its
------------
execution of nor performance under this Lease shall cause Tenant to be in
violation of any agreement, instrument, contract, law, rule or regulation by
which Tenant is bound, and Tenant shall protect, defend, indemnify and hold
Landlord harmless against any claims, demands, losses, damages, liabilities,
costs and expenses, including, without limitation, reasonable attorneys' fees
and costs, arising from Tenant's breach of this warranty and representation.
29.32 Communications and Computer Lines. Tenant may install, maintain,
---------------------------------
replace, remove or use any communications or computer wires and cables
(collectively, the "Lines") at the Project in or serving the Premises, provided
that (i) Tenant shall obtain Landlord's prior written consent, use an
experienced and qualified contractor approved in writing by Landlord, and comply
with all of the other provisions of Articles 7 and 8 of this Lease, (ii) an
acceptable number of spare Lines and space for additional Lines shall be
maintained for existing and future occupants of the Project, as determined in
Landlord's reasonable opinion, (iii) the Lines therefor (including riser cables)
shall be appropriately insulated to prevent excessive electromagnetic fields or
radiation, and shall be surrounded by a protective conduit reasonably acceptable
to Landlord, (iv) any new or existing Lines servicing the Premises shall comply
with all applicable governmental laws and regulations, (v) as a condition to
permitting the installation of new Lines, Landlord may require that Tenant
remove existing Lines located in or serving the Premises and repair any damage
in connection with such removal, and (vi) Tenant shall pay all costs in
connection therewith. Landlord reserves the right to require that Tenant remove
any Lines located in or serving the Premises which are installed in violation of
these provisions, or which are at any time in violation of any laws or represent
a dangerous or potentially dangerous condition. Landlord makes no
representation or assurances with regard to the suitability, available or
capacity of the Building's telephone and communication distribution network or
risers within or service to the Building for Tenant's communication needs.
29.33 Development of the Project.
--------------------------
29.33.1 Subdivision. Landlord reserves the right to further
-----------
subdivide all or a portion of the Project. Tenant agrees to execute and deliver,
upon demand by Landlord and in the form requested by Landlord, any additional
documents needed to conform this Lease to the circumstances resulting from such
subdivision.
29.33.2 The Other Improvements. If portions of the Project or
----------------------
property adjacent to the Project (collectively, the "Other Improvements") are
owned by an entity other than Landlord, Landlord, at its option, may enter into
an agreement with the owner or owners of any or all of the Other Improvements,
(ii) for the common management, operation, maintenance, improvement and/or
repair of all or any portion of the Project and the Other Improvements, (iii)
for the allocation of a portion of the Direct Expenses to the Other Improvements
and the operating expenses and taxes for the Other Improvements to the Project,
and (iv) for the use or improvement of the Other Improvements and/or the Project
in connection
-30-
<PAGE>
with the improvement, construction, and/or excavation of the Other Improvements
and/or the Project. Nothing contained herein shall be deemed or construed to
limit or otherwise affect Landlord's right to convey all or any portion of the
Project or any other of Landlord's rights described in this Lease.
29.33.3 Construction of Project and Other Improvements. Tenant
----------------------------------------------
acknowledges that portions of the Project and/or the Other Improvements may be
under construction following Tenant's occupancy of the Premises, and that such
construction may result in levels of noise, dust, obstruction of access, etc.
which are in excess of that present in a fully constructed project. Tenant
hereby waives any and all rent offsets or claims of constructive eviction which
may arise in connection with such construction.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed the day and date first above written.
"Landlord":
BRE/CBL, LLC,
a Delaware limited liability company
By: /s/ [ILLEGIBLE]
----------------------------------
Its: Vice President
------------------------------
"Tenant":
PRIME RESPONSE, INC.,
A Delaware corporation
By: /s/ Cathy Lewis
---------------------------------
Its: VP - Finance
----------------------------
By: /s/ [ILLEGIBLE]
---------------------------------
Its: VP - Client Services
---------------------------
-31-
<PAGE>
EXHIBIT A
---------
CHINA BASIN LANDING
-------------------
OUTLINE OF PREMISES
-------------------
[FLOOR PLAN APPEARS HERE]
CHINA BASIN LANDING
WHARFSIDE BUILDING
SUITE 4601
Page 32
<PAGE>
EXHIBIT B
---------
CHINA BASIN LANDING
-------------------
TENANT WORK LETTER
------------------
Except as provided below, Landlord shall not be obligated to construct
or install any improvements or facilities of any kind in the Premises, and
Tenant shall accept the Premises in its currently existing, "as-is" condition.
Notwithstanding the foregoing, Landlord agrees that, Landlord shall, at
Landlord's sole cost and expense, complete the following work in the Premises
(the "Landlord Work"):
a. paint the interior of the Premises with one (1) coat of
Building standard paint, in a Building standard color to be designated, subject
to availability, by Tenant, and
b. install new Building standard carpet in the Premises in a
Building standard color.
EXHIBIT B - Page 33
<PAGE>
EXHIBIT C
---------
CHINA BASIN LANDING
-------------------
NOTICE OF LEASE TERM DATES
--------------------------
To: _________________
_________________
_________________
_________________
Re: Office Lease dated ____________, 19__ between _____________, a
__________________ ("Landlord"), and ________________, a
__________________ ("Tenant") concerning Suite ________ on
floor(s) _______________ of the office building located at
________________, San Francisco, California.
Gentlemen:
In accordance with the Office Lease (the "Lease"), we wish to advise
you and/or confirm as follows:
1. The Lease Term shall commence on or has commenced on
_______________ for a term of _______________ ending on
_______________.
2. Rent commenced to accrue on _______________, in the amount of
_______________.
3. If the Lease Commencement Date is other than the first day of
the month, the first billing will contain a pro rata
adjustment. Each billing thereafter, with the exception of the
final billing, shall be for the full amount of the monthly
installment as provided for in the Lease.
4. Your rent checks should be made payable to _______________ at
_______________.
5. The exact number of rentable/usable square feet within the
Premises is _______________ square feet.
6. Tenant's Share as adjusted based upon the exact number of usale
square feet within the Premises is ______________%.
"Landlord":
______________________________________,
a ____________________________________
By: __________________________________
Its: ______________________________
Agreed to and Accepted
as of _________, 19__.
"Tenant":
____________________________
a __________________________
By: ________________________
Its: _____________________
EXHIBIT C - Page 34
<PAGE>
EXHIBIT D
---------
CHINA BASIN LANDING
-------------------
RULES AND REGULATIONS
---------------------
Tenant shall faithfully observe and comply with the following Rules and
Regulations. Landlord shall not be responsible to Tenant for the nonperformance
of any of said Rules and Regulations by or otherwise with respect to the acts or
omissions of any other tenants or occupants of the Project. In the event of any
conflict between the Rules and Regulations and the other provisions of this
Lease, the latter shall control.
1. Tenant shall not alter any lock or install any new or additional locks
or bolts on any doors or windows of the Premises without obtaining Landlord's
prior written consent. Tenant shall bear the cost of any lock changes or
repairs required by Tenant. Two keys will be furnished by Landlord for the
Premises, and any additional keys required by Tenant must be obtained from
Landlord at a reasonable cost to be established by Landlord. Upon the
termination of this Lease, Tenant shall restore to Landlord all keys of stores,
offices, and toilet rooms, either furnished to, or otherwise procured by, Tenant
and in the event of the loss of keys so furnished, Tenant shall pay to Landlord
the cost of replacing same or of changing the lock or locks opened by such lost
key if Landlord shall deem it necessary to make such changes.
2. Landlord reserves the right to close and keep locked all entrance and
exit doors of the Building during such hours as are customary for comparable
buildings in the vicinity of the Building. Tenant, its employees and agents
must be sure that the doors to the Building are securely closed and locked when
leaving the Premises if it is after the normal hours of business for the
Building. Any tenant, its employees, agents or any other persons entering or
leaving the Building at any time when it is so locked, or any time when it is
considered to be after normal business hours for the Building, may be required
to sign the Building register. Access to the Building may be refused unless the
person seeking access has proper identification or has a previously arranged
pass for access to the Building. Landlord will furnish passes to persons for
whom Tenant requests same in writing. Tenant shall be responsible for all
persons for whom Tenant requests passes and shall be liable to Landlord for all
acts of such persons. The Landlord and his agents shall in no case be liable
for damages for any error with regard to the admission to or exclusion from the
Building of any person. In case of invasion, mob, riot, public excitement, or
other commotion, Landlord reserves the right to prevent access to the Building
or the Project during the continuance thereof by any means it deems appropriate
for the safety and protection of life and property.
3. No furniture, freight or equipment of any kind shall be brought into or
removed from the Building without prior notice to Landlord. All moving activity
into or out of the Building shall be scheduled with Landlord and done only at
such time and in such manner as Landlord designates. Landlord shall have the
right to prescribe the weight, size and position of all safes and other heavy
property brought into the Building and also the times and manner of moving the
same in and out of the Building. Safes and other heavy objects shall, if
considered necessary by Landlord, stand on supports of such thickness as is
necessary to properly distribute the weight. Landlord will not be responsible
for loss of or damage to any such safe or property in any case. Any damage to
any part of the Building, its contents, occupants or visitors by moving or
maintaining any such safe or other property shall be the sole responsibility and
expense of Tenant.
4. No sign, advertisement, notice or handbill shall be exhibited,
distributed, painted or affixed by Tenant on any part of the Premises or the
Building without the prior written consent of the Landlord. Tenant shall not
disturb, solicit, peddle, or canvass any occupant of the Project and shall
cooperate with Landlord and its agents of Landlord to prevent same.
5. The toilet rooms, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed, and no
foreign substance of any kind whatsoever shall be thrown therein. The expense
of any breakage, stoppage or damage resulting from the violation of this Rule
shall be borne by the tenant who, or whose servants, employees, agents, visitors
or licensees shall have caused same.
35
<PAGE>
6. Tenant shall not overload the floor of the Premise, nor mark, drive
nails or screws, or drill into the partitions, woodwork or drywall or in any way
deface the Premises or any part thereof without Landlord's prior written
consent. Tenant shall not purchase spring water, ice, towel, linen, maintenance
or other like services from any person or persons not approved by Landlord.
7. Except for vending machines intended for the sole use of Tenant's
employees and invitees, no vending machine or machines other than fractional
horsepower office machines shall be installed, maintained or operated upon the
Premises without the written consent of Landlord.
8. Tenant shall not use or keep in or on the Premises, the Building, or
the Project any kerosene, gasoline, explosive material, corrosive material,
material capable of emitting toxic fames, or other inflammable or combustible
fluid chemical, substitute or material. Tenant shall provide material safety
data sheets for any Hazardous Material used or kept on the Premises.
9. Tenant shall not use, keep or permit to be used or kept, any foul or
noxious gas or substance in or on the Premises, or permit or allow the Premises
to be occupied or used in a manner offensive or objectionable to Landlord or
other occupants of the Project by reason of noise, odors, or vibrations, or
interfere with other tenants or those having business therein, whether by the
use of any musical instrument, radio, phonograph, or in any other way. Tenant
shall not throw anything out of doors, windows or skylights or down passageways.
10. Tenant shall not bring into or keep within the Project, the Building
or the Premises any animals, birds, aquariums, or, except in areas designated by
Landlord, bicycles or other vehicles.
11. No cooking shall be done or permitted on the Premises, nor shall the
Premises be used for the storage of merchandise, for lodging or for any
improper, objectionable or immoral purposes. Notwithstanding the foregoing,
Underwriters' laboratory-approved equipment and microwave ovens may be used in
the Premises for heating food and brewing coffee, tea, hot chocolate and similar
beverages for employees and visitors, provided that such use is in accordance
with all applicable federal, state, county and city laws, codes, ordinances,
rules and regulations.
12. The Premises shall not be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the use of the Premises
provided for in the Summary. Tenant shall not occupy or permit any portion of
the Premises to be occupied as an office for a messenger-type operation or
dispatch office, public stenographer or typist, or for the manufacture or sale
of liquor, narcotics, or tobacco in any form, or as a medical office, or as a
barber or manicure shop, or as an employment bureau without the express prior
written consent of Landlord. Tenant shall not engage or pay any employees on
the Premises except those actually working for such tenant on the Premises nor
advertise for laborers giving an address at the Premises.
13. Landlord reserves the right to exclude or expel from the Project any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or who shall in any manner do any act in violation of any of
these Rules and Regulations.
14. Tenant, its employees and agents shall not loiter in or on the
entrances, corridors, sidewalks, lobbies, courts, halls, stairways, elevators,
vestibules or any Common Areas for the purpose of smoking tobacco products or
for any other purpose, nor in any way obstruct such areas, and shall use them
only as a means of ingress and egress for the Premises.
15. Tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to ensure the most effective operation
of the Building's heating and air conditioning system, and shall refrain from
attempting to adjust any controls. Tenant shall participate in recycling
programs undertaken by Landlord.
16. Tenant shall store all its trash and garbage within the interior of
the Premises. No material shall be placed in the trash boxes or receptacles if
such material is of such nature that it may not be disposed of in the ordinary
and customary manner of removing and disposing of trash and garbage in San
Francisco, California without violation of any law or ordinance governing such
disposal. All trash, garbage and refuse disposal shall be made only through
entry-ways and
EXHIBIT D - Page 36
<PAGE>
elevators provided for such purposes at such times as Landlord shall designate.
If the Premises is or becomes infested with vermin as a result of the use or any
misuse or neglect of the Premises by Tenant, its agents, servants, employees,
contractors, visitors or licensees, Tenant shall forthwith, at Tenant's expense,
cause the Premises to be exterminated from time to time to the satisfaction of
Landlord and shall employ such licensed exterminators as shall be approved in
writing in advance by Landlord.
17. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
18. No awnings or other projection shall be attached to the outside walls
of the Building without the prior written consent of Landlord, and no curtains,
blinds, shades or screens shall be attached to or hung in, or used in connection
with, any window or door of the Premises other than Landlord standard drapes.
All electrical ceiling fixtures hung in the Premises or spaces along the
perimeter of the Building must be fluorescent and/or of a quality, type, design
and a warm white bulb color approved in advance in writing by Landlord. Neither
the interior nor exterior of any windows shall be coated or otherwise
sunscreened without the prior written consent of Landlord. Tenant shall be
responsible for any damage to the window film on the exterior windows of the
Premises and shall promptly repair any such damage at Tenant's sole cost and
expense. Tenant shall keep its window coverings closed during any period of the
day when the sun is shining directly on the windows of the Premises. Prior to
leaving the Premises for the day, Tenant shall draw or lower window coverings
and extinguish all lights. Tenant shall abide by Landlord's regulations
concerning the opening and closing of window coverings which are attached to the
windows in the Premises, if any, which have a view of any interior portion of
the Building or Building Common Areas.
19. Tenant hereby acknowledges that Landlord shall have no obligation to
provide guard service or other security measures for the benefit of the
Premises, the Building or the Project. Tenant hereby assumes all responsibility
for the protection of Tenant and its agents, employees, contractors, invitees
and guests, and the property thereof, from acts of third parties, including
keeping doors locked and other means of entry to the Premises closed, whether or
not Landlord, at its option, elects to provide security protection for the
Project or any portion thereof. Tenant further assumes the risk that any safety
and security devices, services and programs which Landlord elects, in its sole
discretion, to provide may not be effective, or may malfunction or be
circumvented by an unauthorized third party, and Tenant shall, in addition to
its other insurance obligations under this Lease, obtain its own insurance
coverage to the extent Tenant desires protection against losses related to such
occurrences. Tenant shall cooperate in any reasonable safety or security
program developed by Landlord or required by law.
20. No auction, liquidation, fire sale, going-out-of-business or
bankruptcy sale shall be conducted in the Premises without the prior written
consent of Landlord.
21. No tenant shall use or permit the use of any portion of the Premises
for living quarters, sleeping apartments or lodging rooms.
Landlord reserves the right at any time to change or rescind any one or
more of these Rules and Regulations, or to make such other and further
reasonable Rules and Regulations as in Landlord's judgment may from time to time
be necessary for the management, safety, care and cleanliness of the Premises,
Building, the Common Areas and the Project, and for the preservation of good
order therein, as well as for the convenience of other occupants and tenants
therein. Landlord may waive any one or more of these Rules and Regulations for
the benefit of any particular tenants, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of any other
tenant, nor prevent Landlord from thereafter enforcing any such Rules or
Regulations against any or all tenants of the Project. Tenant shall be deemed
to have read these Rules and Regulations and to have agreed to abide by them as
a condition of its occupancy of the Premises.
37
<PAGE>
EXHIBIT E
---------
CHINA BASIN LANDING
-------------------
FORM OF TENANT'S ESTOPPEL CERTIFICATE
-------------------------------------
The undersigned as Tenant under that certain Office Lease (the "Lease")
made and entered into as of ________________, 199_ by and between ________ as
Landlord, and the undersigned as Tenant, for Premises on the _____________
floor(s) of the office building located at ______________, San Francisco,
California __________, certifies as follows:
1. Attached hereto as Exhibit A is a true and correct copy of the Lease
and all amendments and modifications thereto. The documents contained in
Exhibit A represent the entire agreement between the parties as to the Premises
and the project of which the Premises are a part.
2. The undersigned currently occupies the Premises described in the Lease,
the Lease Term commenced on __________, and the Lease Term expires on _________,
and the undersigned has no option to terminate or cancel the Lease or to
purchase all or any part of the Premises, the Building and/or the Project.
3. Base Rent became payable on ___________.
4. The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as provided in Exhibit A.
5. Tenant has not transferred, assigned, or sublet any portion of the
Premises nor entered into any license or concession agreements with respect
thereto except as follows:
6. Tenant shall not modify the documents contained in Exhibit A without
the prior written consent of Landlord's mortgagee.
7. All monthly installments of Base Rent, all Additional Rent and all
monthly installments of estimated Additional Rent have been paid when due
through ________________. The current monthly installment of Base Rent is
$ ___________________.
8. All conditions of the Lease to be performed by Landlord necessary to
the enforceability of the Lease have been satisfied and Landlord is not in
default thereunder. In addition, the undersigned has not delivered any notice
to Landlord regarding a default by Landlord thereunder.
9. No rental has been paid more than thirty (30) days in advance and no
security has been deposited with Landlord except as provided in the Lease.
10. As of the date hereof, there are no existing defenses or offsets, to
the undersigned's knowledge, claims or any basis for a claim, that the
undersigned has against Landlord.
11. If Tenant is a corporation or partnership, each individual executing
this Estoppel Certificate on behalf of Tenant hereby represents and warrants
that Tenant is a duly formed and existing entity qualified to do business in
California and that Tenant has full right and authority to execute and deliver
this Estoppel Certificate and that each person signing on behalf of Tenant is
authorized to do so.
12. There are not actions pending against the undersigned or any guarantor
of the Lease under the bankruptcy or similar laws of the United States or any
state.
38
<PAGE>
13. Other than in compliance with all applicable laws and incidental to
the ordinary course of the use of the Premises, the undersigned has not used or
stored any hazardous substances in the Premises.
14. To the undersigned's knowledge, all tenant improvement work to be
performed by Landlord under the Lease has been completed in accordance with the
Lease and has been accepted by the undersigned and all reimbursements and
allowances due to the undersigned under the Lease in connection with any tenant
improvement work have been paid in full.
The undersigned acknowledges that this Estoppel Certificate may be
delivered to Landlord or to a prospective mortgagee or prospective purchaser,
and acknowledges that said prospective mortgagee or prospective purchaser will
be relying upon the statements contained herein in making the loan or acquiring
the property of which the Premises are a part and that receipt by it of this
certificate is a condition of making such loan or acquiring such property.
Executed at __________________ on the _____________ day of __________, 19__.
"Tenant":
____________________________,
a __________________________
By: ________________________
Its:_____________________
By: ________________________
Its: ____________________
39
<PAGE>
[LETTERHEAD OF CHINA BASIN LANDING APPEARS HERE]
June 11, 1999
Mr. Martin Muoto
Prime Response, Inc.
185 Berry Street
Suite 4601
San Francisco, CA 94107
Re: Subordination Agreement; Acknowledge of Lease Assignment, Estoppel,
Attornment and Non-Disturbance Agreement ("Subordination and Non-
Disturbance Agreement")
Dear Mr. Muoto:
Wells Fargo Bank, which holds a Secured Promissory Note for China Basin Landing,
has requested that the attached Subordination and Non-Disturbance Agreement be
forwarded to you for review and execution.
The purpose of this agreement is to confirm the lien rights of Wells Fargo Bank
following a modification to the Secured Promissory Note, as is described in the
agreement.
As required under your lease, please sign in the presence of a notary and return
three originals of this agreement to me at the address below within five (5)
business days of your receipt of this letter. Once the agreement has been signed
by the owner and lender, one fully executed copy will be returned to you.
Thank you for your cooperation in this matter.
Sincerely,
Jones Lang Wootton California, Inc.
Katherine A. Mattes, CPM(R) CCIM(R)
General Manager
Km: SNDA to tenants
185 Berry Street, Suite 140, San Francisco, CA 94107-1739 .
Phone (415) 543-3521 . Facsimile (415) 543-1623
Managed and Leased by Jones Lang Wootton USA
40
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
WELLS FARGO BANK, NATIONAL
ASSOCIATION
Real Estate Group (AU __________)
417 Montgomery St., 5th Floor
San Francisco, CA 94111
Attn: Kathy Marker
Loan No. 3396TZH
================================================================================
SUBORDINATION AGREEMENT; ACKNOWLEDGMENT OF LEASE ASSIGNMENT, ESTOPPEL,
ATTORNMENT AND NON-DISTURBANCE AGREEMENT
(Lease To Deed of Trust)
NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE
PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF
SOME OTHER OR LATER SECURITY INSTRUMENT.
THIS SUBORDINATION AGREEMENT; ACKNOWLEDGMENT OF LEASE ASSIGNMENT, ESTOPPEL,
ATTORNMENT AND NON-DISTURBANCE AGREEMENT ("Agreement") is made as of
---------
__________________, 1999 by and between BRE/CBL L.L.C., a Delaware limited
liability company ("Owner"), PRIME RESPONSE, INC., a Delaware corporation
-----
("Lessee" and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Lender").
------- ------
RECITALS
--------
A. Pursuant to the terms and provisions of a lease dated March 25, 1999
("Lease"), Owner, as "Lessor", granted to Lessee a leasehold estate in and
-----
to a portion of the property described on Exhibit A attached hereto an
----------
incorporated herein by this reference (which property, together with all
improvements now or hereafter located on the property, is defined as the
"Property").
-------
B. Owner previously executed a Deed of Trust With Absolute Assignment of
Leases and Rents, Security Agreement and Fixture Filing dated as of
November 20, 1997, executed by Owner, as trustor, in favor of Lender, as
beneficiary, recorded on November 20, 1997 as Document No. 97-G261147-00 in
the records of the County Recorder of San Francisco, California ("Deed of
-------
Trust") encumbering the Property and securing, among other things, a
-----
secured Promissory Note ("Original Note") in the principal sum of SIXTY-TWO
-------------
MILLION FIVE HUNDRED THOUSAND AND NO/100THS DOLLARS ($62,500,000.00) dated
November 20, 1997, in favor of Lender, which Note is payable with interest
and upon the terms and conditions described therein ("Loan").
----
C. Owner has executed an Additional Advance Agreement and Omnibus Amendment to
Loan Documents (the "Additional Advance Agreement") pursuant to which,
----------------------------
among other things, Lender has agreed to make an additional advance to
Owner in the amount of up to TEN MILLION AND NO/100THS DOLLAR
($10,000,000.00) (the "Additional Advance"). In connection with the
------------------
Additional Advance, Owner ha executed delivered to Lender (a) an Amended
and Restated Secured Promissory Note in the principal amount of SEVENTY-TWO
MILLION FIVE HUNDRED THOUSAND AND NO/100THS DOLLARS ($72,500,000.00)
evidencing the aggregate amount of the Original Loan and the Additional
Advance (the "Amended Note"), and (b) an Additional Advance Agreement and a
------------
Memorandum thereof, which Memorandum is to be recorded concurrently
herewith. All references in this Agreement to "Note" shall mean the
----
Amended Note, and all references to Deed of Trust and the Note shall
include the revisions and modifications thereto under the Additional
Advance Agreement.
Page 1 of 9
41
<PAGE>
D. As a condition to making the Additional Advance, which is secured by the
Deed of Trust, Lender requires that the Deed of Trust be unconditionally
and at all times remain a lien on the Property, prior and superior to all
the rights of Lessee under the Lease and that the Lessee specifically and
unconditionally subordinate the Lease to the lien of the Deed of Trust.
E. Owner and Lessee have agreed to the subordination, attornment and other
agreements herein in favor of Lender.
NOW THEREFORE, for valuable consideration and to induce Lender to make the
Additional Advance, Owner and Lessee hereby agree for the benefit of Lender as
follows:
1. SUBORDINATION. Owner and Lessee hereby agree that:
-------------
1.1 Prior Lien. The Deed of Trust securing the Note in favor of Lender,
----------
and any modifications, renewals or extensions thereof, shall
unconditionally be and at all times remain a lien on the Property
prior and superior to the Lease;
1.2 Subordination. Lender would not make the Additional Advance without
-------------
this agreement to subordinate; and
1.3 Whole Agreement. This Agreement shall be the whole agreement and
---------------
only agreement with regard to the subordination of the Lease to the
lien of the Deed of Trust and shall supersede and cancel, but only
insofar as would affect the priority between the Deed of Trust and the
Lease, any prior agreements as to such subordination, including,
without limitation, those provisions, if any, contained in the Lease
which provide for the subordination of the Lease to a deed or deeds of
trust or to a mortgage or mortgages.
