<PAGE>
As filed with the Securities and Exchange Commission on May 15, 2000
Registration No. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
EXTRICITY, INC.
(Exact Name of Registrant as Specified in Its Charter)
---------------
<TABLE>
<S> <C> <C>
California 7371 94-3243041
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or
organization) Classification Code Number) Identification No.)
</TABLE>
555 Twin Dolphin Drive, Suite 600
Redwood Shores, California 94065
(650) 596-1300
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------
Barry M. Ariko, Chairman and CEO
555 Twin Dolphin Drive, Suite 600
Redwood Shores, California 94065
(650) 596-1300
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies to:
<TABLE>
<S> <C>
Gregory M. Gallo, Esq. Curtis L. Mo, Esq.
Joe C. Sorenson, Esq. Jonathan P. Shanberge, Esq.
P. James Schumacher, Esq. Alexander C. Chen, Esq.
Alissa N. Park, Esq. Richard A. McCarthy, Esq.
Gray Cary Ware & Freidenrich LLP Brobeck, Phleger & Harrison LLP
400 Hamilton Avenue Two Embarcadero Place
Palo Alto, California 94301-1825 2200 Geng Road
(650) 328-6561 Palo Alto, California 94303
(650) 424-0160
</TABLE>
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
---------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Title of Each Class of Proposed Maximum Aggregate
Securities to Be Registered Offering Price(1) Amount of Registration Fee
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $0.00001 $50,000,000 $13,200
- ----------------------------------------------------------------------------------------
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rules 457(a) and 457(o) under the Securities Act.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 these securities and we are not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 15, 2000
[EXTRICITY LOGO]
Shares
Common Stock
Extricity, Inc. is offering shares of its common stock. This is our
initial public offering and no public market exists for our shares. We
anticipate that the initial public offering price will be between $ and
$ per share. We have applied to list our common stock for quotation on
the Nasdaq National Market under the symbol "EXTY".
--------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 7.
--------------
<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public Offering Price............................................... $ $
Underwriting Discounts and Commissions.............................. $ $
Proceeds to Extricity............................................... $ $
</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.
Extricity has granted the underwriters a 30-day option to purchase up to an
additional shares of our common stock to cover over-allotments.
FleetBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 2000.
--------------
Robertson Stephens
SG Cowen
Banc of America Securities LLC
The date of this Prospectus is , 2000.
<PAGE>
INSIDE FRONT COVER:
GATE FOLD:
On the top far left-hand side of the inside front cover reads: Extricity B2B-a
platform for B2B relationship management that manages the interactions among
businesses over the Internet.
The main graphic, which covers the span of the gatefold, will be a graphic
showing multiple businesses working together on a common object.
On the top right-hand side of the inside front cover reads: Internally
On the left-hand side of the gate fold there is a stick person with a web sheet
behind the stick figure, beneath the figure reads: Web Brower. To the left of
the stick figure reads Company Buyer. The stick figure is connected to a
building by a line to the right. Underneath the building reads EDI. To the left
of the Building reads: Manufacturer. The EDI building is connected to another
set of larger buildings by a thin line. Underneath the larger building reads:
Extricity B2B. To the left of the building reads: Supplier. There is a thin
line from the Extricity B2B, which is connected to a set of three buildings,
which reads: Contract Manufacturer. The Contract Manufacturer is connected to a
circle with 6 different types of building and a stick figure, which reads:
Electronic Market. A line to a truck and building which reads Extricity B2B
connects the electronic market. To the left of the Extricity B2B reads:
Distributor. There is a transparent rectangular wall between the Electronic
Market and the Extricity B2B. The top of the wall reads: Extricity B2B, and the
bottom of the wall reads: External. The transparent wall has one square, and
seven circles, which are connected in a box shape. Above the Extricity B2B is a
transparent square. The top of the square reads: Extricity B2B. Underneath the
Extricity B2B is a picture of two servers and two stick figures. There is a sky
background on the entire gatefold background.
<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 our 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, references
to "Extricity," "we," "us," and "our" refers to Extricity, Inc.
Until , 2000 (twenty-five (25) days after the date of this
prospectus), all dealers that buy, sell or trade our common stock, whether or
not participating in this offering, may be required to deliver a prospectus.
This delivery requirement is in addition to the dealer's obligation to deliver
a prospectus when acting as underwriters and with respect to their allotments
or subscriptions.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Special Note Regarding Forward-Looking Statements........................ 20
Use Of Proceeds.......................................................... 21
Dividend Policy.......................................................... 21
Capitalization........................................................... 22
Dilution................................................................. 23
Selected Consolidated Financial Data..................................... 24
Management's Discussion And Analysis Of Financial Condition And Results
Of Operations........................................................... 25
Business................................................................. 35
Management............................................................... 49
Related-Party Transactions............................................... 58
Principal Stockholders................................................... 61
Description Of Capital Stock............................................. 64
Shares Eligible For Future Sale.......................................... 68
Underwriting............................................................. 70
Legal Matters............................................................ 72
Experts.................................................................. 72