AND FURTHER, Lessee individually declares, agrees and acknowledges for the
benefit of Lender, that:
1.4 Use of Proceeds. Lender, in making disbursements pursuant to the
---------------
Note, the Deed of Trust or any loan agreements with respect to the
Property, is under no obligation or duty to, nor has Lender
represented that it will see to the application of such proceeds by
the person or persons to whom Lender disburses such proceeds, and any
application or use of such proceeds for purposes other than those
provided for in such agreement or agreements shall not defeat this
agreement to subordinate in whole or in part;
1.5 Waiver, Relinquishment and Subordination. Lessee intentionally and
----------------------------------------
unconditionally waives, relinquishes and subordinates all of Lessee's
right, title and interest in and to the Property to the lien of the
Deed of Trust and understands that in reliance upon, and in
consideration of, this waiver, relinquishment and subordination,
specific loans and advances are being and will be made by Lender and,
as part and parcel thereof, specific monetary and other obligations
are being and will be entered into which would not be made or entered
into but for said reliance upon this waiver, relinquishment and
subordination.
2. ASSIGNMENT. Lessee acknowledges and consents to the assignment of the
----------
Lease by Lessor in favor of Lender.
3. ESTOPPEL. Lessee acknowledges and represents that:
--------
3.1 Lease Effective. The Lease has been duly executed and delivered by
---------------
Lessee and, subject to the terms and conditions thereof, the Lease is
in full force and effect, the obligations of Lessee thereunder are
valid and binding and there have been no modifications or additions to
the Lease, written or oral;
Page 2 of 9
42
<PAGE>
3.2 No Default. To the best of Lessee's knowledge, as of the date
----------
hereof: (i) there exists no breach, default, or event or condition
which, with the giving of notice or the passage of time or both, would
constitute a breach or default under the Lease; and (ii) there are no
existing claims, defenses or offsets against rental due or to become
due under the Lease;
3.3 Entire Agreement. The Lease constitutes the entire agreement between
----------------
Lessor and Lessee with respect to the Property and Lessee claims no
rights with respect to the Property other than as set forth in the
Lease; and
3.4 No Prepaid Rent. No deposits or prepayments of rent have been made
---------------
in connection with the Lease, except as follows: (if none, state
"None") Six Thousand Three Hundred Seventeen and 21/100 Dollars
----
($6,317.21).
4. ADDITIONAL AGREEMENTS. Lessee covenants and agrees that, during all such
---------------------
times as Lender is the Beneficiary under the Deed of Trust:
4.1 Modification, Termination and Cancellation. Lessee will not consent
------------------------------------------
to any modification, amendment, termination or cancellation of the
Lease (in whole or in part) without Lender's prior written consent and
will not make any payment to Lessor in consideration of any
modification, termination or cancellation of the Lease (in whole or in
part) without Lender's prior written consent;
4.2 Notice of Default. Lessee will notify Lender in writing concurrently
-----------------
with any notice given to Lessor of any default by Lessor under the
Lease, and Lessee agrees that Lender has the right (but not the
obligation) to cure any breach or default specified in such notice
within the time periods set forth below and Lessee will not declare a
default of the Lease, as to Lender, if Lender cures such default
within fifteen (15) days from and after the expiration of the time
period provided in the Lease for the cure thereof by Lessor; provided,
--------
however, that if such default cannot with diligence be cured by Lender
-------
within such fifteen (15) day period, the commencement of action by
Lender within such fifteen (15) day period to remedy the same shall be
deemed sufficient so long as Lender pursues such cure with diligence;
4.3 No Advance Rents. Lessee will make no payments or prepayments of
----------------
rent more than one (1) month in advance of the time when the same
become due under the Lease; and
4.4 Assignment of Rents. Upon receipt by Lessee of written notice from
-------------------
Lender that Lender has elected to terminate the license granted to
Lessor to collect rents, as provided in the Deed of Trust, and
directing the payment of rents by Lessee to Lender, Lessee shall
comply with such direction to pay and shall not be required to
determine whether Lessor is in default under the Loan and/or the Deed
of Trust.
5. ATTORNMENT. Lessee agrees for the benefit of Lender (including for this
----------
purpose any transferee of Lender or any transferee of Lessor's title in and
to the Property by Lender's exercise of the remedy of sale by foreclosure
under the Deed of Trust) as follows:
5.1 Payment of Rent. Lessee shall pay to Lender all rental payments
---------------
required to be made by Lessee pursuant to the terms of the Lease for
the duration of the term of the Lease;
5.2 Continuation of Performance. Lessee shall be bound to Lender in
---------------------------
accordance with all of the provisions of the Lease for the balance of
the term thereof, and Lessee hereby attorns to Lender as its landlord,
such attornment to be effective and self-operative without the
execution of any further instrument immediately upon Lender succeeding
to Lessor's interest in the Lease and giving written notice thereof to
Lessee;
Page 3 of 9
43
<PAGE>
5.3 No Offset. Lender shall not be liable for, nor subject to, any
---------
offsets or defenses which Lessee may have by reason of any act or
omission of Lessor under the Lease, nor for the return of any sums
which Lessee may have paid to Lessor under the Lease as and for
security deposits, advance rentals or otherwise, except to the extent
that such sums are actually delivered by Lessor to Lender; and
5.4 Subsequent Transfer. If Lender, by succeeding to the interest of
-------------------
Lessor under the Lease, should become obligated to perform the
covenants of Lessor thereunder, then, upon any further transfer of
Lessor's interest by Lender, all of such obligations shall terminate
as to Lender.
6. NON-DISTURBANCE. In the event of a foreclosure under the Deed of Trust,so
---------------
long as there shall then exist no breach, default, or event of default on
the part of Lessee under the Lease, Lender agrees for itself and its
successors and assigns that the leasehold interest of Lessee under the
Lease shall not be extinguished or terminated by reason of such
foreclosure, but rather the Lease shall continue in full force and effect
and Lender shall recognize and accept Lessee as tenant under the Lease
subject to the terms and provisions of the Lease except as modified by this
Agreement; provided, however, that Lessee and Lender agree that the
-------- -------
following provisions of the Lease (if any) shall not be binding on Lender:
any option to purchase with respect to the Property; any right of first
refusal with respect to the Property; any provision regarding the use of
insurance proceeds or condemnation proceeds with respect to the Property
which is inconsistent with the terms of the Deed of Trust.
7. MISCELLANEOUS.
-------------
7.1 Heirs, Successors, Assigns and Transferees. The covenants herein
------------------------------------------
shall be binding upon, and inure to the benefit of, the heirs,
successors and assigns of the parties hereto; and
7.2 Notices. All notices or other communications required or permitted
-------
to be given pursuant to the provisions hereof shall be deemed served
upon delivery or, if mailed, upon the first to occur of receipt or the
expiration of three (3) days after deposit in United States Postal
Service, certified mail, postage prepaid and addressed to the address
of Lessee or Lender appearing below:
Page 4 of 9
44
<PAGE>
"OWNER" "LENDER"
BRE/CBL L.L.C., a Delaware limited WELLS FARGO BANK, NATIONAL
liability company ASSOCIATION
345 Park Avenue, 31st Floor Real Estate Group (AU #______)
New York, NY 10154 417 Montgomery St., 5th Floor
Attention: Steve Orbuch San Francisco, CA 94111
Attn: Kathy Marker
------------------------
Loan No. 339672H
---------------------
"LESSEE"
Prime Response, Inc.
185 Berry Street, Suite 4601
San Francisco, CA 94107
Attn: Mr. Martin Muoto
provided, however, any party shall have the right to change its
-------- -------
address for notice hereunder by the giving of written notice thereof
to the other party in the manner set forth in this Agreement; and
7.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of
which together shall constitute and be construed as one and the same
instrument; and
7.4 Remedies Cumulative. All rights of Lender herein to collect rents
-------------------
on behalf of Lessor under the Lease are cumulative and shall be in
addition to any and all other rights and remedies provided by law and
by other agreements between Lender and Lessor or others; and
7.5 Paragraph Headings. Paragraph headings in this Agreement are for
------------------
convenience only and are not to be construed as part of this Agreement
or in any way limiting or applying the provisions hereof.
INCORPORATION. Exhibit A and Lease Guarantor's Consent (if any) are attached
- ------------- ---------
hereto and incorporated herein b this reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
NOTICE: THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE
PERSON OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A
PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT
OF THE LAND.
Page 5 of 9
45
<PAGE>
IT IS RECOMMENDED THAT, PRIOR TO THE EXECUTION OF THIS AGREEMENT, THE PARTIES
CONSULT WITH THEIR ATTORNEYS WITH RESPECT HERETO.
"OWNER"
BRE/CBL L.L.C.,
a Delaware limited liability company
By:___________________________________
Name:_________________________________
Its:__________________________________
______________________________________
"LENDER"
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By:___________________________________
Name:_________________________________
Its:__________________________________
"LESSEE"
PRIME RESPONSE, INC., a Delaware
corporation
By: /s/ Cathy Lewis
-----------------------------------
Name: Cathy Lewis
---------------------------------
Its: V P - Finance
----------------------------------
(ALL SIGNATURES MUST BE ACKNOWLEDGED)
Page 6 of 9
46
<PAGE>
EXHIBIT A
Loan No. 3396TZ
DESCRIPTION OF PROPERTY
EXHIBIT A to Subordination Agreement; Acknowledgment of Lease Assignment,
- ---------
Estoppel, Attornment and Non-Disturbance Agreement dated as of ________________,
executed by BRE/CBL L.L.C., a Delaware limited liability company, as "Owner",
PRIME RESPONSE, INC., a Delaware corporation as "Lessee", and WELLS FARGO BANK
NATIONAL ASSOCIATION, as "Lender".
All that certain real property located in the City and County of San Francisco,
State of California, described as follows:
BEGINNING at the point of intersection of the southeasterly line of Berry Street
and the southwesterly line of Third Street; running thence southeasterly along
said line of Third Street 234.17 feet to the most northerly corner of that
certain parcel of land described in deed dated January 5, 1933 from Southern
Pacific Company to the City and County of San Francisco, recorded November 30,
1934, in Book 2714 of Official Records, page 403, Records of the City and County
of San Francisco; thence southeasterly at an angle of 12 12' 20" to the right
from said line of Third Street and along the southwesterly line of said parcel
of land described in said deed, a distance of 41.774 feet to a point in the
northwesterly line of Channel Street thence southwesterly at an angle of 77 47'
40" to the right from last described course and along said line of Channel
Street 816.168 feet to a point in the northeasterly line of Fourth Street;
thence northwesterly at right angles from said line of Channel Street and along
said line of Fourth Street 275 feet to the southeasterly line of Berry Street
825 feet to the point of beginning.
EXCEPTING THEREFROM the lands as described in the deed dated August 5, 1970,
from South Berry Street Corporation, a Delaware corporation, to the State of
California, recorded September 30, 1970, Series No. 16072, in the office of the
Recorder of the City and County of San Francisco, State of California, in Book
B-458 of Official Records, page 4 described as follows:
BEGINNING at a point on the southeasterly line of existing Berry Street, distant
thereon north 46 17' 30" east, 33.14 feet from the intersection of said
southeasterly line with the northeasterly line of existing Fourth Street; thence
along said southeasterly line north 46 17' 30" east, 10.31 feet; thence south 57
41' 27" east, 0.60 of a foot; thence south 32 18' 33" west, 10.00 feet; thence
north 57 41' 27" west, 3.09 feet to the point of beginning.
Page 7 of 9
47
<PAGE>
STATE OF Colorado
COUNTY OF Denver ss.
On this 19 day of July, 1999, before me, __________________________________
a Notary Public in and for the State of Colorado, personally appeared
____________________ personally known to me (or proved on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal
Signature /s/ Bambi Lynn Barr
-----------------------------
My commission expires 11-15-99
-----------------
STATE OF ____________
COUNTY OF _____________ ss.
On this ___ day of ________, 19__, before me, __________________________________
a Notary Public in and for the State of __________, personally appeared
____________________ personally known to me (or proved on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal
Signature ______________________________
My commission expires _________________
Page 8 of 9
48
<PAGE>
STATE OF ____________
COUNTY OF _____________ ss.
On this ___ day of ________, 19__, before me, __________________________________
a Notary Public in and for the State of __________, personally appeared
____________________ personally known to me (or proved on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal
Signature ______________________________
My commission expires _________________
STATE OF ____________
COUNTY OF _____________ ss.
On this ___ day of ________, 19__, before me, __________________________________
a Notary Public in and for the State of __________, personally appeared
____________________ personally known to me (or proved on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal
Signature ______________________________
My commission expires _________________
Page 9 of 9
49
<PAGE>
EXHIBIT 10.45
DATED 29th December 1995
PDFM LIMITED
- and -
PRIME RESPONSE LIMITED
LEASE
- of -
Office Premises at
Goat Wharf High Street
Brentford Middlesex
Term 15 years
Commencing 29 September 1995
Rent (Pounds) 151,000
Berwin Leighton
Adelaide House
London Bridge
London EC4R 9HA
snbn/p432/249/a1
19.12.95
<PAGE>
6 OBLIGATIONS IN SCHEDULES TO THIS LEASE
7 STAMP DUTY CERTIFICATE
8 LANDLORD AND TENANT (COVENANT) ACT 1995 DECLARATION
Schedule 1 - Description of the Premises
Part 1 - Description of the Premises
Part 2 - Rights enjoyed with demise
Part 3 - Exceptions and reservations
Part 4 - Encumbrances
Schedule 2 - Rent Reviews
1. The review dates
2. Upward only rent reviews
3. The market rent
4. Matters to be disregarded
5. Procedure for determination of market rent
6. Time limits
7. Rental adjustments
8. Reviewed rent reserved in phases
9. Memorandum of rent review
Schedule 3 - Insurance Provision
1. Insured Risks
2. Tenants liability for insurance premiums
3. Tenant's obligations in relation to insurance cover
4. Landlord's obligation to insure and reinstate
5. Landlord's obligations in relation to insurance
6. Suspension of Rent
7. Options to determine
8. Retention of insurance proceeds
Schedule 4 - Form of guarantee on assignment
1. Guarantee
2. No waiver or release of liability
3. Guarantors to accept new lease upon disclaimer
4. Subordination of rights of the Guarantors
<PAGE>
DEED
LEASE
DATE: 29/th/ December 1995
PARTIES:
(1) PDFM LIMITED whose registered office is at Triton Court 14 Finsbury Square
London EC2A 1PD acting in the capacity of General Partner of PDFM Second
Property Partnership (a limited partnership registered under the Limited
Partnership Act 1907 of the same address) ("the Landlord") and
(2) PRIME RESPONSE LIMITED whose registered office is at Albany House 41 High
Street Brentford Middlesex TW8 OJW ("the Tenant")
OPERATIVE PROVISIONS:
1 INTERPRETATION
1.1 Definitions
In this Lease if the context so allows:
Conducting Media
means any of the drains, sewers, conduits, flues, gutters, gullies,
channels, ducts, shafts, watercourses, pipes, cables, wires mains and other
service media
1
<PAGE>
Encumbrances
means the restrictions, stipulations, covenants, rights, reservations,
provisions and other matters contained imposed by or referred to in the
documents brief particulars of which are set out in Schedule 1 Part 4
Insured Risks
has the meaning given to it in Schedule 3
Interest
means interest at the rate of 3% over the base rate of National
Westminster Bank Plc for the time being and from time to time (as well
after as before judgment), or such other comparable rate as the Landlord
may reasonably designate if the base rate ceases to be published
Landlord
includes all persons from time to time entitled to the immediate
reversion to this Lease
Lease
includes any documents supplemental to this Lease
Outgoings
means in relation to the Premises all non-domestic rates, water rates,
water charges and all existing and future rates, taxes, charges,
assessments, impositions and outgoings whatsoever (whether parliamentary
municipal parochial or otherwise) which are now or may at any time be
payable charged or assessed on property or the owner or occupier of
property, but "taxes" in
2
<PAGE>
this context does not include value added tax, nor any taxes imposed on
the Landlord in respect of the yearly rent reserved by this Lease or in
respect of a disposal of the interest in immediate or mediate reversion
to this Lease
Premises
means the property described in Schedule 1 Part 1
Tenant
includes the Tenant's successors in title and assigns in whom this Lease
may for the time being be vested
Term
means the term of years granted by this Lease
Unsecured Underletting
means an underletting of the whole or part of the Premises in relation to
which the underlessor and the underlessee have agreed to exclude the
provisions of Sections 24 to 28 of the Landlord and Tenant Act 1954 and
their agreement to do so has been duly authorized beforehand by the Court
1.2 Interpretation of restrictions and liability
1.2.1 Where the Tenant is placed under a restriction in this Lease, the
restriction includes the obligation on the Tenant not to permit or allow
the infringement of the restriction by any person
1.2.2 References to liability include, where the context allows, claims demands
proceedings damages losses costs and expenses
3
<PAGE>
1.3 Clauses and clause headings
1.3.1 The clause and paragraph headings in this Lease are for ease of
reference only and are not to be taken into account in the
construction or interpretation of any covenant condition or proviso to
which they refer
1.3.2 Unless the context otherwise requires, references:
1.3.2.1 to numbered clauses and Schedules are references to the relevant
clause in or Schedule to this Lease: and
1.3.2.2 in any Schedule to a numbered paragraph are references to the relevant
paragraph in that Schedule
1.4 Singular and plural meanings
Words in this Lease importing the singular meaning, where the context
so allows, include the plural meaning and vice versa
1.5 Statutes and statutory instruments
References in this Lease to any statutes or statutory instruments
include and refer to any statute or statutory instrument amending
consolidating or replacing them respectively from time to time in
force, and references to a statute include statutory instruments and
regulations made pursuant to them
1.6 Gender
Words in this Lease importing any one gender include both other
genders and may be used interchangeably, and words denoting natural
persons where the context so allows include corporations and vice
versa
4
<PAGE>
1.7 Joint and several obligations
At any time that the party of the second part to this Lease is two or
more persons the expression "the Tenant" includes the plural number and
obligations in this Lease expressed or implied to be made with the Tenant
or by the Tenant are to be treated as made with or by such individuals
jointly and severally
2 THE LETTING TERMS
In consideration of the rent reserved by and the covenants in this Lease:
2.1 the Landlord LETS to the Tenant:
2.1.1 ALL the Premises;
2.1.2 TOGETHER WITH the rights set out in Schedule 1 Part 2; and
2.1.3 EXCEPT AND RESERVED to the Landlord the rights set out in Schedule 1 Part
3;
2.2 for the TERM of fifteen years commencing on 29 September 1995
subject to the Encumbrances; and
2.3 the Tenant PAYING during the Term:
2.3.1 from the 29/th/ day of December 1995 to the 28/th/ day of January 1997
the yearly rent of a peppercorn (if demanded);
5
<PAGE>
2.3.2 for the remainder of the Term the yearly rent of (Pounds)151,000 subject
to revision under Schedule 2
all such payments to be made by equal quarterly payments in advance on
the usual quarter days in every year the first (or a proportionate part)
of such payments in respect of the period commencing on the 29/th/ day of
January 1997 and ending on the following quarter day to be made on the 25
December 1996;
2.3.3 as additional rent the monies payable by the Tenant under Schedule 3
commencing on the date hereof; and
2.3.4 as additional rent any value added tax chargeable on the rent and
additional rent reserved in clauses 2.3.1, 2.3.2 and 2.3.3
3 TENANT'S COVENANTS
THE TENANT COVENANTS with the Landlord as follows:
3.1 Rent
3.1.1 To pay the yearly rent reserved by this Lease, free from any deductions
and rights of set-off, at the times and in the manner required in clause
2.3.2 and by means of a standing order to the Tenant's bankers
3.1.2 To pay the additional rents reserved by this Lease at the times and in
the manner specified in relation to each of them
3.2 Interest
3.2.1 To pay Interest on so much of the rents, reviewed rents, and other monies
payable under this Lease as remain unpaid seven days after they have
become due from the date that they became due until the payment is made
to the Landlord
6
<PAGE>
3.2.2 To pay Interest under clause 3.2.1 for any period during which the
Landlord properly refuses to accept the tender of payment because of
an unremedied breach of covenant of the Tenant
3.3 Outgoings and Contributions
3.3.1 To pay Outgoings
3.3.2 To pay for all gas and electricity consumed on the Premises, all
charges for meters, and all standing charges
3.3.3 To pay to the Landlord on demand a fair and proper proportion (to be
conclusively determined by the Landlord or the Landlord's surveyor) of
the expense of cleaning, lighting, repairing, renewing, decorating,
maintaining and rebuilding any party walls, lifts, fences, gutters,
drains, roadways, pavements, entrance ways, stairs and passages,
access ways and service areas which are or may be used or enjoyed by
an occupier of the Premises in common with any other person or persons
3.4 Repair
Well and substantially to repair maintain and clean the Premises and
to keep the Premises in good and substantial repair maintained and in
clean condition (except in respect of damage by Insured Risks as
allowed in Schedule 3)
3.5 Decorations
3.5.1 To decorate the inside of the Premises in the year 2000 and from then
in every subsequent fifth year of the Term and in the last three
months of the Term (howsoever determined) with two coats of good
quality paint or good quality polish, and with paper for those parts
normally papered, or other suitable and appropriate materials of good
quality, in a workmanlike manner (such
7
<PAGE>
decorations in the last three months of the Term to be executed in
such colours patterns and materials as the Landlord may reasonably
require)
3.5.2 To decorate the exterior of the Premises in the year 1998 and from
then in every subsequent third year of the Term and also in the last
three months of the Term (howsoever determined) with three coats of
good quality paint or good quality polish or other suitable material
of good quality in a proper and workmanlike manner
3.5.3 Not without the consent of the Landlord to alter cover up or change
any part of the architectural decorations or the external colour of
the Premises
3.6 Landlord's right of inspection and right of repair
3.6.1 To permit the Landlord and its employees or agents at all reasonable
times upon reasonable prior notice to enter into inspect and view the
Premises and examine their condition and also to take a schedule of
fixtures in the Premises
3.6.2 If any breach of covenant, defects, disrepair, removal of fixtures or
unauthorised alterations or additions are found on inspection for
which the Tenant is liable, then, on notice from the Landlord, to
execute to the reasonable satisfaction of the Landlord or its Surveyor
all repairs works replacements or removals required within two months
(or sooner if necessary) after the receipt of the notice
3.6.3 If the Tenant fails to comply with a notice under clause 3.6.2, the
Landlord may itself or by its workpeople or agents enter the Premises
and execute the repairs works replacements or removals
3.6.4 To pay to the Landlord on demand all reasonable expenses so incurred
under clause 3.6.3
8
<PAGE>
3.7 Yield up repair at the end of the Term
At the termination of this Lease or at such later time as the Landlord
recovers possession of the Premises from the Tenant:
3.7.1 quietly to yield up the Premises (with all additions and improvements
to the Premises and all fixtures in the Premises, other than tenant's
fixtures which the Tenant may be entitled to remove) repaired
maintained cleaned decorated and kept in accordance with the Tenant's
covenants in this Lease (except in respect of damage by Insured Risks
as allowed in Schedule 3)
3.7.2 if so requested by the Landlord, to remove from the Premises all the
Tenant's belongings - that is to say trade fixtures and fittings and
all notices notice boards and signs bearing the name of or otherwise
relating to the Tenant (including in this context any persons deriving
title to the Premises under the Tenant) or its business; and
3.7.3 to make good to the reasonable satisfaction of the Landlord all damage
to the Premises resulting from the removal of the Tenant's belongings
from the Premises
3.8 Landlord's right of entry for repairs, etc.
To permit the Landlord or other owners tenants or occupiers of any
adjoining or neighbouring property and their respective agents workmen
and employees to enter the Premises at reasonable times, after giving
to the Tenant reasonable written notice (except in an emergency):
3.8.1 to alter maintain or repair the adjoining premises or property of the
Landlord or person so entering; or
9
<PAGE>
3.8.2 to construct alter maintain repair or fix anything or additional thing
serving such property and running through or on the Premises; or
3.8.3 to comply with an obligation to any third party having legal rights
over the Premises; or
3.8.4 in exercise of a right or to comply with an obligation of repair
maintenance or renewal under this Lease; or
3.8.5 in connection with the development of any adjoining or neighbouring
land or premises including the right to build on or into or in
prolongation of any boundary wall of the Premises -
where the same cannot be reasonably effected from any adjoining or
neighbouring premises subject to the Landlord (or other person so
entering) exercising the right in a reasonable manner and making good
any damage caused to the Premises without unreasonable delay
3.9 Alterations
3.9.1 Not to make any alterations or additions to or affecting the structure
or exterior of the Premises, or the appearance of the Premises as seen
from the exterior
3.9.2 Not without the consent of the Landlord (such consent not to be
unreasonably withheld) to make any other alterations or additions to
the Premises
3.9.3 Not to install or erect any exterior lighting shade canopy or awning
or other structure in front of or elsewhere outside the Premises
10
<PAGE>
3.9.4 On the termination of this Lease, to the extent required by the
Landlord, to reinstate the Premises to the condition in which they
were in at the grant of this Lease, such reinstatement to be carried
out under the supervision and to the reasonable satisfaction of the
Landlord or the Landlord's surveyor
3.10 Alienation
3.10.1 Not to assign or charge part only of the Premises
3.10.2 Not to assign or charge the whole nor underlet the whole or any part
of the Premises without the consent of the Landlord (such consent not
to be unreasonably withheld)
3.10.3 Not otherwise than by assignment or underletting permitted under this
clause 3.10 to:
3.10.3.1 part with or share possession or occupation of the whole or a part of
the Premises; or
3.10.3.2 grant to third parties any rights over the Premises
3.10.4 On an assignment, to obtain (if the Landlord reasonably so requires)
guarantors reasonably acceptable to the Landlord for any assignee and
to obtain a direct covenant by deed by the assignee with the Landlord
to observe and perform the covenants of the Tenant and the conditions
in this Lease throughout the period that the assignee holds the Lease
in such form as the Landlord may reasonably require and a direct
covenant by deed by such guarantors in the terms set out in Schedule 4
3.10.5 on the grant of an underlease, to obtain covenants by deed from the
underlessee direct with the Landlord in such form as the Landlord may
reasonably require that the underlessee will:
3.10.5.1 not assign or charge part only of the premises underlet;
11
<PAGE>
3.10.5.2 not part with or share possession or occupation of the whole or any
part of the premises underlet nor grant to third parties rights over
them otherwise than by a permitted assignment or sub-underletting;
3.10.5.3 not assign charge or sub-underlet the whole of the premises sub-
underlet or sub-underlet the whole or any part of the premises
underlet without obtaining the previous consent of the Landlord under
this Lease (such consent not to be unreasonably withheld);
3.10.5.4 provide for the inclusion in any sub-underleases granted out of the
underlease (whether immediate or mediate) of covenants to the same
effect as those contained in these clauses 3.10.5 and clause 3.10.6
3.10.6 On the grant of any underlease:
3.10.6.1 to include provisions for the revision of the rent reserved by the
underlease in an upward only direction to correspond in time and
effect with the provisions for the revision of rent in this Lease;
3.10.6.2 not to reserve or take a premium or fine;
3.10.6.3 to reserve a rent which is at least equal to the market rent as at the
time of the grant of the underlease (assessed in accordance with the
principles in Schedule 2) or the proportionate part of the market rent
of the Premises where only part of the Premises is underlet;
3.10.6.4 to include such covenants of the underlessee as are not inconsistent
with or impair the due performance and observance of the covenants of
the Tenant in this Lease
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3.10.7 Not so to underlet the Premises as to sub-divide them into more than
three units of occupation nor so that any such unit of occupation
created or any left remaining comprises less than one complete floor
(disregarding the common parts on any floor)
3.10.8 Not to underlet the whole or any part of the Premises otherwise than
by way of Unsecured Underletting
3.10.9 The preceding provisions of this clause 3.10 do not apply to any
parting with possession or occupation or the sharing of occupation or
sub-division of the Premises to or with any member of a group of
companies of which the Tenant is itself a member if:
3.10.9.1 the interest in the Premises so created is and remains no more than a
tenancy-at-will; and
3.10.9.2 the possession occupation or sub-division are immediately determined
if the Tenant and the relevant member cease for any reason whatsoever
to be members of the same group of companies;
and for this purpose two companies are members of a group if, and only
if, one is a subsidiary of the other or both are subsidiaries of a
third company, subsidiary having the meaning given to it by Section
736 of the Companies Act 1985
3.11 Registration of dispositions of this Lease
To produce to and leave with the Solicitors of the Landlord the
document effecting the disposition (and in each case a certified copy
for retention by the Landlord) within one month after any disposition
of this Lease or the Premises (a disposition being an assignment,
charge, transfer, underlease, assignment or surrender of any
underlease, or on any transmission by death or otherwise
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documentary evidence of devolution affecting the Premises), and on
each occasion to pay to the Solicitors such fee as they may reasonably
require for the registration
3.12 Enforcement of underleases
3.12.1 Not without the consent of the Landlord (such consent not to be
unreasonably withheld) to vary the terms, or waive the benefit, of any
covenant of the underlessee or condition in an underlease of the
Premises
3.12.2 Diligently to enforce the covenants of the underlessee and the
conditions in an underlease of the Premises and (if reasonably
required by the Landlord) to exercise by way of enforcement the powers
of re-entry in the underlease
3.12.3 Not without the consent of the Landlord to accept any sum or payment
in kind by way of commutation of the rent payable by an underlessee of
the Premises
3.12.4 Not to accept the payment of rent from an underlessee of the Premises
otherwise than by regular quarterly (or more frequent) payments in
advance
3.12.5 Duly and punctually to exercise all rights to revise the rent reserved
by an underlease of the Premises, and not to agree with an underlessee
a revised rent without the approval of the Landlord (such approval not
to be unreasonably withheld)
3.13 User
3.13.1 Not to use the Premises otherwise than as high class offices and for
purposes ancillary to that use
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3.13.2 Nothing in this Lease implies or is to be treated as a warranty to the
effect that the use of the Premises for those purposes is in
compliance with all town planning laws and regulations now or from
time to time in force
3.14 Restrictions affecting use of the Premises
3.14.1 Not to erect nor install in the Premises any engine furnace plant or
machinery which causes noise fumes or vibration which can be heard
smelled or felt outside the Premises
3.14.2 Not to store in the Premises any petrol or other specially inflammable
explosive or combustible substance
3.14.3 Not to use the Premises for any noxious noisy or offensive trade or
business nor for any illegal or immoral act or purpose
3.14.4 Not to hold any sales by auction on the Premises
3.14.5 Not to hold in or on the Premises any exhibition public meeting or
public entertainment
3.14.6 Not to permit any vocal or instrumental music in the Premises so that
it can be heard outside the Premises
3.14.7 Not to permit livestock of any kind to be kept on the Premises
3.14.8 Not to do anything in the Premises which may be or grow to be a
nuisance or damage to the Landlord or to the owners tenants and
occupiers of adjoining and neighbouring properties
3.14.9 Not to load or use the floors walls ceilings or structure of the
Premises so as to cause strain damage or interference with the
structural parts, loadbearing framework, roof, foundations, joists and
external walls of the Premises
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3.14.10 Not to overload the lifts electrical installation or Conducting Media
in the Premises
3.14.11 Not to do or omit to do anything which may interfere with or which
imposes an additional loading on any ventilation heating air
conditioning or other plant or machinery serving the Premises
3.14.12 Not to use the Premises as a betting shop or betting office
3.14.13 Not to use the Premises for the sale of alcoholic liquor for
consumption either on or off the Premises
3.14.14 Not to allow any person to sleep in the Premises nor to use the
Premises for residential purposes
3.14.15 Not to accumulate trade empties on the Premises
3.14.16 Not to place leave or install any articles merchandise goods or other
things in front of or elsewhere outside the Premises
3.14.17 Not to permit the drains to be obstructed by oil grease or other
deleterious matter, but to keep thoroughly cleaned the Premises and
the drains serving the Premises as often as may be necessary
3.14.18 Not to use any portion of any access road leading to the Premises for
the parking of vehicles
3.15 Advertisements and signs
3.15.1 Not to place or display on the exterior of the Premises or on the
windows or inside the Premises so as to be visible from the exterior
of the Premises any name writing notice sign illuminated
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sign display of lights placard poster sticker or advertisement other
than:
3.15.1.1 a suitable sign of a size and kind first approved by the Landlord
(such approval not to be unreasonably withheld) or the Landlord's
surveyor showing the Tenant's name and trade; and
3.15.1.2 such other notices as the Landlord may in its reasonable discretion
approve
3.15.2 If any name writing notice sign placard poster sticker or
advertisement is placed or displayed in breach of these provisions, to
permit the Landlord to enter the Premises and remove such name writing
notice sign placard poster sticker or advertisement and to pay to the
Landlord on demand the expense of so doing
3.16 Compliance with statutes, etc
3.16.1 To comply in all respects with the provisions of all statutes for the
time being in force and requirements of any competent authority
relating to the Premises or anything done in or on them by the Tenant,
and to keep the Landlord indemnified against liability in consequence
of the Tenant's failure to comply with them
3.16.2 In particular but without affecting the general operation of clause
3.16.1:
3.16.2.1 to execute all works and do all things on or in respect of the
Premises which are required under the Offices Shops and Railway
Premises Act 1963;
3.16.2.2 to comply with all requirements under any present or future statute
order by-law or regulation as to the use or occupation of or otherwise
concerning the Premises;
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3.16.2.3 to execute with all due diligence (commencing work within two months
or sooner if necessary and then proceeding continuously) all works to
the Premises for which the Tenant is liable under this clause 3.16 and
of which the Landlord has given notice to the Tenant;
and, if the Tenant does not comply with clause 3.16.2.3, to permit the
Landlord to enter the Premises to carry out such works, and to
indemnify the Landlord on demand for the expenses of so doing
(including surveyors' and other professional advisers' fees)
3.17 Planning permissions
3.17.1 Not without the consent of the Landlord (such consent not to be
unreasonably withheld) to make any application under the Town and
Country Planning Acts, as defined in the Town and Country Planning Act
1990, to any local planning authority for permission to develop,
including change of use of, the Premises
3.17.2 To indemnify the Landlord against any development charges other
charges and expenses payable in respect of such applications made by
the Tenant and to reimburse to the Landlord the reasonable costs it
may properly incur in connection with such consent
3.17.3 To keep the Landlord indemnified against any expense incurred in
consequence of the use of the Premises reverting to that existing
before the application was made
3.17.4 Forthwith to give to the Landlord full particulars in writing of the
grant of planning permission
3.17.5 Not to implement any planning permission if the Landlord makes
reasonable objection to any of the conditions subject to which it has
been granted
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3.18 Compliance with town planning and environmental requirements
3.18.1 To perform and observe the requirements of statutes and regulations
relating to town and country planning and environmental protection
applying to the Premises, and to obtain any development or other
consent permit or licence by reason of the development or manner of
use of or on the Premises by the Tenant
3.18.2 To keep the Landlord indemnified against liability by reason of the
Tenant's failure to obtain any requisite development or other consent
permit or licence or in complying with the requirements of statutes
and regulations
3.18.3 To give full particulars to the Landlord of any notice, or proposal
for a notice, or order or proposal for an order, made given or issued
to the Tenant under any statute or regulation relating to town and
country planning, environmental protection or otherwise within seven
days after the receipt of any such by the Tenant
3.18.4 Forthwith to take all reasonable and necessary steps to comply with
any such notice or order
3.18.5 At the request and cost of the Landlord, to make or join with the
Landlord in making such objections or representations against or in
respect of any proposal for such a notice or order as the Landlord may
consider expedient
3.19 Claims made by third parties
3.19.1 To keep the Landlord indemnified against liability in respect of any
accident loss or damage to person or property in the Premises
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3.19.2 To keep the Landlord indemnified against liability of the Landlord to
third parties by reason of breach by the Tenant of its obligations in
this Lease
3.20 Expenses of the Landlord
To pay to the Landlord on demand all reasonable expenses (including
solicitors' costs bailiffs' fees and surveyors' and architects' fees)
incurred by the Landlord:
3.20.1 incidental to or in proper contemplation of the preparation and
service of a schedule of dilapidations during or within 3 months after
the termination of this Lease and/or a notice under Sections 146 and
147 of the Law of Property Act 1925, even if forfeiture is avoided
otherwise than by relief granted by the Court;
3.20.2 in the recovery or attempted recovery of arrears of rent or additional
rent due from the Tenant; and
3.20.3 in connection with every application for any consent or approval made
under this Lease whether or not consent or approval is given (unless
such consent is unlawfully withheld)
3.21 Obstruction of windows or lights and easements
3.21.1 Not to stop up or obstruct any windows of the Premises or any other
buildings belonging to the Landlord
3.21.2 Not to permit any easement or similar right to be made or acquired
into against or on the Premises
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3.21.3 Where any such easement or right is or is attempted to be acquired,
immediately to give notice of the circumstances to the Landlord, and
at the request and cost of the Landlord to adopt such course as it may
reasonably require for preventing the acquisition of the easement or
right to such easement
3.22 Cleaning windows
To keep clean the glass in the windows of the Premises
3.23 Value added tax
To pay value added tax on taxable supplies of goods and services made
by the Landlord in connection with this Lease, for which the
consideration is to be treated as exclusive of value added tax
chargeable on the payment
3.23.1 Where the Landlord is entitled under this Lease to recover from the
Tenant the costs of goods and services supplied to the Landlord, but
in respect of which the Landlord makes no taxable supply to the
Tenant, to indemnify the Landlord against so much of the input tax on
the cost for which the Landlord is not entitled to credit allowance
under Section 26 of the Value Added Tax Act 1994
3.24 Notices "to let" and "for sale"
3.24.1 To allow the Landlord or its agents to enter the Premises at any time:
3.24.1.1 within six months next before the termination of this Lease to fix on
the Premises a notice board for reletting the Premises;
3.24.1.2 to fix on some part of the Premises a notice board for the sale of the
interest of the Landlord
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3.24.2 Not to remove or obscure any such notice board; and
3.24.3 To permit all persons authorized by the Landlord or its agents to view
the Premises at reasonable hours without interruption in connection
with any such letting or sale
4 PROVISOS
THE PARTIES AGREE to the following provisos:
4.1 Proviso for Re-Entry
4.1.1 The Landlord may terminate this Lease by re-entering the Premises (or
a part of them) itself or by an authorized agent if:
4.1.1.1 any rent remains unpaid twenty one days after becoming due for payment
(whether or not formally demanded); or
4.1.1.2 the Tenant fails to perform or observe any of its covenants or the
conditions in this Lease or allows any distress or execution to be
levied on its goods; or
4.1.1.3 an event of insolvency occurs in relation to the Tenant or one of the
Tenants or any guarantor of the Tenant or one of the Tenants
4.1.2 Re-entry in exercise of the rights in clause 4.1.1 does not affect any
other right or remedy of the Landlord for breach of covenant or
condition by the Tenant occurring before the termination of this Lease
4.1.3 The expression an event of insolvency in clause 4.1.1 includes:
4.1.3.1 (in relation to a company or other corporation which is the Tenant or
one of the Tenants or a guarantor) inability of the company to pay its
debts, entry into liquidation either
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compulsory or voluntary (except for the purpose of amalgamation or
reconstruction), the passing of a resolution for a creditors winding
up, the making of a proposal to the company and its creditors for a
composition in satisfaction of its debts or a scheme of arrangement of
its affairs, the application to the court for an administration order,
and the appointment of a receiver or administrative receiver; and
4.1.3.2 (in relation to an individual who is the Tenant or a guarantor)
inability to pay or having no reasonable prospect of being able to pay
his debts, the presentation of a bankruptcy petition, (unless
vexatiously presented) the making of a proposal to his creditors for a
composition in satisfaction of his debts or a scheme of an arrangement
of his affairs, the application to the court for an interim order, and
the appointment of a receiver or interim receiver;
and in relation to the various events of insolvency they are, wherever
appropriate, to be interpreted in accordance and conjunction with the
relevant provisions of the Insolvency Act 1986
4.2 Power for Landlord to deal with adjoining property
The Landlord may deal as it thinks fit with other property adjoining
or nearby belonging to the Landlord, and may erect or permit to be
erected on such property any buildings irrespective of whether they
affect or diminish the light or air which may now or at any time be
enjoyed by the Tenant in respect of the Premises but not so as to
materially interfere with the Tenant's use of the Premises or the
business carried on thereat
4.3 Accidents
The Landlord shall not be responsible to the Tenant or the
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Tenant's licensees nor to any other person for any:
4.3.1 accident happening or injury suffered in the Premises; or
4.3.2 damage to or loss of any goods or property sustained in the building
on the Premises
4.4 Removal of property after determination of term
4.4.1 If after the Tenant has vacated the Premises following the termination
of this Lease any property of the Tenant remains in the Premises, and
the Tenant fails to remove it within fourteen days after being
requested in writing by the Landlord to do so the Landlord may as the
agent of the Tenant sell such property and hold the proceeds of sale,
after deducting the costs and expenses of removal storage and sale
reasonably and properly incurred by it, to the order of the Tenant
4.4.2 The Tenant will indemnify the Landlord against any liability incurred
by it to any third party whose property has been sold by the Landlord
in the bona fide mistaken belief (which is to be presumed unless the
contrary be proved) that it belonged to the Tenant and was liable to
be dealt with as such under this clause 4.4
4.5 Notices consents and approvals
4.5.1 Any notice served under or in connection with this Lease is to be in
writing and be treated as properly served if compliance is made with
either the provisions of Section 196 of the Law of Property Act 1925
(as amended by the Recorded Delivery Service Act 1962) or Section 23
of the Landlord and Tenant Act 1927
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4.5.2 Any consent or approval under this Lease is required to be obtained
before the act or event to which it applies is carried out or done and
is to be treated as effective only if the consent or approval is given
in writing
4.6 Limitation on Original Tenant's Liability
Notwithstanding anything to the contrary contained in this Lease Prime
Response Limited ("Prime Response") shall only be liable for the
Tenant's covenants and obligations herein contained for such period as
the Lease remains vested in Prime Response subject to the condition
that immediately prior to transferring its interest in this Lease
Prime Response enters into a guarantee of the Tenant's covenants and
obligations contained herein in the form of guarantee contained in
Schedule 4 of this Lease for such period only as the Lease remains
vested in the assignee of Prime Response ("the Condition") and in the
event that Prime Response fails to comply with the Condition it shall
remain liable under the tenant's covenants and obligations herein
contained until such time as it has complied with all elements the
Condition save as to timing
5 LANDLORD'S COVENANTS
THE LANDLORD COVENANTS with the Tenant as follows:
Quiet enjoyment
That the Tenant, paying the rents reserved and performing the Tenant's
covenants in this Lease, may lawfully and peaceably enjoy the Premises
throughout the Term without interruption by the Landlord or by any
person lawfully claiming through under or in trust for the Landlord
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6 OBLIGATIONS IN SCHEDULES TO THIS LEASE
The Landlord and the Tenant mutually covenant to observe and perform
their respective obligations and the conditions in the Schedules
7 STAMP DUTY CERTIFICATE
It is certified that there is no agreement to which this Lease gives
effect
8 LANDLORD AND TENANT (COVENANTS) ACT 1995 DECLARATION
This Lease does not constitute a new tenancy for the purposes of
Section 1 of the Landlord and Tenant (Covenants) Act 1995
DELIVERED as a deed on the date at the head of this Lease
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SCHEDULE 1
PART 1
Description of the Premises
All that piece or parcel of land situate at 2 Goat Wharf High Street Brentford
in the London Borough of Hounslow together with the office building erected
thereon or on some part thereof being the whole of the property comprised in HM
Land Registry title number AGL5973 and all which said premises are for the
purposes of identification only shown edged red on the plan annexed hereto but
excluding therefrom (to the extent that it forms part of Title Number AGL5973)
the retaining wall running between the points marked A and B on the said plan.
PART 2
Rights Enjoyed with the Premises
The rights listed or referred to in the Property Register to Title Number
AGL5973
PART 3
Exceptions and Reservations
1. All rights of entry upon the Premises referred to in clause 3
2. The exceptions and reservations listed or referred to in the Property
Register to title number AGL5973 and in particular (but without prejudice
to the generality of the foregoing) those listed in a Transfer dated 14th
October 1988 made between (1) Oxford & Cambridge Developments Limited and
(2) Provident Mutual Life Assurance Association and a further Transfer
dated 24 June 1994 made between Provident Mutual Life Assurance
Association and (2) PDFM Limited
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PART 4
Encumbrances
The matters contained referred or mentioned in the Property Register and Entry
number 1 of the Charges Register to title number AGL5973
[ROAD MAP APPEARS HERE]
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SCHEDULE 2
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Rent Reviews
1 The review dates
The yearly rent payable under this Lease is to be reviewed on the
29/th/ September 2000, 29/th/ September 2005 (referred to in this
Schedule as the review dates and the relevant review date shall be
construed accordingly) and with effect on and from each review date
the reviewed rent (as agreed or determined in accordance with this
Schedule) is to become payable as the yearly rent reserved by this
Lease
2 Upward only rent reviews
The reviewed rent is to be the greater of:
2.1 the yearly rent reserved under this Lease immediately preceding the
relevant review date; and
2.2 the market rent of the Premises at the relevant review date
3 The market rent
For the purposes of this Lease, the expression "market rent" means the
yearly rent at which the Premises might reasonably be expected to be
let in the open market by a willing landlord to a willing tenant:
3.1 with vacant possession;
3.2 for a term of ten years from the relevant review date having a rent
review, in the same terms as this Lease, at the expiry of each period
of five years throughout the term;
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3.3 without the payment of a premium by the willing tenant;
3.4 on the basis that the willing tenant would receive as a term of the
letting such a rent free or concessionary rental period, or other
inducement, as the willing landlord would negotiate with the willing
tenant, in respect of the period that such willing tenant would
require in which to carry out its fitting out works and the rate of
the market rent payable by the Tenant from the review date would be
such as the willing tenant would pay at the expiry of the rent free or
concessionary rent period, or following the receipt of the inducement;
and
3.5 subject to the provisions of this Lease, other than the length of the
term and the amount of rent, but including these provisions for rent
review;
but on the assumption, if not the fact, that at the relevant review
date:
3.6 the Premises are fit for immediate occupation and use (but this
assumption does not affect the operation of paragraph 4.3);
3.7 in case the Premises have been destroyed or damaged they have been
fully reinstated;
3.8 the Premises are in a state of full repair and the covenants of the
Tenant and the Landlord have been fully observed and performed;
3.9 there is not in operation any statute order or instrument regulation
or direction which has the effect of regulating or restricting the
amount of rent of the Premises which might otherwise be payable; and
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3.10 the Premises may be lawfully used throughout the Term as offices and
that no capital is required to be expended upon the Premises to enable
them to be so used
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4 Matters to be disregarded
In agreeing or determining the market rent the effect upon it of the
following matters are to be disregarded:-
4.1 the occupation of the Premises by the Tenant
4.2 any goodwill attached to the Premises by reason of the carrying on at
the Premises of the business of the Tenant;
4.3 any improvements to the Premises made by the Tenant with the consent
of the Landlord other than those:
4.3.1 made in pursuance of an obligation to the Landlord;
4.3.2 for which the Landlord has paid;
4.4 any works carried out by the Tenant which have diminished the market
rent; and
4.5 (at the option of the Landlord) the level of rent in any underletting
of the Premises or part thereof
and in this paragraph 4 reference to "the Tenant" include
predecessors-in-title to the Tenant, and sub-tenants of the Tenant or
of the predecessors-in-title of the Tenant and any other lawful
occupiers
5 Procedure for determination of market rent
5.1 The Landlord and the Tenant are to endeavour to agree the market rent
at any time not being earlier than twelve months before the relevant
review date, but if they have not agreed the market rent three months
before the relevant review date the amount of the market rent is to be
determined by reference to the determination of an independent expert
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5.2 The expert shall be nominated by the Landlord and the Tenant jointly,
but, if they cannot or do not do so, then he shall be nominated by the
President for the time being of the Royal Institution of Chartered
Surveyors on the application either of the Landlord or of the Tenant
at any time after the date being three months before the relevant
review date
5.3 The expert shall act as an expert not as an arbitrator and shall be
required to:
5.3.1 give notice to the Landlord and the Tenant allowing each of them an
opportunity to submit to him within such reasonable time as he may
stipulate a proposal for the market rent accompanied (if either of
them so wish) by a statement of reasons, and a professional rental
valuation or report; and
5.3.2 permit each of the Landlord and the Tenant to make submissions in
respect of the other's reasons valuation and report;
but the expert shall not be bound by any such proposal or submission
and may make his determination as he thinks fit
5.4 The expert nominated is to be a chartered surveyor having not less
than 10 years' experience of leasehold valuation of property being put
to the same or similar use as the Premises and of property in the same
region in which the Premises are situated
5.5 If the expert refuses to act, becomes incapable of acting or dies, the
Landlord or the Tenant may require the appointment of another expert
as provided in paragraph 5.1
5.6 The fees and expenses of the expert, including the cost of his
nomination, are to be borne in such manner and proportions as the
expert may direct, but in the absence of any such direction, they are
to be borne by the Landlord and the Tenant in equal shares
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5.7 The determination of the expert is to be final and binding on the
parties except on a matter of law
6 Time limits
Time is not of the essence in agreeing or determining the reviewed
rent or of appointing an expert
7 Rental adjustments
7.1 If the market rent has not been agreed or determined in accordance
with the provisions of this Schedule before the relevant review date,
then, until the market rent has been so agreed or determined, the
Tenant will continue to pay on account rent at the rate of yearly rent
payable immediately before the relevant review date
7.2 The Tenant will pay to the Landlord within seven days after the time
that the market rent has been agreed or determined all arrears of the
reviewed rent which have accrued in the meantime, with interest equal
to the base rate of National Westminster Bank Plc on each of the
instalments of the arrears from the time that it would have become due
if the market rent had then been agreed or determined until payment
becomes due from the Tenant to the Landlord under this paragraph 7.2
8 Reviewed rent reserved in phases
The Landlord and the Tenant may, at any time before the market rent is
determined by an expert, settle the reviewed rent in more than one
amount and agree to reserve the amounts increasing in phases until the
next review date or, if none, the expiry of the Term
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9 Memorandum of rent review
The parties shall cause a memorandum of the reviewed rent duly signed
by the Landlord and the Tenant to be endorsed on or securely annexed
to this Lease and the counterpart of this Lease
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SCHEDULE 3
Insurance provisions
1 Insured Risks
1.1 Insured Risks means the risks and other contingencies against which the
Premises are required to be, or which may from time to time be, insured
under this Lease, but subject to any exclusions limitations and
conditions in the policy of insurance
1.2 Insured Risks include, without limitation, fire, lightning, explosion,
storm, tempest, flood, bursting and overflowing of water tanks apparatus
or pipes, earthquake, aircraft (but not hostile aircraft) and other
aerial devices dropped from aircraft, riot and civil commotion, malicious
damage and such other risks as the Landlord may reasonably consider it
prudent to insure
1.3 If a risk or contingency itemised, or otherwise included, as an Insured
Risk, can no longer be insured or can only be insured at an uneconomic
rate, the risk or contingency shall cease to be treated as an Insured
Risk from the time that cover is withdrawn and the Landlord has notified
the Tenant of its withdrawal
2 Tenant's liability for insurance premiums
2.1 The Tenant will pay to the Landlord on demand the reasonable insurance
premiums incurred by the Landlord
2.2 Insurance premiums are to include all monies expended, or required to be
expended by the Landlord in effecting and maintaining cover against:
2.2.1 Insured Risks;
2.2.2 three years' loss of rent insurance;
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2.2.3 such professional fees as may be incurred in connection with rebuilding
or reinstatement of the Premises;
2.2.4 the costs of demolition, shoring up, and site clearance works;
2.2.5 third party and public liability risks; and
2.2.6 value added tax liability on such items
2.3 The insurance cover may take into account cover for the effects of
inflation and escalation of costs and fees, the Landlord's reasonable
estimate of the market rent of the Premises as defined in Schedule 2 in
the context of ensuing rent reviews and the termination of the Lease
3 Tenant's Obligations in relation to insurance cover
3.1 The Tenant will not do anything which may render void or voidable the
insurance of the Landlord on the Premises or which may cause insurance
premiums to be increased
3.2 The Tenant will provide efficient fire extinguishers of a type reasonably
approved by the Landlord, and will adopt such other precautions against
Insured Risks as the Landlord or its insurers may reasonably consider
appropriate
3.3 If the insurance of the Landlord is vitiated in whole or in part in
consequence of an act or omission of the Tenant, persons occupying or
enjoying the use of the Premises through or under the Tenant, or their
respective employees workmen agents or visitors, the Tenant will pay to
the Landlord on demand a sum equal to the amount of the insurance monies
which have become irrecoverable in consequence of that act or omission
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3.4 The Tenant may not insure the Premises for any of the Insured Risks in
such a manner as would permit the insurer of the Landlord to average the
proceeds of insurance or cancel insurance cover
3.5 The Tenant will notify the Landlord forthwith of the occurrence of damage
to the Premises by any of the Insured Risks
3.6 If the Premises are damaged by Insured Risks, the Tenant will pay to the
Landlord on demand the amount of any reasonable uninsured excess to which
the insurance cover of the Landlord is subject
3.7 The obligations of the Tenant to repair and to yield up in repair the
Premises are to remain operative to the extent that the insurance of the
Landlord in respect of Insured Risks is vitiated or insurance monies are
withheld by reason of an act or omission of the Tenant, persons occupying
or enjoying the use of the Premises through or under the Tenant, or their
respective employees workmen agents or visitors, but do not otherwise
operate in respect of damage to the Premises by Insured Risks
4 Landlord's obligation to insure and reinstate
4.1 The Landlord will keep the Premises insured with an insurer of repute
against Insured Risks and other items referred to in paragraph 2.2 for
the full cost of reinstatement, subject to such uninsured excess as the
insurer may reasonably apply
4.2 Following the occurrence of damage to or destruction of the Premises by
an Insured Risk, the Landlord will diligently apply, or procure the
application of, the proceeds of the insurance covering reinstatement and
rebuilding costs for those purposes, and will make good any deficiency in
the proceeds of the insurance out of its own resources
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4.3 The obligations of the Landlord in paragraph 4.2 do not apply:
4.3.1 if the Landlord is unable, after using its reasonable endeavours to do
so, to obtain any requisite planning permission or other consents for the
reinstatement or rebuilding of the Premises or of a building of similar
size character and amenity; or
4.3.2 if the Landlord's insurance is vitiated by reason of an act or omission
of the Tenant, persons occupying or enjoying the use of the Premises
through or under the Tenant, or their respective employees workmen agents
or visitors
4.4 Where the Premises are substantially damaged or destroyed, the Tenant may
not object to the reinstatement or rebuilding of the Premises in a form
which is not identical to the Premises immediately before the damage or
destruction occurred if the Premises as reinstated or rebuilt are of
equivalent or better standard, with materially the same floor area and
affords amenities which are not inferior to or deficient from those
enjoyed by the Tenant before the occurrence of the damage or destruction
5 Landlord's obligations in relation to insurance
5.1 The Landlord will use its reasonable endeavours to procure that its
insurers waive entitlement to rights of subrogation against the Tenant,
persons occupying or enjoying the use of the Premises through or under
the Landlord, and their respective employees workmen agents or visitors
5.2 The Landlord will notify its insurers of the Tenant's interest in the
Premises and, if practicable, have it noted on the policies of insurance
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5.3 The Landlord will provide the Tenant with a copy of its insurance
policies (or other evidence of the conditions of insurance) on the
Premises, and at the request of the Tenant with a receipt for the payment
of the last premium or other evidence of renewal and up-to-date details
of the amount of cover
5.4 The Landlord will promptly notify the Tenant of any changes in its
insurance cover or of the terms on which cover has been effected
5.5 The Landlord may retain for its exclusive benefit any discount on the
insurance premiums or commission offered to it by its insurer
6 Suspension of Rent
6.1 Paragraph 6.2 applies if the Premises are at any time during the Term so
damaged by an Insured Risk as to render the Premises or any part of them
unfit for occupation use or enjoyment, except in the circumstances
referred to in paragraph 4.3.2
6.2 The rent and additional rent reserved by this Lease, or a fair proportion
of them according to the nature and extent of the damage sustained, shall
be suspended and cease to be payable until the Premises (excluding
fitting out works and replacement of contents) have been reinstated and
made fit for occupation use and enjoyment, or, if earlier, until the
expiry of three years from the occurrence of the damage
6.3 A dispute as to the amount of the abatement of the rent or the duration
of the period of abatement is to be submitted to a single arbitrator, by
whose decision the parties are to be bound, who is to be appointed by the
parties jointly if they can agree on one, but if they do not agree, then
by the President for the time being of the Royal Institution of Chartered
Surveyors at the request of either party, and the arbitration is to be
conducted under the Arbitration Acts 1950-1979
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7 Options to determine
7.1 If for any reason beyond the control of the Landlord it proves impossible
to commence rebuilding or reinstatement of the Premises within two years
of the occurrence of the damage by an Insured Risk, the Landlord may
terminate this Lease by giving to the Tenant notice to that effect at any
time until such rebuilding and reinstatement has actually commenced
7.2 If the rebuilding or reinstatement of the Premises has not been commenced
two years after the occurrence of the damage by an Insured Risk, the
Tenant may give three months notice to the Landlord of intention to
terminate this Lease, and if the rebuilding or reinstatement work has not
commenced in earnest within three months of the giving of the notice,
this Lease shall terminate at the expiry of the notice
7.3 The termination of this Lease under this paragraph 7 shall not affect any
liability which has accrued at any time before the time of termination
8 Retention of insurance proceeds
On the termination of this Lease under paragraph 7, or if this Lease is
terminated by the operation of the doctrine of frustration, the Landlord
shall be entitled to retain for its exclusive benefit the proceeds of
insurance
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SCHEDULE 4
Form of guarantee on assignment
1 Guarantee
1.1 The Guarantors jointly and severally guarantee to the Landlord (but only
for such period as the Lease remains vested in the BL Assignee) that
the Tenant will pay the rents reserved by and perform and observe all the
Tenant's covenants in this Lease and the Guarantors will pay and make
good to the Landlord on demand any losses damages costs and expenses
suffered or incurred by the Landlord by reason of any failure of the
Tenant to do so
1.2 In the context of these guarantee provisions, references to the Tenant
are to the Assignee only (in its capacity as Tenant) with respect of whom
this guarantee is given
2 No waiver or release of liability
The Guarantors shall not be released from liability under these
provisions by reason of:
2.1 any forbearance the granting of time or any other indulgence on the part
of the Landlord, including (but without affecting the general operation
of this paragraph 2) any granting or extension of time under or varying
the procedure set out in Schedule 2, paragraph 5; or
2.2 any variation of this Lease, whether or not made with the consent of the
Guarantors, and the guarantee of the Guarantors in clause 1 is to operate
in relation to this Lease as it may be varied from time to time
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3 Guarantors to accept new lease upon disclaimer
3.1 If this Lease is effectively determined by disclaimer at any time during
such period as the Lease is vested in the Assignee, the BL Guarantors
shall, if the Landlord by notice within three months after the date of
determination so requires take from the Landlord a lease of the Premises
3.2 The lease is to be granted to the Guarantors under clause 3.1 is to be on
the following terms:
3.2.1 the term is to commence on the date of termination of this Lease and to
be equal to the residue of the Term which would have remained unexpired
at that date if this Lease had not then been terminated;
3.2.2 the yearly rent is to be the same as would have been payable under this
Lease if it had continued and, if a rent review operative from a review
date before the grant of the lease has not been completed, the Guarantors
will complete the rent review as if it had been the Tenant under this
Lease;
3.2.3 the lease is otherwise to be on the same terms and conditions as would
have applied under this Lease if it had continued undetermined; and
3.2.4 the Guarantors are to succeed to the rights and assume the liability of
the Tenant under this Lease as if the Lease had continued undetermined
4 Subordination of rights of the Guarantors
4.1 With respect to any sums paid by the Guarantors under this Schedule and
to any other rights which may accrue to the Guarantors in respect of any
sums so paid or liabilities incurred under this guarantee or in the
observance performance or discharge
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of the obligations and covenants of the Tenant in this Lease, the
Guarantors shall rank and be entitled to enforce its rights only after
all obligations and covenants under this guarantee have been fully
observed and performed, and if they have not the Guarantors shall not:
4.1.1 seek to recover from the Tenant, or any third party whether directly or
by way of set-off lien counterclaim or otherwise or accept any money or
other property or security or exercise any rights in respect of any sum
which may be or become due to the Guarantors on account of the failure by
the Tenant to observe and perform or discharge such obligations or
covenants in this Lease;
4.1.2 claim, prove or accept any payment in composition by way of winding-up,
liquidation, bankruptcy or other form of insolvency of the Tenant in
competition with the Landlord for any amount whatsoever owing to the
Guarantors by the Tenant; nor
4.1.3 exercise any right or remedy in respect of any amount paid by the
Guarantors under this Lease or any liability incurred in observing
performing or discharging the obligations and covenants of the Tenant
4.2 The Guarantors warrant that it has not taken, and undertakes with the
Landlord that it will not without the consent of the Landlord (such
consent not to be unreasonably withheld):
4.2.1 take any security from the Tenant in respect of this guarantee and, if
any such security is so taken notwithstanding, it shall be held on trust
for the Landlord as security for the respective liabilities of the
Guarantors and the Tenant; nor
4.2.2 be entitled to any right of proof in the bankruptcy, liquidation or other
form of insolvency of the Tenant or exercise any other right of the
Guarantors discharging his liability in respect of such obligations and
covenants
44
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EXECUTED under the )
Common Seal Of )
PDFM LIMITED )
in the presence of:- )
/s/ [ILLEGIBLE] SEAL APPEARS HERE
/s/ [ILLEGIBLE]
45
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Exhibit 10.46
DATE OF LEASE EXECUTION:
1. REFERENCE DATA
1.1 SUBJECTS REFERRED TO:
Each reference in this Lease to any of the following subjects shall be construed
to incorporate the data stated for that subject in this Section 1.1:
LANDLORD: BRE/CambridgePark Office H L.L.C., a Delaware limited
liability company
MANAGING AGENT: Spaulding and Slye Services Limited Partnership
LANDLORD'S & MANAGING AGENT'S ADDRESS:
Spaulding and Slye Services Limited Partnership
125 CambridgePark Drive
Cambridge, MA 02140
LANDLORD'S REPRESENTATIVE: John M. Kane
TENANT: Prime Response Group, Inc., a Delaware corporation.
TENANT'S ADDRESS (FOR NOTICE AND BILLING):
Prime Response Group, Inc.
150 CambridgePark Drive
Cambridge, Massachusetts 02140
TENANT'S REPRESENTATIVE: Jacqueline Crowley
BUILDING: The building located at 150 CambridgePark Drive, Cambridge,
Massachusetts.
LOT: The parcel of land on which the Building is located and described in
Exhibit A.
PREMISES: The space located on the first floor of the Building as shown on
Exhibit B.
RENTABLE FLOOR AREA OF THE PREMISES: Approximately 4,705 square feet
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TOTAL RENTABLE FLOOR AREA OF THE BUILDING: approximately 252,180 square feet
SCHEDULED TERM COMMENCEMENT DATE: June 1, 1999
LEASE TERM OR TERM: Commencing on the Term Commencement Date as defined in
Section 3.2 hereof and continuing for five (5) years
thereafter, plus the partial month at the beginning of the
Term, if any, unless sooner terminated as provided herein
ANNUAL RENT: $36.50 per square foot of Rentable Floor Area of the Premises, or
$14,311.04 per calendar month, and proportionally at such rate
for any partial month (net of Tenant's charges for electrical
consumption in the Premises).
BASE ANNUAL ELECTRICITY CHARGE: $1.00 per square foot of Rentable Floor
Area of the Premises
BASE ANNUAL OPERATING COSTS: All of Landlord's Operating Costs (other than
real estate taxes) for calendar year 1999
(i.e., January 1, 1999 through December 31,
1999), together with all real estate taxes
for fiscal year 2000 (i.e., July 1, 1999
through June 30, 2000).
TENANT'S PROPORTIONATE SHARE: 1.87%
PERMITTED USES: Office Uses
COMMERCIAL GENERAL LIABILITY INSURANCE:
$1,000,000 bodily injury, property damage combined single
limit per occurrence, $2,000,000 annual aggregate.
BROKER: Spaulding and Slye Services Limited Partnership and Godino & Company
SECURITY DEPOSIT: $42,933.12
TENANT'S PARKING ACCESS CARDS: 14
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TENANT IMPROVEMENT ALLOWANCE: $12.00 per square foot of Rentable Floor
Area of the Premises
1.2 EXHIBITS.
The exhibits listed below in this section are incorporated in this Lease by
reference and are to be construed as part of this Lease:
EXHIBIT A Description of Lot
EXHIBIT B Plan showing Premises.
EXHIBIT C Landlord's Services
EXHIBIT D Rules and Regulations
3
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TABLE OF CONTENT'S
<TABLE>
<CAPTION>
Page
<C> <S> <C>
ARTICLE II - PREMISES AND TERM...................................... 11
2.1 DESCRIPTION OF PREMISES.................................... 11
2.2 TERM....................................................... 11
2.3 OPTION TO EXTEND........................................... 11
ARTICLE III - CONSTRUCTION.......................................... 13
3.1 TERM COMMENCEMENT DATE..................................... 13
3.2 DELIVERY OF PREMISES....................................... 13
3.3 PREPARATION OF PREMISES FOR OCCUPANCY...................... 14
3.4 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.............. 15
3.5 ALTERATIONS AND ADDITIONS.................................. 15
3.6 REPRESENTATIVES............................................ 17
ARTICLE IV - RENT................................................... 17
4.1 ANNUAL RENT................................................ 17
4.2 ANNUAL OPERATING COST ESCALATION........................... 17
4.3 ESTIMATED ANNUAL OPERATING EXPENSE ESCALATION PAYMENT...... 19
4.4 ELECTRICITY................................................ 20
4.5 CHANGE OF FISCAL YEAR...................................... 21
4.6 PAYMENTS................................................... 21
ARTICLE V - LANDLORD'S COVENANTS.................................... 22
5.1 LANDLORD'S COVENANTS DURING THE TERM....................... 22
5.1.1 Building Services................................ 22
5.1.2 Additional Building Services..................... 22
5.1.3 Repairs.......................................... 22
5.1.4 Tenant Directory................................. 22
5.1.5 Food Service..................................... 23
5.1.6 Quiet Enjoyment.................................. 24
5.2 INTERRUPTIONS.............................................. 24
ARTICLE VI - TENANT'S COVENANTS..................................... 25
6.1 TENANT'S COVENANTS DURING THE TERM......................... 25
6.1.1 Tenant's Payments................................ 25
6.1.2 Repairs and Yielding Up.......................... 25
6.1.3 Occupancy and Use................................ 25
6.1.4 Rules and Regulations............................ 26
6.1.5 Safety Appliances................................ 27
6.1.6 Assignment and Subletting........................ 27
</TABLE>
4
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<TABLE>
<CAPTION>
Page
<C> <S> <C>
6.1.7 Indemnity........................................ 28
6.1.8 Tenant's Insurance............................... 29
6.1.9 Tenant's Worker's Compensation Insurance......... 30
6.1.10 Landlord's Right of Entry........................ 30
6.1.11 Loading.......................................... 30
6.1.12 Landlord's Costs................................. 30
6.1.13 Tenant's Property................................ 31
6.1.14 Labor or Materialmen's Liens..................... 31
6.1.15 Changes or Additions............................. 31
6.1.16 Holdover......................................... 31
6.1.17 Security......................................... 32
6.1.18 Tenant Financial Statements...................... 32
ARTICLE VII - DAMAGE AND DESTRUCTION; CONDEMNATION.................. 32
7.1 FIRE OR OTHER CASUALTY................................ 32
7.2 EMINENT DOMAIN........................................ 34
ARTICLE VIII - RIGHTS OF MORTGAGEE.................................. 36
8.1 PRIORITY OF LEASE..................................... 36
8.2 RIGHTS OF MORTGAGE HOLDERS; LIMITATION OF
MORTGAGEE'S LIABILITY................................. 36
8.3 MORTGAGEE'S ELECTION.................................. 37
8.4 NO PREPAYMENT OR MODIFICATION, ETC.................... 37
8.5 NO RELEASE OR TERMINATION............................. 38
8.6 CONTINUING OFFER...................................... 38
8.7 MORTGAGEE'S APPROVAL.................................. 38
ARTICLE IX - DEFAULT................................................ 39
9.1 EVENTS OF DEFAULT..................................... 39
9.2 TENANT'S OBLIGATIONS AFTER TERMINATION................ 40
ARTICLE X - MISCELLANEOUS........................................... 41
10.1 NOTICE OF LEASE....................................... 41
10.2 RELOCATION............................................ 42
10.3 NOTICES FROM ONE PARTY TO THE OTHER................... 42
10.4 BIND AND INURE........................................ 42
10.5 NO SURRENDER.......................................... 43
10.6 NO WAIVER, ETC........................................ 43
10.7 NO ACCORD AND SATISFACTION............................ 43
10.8 CUMULATIVE REMEDIES................................... 44
10.9 LANDLORD'S RIGHT TO CURE.............................. 44
10.10 ESTOPPEL CERTIFICATE.................................. 44
10.11 WAIVER OF SUBROGATION................................. 45
10.12 ACTS OF GOD........................................... 45
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Page
<C> <S> <C>
10.13 BROKERAGE............................................. 45
10.14 SUBMISSION NOT AN OFFER............................... 46
10.15 APPLICABLE LAW AND CONSTRUCTION....................... 46
10.16 AUTHORITY OF TENANT................................... 47
ARTICLE XI - SECURITY DEPOSIT....................................... 47
</TABLE>
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ARTICLE II PREMISES AND TERM
2.1 DESCRIPTION OF PREMISES.
Subject to and with the benefit of the provisions of this Lease, Landlord
hereby leases to Tenant, and Tenant leases from Landlord, Tenant's Space in the
Building, excluding exterior faces of exterior walls, the common facilities area
and building service fixtures and equipment serving exclusively or in common
other parts of the Building. Tenant's Space, with such exclusions, is
hereinafter referred to as the Premises.
Tenant shall have, as appurtenant to the Premises, the right to use in
common with others entitled thereto: (a) common walkways, driveways, hallways,
lobbies, ramps, loading docks and stairways located in the Building or on the
parcel on which the Building is located (the "Lot"), (b) building service
fixtures and equipment serving the Premises including elevators, (c) the parking
facility, if any, on a first-come, first-served basis in the location from time
to time designated by Landlord, Tenant's use not to exceed the number of
Tenant's Parking Access Cards, and (d) if the Premises include less than the
entire Rentable Floor Area of any floor, the common toilets in the central core
area of such floor. Such rights shall be always subject to the Rules and
Regulations set forth in Exhibit D, attached hereto and incorporated herein by
reference, as the same may be amended by the Landlord from time to time and such
other reasonable Rules and Regulations from time to time established by the
Landlord by suitable notice to Tenant, and to the right of the Landlord to
designate and change from time to time such areas, facilities, fixtures and
equipment.
2.2 TERM.
To have and to hold for a period (the "Term") commencing on the Term
Commencement Date (as defined in Section 3.1 hereof) and continuing for the
Term, unless sooner terminated as provided herein.
2.3 OPTION TO EXTEND.
Tenant shall have the right and option to extend the Term for one (1)
additional period of five (5) years (the "Extension Term") commencing upon the
expiration of the original Term referred to in Section 1.1 (the "Original
Term"), provided that Tenant shall give Landlord notice of Tenant's exercise of
such option at least nine (9) months prior to the expiration of the Original
Term and provided further that no event of default by Tenant exists hereunder,
and no condition exists which with the giving of notice or the passage of time,
or both, would constitute an event of default
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hereunder, at either the time of giving such notice or at the time of the
commencement of such Extension Term. Prior to the exercise by Tenant of such
option, the expression "Term" shall mean the Original Term, and after the
exercise by Tenant of such option, the expression "Term" shall mean the Original
Term as it has been extended by the Extension Term. Except as expressly
otherwise provided in the following paragraph and except for this Section 2.3
hereof, all the terms, covenants, conditions, provisions and agreements in the
Lease contained shall be applicable to the Extension Term. If Tenant shall give
notice of its exercise of said option to extend in the manner and within the
time period provided aforesaid, the Term shall be extended upon the giving of
such notice without the requirement of any further action on the part of either
Landlord or Tenant. If Tenant shall fail to give timely notice of the exercise
of any such option as aforesaid, Tenant shall have no right to extend the Term
of this Lease, time being of the essence of the foregoing provisions.
The Annual Base Rent payable during the Extension Term shall be the amount
being the greater of (i) the Annual Base Rent in effect for the Lease Year
immediately preceding the commencement of the Extension Term or (ii) the Fair
Market Rent for the Premises, as determined below, as of the commencement of the
Extension Term. If for any reason the Annual Base Rent payable during the
Extension Term has not been determined as of the commencement of the Extension
Term, Tenant shall pay the Annual Base Rent payable during the Original Term
until the Annual Base Rent for the Extension Term is determined, at which time,
an appropriate adjustment, if any, shall be made.
For purposes here, the Fair Market Rent shall mean the fair rent for the
Premises as of the commencement of the Extension Term under market conditions
then existing. Fair Market Rent shall be determined by agreement between
Landlord and Tenant, but if Landlord and Tenant are unable to agree upon the
Fair Market Rent at least six (6) months prior to the date upon which the Fair
Market Rent is to take effect, then the Fair Market Rent shall be determined by
appraisal made as hereinafter provided by a board of three (3) reputable
independent commercial real estate consultants, appraisers, or brokers, each of
whom shall have at least ten years of experience in the north suburban Boston
office rental market and each of whom is hereinafter referred to as "appraiser".
Tenant and Landlord shall each appoint one such appraiser and the two appraisers
so appointed shall appoint the third appraiser. The cost and expenses of each
appraiser appointed separately by Tenant and Landlord shall be borne by the
party who appointed the appraiser. The cost and expenses of the third appraiser
shall be shared equally by Tenant and Landlord. Landlord and Tenant shall
appoint their respective appraisers at lease five (5) months
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prior to commencement of the period for which Fair Market Rent is to be
determined and shall designate the appraisers so appointed by notice to the
other party. The two (2) appraisers so appointed and designated shall appoint
the third appraiser at lease four (4) months prior to the commencement of such
period and shall designate such appraisers by notice to Landlord and Tenant. The
board of three (3) appraisers shall determine the Fair Market Rent of the space
in question as of the commencement of the period to which the Fair Market Rent
shall apply and shall notify Landlord and Tenant of their determinations at
least sixty (60) days prior to the commencement of such period. If the
determinations of the Fair Market Rent of any two (2) or all three (3)
appraisers shall be identical in amount, said amount shall be deemed to be the
Fair Market Rent of the subject space. If the determinations of all three (3)
appraisers shall be different in the amount, the average of the two values
nearest in amount shall be deemed the Fair Market Rent. The Fair Market Rent of
the subject space determined in accordance with the provisions of this Section
shall be binding and conclusive on Tenant and Landlord.
Time is of the essence of the foregoing provisions.
ARTICLE III CONSTRUCTION
3.1 TERM COMMENCEMENT DATE.
The Term of this Lease shall commence on, and the Term Commencement Date
shall be, the Scheduled Term Commencement Date if Landlord is not obligated to
do Landlord's Work hereunder or, if Landlord is so obligated, the earlier of (a)
the date on which the premises shall be deemed ready for occupancy in accordance
with Section 3.3. below; or (b) the date on which Tenant commences beneficial
use of the Premises. Tenant shall, in all events, be treated as having commenced
beneficial use of the Premises when it begins to move into the Premises
furniture and equipment for its regular business operations.
As soon as may be convenient after the Term Commencement Date has been
determined, Landlord and Tenant agree to join with each other in the execution,
in recordable form, of a written Declaration in which the Term Commencement Date
and specified term of this Lease shall be stated.
3.2 DELIVERY OF PREMISES.
Tenant acknowledges that Tenant has had an opportunity to inspect the
Premises. Except as set forth hereinafter, the Premises, shall be delivered to
Tenant As Is, Where Is with all faults and without
9
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representation, warranty or guaranty of any kind by Landlord to Tenant. Landlord
agrees to give Tenant, its architect, the Contractor (as defined below), and
subcontractors reasonable access to the Premises to permit Tenant to prepare
drawings and obtain permits and approvals with respect to Tenant's Work (as
defined below). Tenant's access to and use and occupancy of the Premises prior
to the Term Commencement Date shall be subject to all of the provisions of this
Lease, other than the payment of Annual Rent and electricity changes.
3.3 PREPARATION OF PREMISES FOR OCCUPANCY.
Subject to the provisions hereof, Tenant shall undertake all work to
prepare the Premises for Tenant's use and occupancy in accordance with Plans
approved as set forth below ("Tenant's Work") at Tenant's sole cost and expense,
except that Landlord shall reimburse Tenant in an amount not to exceed the
Tenant Improvement Allowance. Provided that Tenant is not then in default under
any provision of this Lease or, if Tenant is in default, that Tenant cures the
same within the applicable cure period, if any, the Tenant Improvement Allowance
shall be payable by Landlord to Tenant to reimburse Tenant for architectural
fees payable to Tenant's architect, Design Science (the "Architect"), upon
notice to Tenant accompanied by the Architect's invoice therefor and to pay the
Contractor (as defined hereinafter) directly upon notice to Landlord from time
to time, accompanied by invoices from the Contractor which have been approved by
the Architect. After the entire amount of the Tenant Improvement Allowance has
been paid out by Landlord, Tenant shall bear all additional costs to complete
Tenant's Work at Tenant's sole cost and expense. If any portion of the Tenant
Improvement Allowance remains after the completion of Tenant's Work, it shall
not be payable or credited to Tenant in any manner whatsoever. Tenant shall
retain Spaulding and Slye Construction Company (the "Contractor") to serve as
Tenant's general contractor. It is understood and agreed that the actions or
inactions of the Contractor shall in no way be attributable to the Landlord, and
that Landlord has no responsibility for the completion of Tenant's Work.
For purposes hereof, Tenant shall submit a complete set of proposed plans
and specifications (collectively, "Plans") showing Tenant's Work to Landlord.
No later than five (5) business days thereafter, Landlord shall either approve
or disapprove the Plans, specifying by notice to Tenant in reasonable detail the
respects in which the Plans are disapproved. If Landlord disapproves the Plans,
Tenant shall submit to Landlord revised Plans which respond to the items of
disapproval specified in Landlord's notice no later than five (5) days from
Landlord's notice of disapproval. Thereafter, Landlord shall have five (5) days
from Tenant's submission of the
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Plans to Landlord to approve or disapprove the revised Plans in accordance with
the foregoing and, in case of disapproval, Tenant shall have an additional five
(5) days to submit revised Plans responding to the items of disapproval
specified in Landlord's notices. The parties shall work diligently and in good
faith to agree upon approved Plans.
Landlord will not approve any construction, alterations, or additions
requiring unusual expense to readapt the Premises to normal office use on lease
termination or increasing the cost of construction, insurance or taxes on the
Building or of Landlord's services called for by Section 5.1 unless Tenant first
gives assurances acceptable to Landlord that such readaptation will be made
prior to such termination without expense to Landlord and makes provisions
acceptable to Landlord for payment of such increased cost. Landlord will also
disapprove any alterations or additions requested by Tenant which will delay
completion of the Premises. Tenant's construction, installation of furnishings,
and later changes or additions shall be coordinated with any work being
performed by Landlord in such manner as to maintain harmonious labor relations
and not to damage the Building or Lot or interfere with Building operations.
3.4 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.
All construction work required or permitted by this Lease, whether by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws and all lawful ordinances, regulations and
orders of governmental authority and insurers of the Building and the Lot.
Either party may inspect the work of the other at reasonable times and promptly
shall give notice of observed defects. Landlord's obligations under Sections
3.2 and 3.3, if any, shall be deemed to have been performed when Tenant
commences to occupy any portion of the Premises for the Permitted Uses except
for items which are incomplete or do not conform with the requirements of
Section 3.1 and as to which Tenant shall in either case have given written
notice to Landlord within three (3) weeks after such commencement. Tenant
acknowledges that the Building may be undergoing substantial renovation during
the Term of the Lease. Tenant acknowledges that its quiet enjoyment and access
to the Demised Premises during the Term may be disturbed by the noise, dust,
vibrations and other effects of demolition in the Building, provided, however,
that Landlord shall use reasonable efforts to avoid undue interference with
Tenant's use of the Premises.
3.5 ALTERATIONS AND ADDITIONS.
This Section 3.5 shall apply before and during the Term. Tenant shall not
make any alterations and additions to the Premises except in accordance with
plans and specifications first approved by Landlord. In no event shall any
alterations or additions be considered or approved by Landlord which (a) involve
or might affect any structural or exterior element of the Building or building
mechanical, electrical or plumbing systems, including the common facilities of
the Building, or (b) will require unusual expense to readapt the Premises to
normal office use on Lease termination or increase the cost of construction or
of insurance or taxes on the Building or the Lot. All alterations and additions
shall become a part of the Premises, unless and until Landlord, at its option,
shall specify the same for removal pursuant to Section 6.1.2. All of Tenant's
alterations and additions and installation and delivery of telephone systems,
furnishings, and equipment shall be coordinated with any work being performed by
Landlord and shall be performed in such manner, and by such persons as shall
maintain harmonious labor relations and not cause any damage to the Building or
interference with Building construction or operation and, except for
installation of furnishings, equipment and telephone systems, and except as
otherwise expressly set forth herein, shall be performed by general contractors
first approved by Landlord. Before commencing any work Tenant shall: secure all
licenses and permits necessary therefor; deliver to Landlord a statement of the
names of all its contractors and subcontractors (the identity of which must have
been previously approved by Landlord as hereinabove contemplated) and the
estimated cost of all labor and material to be furnished by them; and cause each
contractor to carry (i) worker's compensation insurance in statutory amounts
covering an the contractor's and subcontractor's employees and (ii)
comprehensive public liability insurance with such limits as Landlord may
reasonably require, but in no event less than a combined single limit of
$1,500,000 (all such insurance to be written in companies approved by Landlord
and insuring Landlord and Tenant as well as the contractors), and to deliver to
Landlord certificates of all such insurance. Tenant agrees to pay promptly when
due, and to defend and indemnify Landlord from and against, the entire cost of
any work done on the Premises by Tenant, its agents, employees or independent
contractors, and not to cause or permit any liens for labor or materials
performed or furnished in connection therewith to attach to the Building or the
Lot and immediately to discharge any such liens which may so attach. Tenant
shall pay within fourteen (14) days after being billed therefor by Landlord, as
additional rent, one hundred percent (100%) of any increase in real estate taxes
on the Premises not otherwise billed to Tenant which shall, at any time after
the commencement of the Term, result from any alteration, addition or
improvement to the Premises made by or on behalf of Tenant.
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In connection with the installation of telecommunication equipment by
Tenant, such installation shall occur only in such locations and in such a
manner as approved in writing by the Landlord and none of such wires, ducts or
equipment shall be located in areas outside the Premises (provided, however,
that Tenant may install wires and cables in risers and ducts outside the
Premises which are in existence on the date of this Lease and for which there
exists, in Landlord's sole discretion, adequate space for Tenant's wires and
cables). Telephone switches, antennae, electronic distribution boxes and
similar equipment shall only be located within the Premises. Landlord shall not
be liable for any loss, damage or interruption of service related to such
facilities.
3.6 REPRESENTATIVES.
Each party authorizes the other to rely in connection with their respective
rights and obligations under this Article III upon approval and other actions on
the party's behalf by Landlord's Representative in the case of Landlord or
Tenant's Representative in the case of Tenant or by any person designated in
substitution or addition by notice to the other party.
ARTICLE IV RENT
4.1 ANNUAL RENT.
Tenant agrees to pay rent to Landlord without any offset or reduction
whatever (except as made in accordance with the express provisions of this
Lease), the Annual Rent in equal monthly installments in advance on the first
day of each calendar month included in the Term after the Term Commencement
Date; and for any portion of a calendar month at the beginning or end of the
Term, at the proportionate rate payable for such portion, in advance.
4.2 ANNUAL OPERATING COST ESCALATION.
In addition to Annual Rent, Tenant shall pay to Landlord as additional
rent, Tenant's Proportionate Share of Annual Operating Costs (as hereinafter
defined) which is in excess of Base Annual Operating Costs ("Tenant's Escalation
Payment"). Tenant's Proportionate Share of Annual Operating Costs shall be
determined by multiplying Annual Operating Costs by a fraction, the numerator of
which is the Rentable Floor Area of the Premises and the denominator of which is
the Total Rentable Floor Area of the Building. In the event that the Building
is not fully occupied, such Annual Operating Costs shall be adjusted to reflect
the costs which would be incurred if the Building were 95% occupied.
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Annual Operating Costs shall mean the actual expenses paid or incurred by
Landlord in the operation, maintenance and management of the Building and Lot
and all real estate taxes and assessments, general or special, ordinary or
extraordinary, foreseen or unforeseen, imposed upon the Building and Lot and any
future improvement of whatever kind thereto or thereon. Annual Operating Costs
shall include without limitation:
4.20.1 (a) real estate taxes on the Building and Lot and off-site parking areas;
(b) installments and interest on assessments for public betterment or
public improvements; (c) expenses of any proceedings for abatement of
taxes and assessments with respect to any fiscal year or fraction of a
fiscal year; (d) service, repair, replacement and other maintenance to
the Building and Lot and components thereof; (e) wages and salaries (and
taxes and other charges imposed upon employers with respect to such wages
and salaries) and fringe benefits and worker's compensation insurance
premiums paid to persons employed by the Landlord for rendering service
in the operation, maintenance, and repair of the Building and Lot and
related facilities and off-site parking areas and amenities; (f) cost of
independent contractors hired for the operation, maintenance and repair
of the Building and Lot and related facilities and amenities (which
payments may be to affiliates of Landlord provided the same are at
reasonable rates consistent with the type of occupancy and the services
rendered); (g) costs of electricity, steam, water, fuel, heating,
lighting, air conditioning, sewer, and other utilities chargeable to the
operation and maintenance of the Building and Lot net of tenant's
electric; (h) cost of insurance including insurance deductible for and
relating to the Building and the Lot, including fire and extended
coverage (or such greater coverages as Landlord may elect to carry),
elevator, boiler, sprinkler leakage, water damage, public liability and
property damage, plate glass, and rent protection; (i) costs of supplies;
(j) costs of window cleaning, janitorial services, security services,
landscaping, snow and ice removal and painting; (k) sales or use taxes on
supplies and services; (l) consulting, accounting fees, legal, tax
appeal, engineering and other professional fees and expenses; (m)
management fees; (n) contributions, costs or expenses related to common
areas or facilities and off-site parking areas of any office park or
development of which the Building or Lot are a part, (o) alterations and
improvements to the Building and Lot which are not capital in nature made
by reason of any requirement of any insurance underwriters
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or any federal, state, or local statutes, regulations, ordinances, or any
other duly constituted public authorities having jurisdiction over the
Building and Lot; and (p) all Expense of Operation of the Food Services as
defined in section 5.1.5 and (q) without limiting any of the foregoing, any
other expense or charge which, in accordance with sound accounting and
management principles generally accepted, would be construed as an
operating expense. The term Operating Costs shall not include the interest
and amortization on mortgages for the Building and Lot or leasehold
interests therein; any charge for depreciation; leasing commissions or
legal fees for the negotiation and enforcement of leases; and the cost of
special services rendered to tenants (including Tenant) for which a special
charge is made.
In the event Landlord shall make a capital expenditure for Essential
Capital Improvements, as hereinafter defined, during any year, the annual
amortization of such expenditure (determined by dividing the amount of the
expenditure by the useful life of the improvement, as determined by Landlord),
together with interest at the greater of the Prime Rate prevailing plus 2% or
Landlord's actual borrowing rate for such Essential Capital Improvements shall
be deemed part of Annual Operating Costs for each year of such useful life. As
used herein, "Essential Capital Improvement" means any of the following:
4.2.0.1.1 a labor saving device, energy saving device or other
installation, improvement or replacement which reduces
Operating Costs as referred to above, whether or not voluntary
or required by governmental mandate; or
4.2.0.1.2 an installation, change, improvement, addition, alteration, or
removal of any architectural barriers, whether or not the
foregoing are structural in nature, made by reason of any
governmental requirement whether or not such governmental
requirement exists on the date of the execution of this Lease
if such governmental requirement is or will be applicable
generally to similar office buildings; or
4.2.0.1.3 an installation or improvement which directly enhances the
health or safety of tenants in the Building generally, whether
or not voluntary or required by governmental
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mandate (as for example, without limitation, for life safety or
security).
4.2.0.1.4 costs or expenditures incurred in replacing compressors and
refrigeration equipment in order to comply with regulations
regarding ozone depleting refrigerants or resulting from the
excessive cost of or inability to obtain such materials.
4.3 ESTIMATED ANNUAL OPERATING EXPENSE ESCALATION PAYMENT.
If, with respect to any fiscal year or fraction thereof during the Term,
Landlord estimates that Tenant will be obligated to pay Tenant's Escalation
Payment, then Tenant shall pay, as additional rent, on the first day of each
month of such fiscal year and each ensuing fiscal year thereafter, an estimate
equal to 1/12th of Tenant's Escalation Payment for the respective fiscal year
("Estimated Monthly Operating Expense Cost Payments"), with an appropriate
additional payment or refund to be made within 30 days after Landlord's
Statement (as hereafter defined) is delivered to Tenant. Landlord may adjust
such Estimated Monthly Annual Operating Cost Payment from time to time and at
any time during a fiscal year, and Tenant shall pay, as additional rent, on the
first day of each month following receipt of Landlord's notice thereof, the
adjusted Estimated Monthly Annual Operating Cost Payment.
As soon as practicable after the end of each fiscal year ending during the
Term and after lease termination, Landlord shall render a statement ("Landlord's
Statement") in reasonable detail and according to usual accounting practices
certified by Landlord and showing for the preceding fiscal year or fraction
thereof, as the case may be, Landlord's Annual Operating Costs, Tenant's
Proportionate Share thereof, and Tenant's Escalation Payment, as defined above.
4.4 ELECTRICITY.
Tenant will be billed for electricity for Tenant's lights and outlet
consumption on a monthly basis based on an annual estimate of $1.00 per rentable
square foot. Should the actual average expense to Landlord per square foot for
Tenant's electricity be different, an additional charge or a credit will be made
at the end of each year's occupancy to be paid with or credited against the next
monthly charge for Tenant's electricity. Notwithstanding the foregoing,
Landlord reserves the right to assess Tenant's charge for electricity based on
an engineer's survey of Tenant's electrical usage conducted from time to time or
on the sub-metering of
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all or part of the Premises. Such charges for Tenant's electricity shall be paid
by Tenant as additional rent at the same time and in the same manner as payments
of Annual Rent.
Tenant covenants and agrees that its use of electric current shall not
exceed 4.0 watts per square foot of usable floor area and that its total
connected lighting load will not exceed the maximum load from time to time
permitted by applicable governmental regulations. In the event Tenant
introduces into the Premises personnel or equipment which overloads the capacity
of the Building's electrical system or in any other way interferes with the
system's ability to perform properly, supplementary systems including check
meters may, if and as needed, at Landlord's option, be provided by Landlord, at
Tenant's expense. Landlord shall not in any way be liable or responsible to
Tenant for any loss or damage or expense which Tenant may sustain or incur if,
during the Term of this Lease, either the quantity or character of electric
current is changed or electric current is no longer available or suitable for
Tenant's requirements due to a factor or cause beyond Landlord's control.
Landlord reserves the exclusive right to provide electric and other utility
service to the Building. Tenant may request permission from Landlord (which
consent may be withheld in its sole discretion) to arrange electric and other
utility service exclusively serving the Premises. Should such permission be
granted, however, such service shall be installed only in such locations and in
such manner as shall be specifically approved by Landlord in its sole
discretion, Tenant shall be responsible for restoration of any damage caused by
such installation and Tenant shall be responsible for removal of such
installations at the termination of this Lease. Landlord may limit Tenant's
choice of electrical or other utility providers in order to avoid proliferation
of such services to the Building or for any other reason. In no event, however,
shall Landlord be responsible for any damages or inconvenience caused by
interruption in or poor quality of electricity or other utility services
provided to the Building or the Premises unless such damages are caused by the
negligence of Landlord, its agents or employees.
4.5 CHANGE OF FISCAL YEAR.
Landlord shall have the right from time to time to change the periods of
accounting under Section 4.2 to any annual period other than a calendar year,
and upon any such change all items referred to in Section 4.2 shall be
appropriately apportioned. In all Landlord's
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Statements rendered under Section 4.2, amounts for periods partially within and
partially without the accounting periods shall be appropriately apportioned, and
any items which are not determinable at the time of a Landlord's Statement shall
be included therein on the basis of Landlord's estimate, and with respect
thereto Landlord shall render promptly after determination a supplemental
Landlord's Statement, and appropriate adjustment shall be made according
thereto. All Landlord's Statements shall be prepared on an accrual basis of
accounting.
4.6 PAYMENTS.
All payments of Annual Rent and additional rent shall be made to Managing
Agent, or to such other person as Landlord may from time to time designate. If
any installment of Annual Base Rent or additional rent or payments due on
account of leasehold improvements is paid more than 10 days after the due date
thereof, at Landlord's election, it shall bear interest at a rate equal to the
average prime commercial rate from time to time established by the three largest
national banks in Boston, Massachusetts plus 4% per annum from such due date,
which interest shall be immediately due and payable as further additional rent.
ARTICLE V LANDLORD'S COVENANTS
5.1 LANDLORD'S COVENANTS DURING THE TERM.
Landlord covenants during the Term:
5.1.1 Building Services - To furnish during normal working hours heat,
air-conditioning, elevator service and hot and chilled water
service and after normal working hours on business days cleaning
service as shown in Exhibit C. "Normal working hours" shall mean
the hours of 8:00 a.m. through 5:00 p.m. Monday through Friday
and the hours of 8:00 a.m. through 1:00 p.m. on Saturdays, and no
hours on legal holidays and Sundays; provided, however, that
Tenant shall have access to the Building 24 hours a day, 365 days
a year, by means of a key or other access device to the main
lobby of the Building to be provided to Tenant by Landlord.
Tenant shall pay when due all amounts and charges for such
services during hours other than normal working hours and shall
indemnify and hold harmless Landlord from and against any and all
claims, liabilities, damages, losses, costs and expenses
(including reasonable attorneys' fees) in connection therewith.
Landlord is not and shall not be required
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to furnish to Tenant or any other occupant of the Premises
telephone or other communication service.
5.1.2 Additional Building Services - To furnish, through Landlord's
employees or independent contractors, reasonable additional
Building operation services upon reasonable advance request of
Tenant at equitable rates including an administrative fee from
time to time established by Landlord to be paid by Tenant;
5.1.3 Repairs - Except as otherwise provided in Article VII, to make
such repairs to the roof, exterior walls, floor slabs, other
structural components and common facilities of the Building as
may be necessary to keep them in serviceable condition; and
5.1.4 Tenant Directory - To include Tenant's name on the Tenant
directory maintained by Landlord in the main lobby of the
Building and on the floor of the Building on which the Premises
are located, and to provide a Building standard sign on or
adjacent to the entrance door to the Premises.
5.1.5 Food Service - Landlord (or any affiliate or agent designated by
Landlord) may provide, within the Building or any building in the
office park in which the Building is located known as
CambridgePark (an "Office Park Building"), a food service of a
size, type, location and serving capacity as Landlord shall deem
suitable, in its sole discretion. All losses incurred by Landlord
in operating the food service facility during any fiscal year and
properly allocable to the Building and other Office Park
Buildings (the "Food Service Losses") shall be added to the
Landlord's Annual Operating Costs for the year in which such
losses were incurred for the purpose of calculating the Tenant's
Escalation Payment pursuant to Section 4.2. All profits realized
by the Landlord in operating the food service facility during any
fiscal year and properly allocable to the Building and other
Office Park Buildings (the "Food Service Profits") shall be
credited against the Landlord's Annual Operating Costs for the
Building and other Office Park Buildings for such year. For the
purposes of this Section 5.1.5, the Food Service Profits or
Losses for any year shall be calculated by deducting from the
Gross Receipts of the Food Service (as hereinafter defined) all
Expenses of Operation (as hereinafter defined). Gross Receipts of
the Food Service as used herein are defined to mean the total
amount in dollars of the actual prices charged, in cash, for food
and beverages served at the facility,
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excluding sums collected for any sales tax or excise tax. The
Expenses of Operation of the food service shall mean all expenses
of operating the food service facility, including without
limitation, salaries, wages, employment taxes and fringe
benefits, food service administration costs, food costs,
concessionaire's costs, operating costs, equipment maintenance
and repair costs, if any, plus an annual return to the Landlord
upon its investment in establishing the food service facility
(including without limitation the cost of furniture, equipment,
furnishings, and related mechanical systems) equal to fifteen
percent (15%) of its investment or $50,000, whichever is less.
If during any six-month period, the mathematical average of the number of
luncheon meals served by the food service facility per day is fewer than 300, or
the Food Service Losses incurred by the Landlord in operating the food service
facility during such six-month period exceed $25,000, then the Landlord shall
have the right and option, in its sole discretion, to take any steps necessary
to reduce or eliminate the losses (including without limitation, modification or
termination of the food service), unless one hundred percent (100%) of the
tenants occupying the Building agree that the Landlord's Annual Operating Costs
hereunder for the purpose of calculating the Annual Operating Expense Escalation
shall include one hundred percent (100%) of the Food Service Losses, without
limitation.
Landlord reserves the right to approve Tenant's use of a food service
operator other than the Landlord's food service operator, if any. Such approval
will not be unreasonably withheld.
5.1.6 Quiet Enjoyment - That Landlord has the right to make this Lease
and that Tenant on paying the rent and performing its obligations
hereunder shall peacefully and quietly have, hold and enjoy the
Premises throughout the Term without any manner of hindrance or
molestation from Landlord or anyone claiming under Landlord,
subject however to all the terms and provisions hereof.
5.2 INTERRUPTIONS.
Landlord shall not be liable to Tenant for any compensation or reduction of
rent by reason of inconvenience or annoyance, injury, death or for loss of
business arising from power or other utility losses or shortages, air pollution
or contamination, or from the necessity of Landlord's entering the Premises for
any of the purposes in this Lease
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authorized, or for repairing the Premises or any portion of the Building or the
Lot or for any interruption or termination (by reason of any cause reasonably
beyond Landlord's control, including without limitation, loss of any applicable
license or government approval) of the food service provided by Landlord
pursuant to Section 5.1.5. In case Landlord is prevented or delayed from making
any repairs, alterations or improvements, or furnishing any service or
performing any other covenant or duty to be performed on Landlord's part, by
reason of any cause beyond Landlord's reasonable control, Landlord shall not be
liable to Tenant therefor, nor, except as expressly otherwise provided in
Article VII, shall Tenant be entitled to any abatement or reduction of rent by
reason thereof, nor shall the same give rise to a claim in Tenant's favor that
such failure constitutes actual or constructive total or partial, eviction from
the Premises.
Landlord reserves the right to stop any service or utility system when
necessary by reason of accident or emergency or until necessary repairs have
been completed. Except in case of emergency repairs, Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
Landlord also reserves the right to institute such policies, programs and
measures as may be necessary, required or expedient for the conservation or
preservation of energy or energy services or as may be necessary or required to
comply with applicable codes, rules, regulations or standards.
ARTICLE VI TENANT'S COVENANTS
6.1 TENANT'S COVENANTS DURING THE TERM.
Tenant covenants during the Term and such further time as Tenant occupies
any part of the Premises:
6.1.1 Tenant's Payments - To pay when due (a) all Annual Rent, (b) all
taxes which may be imposed on Tenant's personal property in the
Premises (including, without limitation, Tenant's fixtures and
equipment) regardless to whomever assessed, (c) as additional
rent, Tenant's Escalation Payments, (d) all charges by public
utilities for electricity, telephone (including service
inspections therefor) and other services rendered to the Premises
not otherwise required hereunder to be furnished by Landlord
without charge and not
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consumed in connection with any services required to be furnished
by Landlord without charge, (e) as additional rent, all costs for
Landlord's Work attributable to change orders and any work
performed in the Premises by Landlord or Tenant in excess of
Landlord's Work, and (f) as additional rent, all charges to
Landlord for services rendered pursuant to Section 5.1.2 hereof.
6.1.2 Repairs and Yielding Up - Except as otherwise provided in Article
VII and Section 5.1.3, to keep the Premises in good order, repair
and condition, reasonable wear only excepted; and at the
expiration or termination of this Lease peaceably to yield up the
Premises and all alterations and additions therein, including all
telephone and data wiring installed by or at the request of
tenant, in such order, repair and condition, first removing all
goods and effects of Tenant and any alterations and additions,
the removal of which is required by agreement or specified to be
removed by Landlord by notice to Tenant, and repairing all damage
caused by such removal and restoring the Premises and leaving
them dean and neat.
6.1.3 Occupancy and Use - Continuously from the Commencement Date, to
use and occupy the Premises only for the Permitted Uses; not to
injure or deface the Building or the Lot; to keep the Premises
dean and in a neat and orderly condition; and not to permit in
the Premises any use thereof which is improper, offensive,
contrary to law or ordinances, or liable to create a nuisance or
to create an unsafe or hazardous condition, or to invalidate or
increase the premiums for any insurance on the Building or its
contents or liable to render necessary any alteration or addition
to the Building; not to dump, flush, or in any way introduce any
Hazardous Materials or any other toxic substances into the
septic, sewage or other waste disposal system serving the
Premises, not to generate, store or dispose of Hazardous
Materials in or on the Premises, or the Lot or dispose of
Hazardous Materials from the Premises to any other location
without the prior written consent of Landlord and then only in
compliance with the Resource Conservation and Recovery Act of
1976, as amended, 42 U.S.C. (S) 6901 et seq., and all other
applicable laws, ordinances and regulations; to notify Landlord
of any incident which would require the filing of a notice under
applicable federal, state, or local law; not to use, store or
dispose of Hazardous Materials on the Premises without first
submitting to Landlord a list of all such Hazardous substances
and all permits required therefor and thereafter providing to
Landlord on an annual basis Tenant's certification
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that all such permits have been renewed with copies of such
renewed permits; and to comply with the orders and regulations of
all governmental authorities with respect to zoning, building,
fire, health and other codes, regulations, ordinances or laws
applicable to the Premises. As used herein, "Hazardous Materials"
shall mean and include, but shall not be limited to, any
petroleum product and all hazardous or toxic substances or wastes
including any asbestos-containing materials, waste oils, solvents
and chlorinated oils, polychlorinated biphenyls (PCBs), or
substances which are included under or regulated by any federal,
state or local law, rule or regulation (whether now existing or
hereafter enacted or promulgated, as they may be amended from
time to time) pertaining to the environment, contamination or
clean-up (all such laws, rules and regulations being referred to
collectively as the "Environmental Laws"), including, without
limitation, the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601 and
regulations adopted pursuant to said Act.
6.1.4 Rules and Regulations - To comply with the Rules and Regulations
set forth in Exhibit D and all other reasonable Rules and
Regulations hereafter made by Landlord, of which Tenant has been
given notice, for the care and use of the Building and the Lot
and their facilities and approaches, it being understood that
Landlord shall not be liable to Tenant for the failure of other
tenants of the Building to conform to such Rules and Regulations.
6.1.5 Safety Appliances - To keep the Premises equipped with all safety
appliances required by law or ordinance or any other regulation
of any public authority because of any use made by Tenant and to
procure all licenses and permits so required because of such use
and, if requested by Landlord, to do any work so required because
of such use, it being understood that the foregoing provisions
shall not be construed to broaden in any way Tenant's Permitted
Uses.
6.1.6 Assignment and Subletting.
Not without the prior written consent of Landlord to assign, mortgage,
pledge, encumber, sell or transfer this Lease, in whole or in part, to make any
sublease, or to permit occupancy of the Premises or any part thereof by anyone
other than Tenant, voluntarily or by operation of law (it being understood that
in no event shall Landlord consent to any such assignment, sublease or occupancy
if the same is on terms more
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favorable to the successor occupant than to the then occupant); as additional
rent, to reimburse Landlord promptly for reasonable legal and other expenses
incurred by Landlord in connection with any request by Tenant for consent to
assignment or subletting; no assignment or subletting shall affect the
continuing primary liability of Tenant (which, following assignment, shall be
joint and several with the assignee); no consent to any of the foregoing in a
specific instance shall operate as a waiver in any subsequent instance.
Landlord's consent to any proposed assignment or subletting shall not be
unreasonably withheld, but is required both as to the terms and conditions
thereof, and as to the creditworthiness of the proposed assignee or subtenant
and the consistency of the proposed assignee's or subtenant's business with
other uses and tenants in the Building. In the event that any assignee or
subtenant pays to Tenant any amounts in excess of the Annual Rent and additional
rent then payable hereunder, or pro rata portion thereof on a square footage
basis for any portion of the Premises, Tenant shall promptly pay one hundred
percent (100%) of said excess to Landlord as and when received by Tenant. If
Tenant requests Landlord's consent to assign this Lease or sublet more than
twenty-five (25%) of the Premises, Landlord shall have the option, exercisable
by written notice to Tenant given within ten (10) days after receipt of such
request, to terminate this Lease as of a date specified in such notice which
shall be not less than thirty (30) or more than sixty (60) days after the date
of such notice. Landlord may, in its sole discretion, withhold consent to any
proposed assignment or subletting to another tenant of the Building or an
affiliate of such tenant or an entity (or affiliate of any entity) with which
Landlord was negotiating for space in the Building during the preceding eighteen
(18) months.
If at any time during the Term of this Lease, Tenant is:
6.1.6.0.1 (i) a corporation, limited liability company or a trust (whether or
not having shares of beneficial interest) and there shall occur
any change in the identity of any of the persons then having
power to participate in the election or appointment of the
directors, trustees or other persons exercising like functions
and managing the affairs of Tenant; or
6.1.6.0.2 (ii) a partnership or association or otherwise not a natural person
(and is not a corporation, limited liability company or a
trust) and there shall occur any change in the identity of any
of the persons who then are members of such partnership or
association or who comprise Tenant;
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Tenant shall so notify Landlord and Landlord may terminate this Lease by notice
to Tenant given within ninety (90) days thereafter if, in Landlord's reasonable
judgment, the credit of Tenant is thereby materially impaired. This paragraph
shall not apply if the initial Tenant named herein is a corporation and the
outstanding voting stock thereof is listed on a recognized securities exchange.
Notwithstanding anything to the contrary contained in this Lease, Tenant
may assign Tenant's interest in this Lease, without Landlord's prior written
consent (but upon not less than thirty (30) days prior notice to Landlord
setting forth the name and address and enclosing the most recent annual and
quarterly financial reports (audited, if available) of the proposed assignee),
to: (a) a subsidiary, affiliate, parent or other entity which controls, is
controlled by, or is under common control with Tenant; or (b) a successor entity
to Tenant resulting from merger, consolidation or non-bankruptcy reorganization;
provided, in each case, that the assignee has a net worth which is at least as
great as the greater of the net worth of Tenant (x) at the time of execution of
the Lease or (y) immediately prior to the assignment.
6.1.7 Indemnity - To defend, with counsel approved by Landlord, all
actions against Landlord, Managing Agent, any partner, member,
trustee, stockholder, officer, director, employee or beneficiary
of Landlord or Managing Agent, holders of mortgages secured by
the Premises or the Building and Lot and any other party having
an interest in the Premises ("Indemnified Parties") with respect
to, and to pay, protect, indemnify and save harmless, to the
extent permitted by law, all Indemnified Parties from and
against, any and all liabilities, losses damages, costs, expenses
(including reasonable attorneys' fees and expenses), causes of
action, suits, claims, demands or judgments of any nature arising
from or related to (i) injury to or death of any person, or
damage to or loss of property, on the Premises or on adjoining
sidewalks, streets or ways, or connected with the use, condition
or occupancy of any of the foregoing unless caused by the
negligence of Landlord or its servants or agents, (ii) violation
of this Lease, or (iii) any act, fault, omission, or other
misconduct of Tenant or its agents, employees, contractors,
licensees, sublessees or invitees or (iv) the use, generation,
storage or disposal of Hazardous Materials by Tenant or its
agents, employees or invitees on the Premises, the Building or
Lot or any portion thereof or any surrounding area, including,
without limitation, any and all liabilities, losses, damages,
costs, expenses
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(including reasonable attorneys' fees and expenses), causes of
action, suits, claims, demands or judgments of any nature arising
from or related to removal or other remediation of any Hazardous
Materials or precautions required to protect against the release
of Hazardous Materials by Tenant or its agents, employees,
contractors, licensees, sublessees or invitees into the
environment to the extent required by any Environmental Laws (as
defined below).
6.1.8 Tenant's Insurance - To maintain (a) all risk property insurance
in amounts sufficient to fully cover Tenant's improvements and
all property in the Premises which is not owned by Landlord and
(b) commercial general liability insurance on the Premises, with
Landlord named as an additional insured, indemnifying Landlord
and Tenant against all claims and demands for (i) injury to or
death of any person or damage to or loss of property, on the
Premises or adjoining walks, streets or ways, or connected with
the use, condition or occupancy of any of the foregoing unless
caused by the negligence of Landlord or its servants or agents,
(ii) violation of this Lease, or (iii) any act, fault or
omission, or other misconduct of Tenant or its agents, employees,
contractors, licensees, sublessees or invitees, in amounts which
shall, at the beginning of the Term, be at least equal to the
limits set forth in Section 1.1, and from time to time during the
Term, shall be for such higher limits, if any, as are customarily
carried in the area in which the Premises are located on property
similar to the Premises and used for similar purposes, and shall
be written on the "Occurrence Basis," and to furnish Landlord
with certificates thereof. Such insurance shall be effected under
valid and enforceable policies with insurers authorized to do
business in Massachusetts as stock or mutual companies that are
rated in the current edition of Best's Key Rating Guide, Property
---------------------------------
and Casualty as A and as Class VII or higher. Such policies shall
------------
name Landlord and Tenant as the insureds as their respective
interests may appear. Not later than the first to occur of (a)
the Commencement Date or (b) the commencement of any activities
by Tenant in or about the Premises and thereafter not less than
thirty (30) days prior to the expiration dates of the expiring
policies theretofore furnished pursuant to this Section 6.1.8,
Tenant shall deliver to Landlord certificates of insurance issued
by the insurers evidencing all such policies in form satisfactory
to Landlord, accompanied by evidence satisfactory to Landlord of
payment of the first installment of the premiums. Each such
policy shall provide that it may not be canceled and that its
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form, terms or conditions may not be changed without at least
thirty (30) days' prior written notice to each insured named
therein.
6.1.9 Tenant's Worker's Compensation Insurance - To keep all of
Tenant's employees working in the Premises covered by worker's
compensation insurance in statutory amounts and to furnish
Landlord with certificates thereof.
6.1.10 Landlord's Right of Entry - To permit Landlord and Landlord's
agents entry: to examine the Premises at reasonable times and, if
Landlord shall so elect, to make repairs or replacements; to
remove, at Tenant's expense, any changes, additions, signs,
curtains, blinds, shades, awnings, aerials, or the like not
consented to in writing; and to show the Premises to prospective
tenants during the twelve (12) months preceding expiration of the
Term and to prospective purchasers and mortgagees at all
reasonable times.
6.1.11 Loading - Not to place Tenant's Property, as defined in Section
6.1.13, upon the Premises so as to exceed a rate of fifty (50)
pounds of live load per square foot and not to move any safe,
vault or other heavy equipment in, about or out of the Premises
except in such manner and at such times as Landlord shall in each
instance approve; Tenant's business machines and mechanical
equipment which cause vibration or noise that may be transmitted
to the Building structure or to any other leased space in the
Building shall be placed and maintained by Tenant in settings of
cork, rubber, spring, or other types of vibration eliminators
sufficient to eliminate such vibration or noise.
6.1.12 Landlord's Costs - In case Landlord shall be made party to any
litigation commenced by or against Tenant or by or against any
parties in possession of the Premises or any part thereof
claiming under Tenant, to pay, as additional rent, all costs
including, without implied limitation, reasonable counsel fees
incurred by or imposed upon Landlord in connection with such
litigation and, as additional rent, also to pay all such costs
and fees incurred by Landlord in connection with the successful
enforcement by Landlord of any obligations of Tenant under this
Lease.
6.1.13 Tenant's Property - All the furnishings, fixtures, equipment,
effects and property of every kind, nature and description of
Tenant and of all persons claiming by, through or under Tenant
which, during the continuance of this Lease or any occupancy of
the Premises by
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Tenant or anyone claiming under Tenant, may be on the Premises or
elsewhere in the Building or on the Lot shall be at the sole risk
and hazard of Tenant, and if the whole or any part thereof shall
be destroyed or damaged by fire, water or otherwise, or by the
leakage or bursting of water pipes, steam pipes, or other pipes,
by theft, or from any other cause, no part of said loss or damage
is to be charged to or to be borne by Landlord unless due to the
gross negligence of Landlord.
6.1.14 Labor or Materialmen's Liens - To pay promptly when due the
entire cost of any work done on the Premises by Tenant, its
agents, employees, or independent contractors; not to cause or
permit any liens for labor or materials performed or furnished in
connection therewith to attach to the Premises; and immediately
to discharge any such liens which may so attach.
6.1.15 Changes or Additions - Not to make any changes or additions to
the Premises without Landlord's prior written consent and only in
accordance with Article III hereto, provided that Tenant shall
reimburse Landlord for all costs incurred by Landlord in
reviewing Tenant's proposed changes or additions, and provided
further that, in order to protect the functional integrity of the
Building, all changes and additions shall be performed by
contractors selected from a list of approved contractors prepared
by Landlord from time to time.
6.1.16 Holdover - To pay to Landlord the greater of twice (a) the then
fair market rent as conclusively determined by Landlord or (b)
the total of the Annual Rent and all additional rent then
applicable for each month or portion thereof Tenant shall retain
possession of the Premises or any part thereof after the
termination of this Lease, whether by lapse of time or otherwise,
and also to pay an damages sustained by Landlord on account
thereof; the provisions of this subsection shall not operate as a
waiver by Landlord of the right of reentry provided in this
Lease. At the option of Landlord exercised by a written notice
given to Tenant while such holding over continues, such holding
over shall constitute an extension of this Lease for a period of
one year.
6.1.17 Security - To indemnify, and save Landlord harmless from any
claim for injury to person or damage to property asserted by any
personnel, employee, guest, invitee or agent of Tenant which is
suffered or occurs in or about the Premises or in or about the
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Building or the Lot by reason of the act of any intruder or any
other person in or about the Premises, the Building or the Lot.
6.1.18 Tenant Financial Statements - Tenant shall provide Landlord with
audited financial statements on an annual basis, within ninety
(90) days of the end of Tenant's fiscal year.
ARTICLE VII DAMAGE AND DESTRUCTION; CONDEMNATION
7.1 FIRE OR OTHER CASUALTY.
Subject to the provisions of Section 7.1.2 hereof, in the event during the
Term hereof the Premises shall be partially damaged (as distinguished from
"substantially damaged" as such term is hereinafter defined) by fire, explosion,
casualty or any other occurrence covered or as may be required to be covered, as
herein provided, by Landlord's insurance or by such casualty plus required
demolition, or by action taken to reduce the impact of any such event, Landlord
shall forthwith proceed to repair such damage and restore the Premises, or so
much thereof as was originally constructed or delivered by Landlord to
substantially its condition at the time of such fire, explosion, casualty or
occurrence, provided that Landlord shall not be obligated to expend for such
repair an amount in excess of the insurance proceeds recovered as a result of
such damage and, further provided that Tenant is not then in default of any of
its obligations under this Lease beyond any applicable cure period. Landlord
shall not be responsible for any delay which may result from any cause beyond
Landlord's reasonable control.
7.1.1 If, however, (i) the Premises should be damaged or destroyed (a)
by fire or other casualty (1) to the extent of twenty-five
percent (25%) or more of the cost of replacement, or (2) so that
twenty-five (25%) or more of the principal area contained in the
Premises shall be rendered untenantable, or (b) by any casualty
other than those covered by insurance policies required to be
maintained by Landlord under this Lease (hereinafter
"substantially damaged"), or (ii) the Premises shall be damaged
in whole or in part during the last year of the Term, or (iii)
there shall be damage to the Premises of a character as cannot
reasonably be expected to be repaired within twelve (12) months
from the date of casualty, or (iv) such restoration involves the
demolition of or repair of damage to twenty-five percent (25%) or
more of the Premises, or (v) applicable law requires the
demolition of the Building or forbids the rebuilding of the
damaged portion of the Building, or (vi) such
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restoration requires repairs in an amount in excess of the
insurance proceeds recovered or recoverable, or (vii) Landlord's
mortgagee shall require that the insurance proceeds from such
damage or destruction be applied against the principal balance
due on any mortgage, Landlord may, at its option, either
terminate this Lease or elect to repair the Premises and Landlord
shall notify Tenant as to its election within ninety (90) days
after such fire or casualty. If Landlord elects to terminate this
Lease, the Term hereof shall end on the date specified in the
notice (which shall be the end of a calendar month and not sooner
than thirty (30) days after such election was made). If Landlord
does not elect to terminate this Lease, then Landlord shall
perform such repairs set forth in Section 7.1.3 hereof and Tenant
shall perform such repairs in the Building as set forth in
Section 7.1.4 hereof, and the Term shall continue without
interruption and this Lease shall remain in full force and
effect.
If Landlord has not elected to terminate this Lease and if there shall be
damage to the Premises of a character as cannot (in the judgment of Landlord's
engineer) reasonably be expected to be repaired within twelve (12) months from
the date of casualty, then Tenant may, at its option, terminate this Lease
provided that Tenant's election shall be made by notice to Landlord within
thirty (30) days of Landlord's delivery of the estimate of Landlord's engineer
as to the time period required for restoration.
7.1.2 If Landlord does not elect to terminate this Lease as provided in
Section 7.1.2 hereof and if Tenant is not then in default of any
of its obligations under the Lease beyond any applicable cure
period provided for herein, Landlord shall, provided any third
party mortgagee of the Building makes insurance proceeds
available for restoration, reconstruct as much of the Premises as
was originally constructed by Landlord (it being understood by
Tenant that Landlord shall not be responsible for any
reconstruction of leasehold improvements, which reconstruction is
the sole responsibility of Tenant) to substantially its condition
at the time of such damage, but Landlord shall not be responsible
for any delays which may result from any cause beyond Landlord's
reasonable control.
7.1.3 If Landlord does not elect to terminate this Lease as provided in
Section 7.1.2 hereof; Tenant shall, at its own cost and expense,
repair and restore the Premises in accordance with the provisions
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of Section 6.1.15 hereof to the extent not required to be
repaired by Landlord pursuant to the provisions of this Section
7.1, including, but not limited to, the repairing and/or
replacement of its merchandise, trade fixtures, furnishings and
equipment in a manner and to at least a condition equal to that
prior to its damage or destruction. Tenant agrees to commence the
performance of its work when notified by Landlord that the work
to be performed by Tenant can, in accordance with good
construction practices, then be commenced and Tenant shall
complete such work as promptly thereafter as is practicable, but
in no event more than 90 days thereafter.
7.1.4 All proceeds payable from Landlord's insurance policies with
respect to the Premises shall belong to and shall be payable to
Landlord. If Landlord does not elect to terminate this Lease as
provided in Section 7.1.2 hereof, Landlord shall disburse and
apply so much of any insurance recovery as shall be necessary
against the cost to Landlord of restoration and rebuilding of
Landlord's work referred to in Section 7.1.3 hereof, subject to
the prior rights of any lessor under a ground or underlying lease
covering the Building and/or the holder of any mortgage liens
against the Building.
7.1.5 In the event that the provisions of Section 7.1.1 or Section
7.1.2 shall become applicable, the Annual Rent and additional
rent shall be abated or reduced proportionately during any period
in which, by reason of such damage or destruction, there is
substantial interference with the operation of the business of
Tenant in the Premises, having regard to the extent to which
Tenant may be required to discontinue its business in the
Premises, and such abatement or reduction shall continue for the
period commencing with such destruction or damage and ending with
the completion by Landlord of such work of repair and/or
reconstruction as Landlord is obligated to do.
7.2 EMINENT DOMAIN.
If, after the execution and before termination of this Lease, the entire
Premises shall be taken by eminent domain or destroyed by the action of any
public or quasi-public authority, or in the event of conveyance in lieu thereof,
the Term shall cease as of the day possession shall be taken by such authority,
and Tenant shall pay rent up to that date with a pro-rata refund by Landlord of
such rent and additional
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rent as shall have been paid in advance for a period subsequent to the date of
the taking of possession.
If less than twenty-five percent (25%) of the Premises shall be so taken or
conveyed, this Lease shall cease only with respect to the parts so taken or
conveyed, as of the day possession shall be taken, and Tenant shall pay rent up
to that day, with an appropriate refund by Landlord of such rent as may have
been paid in advance for a period subsequent to the date of the taking of
possession, and thereafter the Annual Rent shall be equitably adjusted. Pending
agreement of such rental adjustment, Tenant agrees to pay to Landlord the Annual
Rent and additional rent in effect immediately prior to the taking by eminent
domain. Landlord shall at its expense make all necessary repairs or alterations
so as to constitute the remaining premises a complete architectural unit.
If more than twenty-five percent (25%) of the Premises shall be so taken or
conveyed, then the Term shall cease only as respects the part so taken or
conveyed, from the day possession shall be taken, and Tenant shall pay rent to
that date with an appropriate refund by Landlord of such rent as may have been
paid in advance for a period subsequent to the date of the taking of possession,
but Landlord shall have the right to terminate this Lease upon notice to Tenant
in writing within thirty (30) days after such taking of possession. If Landlord
does not elect to terminate the Lease, all of the terms herein provided shall
continue in effect except that the Annual Rent shall be equitably adjusted, and
Landlord shall make all necessary repairs or alterations so as to constitute the
remaining premises a complete architectural unit.
All compensation awarded for any such taking or conveyance, whether for the
whole or a part of the Premises, shall be the property of Landlord, whether such
damages shall be awarded as compensation for diminution in the value of the
leasehold or of the fee of or underlying leasehold interest in the Premises, and
Tenant hereby assigns to Landlord all of Tenant's right, title and interest in
and to any and all such compensation; provided, however, that Tenant shall be
entitled to seek a separate award for Tenant's stock, trade fixtures and
relocation expense.
In the event of any taking of the Premises or any part thereof for
temporary use, this Lease shall be and remain unaffected thereby and rent shall
not abate.
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ARTICLE VIII RIGHTS OF MORTGAGEE
8.1 PRIORITY OF LEASE.
This Lease is and shall continue to be subject and subordinate to any
presently existing mortgage or deed of trust of record covering the Lot or
Building or both (the "mortgaged premises"). The holder of any such presently
existing mortgage or deed of trust shall have the election to subordinate the
same to the rights and interests of Tenant under this Lease exercisable by
filing with the appropriate recording office a notice of such election,
whereupon the Tenant's rights and interests hereunder shall have priority over
such mortgage or deed of trust.
Unless the option provided for in the next following sentence shall be
exercised, this Lease shall be superior to and shall not be subordinate to, any
mortgage, deed of trust or other voluntary hen hereafter placed on the mortgaged
premises. The holder of any such mortgage, deed of trust or other voluntary
lien shall have the option to subordinate this Lease to the same, provided that
such holder enters into an agreement with Tenant by the terms of which the
holder will agree to recognize the rights of Tenant under this Lease and to
accept Tenant as tenant of the Premises under the terms and conditions of this
Lease in the event of acquisition of title by such holder through foreclosure
proceedings or otherwise and Tenant will agree to recognize the holder of such
mortgage as Landlord in such event, which agreement shall be made to expressly
bind and inure to the benefit of the successors and assigns of Tenant and of the
holder and upon anyone purchasing the mortgaged premises at any foreclosure
sale. Any such mortgage to which this Lease shall be subordinated may contain
such terms, provisions and conditions as the holder deems usual or customary.
8.2 RIGHTS OF MORTGAGE HOLDERS; LIMITATION OF MORTGAGEE'S LIABILITY.
The word "mortgage" as used herein includes mortgages, deeds of trust or
other similar instruments evidencing other voluntary liens or encumbrances, and
modifications, consolidations, extensions, renewals, replacements and
substitutes thereof. The word "holder" shall mean a mortgagee, and any
subsequent holder or holders of a mortgage. Until the holder of a mortgage
shall enter and take possession of the Premises for the purpose of foreclosure,
such holder shall have only such rights of Landlord as are necessary to preserve
the integrity of this Lease as security. Upon entry and taking possession of
the Premises for the
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purpose of foreclosure, such holder shall have all the rights of Landlord.
Notwithstanding any other provision of this Lease to the contrary, including
without limitation Section 10.4, no such holder of a mortgage shall be liable,
either as mortgagee or as assignee, to perform, or be liable in damages for
failure to perform any of the obligations of Landlord unless and until such
holder shall enter and take possession of the Premises for the purpose of
foreclosure, and such holder shall not in any event be liable to perform or for
failure to perform the obligations of Landlord under Section 3.2. Upon entry for
the purpose of foreclosure, such holder shall be liable to perform all of the
obligations of Landlord (except for the obligations under Section 3.2), subject
to and with the benefit of the provisions of Section 10.4, provided that a
discontinuance of any foreclosure proceeding shall be deemed a conveyance under
said provisions to the owner of the equity of the Premises.
8.3 MORTGAGEE'S ELECTION.
Notwithstanding any other provision to the contrary contained in this
Lease, if prior to substantial completion of Landlord's obligations under
Article III, any holder of a first mortgage on the mortgaged premises enters and
takes possession thereof for the purpose of foreclosing the mortgage, such
holder may elect, by written notice given to Tenant and Landlord at any time
within ninety (90) days after such entry and taking of possession, not to
perform Landlord's obligations under Article III, and in such event such holder
and all persons claiming under it shall be relieved of all obligations to
perform, and all liability for failure to perform, said Landlord's obligations
under Article III, and Tenant may terminate this Lease and all its obligations
hereunder by written notice to Landlord and such holder given within thirty (30)
days after the day on which such holder shall have given its notice as
aforesaid.
8.4 NO PREPAYMENT OR MODIFICATION, ETC.
Tenant shall not pay Annual Rent, additional rent, or any other charge more
than ten (10) days prior to the due date thereof. No prepayment of Annual Rent,
additional rent or other charge, no assignment of this Lease and no agreement to
modify so as to reduce the rent, change the Term, or otherwise materially change
the rights of Landlord under this Lease, or to relieve Tenant of any obligations
or liability under this Lease, shall be valid unless consented to in writing by
Landlord's mortgagees of record, if any.
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8.5 NO RELEASE OR TERMINATION.
No act or failure to act on the part of Landlord which would entitle Tenant
under the terms of this Lease, or by law, to be relieved of Tenant's obligations
hereunder or to terminate this Lease, shall result in a release or termination
of such obligations or a termination of this Lease unless (i) Tenant shall have
first given written notice of Landlord's act or failure to act to Landlord's
mortgagees of record, if any, specifying the act or failure to act on the part
of Landlord which could or would give basis to Tenant's rights and (ii) such
mortgagees, after receipt of such notice, have failed or refused to correct or
cure the condition complained of within a reasonable time thereafter, but
nothing contained in this Section 8.5 shall be deemed to impose any obligation
on any such mortgagee to correct or cure any such condition. "Reasonable time"
as used above means and includes a reasonable time to obtain possession of the
mortgaged premises, if the mortgagee elects to do so, and a reasonable time to
correct or cure the condition if such condition is determined to exist.
8.6 CONTINUING OFFER.
The covenants and agreements contained in this Lease with respect to the
rights, powers and benefits of a mortgagee (particularly, without limitation
thereby, the covenants and agreements contained in this Article VIII) constitute
a continuing offer to any person, corporation or other entity, which by
accepting or requiring an assignment of this Lease or by entry or foreclosure
assumes the obligations herein set forth with respect to such mortgagee; such
mortgagee is hereby constituted a party to this Lease as an obligee hereunder to
the same extent as though its name were written hereon as such; and such
mortgagee shall be entitled to enforce such provisions in its own name. Tenant
agrees on request of Landlord to execute and deliver from time to time any
agreement which may reasonably be deemed necessary to implement the provisions
of this Article VIII.
8.7 MORTGAGEE'S APPROVAL.
Landlord's obligation to perform its covenants and agreements hereunder is
subject to the condition precedent that this Lease be approved by the holder of
any mortgage of which the Premises are a part and by the issuer of any
commitment to make a mortgage loan which is in effect on the date hereof.
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ARTICLE IX DEFAULT
9.1 EVENTS OF DEFAULT.
If any default by Tenant continues, in case of Annual Rent, additional rent
or any other monetary obligation to Landlord for more than ten (10) days after
notice (provided, however, that if Tenant defaults in any monetary obligation to
Landlord twice in any twelve (12) month period, no notice of default by Tenant
of any monetary obligation shall thereafter be required), or if Tenant fails to
provide an estoppel certificate in accordance with Section 10.10 hereof, or if
any default by Tenant continues in any other case for more than thirty (30) days
after notice and such additional time, if any, as is reasonably necessary to
cure the default if the default is of such a nature that it cannot reasonably be
cured in thirty (30) days and Tenant promptly commences to cure such default and
diligently pursues such cure without interruption to completion; or if Tenant
becomes insolvent, fails to pay its debts as they fall due, files a petition
under any chapter of the U.S. Bankruptcy Code, 11 U.S.C. 101 et seq., as it may
be amended (or any similar petition under any insolvency law of any
jurisdiction), or if such petition is filed against Tenant; or if Tenant
proposes any dissolution, liquidation, composition, financial reorganization or
recapitalization with creditors, makes an assignment or trust mortgage for
benefit of creditors, or if a receiver, trustee, custodian or similar agent is
appointed or takes possession with respect to any property of Tenant; or if the
leasehold hereby created is taken on execution or other process of law in any
action against Tenant; then, and in any such case, Landlord and the agents and
servants of Landlord may, in addition to and not in derogation of any remedies
for any preceding breach of covenant, immediately or at any time thereafter
while such default continues and without further notice, at Landlord's election,
do any one or more of the following: (1) give Tenant written notice stating
that the Lease is terminated, effective upon the giving of such notice or upon a
date stated in such notice, as Landlord may elect, in which event the Lease
shall be irrevocably extinguished and terminated as stated in such notice
without any further action, or (2) with or without process of law, in a lawful
manner enter and repossess the Premises as of Landlord's former estate, and
expel Tenant and those claiming through or under Tenant, and remove its and
their effects, without being guilty of trespass, in which event the Lease shall
be irrevocably extinguished and terminated at the time of such entry, or (3)
pursue any other rights or remedies permitted by law. Any such termination of
the Lease shall be without prejudice to any remedies which might otherwise be
used for arrears of rent or prior breach of covenant,
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and in the event of such termination Tenant shall remain liable under this Lease
as hereinafter provided. Tenant hereby waives all statutory rights (including,
without limitation, rights of redemption, if any) to the extent such rights may
be lawfully waived, and Landlord, without notice to Tenant, may store Tenant's
effects and those of any person claiming through or under Tenant at the expense
and risk of Tenant and, if Landlord so elects, may sell such effects at public
auction or private sale and apply the net proceeds to the payment of all sums
due to Landlord from Tenant, if any, and pay over the balance, if any, to
Tenant.
9.2 TENANT'S OBLIGATIONS AFTER TERMINATION.
In the event that this Lease is terminated under any of the provisions
contained in Section 9.1 or shall be otherwise terminated for breach of any
obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as
compensation, (i) the excess of the total rent reserved for the residue of the
Term over the rental value of the Premises for said residue of the Term and (ii)
the unamortized portion of the actual out-of-pocket costs and expenses incurred
by Landlord in completing Landlord's Work and fees and commissions paid to the
Broker, amortized on a straight-line reduction basis from 100% to 0% over the
Term of the Lease set forth in Section 1.1 hereof. In calculating the rent
reserved, there shall be included, in addition to the Annual Rent and all
additional rent, the value of all other consideration agreed to be paid or
performed by Tenant for said residue. Tenant further covenants as an additional
and cumulative obligation after any such ending to pay punctually to Landlord
all the sums and perform all the obligations which Tenant covenants in this
Lease to pay and to perform in the same manner and to the same extent and at the
same time as if this Lease had not been terminated. In calculating the amounts
to be paid by Tenant under the next foregoing covenant, Tenant shall be credited
with any amount paid to Landlord as compensation as provided in the first
sentence of this Section 9.2 and also with the net proceeds of any rents
obtained by Landlord by reletting the Premises, after deducting all Landlord's
expenses in connection with such reletting, including, without implied
limitation, all repossession costs, brokerage commissions, fees for legal
services and expenses of preparing the Premises for such reletting, it being
agreed by Tenant that Landlord may (i) relet the Premises or any part or parts
thereof for a term or terms which may at Landlord's option be equal to or less
than or exceed the period which would otherwise have constituted the balance of
the Term and may grant such concessions and free rent as Landlord in its sole
judgment considers advisable or necessary to relet the same and (ii) make such
alterations, repairs and
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decorations in the Premises as Landlord in its sole judgment considers advisable
or necessary to relet the same, and no action of Landlord in accordance with the
foregoing or failure to relet or to collect rent under reletting shall operate
or be construed to release or reduce Tenant's liability as aforesaid.
So long as at least twelve (12) months of the Term remain unexpired at the
time of such termination, in lieu of any other damages or indemnity and in lieu
of full recovery by Landlord of all sums payable under all the foregoing
provisions of this Section 9.2, Landlord may by written notice to Tenant, at any
time after this Lease is terminated under any of the provisions contained in
Section 9.1, or is otherwise terminated for breach of any obligation of Tenant
and before such full recovery, elect to recover and Tenant shall thereupon pay,
as liquidated damages, an amount equal to the aggregate of the Annual Rent and
additional rent accrued under Article IV in the 12 months ended next prior to
such termination plus the amount of Annual Rent and additional rent of any kind
accrued and unpaid at the time of termination and less the amount of any
recovery by Landlord under the foregoing provisions of this Section 9.2 up to
the time of payment of such liquidated damages.
Nothing contained in this Lease shall, however, limit or prejudice the
right of Landlord to prove and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater, equal to, or less than the amount of the loss or damages
referred to above.
ARTICLE X MISCELLANEOUS
10.1 NOTICE OF LEASE.
Upon request of either party, both parties shall execute and deliver, after
the Term begins, a notice of this Lease in form appropriate for recording or
registration, and if this Lease is terminated before the Term expires, an
instrument in such form acknowledging the date of termination.
10.2 RELOCATION.
Landlord reserves the right to relocate the Premises to comparable space
within the Building or another Office Park Building by giving
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Tenant prior written notice of such intention to relocate. If within thirty (30)
days after receipt of such notice, Landlord and Tenant have not agreed on the
space to which the Premises are to be relocated and the timing of such
relocation, this Lease shall terminate on that date which is sixty (60) days
after the Tenant's receipt of such notice. If Landlord and Tenant do so agree,
then the Lease shall be deemed amended by deleting the description of the
original Premises and substituting thereof a description of such comparable
space and, if such relocation is to another Office Park Building owned by a
party other than Landlord, by reexecuting the Lease with the owner of such other
Office Park Building being substituted for the Landlord hereunder. Landlord
agrees to pay the reasonable costs of moving Tenant to such other space within
the Building or the park.
10.3 NOTICES FROM ONE PARTY TO THE OTHER.
All notices required or permitted hereunder shall be in writing and
addressed, if to the Tenant, at Tenant's Address or such other address as Tenant
shall have last designated by notice in writing to Landlord and, if to Landlord,
at Landlord's Address or such other address as Landlord shall have last
designated by notice in writing to Tenant. Any notice shall have been deemed
duly given if mailed to such address postage prepaid, registered or certified
mail, return receipt requested, when deposited with the U.S. Postal Service, or
if delivered to such address by hand, when so delivered.
10.4 BIND AND INURE.
The obligations of this Lease shall run with the land, and this Lease shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Landlord named herein and
each successive owner of the Premises shall be liable only for the obligations
accruing during the period of its ownership. The obligations of Landlord shall
be binding upon the assets of Landlord which comprise the Building and the Lot
but not upon other assets of Landlord. No individual partner, member, trustee,
stockholder, officer, director, employee or beneficiary of Landlord shall be
personally liable under this Lease and Tenant shall look solely to Landlord's
interest in the Building and the Lot in pursuit of its remedies upon an event of
default hereunder, and the general assets of the individual partners, trustees,
stockholders, officers, employees or beneficiaries of Landlord shall not be
subject to levy, execution or other enforcement procedure for the satisfaction
of the remedies of Tenant.
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10.5 NO SURRENDER.
The delivery of keys to any employee of Landlord or to Landlord's agent or
any employee thereof shall not operate as a termination of this Lease or a
surrender of the Premises.
10.6 NO WAIVER, ETC.
The failure of Landlord to seek redress for violation of, or to insist upon
the strict performance of any covenant or condition of this Lease or any of the
Rules and Regulations referred to in Section 6.1.4, whether heretofore or
hereafter adopted by Landlord, shall not be deemed a waiver of such violation
nor prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original violation, nor
shall the failure of Landlord to enforce any of said Rules and Regulations
against any other tenant in the Building be deemed a waiver of any such Rules or
Regulations. The receipt by Landlord of Annual Rent or additional rent with
knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach by Landlord, unless such waiver be in writing and signed
by Landlord. No consent or waiver, express or implied, by Landlord to or of any
breach of any agreement or duty shall be construed as a waiver or consent to or
of any other breach of the same or any other agreement or duty.
10.7 NO ACCORD AND SATISFACTION.
No acceptance by Landlord of a lesser sum than the Annual Rent and
additional rent then due shall be deemed to be other than on account of the
earliest installment of such rent due, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as rent be deemed as
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
10.8 CUMULATIVE REMEDIES.
The specific remedies to which Landlord may resort under the terms of this
Lease are cumulative and are not intended to be exclusive of any other remedies
or means of redress to which it may be lawfully entitled in case of any breach
or threatened breach by Tenant of any provisions of this Lease. In addition to
the other remedies provided in this Lease,
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Landlord shall be entitled to the restraint by injunction of the violation or
attempted or threatened violation of any of the covenants, conditions or
provisions of this Lease or to a decree compelling specific performance of any
such covenants, conditions or provisions.
10.9 LANDLORD'S RIGHT TO CURE.
If Tenant shall at any time default in the performance of any obligation
under this Lease, Landlord shall have the right, but shall not be obligated, to
enter upon the Premises and to perform such obligation, notwithstanding the fact
that no specific provision for such substituted performance by Landlord is made
in this Lease with respect to such default. In performing such obligation,
Landlord may make any payment of money or perform any other act. All sums so
paid by Landlord (together with interest at the rate of 4% per annum in excess
of the then prime commercial rate of interest being charged by the three largest
national banks in Boston, Massachusetts) and all necessary incidental costs and
expenses in connection with the performance of any such act by Landlord, shall
be deemed to be additional rent under this Lease and shall be payable to
Landlord immediately on demand. Landlord may exercise the foregoing rights
without waiving any other of its rights or releasing Tenant from any of its
obligations under this Lease.
10.10 ESTOPPEL CERTIFICATE.
Tenant agrees, from time to time, upon not less than 15 days' prior written
request by Landlord, to execute, acknowledge and deliver to Landlord a statement
in writing certifying that this Lease is unmodified and in full force and
effect; that Tenant has no defenses, offsets or counterclaims against its
obligations to pay the Annual Rent and additional rent and to perform its other
covenants under this Lease; that there are no uncured defaults of Landlord or
Tenant under this Lease (or, if there have been modifications, that this Lease
is in full force and effect as modified and stating the modifications, and, if
there are any defenses, offsets, counterclaims, or defaults, setting them forth
in reasonable detail); and the dates to which the Annual Rent, additional rent
and other charges have been paid. Any such statement delivered pursuant to this
Section 10.10 shall be in a form reasonably acceptable to and may be relied upon
by any prospective purchaser or mortgagee of premises which include the Premises
or any prospective assignee of any such mortgagee.
10.11 WAIVER OF SUBROGATION.
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Any insurance carried by either party with respect to the Premises and
property therein or occurrences thereon shall include a clause or endorsement
denying to the insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to occurrences of injury or
loss. Each party, notwithstanding any provisions of this Lease to the contrary,
hereby waives any rights of recovery against the other for injury or loss due to
hazards covered by insurance containing such clause or endorsement to the extent
of the indemnification received thereunder.
10.12 ACTS OF GOD.
In any case where either party hereto is required to do any act, delays
caused by or resulting from Acts of God, war, civil commotion, fire, flood or
other casualty, labor difficulties, shortages of labor, materials or equipment,
government regulations, unusually severe weather, or other causes beyond such
party's reasonable control shall not be counted in determining the time during
which work shall be completed, whether such time be designated by a fixed date,
a fixed time or a "reasonable time," and such time shall be deemed to be
extended by the period of such delay.
10.13 BROKERAGE.
Tenant and Landlord represent and warrant that they dealt with no brokers
in connection with this transaction other than the Broker and agree to defend,
with counsel approved by the other, indemnify and save the other harmless from
and against any and all cost, expense or liability for any compensation,
commissions or charges claimed by a broker or agent, other than the Broker in
connection with this Lease. Landlord hereby agrees to pay the brokerage fees to
the Broker in connection with the execution and delivery of this Lease.
10.14 SUBMISSION NOT AN OFFER.
The submission of a draft of this Lease or a summary of some or all of its
provisions does not constitute an offer to lease or demise the Premises, it
being understood and agreed that neither Landlord nor Tenant shall be legally
bound with respect to the leasing of the Premises unless and until this Lease
has been executed by both Landlord and Tenant and a fully executed copy has been
delivered to each of them.
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10.15 APPLICABLE LAW AND CONSTRUCTION.
This Lease shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts. If any term, covenant, condition or
provision of this Lease or the application thereof to any person or
circumstances shall be declared invalid or unenforceable by the final ruling of
a court of competent jurisdiction having final review, the remaining terms,
covenants, conditions and provisions of this Lease and their application to
persons or circumstances shall not be affected thereby and shall continue to be
enforced and recognized as valid agreements of the parties, and in the place of
such invalid or unenforceable provision, there shall be substituted a like, but
valid and enforceable provision which comports to the findings of the aforesaid
court and most nearly accomplishes the original intention of the parties.
There are no oral or written agreements between Landlord and Tenant
affecting this Lease. This Lease may be amended, and the provisions hereof may
be waived or modified, only by instruments in writing executed by Landlord and
Tenant.
The titles of the several Articles and Sections contained herein are for
convenience only and shall not be considered in construing this Lease.
Unless repugnant to the context, the words "Landlord" and "Tenant"
appearing in this Lease shall be construed to mean those named above and their
respective heirs, executors, administrators, successors and assigns, and those
claiming through or under them respectively. If there be more than one tenant,
the obligations imposed by this Lease upon Tenant shall be joint and several.
10.16 AUTHORITY OF TENANT.
Tenant represents and warrants to Landlord (which representations and
warranties shall survive the delivery of this Lease) that: (a) Tenant (i) is
duly organized, validly existing and in good standing under the laws of its
state of incorporation, (ii) has the corporate power and authority to carry on
businesses now being conducted and is qualified to do business in every
jurisdiction where such qualification is necessary and (iii) has the corporate
power to execute and deliver and perform its obligations under this Lease and
(b) the execution, delivery and performance by Tenant of its obligations under
this Lease have been duly authorized by all requisite corporate action and will
not
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violate any provision of law, any order of any court or other agency of
government, the corporate charter or by-laws of the Tenant or any indenture,
agreement or other instrument to which it is a party or by which it is bound.
ARTICLE XI SECURITY DEPOSIT
Simultaneously with Tenant's delivery of the executed Lease to Landlord,
Tenant will deliver the Security Deposit to Landlord, to be held by Landlord, as
security, without interest, for and during the Term, which deposit shall be
returned to Tenant at the termination of this Lease, provided there exists no
default by Tenant or breach of any understanding of Tenant. Notwithstanding the
foregoing, (a) no later than fifteen (15) days after the sixth (6th) month
anniversary of the Term Commencement Date, the Security Deposit shall be reduced
to $28,622.08 by the return to Tenant of the difference between the Security
Deposit then held by Landlord and $28,622.08, provided that no event of default
by Tenant then exists hereunder, and no condition exists which with the giving
of notice or the passage of time, or both, would constitute an event of default,
and (b) no later than fifteen (15) days after the twenty-fourth (24th) month
anniversary of the Term Commencement Date, the Security Deposit shall be reduced
to $14,311.04 by the return to Tenant of the difference between the Security
Deposit then held by Landlord and $14,311.04 provided that no event of default
by Tenant then exists hereunder, and no condition exists which with the giving
of notice or the passage of time, or both, would constitute an event of default,
and provided further that Tenant provides current financial statements to
Landlord which are acceptable to Landlord in Landlord's sole discretion. If all
or any part of the Security Deposit is applied to an obligation of Tenant
hereunder, Tenant shall immediately upon request by Landlord restore the
Security Deposit to its original amount. Tenant shall not have the right to
call upon Landlord to apply all or any part of the Security Deposit to cure any
default or fulfill any obligation of Tenant, but such use shall be solely in the
discretion of Landlord. Upon any conveyance by Landlord of its interest under
this Lease, the Security Deposit may be delivered by Landlord to Landlord's
grantee or transferee. Upon any delivery, Tenant hereby releases Landlord
herein named of any and all liability with respect to look solely to such
grantee or transferee. It is further understood that this provision shall also
apply to subsequent grantees and transferees.
EXECUTED as a sealed instrument in two or more counterparts on the day and
year first above written.
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LANDLORD:
BRE/CAMBRIDGEPARK OFFICE II L.L.C.,
a Delaware limited liability company
By:________________________________
TENANT:
PRIME RESPONSE GROUP, INC.
By:________________________________
Name:
Title:
Hereunto duly authorized
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EXHIBIT A
Description of the Lot
That certain parcel of land with buildings thereon situated in Cambridge,
Middlesex County, Massachusetts, shown as Lot A on plan entitled "Subdivision
Plan of Land Cambridge, Mass." Scale 1" - 60', dated February 27, 1985, prepared
by Harry R. Feldman, Inc. recorded with Middlesex South Registry of Deeds as
Plan No. 1038 of 1985 more particularly bounded and described as follows:
Northerly by CambridgePark Drive, four hundred seventy-three and 70/100
(473.70) feet;
Easterly by Lot B as shown on said plan, two hundred sixty-two and 50/100
(262.50) feet;
Southerly by said Lot B, sixteen and 70/100 (16.70) feet;
Easterly again by said Lot.B, one hundred ten (110.00) feet;
Southerly again by said Lot B, by three lines of two hundred twenty-two and
24/100 (222.24) feet, two hundred eighteen and 12/100 (218.12) feet and twenty-
three and 28/100 (23.28) feet; and
Westerly by said Lot B, two hundred ninety-five and 15/100 (295.15) feet.
Containing according to said plan 158,215 square feet.
<PAGE>
EXHIBIT C
LANDLORD'S SERVICES
I. CLEANING
A. GENERAL
1. All cleaning work will be performed between 8 a.m. and 12
midnight, Monday through Friday, unless otherwise necessary for
stripping, waxing, etc.
2. Abnormal waste removal (e.g., computer installation paper, bulk
packaging, wood or cardboard crates, refuse from cafeteria
operation, etc.) shall be Tenant's responsibility.
B. DAILY OPERATIONS (5 TIMES PER WEEK)
1. Tenant Areas
a. Empty and clean all waste receptacles; wash receptacles as
necessary.
b. Vacuum all rugs and carpeted areas.
c. Empty, damp-wipe and dry all ashtrays.
2. Lavatories
a. Sweep and wash floors with disinfectant.
b. Wash both sides of toilet seats with disinfectant.
c. Wash all mirrors, basins, bowls, urinals.
d. Spot clean toilet partitions.
e. Empty and disinfect sanitary napkin disposal receptacles.
f. Refill toilet tissue, towel, soap, and sanitary napkin
dispensers.
3. Public Areas
a. Wipe down entrance doors and clean glass (interior and
exterior).
b. Vacuum elevator carpets and wipe down doors and walls.
c. Clean water coolers.
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C. OPERATIONS AS NEEDED (BUT NOT LESS THAN EVERY OTHER DAY)
1. Tenant and Public Areas
a. Buff all resilient floor areas.
D. WEEKLY OPERATIONS
1. Tenant Areas, Lavatories, Public Areas
a. Hand-dust and wipe clean all horizontal surfaces with
treated cloths to include furniture, office equipment,
window sills, door ledges, chair rails, baseboards,
convector tops, etc., within normal reach.
b. Remove finger marks from private entrance doors, light
switches, and doorways.
c. Sweep all stairways.
E. MONTHLY OPERATIONS
1. Tenant and Public Areas
a. Thoroughly vacuum seat cushions on chairs, sofas, etc.
b. Vacuum and dust grillwork.
2. Lavatories
a. Wash down interior walls and toilet partitions.
F. AS REQUIRED AND WEATHER PERMITTING
1. Entire Building
a. Clean inside of all windows.
b. Clean outside of all windows.
G. YEARLY
1. Public Areas
a. Strip and wax all resilient tile floor areas.
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II. HEATING, VENTILATING, AND AIR CONDITIONING
1. Heating, ventilating, and air conditioning as required to provide
reasonably comfortable temperatures for normal business day
occupancy (excepting holidays); Monday through Friday from 8:00
a.m. to 6:00 p.m. and Saturday from 8:00 a.m. to 1:00 p.m.
2. Maintenance of any additional or special air conditioning
equipment and the associated operating cost will be at Tenant's
expense, which is estimated at $50 per hour.
III. WATER
Hot water for lavatory purposes and cold water for drinking,
lavatory and toilet purposes, and cold water for Tenant's kitchen
and Tenant's hot water heater (Tenant is to supply hot water
heater).
IV. ELEVATORS (IF BUILDING IS ELEVATORED)
Elevators for the use of all tenants and the general public for
access to and from all floors of the Building. Programming of
elevators (including, but not limited to, service elevators)
shall be as Landlord from time to time determines best for the
Building as a whole.
V. RELAMPING OF LIGHT FIXTURES
Tenant will reimburse Landlord for the cost of lamps, ballasts
and starters and the cost of replacing same within the Premises.
VI. CAFETERIA AND VENDING INSTALLATIONS
1. Any space to be used primarily for lunchroom or cafeteria
operation shall be Tenant's responsibility to keep clean and
sanitary, it being understood that Landlord's approval of such
use must be first obtained in writing.
2. Vending machines or refreshment service installations by Tenant
must be approved by Landlord in writing and shall be restricted
in use to employees and business callers.
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All cleaning necessitated by such installations shall be at
Tenant's expense.
VII ELECTRICITY
A. Landlord, at Landlord's expense, shall furnish electrical energy
required for lighting, electrical facilities, equipment, machinery,
fixtures, and appliances used in or for the benefit of the Premises,
in accordance with the provisions of the Lease of which this Exhibit
is part.
B. Tenant shall not, without prior written notice to Landlord in each
instance, connect to the Building electric distribution system any
fixtures, appliances or equipment other than normal office machines
such as personal computers, desk-top calculators and typewriters, or
any fixtures, appliances or equipment which Tenant on a regular basis
operates beyond normal building operating hours. In the event of any
such connection, Tenant agrees to an increase in the ANNUAL ESTIMATED
ELECTRICAL COST TO THE PREMISES and a corresponding increase in Annual
Rent by an amount which will reflect the cost to Landlord of the
additional electrical service to be furnished by Landlord, such
increase to be effective as of the date of any such installation. If
Landlord and Tenant cannot agree thereon, such amount shall be
conclusively determined by a reputable independent electrical engineer
or consulting firm to be selected by Landlord and paid equally by both
parties, and the cost to Landlord will be included in Landlord's
Operating Costs provided in Section 4.2 hereof.
C. Tenant's use of electrical energy in the Premises shall not at any
time exceed the capacity of any of the electrical conductors or
equipment in or otherwise serving the Premises. In order to insure
that such capacity is not exceeded and to avert possible adverse
effect upon the Building electric service, Tenant shall not, without
prior written notice to Landlord in each instance, connect to the
Building electric distribution system any fixtures, appliances or
equipment which operate on a voltage in excess of 120 volts nominal or
make any alteration or addition to the electric system of the
Premises. Unless Landlord shall reasonably object to the connection of
any such fixtures, appliances or equipment, all additional risers or
other equipment required therefor shall be provided by Landlord, and
the cost thereof shall be paid by Tenant upon Landlord's
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demand. In the event of any such connection, Tenant agrees to an
increase in the ANNUAL ESTIMATED ELECTRICAL COST TO THE PREMISES such
increase to be effective as of the date of any such connection. If
Landlord and Tenant cannot agree thereon, such amount shall be
conclusively determined by a reputable independent electrical engineer
or consulting firm to be selected by Landlord and paid equally by both
parties, and the cost to Landlord will be included in Landlord's
Operating Costs provided in Section 4.2 hereof.
D. If at any time after the date of this Lease, the rates at which
Landlord purchases electrical energy from the public utility supplying
electric service to the Building, or any charges incurred or taxes
payable by Landlord in connection therewith, shall be increased or
decreased, the ANNUAL ESTIMATED ELECTRICAL COST TO THE PREMISES shall
be increased or decreased, as the case may be, by an amount equal to
the estimated increase or decrease, as the case may be, in Landlord's
cost of furnishing the electricity referred to in Paragraph A above as
a result of such increase or decrease in rates, charges, or taxes. If
Landlord and Tenant cannot agree thereon, such amount shall be
conclusively determined by a reputable independent electrical engineer
or consulting firm to be selected by Landlord and paid equally by both
parties, and the cost to Landlord will be included in Landlord's
Operating Costs as provided in Section 4.2 hereof. Any such increase
or decrease shall be effective as of the date of the increase or
decrease in such rate, charge or taxes.
E. Landlord may, at any time, elect to discontinue the furnishing of
electrical energy. In the event of any such election by Landlord: (1)
Landlord agrees to give reasonable advance notice of any such
discontinuance to Tenant; (2) Landlord agrees to permit Tenant to
receive electrical service directly from the public utility supplying
service to the Building and to permit the existing feeders, risers,
wiring and other electrical facilities serving the Premises to be used
by Tenant and/or such public utility for such purpose to the extent
they are suitable and safely capable; (3) Landlord agrees to pay such
charges and costs, if any, as such public utility may impose in
connection with the installation of Tenant's meters and to make or, at
such public utility's election, to pay for such other installations as
such public utility may require, as a condition of providing
comparable electrical service to Tenant; and (4) Tenant shall
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thereafter pay, directly to the utility furnishing the same, all
charges for electrical services to the Premises.
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EXHIBIT D
RULES AND REGULATIONS
The following rules and regulations have been formulated for the safety and
well-being of all tenants of the Building and to insure compliance with
governmental and other requirements. Strict adherence to these rules and
regulations is necessary to guarantee that each and every tenant will enjoy a
safe and undisturbed occupancy of its premises in the Building. Any continuing
violation of these rules and regulations by Tenant shall constitute a default by
Tenant under the Lease.
Landlord may, upon request of any tenant, waive the compliance by such
tenant of any of the following rules and regulations, provided that (i) no
waiver shall be effective unless signed by Landlord's authorized agent, (ii) any
such waiver shall not relieve such tenant from the obligation to comply with
such rule or regulation in the future unless otherwise agreed to by Landlord,
(iii) no waiver granted to any tenant shall relieve any other tenant from the
obligation of complying with these rules and regulations, unless such other
tenant has received a similar written waiver from the Landlord, and (iv) any
such waiver shall not relieve Tenant from any liability to Landlord for any loss
or damage occasioned as a result of Tenant's failure to comply with any rule or
regulation
1. The entrances, lobbies, passages, corridors, elevators, halls, courts,
sidewalks, vestibules, and stairways shall not be encumbered or
obstructed by Tenant, Tenant's agents, servants, employees, licensees
or visitors or used by them for any purposes other than ingress or
egress to and from the Premises. Landlord shall have the right to
control and operate portions of the Building and the facilities
furnished for common use of the tenants in such manner as Landlord
deems best for the benefit of the tenants generally.
2. The moving in or out of all safes, freight, furniture, or bulky matter
of any description shall take place during the hours which Landlord
may determine from time to time. Landlord reserves the right to
inspect all freight and bulky matter to be brought into the Building
and to exclude from the Building all freight and bulky matter which
violates any of these Rules and Regulations or the Lease of which
these Rules and Regulations are a part. Landlord reserves the right to
have Landlord's structural engineer review Tenant's floor loads on the
Premises at Tenant's expense.
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3. Tenant, or the employees, agents, servants, visitors or licensees of
Tenant shall not at any time place waste or discard any rubbish,
paper, articles, or objects of any kind whatsoever outside the doors
of the Premises or in the corridors or passageways of the Building. No
animals or birds shall be brought or kept in or about the Building.
Bicycles shall not be permitted in the Building.
4. Tenant shall not place objects against glass partitions or doors or
windows or adjacent to any common space which would be unsightly from
the Building corridors or from the exterior of the Building and will
promptly remove the same upon notice from Landlord.
5. Tenant shall not make noises, cause disturbances, create vibrations,
odors (other than ordinarily acceptable tenant kitchen odors in the
building) or noxious fumes or use or operate any electric or
electrical devices or other devices that emit sound waves or are
dangerous to other tenants and occupants of the Building or that would
interfere with the operation of any device or equipment or radio or
television broadcasting or reception from or within the Building or
elsewhere, or with the operation of roads or highways in the vicinity
of the Building, and shall not place or install any projections,
antennae, aerials, or similar devices inside or outside of the
Premises, without the prior written approval of Landlord.
6. Tenant may not (without Landlord's approval therefor, which approval
will be signified on Tenant's Plans submitted pursuant to the Lease)
and Tenant shall not permit or suffer anyone to: (a) cook in the
Premises except as accessory to the use of a coffee room/kitchenette
containing a microwave oven; (b) place vending or dispensing machines
of any kind in or about the Premises; (c) at any time sell, purchase
or give away, or permit the sale, purchase, or gift of food in any
form.
7. Tenant shall not: (a) use the Premises for lodging, manufacturing or
for any immoral or illegal purposes; (b) use the Premises to engage in
the manufacture or sale of, or permit the use of spirituous,
fermented, intoxicating or alcoholic beverages on the Premises; (c)
use the Premises to engage in the manufacture or sale of, or permit
the use of, any illegal drugs on the Premises.
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8. No awning or other projections (including antennae) shall be attached
to the outside walls or windows. No curtains, blinds, shades, screens
or signs other than those furnished by Landlord shall be attached to,
hung in, or used in connection with any window or door of the Premises
without prior written consent of Landlord.
9. No signs, advertisement, object, notice or other lettering shall be
exhibited, inscribed, painted or affixed on any part of the outside or
inside of the Premises if visible from outside of the Premises.
Interior signs on doors shall be painted or affixed for Tenant by
Landlord or by sign painters first approved by Landlord at the expense
of Tenant and shall be of a size, color and style acceptable to
Landlord.
10. Tenant shall not use the name of the Building or use pictures or
illustrations of the Building in advertising or other publicity
without prior written consent of Landlord. Landlord shall have the
right to prohibit any advertising by Tenant which, in Landlord's
opinion, tends to impair the reputation of the Building or its
desirability for offices, and upon written notice from Landlord,
Tenant will refrain from or discontinue such advertising.
11. Door keys for doors in the Premises will be furnished at the
Commencement of the Lease by Landlord. Tenant shall not affix
additional locks on doors and shall purchase duplicate keys only from
Landlord and will provide to Landlord the means of opening of safes,
cabinets, or vaults left on the Premises. In the event of the loss of
any keys so furnished by Landlord, Tenant shall pay to Landlord the
cost thereof. Each tenant shall, upon the termination of its tenancy,
restore to Landlord all keys of offices, storage and toilet rooms
either furnished to, or otherwise procured by, such tenant.
12. Tenant shall cooperate and participate in all security programs
affecting the Building.
13. Tenant assumes full responsibility for protecting its space from
theft, robbery and pilferage, which includes keeping doors locked and
other means of entry to the Premises closed and secured.
14. Tenant shall not make any room-to-room canvass to solicit business
from other tenants in the Building, and shall not
D-3
<PAGE>
exhibit, sell or offer to sell, use, rent or exchange any item or
services in or from the Premises unless ordinarily embraced within
Tenant's use of the Premises as specified in its Lease. Canvassing,
soliciting and peddling in the Building are prohibited and Tenant
shall cooperate to prevent the same. Peddlers, solicitors and beggars
shall be reported to the Management Office.
15. Tenant shall not mark, paint, drill into, or in any way deface any
part of the Building or Premises. No boring, driving of nails or
screws (except for picture hanging, etc.), cutting or stringing of
wires shall be permitted, except with the prior written consent of
Landlord, and as Landlord may direct. Tenant shall not construct,
maintain, use or operate within their respective premises any
electrical device, wiring or apparatus in connection with a loud
speaker system or other sound system, except as reasonably required as
part of a communication system approved in writing by Landlord, prior
to the installation thereof. Tenant shall not install any resilient
tile or similar floor covering in the Premises except with the prior
written approval of Landlord. The use of cement or other similar
adhesive material is expressly prohibited.
16. Tenant shall not waste electricity or water and agrees to cooperate
fully with Landlord to assure the most effective operation of the
Building's heating and air conditioning and shall refrain from
attempting to adjust controls. Tenant shall keep corridor doors dosed
except when being used for access.
17. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were
constructed, and no sweepings, rubbish, rags, or other substances
shall be thrown therein. All damage resulting from misuse of said
fixtures shall be borne by the tenant who, or whose servant,
employees, agents, licensees, invitees, customers or guests shall have
caused the same.
18. Building employees shall not be required to perform, and shall not be
requested by any tenant or occupant to perform, any work outside of
their regular duties, unless under specific instructions from the
office of the Managing Agent of the Building. The requirements of
tenants will be attended to only upon application to Landlord, and any
special requirements shall be billed to Tenant (and paid when the next
installment of
D-4
<PAGE>
rent is due) in accordance with the schedule of charges maintained by
Landlord from time to time or at such charge as is agreed upon in
advance by Landlord and Tenant.
19. Tenant may request heating and/or air conditioning during other
periods in addition to normal working hours by submitting its request
in writing to the office of the Managing Agent of the Building no
later than 2:00 p.m. the preceding work day (Monday through Friday) on
forms available from the office of the Managing Agent. The request
shall clearly state the start and stop hours of the "off-hour"
service. Tenant shall submit to the Building Manager a list of
personnel authorized to make such request. The Tenant shall be charged
for such operation in the form of additional rent; such charges are to
be determined by the Managing Agent and shall be fair and reasonable
and reflect the additional operating costs involved.
20. Tenant covenants and agrees that its use of the Premises shall not
cause a discharge of more than the gallonage per foot of Premises
Design Floor Area per day of sanitary (non-industrial) sewage allowed
under the sewage discharge permit for the Building. Discharges in
excess of that amount, and any discharge of industrial sewage, shall
only be permitted if Tenant, at its sole expense, shall have obtained
all necessary permits and licenses therefor, including without
limitation permits from state and local authorities having
jurisdiction thereof. Tenant shall submit to Landlord on December 31
of each year of the Term of this Lease a statement, certified by an
authorized officer of Tenant, which contains the following
information: name of all chemicals, gases, and hazardous substances,
used, generated, or stored on the Premises; type of substance (liquid,
gas or granular); quantity used, stored or generated per year; method
of disposal; permit number, if any, attributable to each substance,
together with copies of all permits for such substances; and permit
expiration date for each substance. No flammable, combustible or
explosive fluid, chemical or substance shall be brought into or kept
upon the Premises, the Building or the Lot (other than those fluids or
chemicals customarily used by tenants of other first-class office
buildings in connection with office purposes and then only those types
and quantities permitted under Landlord's policies of insurance for
the Building).
D-5
<PAGE>
21. Landlord reserves the right to exclude from the Building at all times
any person who is not known or does not properly identify himself to
the Building management. Landlord may, at its option, require all
persons admitted to or leaving the Building between the hours of 6:00
p.m. and 8:00 a.m., Monday through Friday, and at any hour on
Saturdays, Sundays and legal holidays, to register. Each tenant shall
be responsible for all persons for whom it authorizes entry into the
Building, and shall be liable to Landlord for all acts or ornissions
of such persons.
22. Landlord reserves the right to inspect all freight to be brought into
the Building and to exclude from the Building all freight which
violates any of these rules and regulations. There shall not be used
in any space or in the common halls of the Building, either by any
tenant or by jobbers or others in the delivery or receipt of
merchandise, any hand trucks, except those equipped with rubber tires
and side guards.
D-6
<PAGE>
Exhibit 10.47
[LETTERHEAD OF COLLINS STREET BUSINESS CENTER APPEARS HERE]
________________________________________________________________________________
COLLINS STREET BUSINESS CENTRE
SERVICED OFFICES AGREEMENT
BETWEEN
MERDENE PTY LTD (A.C.N. 052 404 690)
trading as COLLINS STREET BUSINESS CENTRE
The Manager
AND
PRIME RESPONSE PTY LTD
(A.C.N. 082 682 451)
The Tenant
SIX MONTHS
24 November, 1999
________________________________________________________________________________
<PAGE>
COLLINS STREET BUSINESS CENTRE
SERVICED OFFICES AGREEMENT
BETWEEN
- -------
MERDENE PTY LTD (A.C.N. 052 404 690) (trading as COLLINS STREET BUSINESS CENTRE)
of Level 8, 350 Collins Street, Melbourne 3000 (the "Manager")
AND
- ---
THE TENANT whose name and address appear in the Schedule under the heading of
Tenant.
- --------------------------------------------------------------------------------
WHEREAS:
- -------
The Manager wishes to licence to and the Tenant wishes to accept such licence of
the Premises set out in the Schedule on the terms and conditions of this
Agreement.
- --------------------------------------------------------------------------------
THE PARTIES AGREE AS FOLLOWS:
- ----------------------------
Premises, Services, Term and Rent
- ---------------------------------
1. The Manager hereby licences to the Tenant the premises and any Furniture
specified in the Schedule for the Term and at the Rent also specified in
the Schedule.
2. The Manager shall also provide to the Tenant a telephone answering and
reception service between 8:30 a.m. and 5:30 p.m. Monday to Friday
excluding public holidays, together with any Services specified in the
Schedule. The Tenant shall give the Manager one month's notice of any
intention to cease or vary use by the Tenant of any of the Services.
3. Where the Manager has provided any of the Services to the Tenant, the
Manager shall issue monthly invoices in arrears which shall be paid by the
Tenant within 7 days of receipt.
4. The Premises shall only be used for the purpose of conducting a legal and
reputable business or profession.
5. The Tenant shall have exclusive possession of the Premises for the Term,
without unreasonable interference by the Manager.
Access
- ------
6. The Tenant shall have access to the Premises from the commencement of the
Term as set out in the Schedule 24 hours a day, 365 days a year. Any
access by the Tenant outside normal business hours shall be restricted to
the Tenant, persons accompanied by the Tenant or persons authorised by the
Tenant and for which the Tenant has first obtained permission for their
access from the Manager.
<PAGE>
Serviced Offices Agreement 3 Prime Response Pty Ltd
- -------------------------------------------------------------------------------
7. The Manager shall have access to the Premises for the purposes of
inspection or repair upon reasonable notice to the Tenant, but may enter
the Premises without such notice in the case of emergency, or if the
Manager has reasonable cause to believe the Tenant has abandoned the
Premises.
Manager's Obligation
- --------------------
8. The Manager shall:-
(a) ensure the Premises and any equipment is in good condition at the
commencement of and for the duration of the Term, and that there is
adequate security for the Premises;
(b) ensure the Premises are adequately insured against public liability,
fire and theft and;
(c) promptly pay all applicable rates, taxes and other outgoings relating
to the Premises, excluding telephone charges.
Tenant's Obligations
- --------------------
9. The Tenant shall:
(a) attend to prompt payment of Rent and any invoices for Services in
accordance with the terms and conditions of this Agreement, and shall
be responsible for insuring his assets and possessions on the
Premises;
(b) obtain at the Tenant's own expense any necessary consents for the
purpose of running the Tenant's business at the Premises, together
with arranging for rental and payment of any telephone lines and calls
(the Tenant may install up to 2 lines per office);
(c) take care of the Premises and ensure the Premises are kept in a tidy
and clean condition and upon termination of this Agreement to
peaceably surrender the Premises to the Manager in such condition,
fair wear and tear excepted;
(d) not make any alterations or additions to the Premises without the
Manager's consent in writing, including placement of any sign or
advertisement either inside or outside the Premises;
(e) notify the Manager immediately upon becoming aware of any loss or
damage or defect to the Premises, or anything which may affect the
Manager's insurance over the Premises;
(f) not obstruct or interfere with any of the common areas or any of the
other Tenants in their business activities, and not sleep or hold any
auctions on the Premises;
(g) not directly air any matter of concern relating to the Premises or the
Manager directly with the Manager's employees, either in public or
private, but shall instead take up such matter direct with the Manager
by appointment or by letter addressed to the Manager;
<PAGE>
Serviced Offices Agreement 4 Prime Response Pty Ltd
- -------------------------------------------------------------------------------
(h) not keep on the Premises any oils, greases, hazardous chemicals or
other noxious substances, any animals, birds or fish and shall ensure
all rubbish is regularly removed; and
(i) ensure that all agents, officers and employees of the Tenant are aware
of and observe the Tenant's obligations under this Agreement, and if
the Tenant comprises of two or more persons their obligations under
this Agreement shall be joint and several.
Mutual Obligations
- ------------------
10. The Manager and the Tenant shall:
(a) keep the terms and conditions of this Agreement confidential and shall
not disclose any information relating to those terms and conditions to
any third party, unless the consent of the other is first obtained in
writing;
(b) hereby indemnify the other and shall keep the other indemnified from
and against any loss or damage to the Premises, any person's property
or any person through injury or death, caused as a result of any
accident, neglect or deliberate or careless act of such party on the
Premises or resulting from any breach by such party of the terms and
conditions of this Agreement (but the Manager shall not be responsible
for any loss or damage incurred by the Tenant from provision by the
Manager of cleaning services); and
(c) if the Premises for any reason beyond the control of the parties
becomes unfit for use or occupation, terminate this Agreement
immediately by notice in writing from one to the other, without
compensation payable between them.
Option for Renewal
- ------------------
11. If an Option period is specified in the Schedule, the Tenant shall have the
right to extend the Term for that period, provided the Tenant gives to the
Manager at least one month's notice in writing of the Tenant's desire to
exercise the Option, and has paid all monies owning to the Manager under
this Agreement to the date of giving notice.
12. The terms and conditions of this Agreement shall apply to any extended
period, subject to the Manager reasonably determining a new rent in
accordance with the current market conditions.
Security Deposit
- ----------------
13. The Tenant shall pay to the Manager the Security amount specified in the
Schedule before commencing the Term, for security against default by and
liability for payment of monies owing to the Manager under this Agreement.
14. The Manager shall be entitled to deduct from the Security any monies owed
to the Manager for Rent or provision of Services under this Agreement, or
otherwise as a result of a breach of this Agreement by the Tenant.
15. The Security, or any remaining portion of it, shall be refunded to the
Tenant within 7 days of the termination of this Agreement.
<PAGE>
Serviced Offices Agreement 5 Prime Response Pty Ltd
- -------------------------------------------------------------------------------
Repairs
- -------
16. The Tenant shall in a prompt manner repair in full any damage to the
Premises resulting from neglect, omission or a deliberate or careless act
or a breach of a term or condition of this Agreement by the Tenant.
Early Termination
- -----------------
17. Where a party is of the view that the other (the "Defaulting Party") is in
breach of this Agreement or is otherwise performing its obligations under
this Agreement in an unsatisfactory manner, it may give notice in writing
to the Defaulting Party requesting a remedy of such breach or
unsatisfactory performance within 7 days of the date of the notice, failing
which that party may immediately terminate this Agreement and pursue
remedies available to it at law.
18. Upon such early termination, the Tenant shall peaceably vacate the
Premises, and the Security shall be refunded less any amounts duly deducted
by the Manager in accordance with this Agreement.
Holding Over
- ------------
19. Where leases of the Premises continues beyond the Term and any Option
period, the terms and conditions of this Agreement shall apply until such
time as either the Tenant or the Manager gives not less than one month's
notice in writing to the other of that party's intention to terminate this
Agreement.
Costs
- -----
20. The reasonable costs of both the Manager and the Tenant in preparing this
Agreement and any necessary stamp duty shall be paid by the Tenant.
Keys
- ----
21. The Tenant shall receive one set of keys to the Premises free of charge.
Additional sets of keys are available on request at a charge of $20,
refundable upon return for the keys during the Term or upon termination of
this Agreement.
22. All keys remain the property of the Manager.
Assignment
- ----------
23. The Manager may assign his rights and obligations under this Agreement to a
third party without the consent of the Tenant, while the Tenant may only
assign his rights and obligations with the consent of the Manager in
writing.
Notices
- -------
24. Any written notice served by a party under this Agreement is deemed to be
duly served if delivered by hand or mailed:-
(a) in the case of Tenant, at the Premises; and
(b) in the case of the Manager, also at the Premises.
<PAGE>
Serviced Offices Agreement 6 Prime Response Pty Ltd
- -------------------------------------------------------------------------------
Headlease
- ---------
25. The Tenant shall comply with all applicable terms and conditions of the
Manager's Headlease with respect to the Premises, a copy of which the
Tenant acknowledges receiving at or prior to the date of execution of this
Agreement (less details of any financial provisions contained in the
Headlease).
- --------------------------------------------------------------------------------
THE PARTIES HEREBY ENTER INTO THIS AGREEMENT ON THE DATE FIRST APPEARING IN THE
- -------------------------------------------------------------------------------
SCHEDULE.
- --------
The Manager
The Common Seal of MERDENE PTY LTD }
is hereunto affixed in accordance } (SEAL)
with its Articles of Association }
in the presence of: }
/s/ J.R. Lacey /s/ Susan Lacey
_________________________________ __________________________________
Secretary Director
J.R. Lacey Susan Lacey
_________________________________ __________________________________
Print Name Print Name
The Tenant
The Common Seal of THE TENANT }
is hereunto affixed in accordance with its }
Articles of Association in the presence of:}
/s/ Nigel Cannings /s/ Brain Rowe
- --------------------------------- ----------------------------------
Secretary Director
Nigel Cannings Brain Rowe
- --------------------------------- ----------------------------------
Print Name Print Name
<PAGE>
Serviced Offices Agreement 7 Prime Response Pty Ltd
- -------------------------------------------------------------------------------
SCHEDULE
AGREEMENT SIGNED: the day of , 1999.
- ----------------
TENANT: PRIME RESPONSE PTY LTD
- ------
(A.C.N. 082 682 451)
of Level 8, 350 Collins Street, Melbourne 3000
PREMISES: Suite 2 and Office Number 1.3 of Suite 1 at Level 8 (North),
- --------
350 Collins Street, Melbourne, Victoria, together with
shares use of waiting room at reception, kitchen, toilet and
bathroom facilities, and other common floor areas, as
indicated on the attached floor plan.
RENT: $4,585.00 per calendar month in advance, payable as the
- ----
Manager shall direct on the first day of each calendar month
and for any part of a month a payment proportionate to that
part, which Rent includes the provision of services
described in Clause 2 and all outgoings for rates, taxes,
insurance premiums, cleaning and like charges, but excludes
telephone line rentals and call charges, and any car parking
arrangement.
Offices rented on a monthly basis are subject to rent
increases upon the giving of one month's notice.
TERM: Commencing 25/th/ May, 1999, and terminating 24/th/
- ----
November, 1999.
OPTION: Monthly
- ------
SECURITY: $Nil
- --------
FURNITURE: Three Desks
- ---------
Three Credenza's
Three 3 Draw Pedestal's
Three 3 Draw Filing Cabinet's
Three Executive Chairs
Six Visitor Chairs
SERVICES: Telephone handset Provided at no charge
- --------
Additional Furniture }
Photocopying } At market rates
Secretarial Services } determined by the Manager
Boardroom Rental }
Use of Fax }
<PAGE>
[FLOORPLAN APPEARS HERE]
<PAGE>
Australian Securities Commission
Corporations Law
Memorandum
and
Articles of Association
OF
PRIME RESPONSE PTY LTD
A.C.N.. 082 682 451
[LOGO]
- -------------------------------------------------------------------------------
Melbourne Law Searches Pty, Ltd.
A.C.N. 050 239 417
Level 11 C.U. Tower, 485 La Trobe Street Melbourne Vic 3000
- -------------------------------------------------------------------------------
<PAGE>
----------------
----------------
Form 204
PANNELL KERR FORSTER
ATTN: JAN GORING
GPO BOX 5099BB
MELBOURNE VIC 3001
- --------------------------------------------------------------------------------
Certificate of Registration [SEAL]
of a Company AUSTRALIAN
SECURITIES
COMMISSION
Corporations Law Sub-section 121(1)
This is to certify that
PRIME RESPONSE PTY. LTD.
Australian Company Number 082 682 451
is a registered company under Division 1 of Part 2.2 of the
Corporations Law of Victoria and because
of its registration it is an incorporated company.
The company is limited by shares.
The company is a proprietary company.
The day of commencement of registration is
the nineteenth day of May, 1998.
Given under the seal of the
Australian Securities Commission
on this nineteenth day of May, 1998.
[Seal]
/s/ Alan Cameron
Alan Cameron
Chairman
<PAGE>
Exhibit 21.1
Subsidiaries of Prime Response, Inc.
------------------------------------
Name of Subsidiary Jurisdiction of Organization
- ------------------ ----------------------------
Prime Response U.S., Inc. Delaware
Prime Response Limited England
Prime Response Pty. Australia
Prime Response SARL France
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated February 2, 2000 relating to the financial statements of Prime
Response, Inc., which appear in such Registration Statement. We also consent to
the references to us under the headings "Experts" and "Selected Financial Data"
in such Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 7, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1999 JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<CASH> 3,999 530 0
<SECURITIES> 0 0 0
<RECEIVABLES> 9,204 4,858 0
<ALLOWANCES> (147) (43) 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 15,651 6,508 0
<PP&E> 5,733 4,267 0
<DEPRECIATION> (3,131) (2,156) 0
<TOTAL-ASSETS> 25,515 10,152 0
<CURRENT-LIABILITIES> 16,931 6,446 0
<BONDS> 0 0 0
43,076 31,261 0
0 0 0
<COMMON> 8,360 4,333 0
<OTHER-SE> (44,496) (32,918) 0
<TOTAL-LIABILITY-AND-EQUITY> (44,496) (32,860) 0
<SALES> 20,522 16,536 10,182
<TOTAL-REVENUES> 20,522 16,536 10,182
<CGS> 7,411 9,106 5,058
<TOTAL-COSTS> 38,299 30,976 12,189
<OTHER-EXPENSES> 2,443 (131) (148)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 115 294 227
<INCOME-PRETAX> (20,404) (14,603) (2,086)
<INCOME-TAX> 15 0 159
<INCOME-CONTINUING> (20,419) (14,603) (2,245)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (20,419) (14,603) (2,245)
<EPS-BASIC> (3.44) (2.36) (2.43)
<EPS-DILUTED> (3.44) (2.36) (2.43)
</TABLE>
<PAGE>
Exhibit 99.1
CONSENT
I hereby consent to the use of my name as a nominee for director of Prime
Response, Inc. (the "Company") in the Company's Registration Statement on Form
S-1 to be filed with the United States Securities and Exchange Commission.
Date: November 30, 1999 /s/ Marc McMorris
-----------------------------------------
Marc McMorris
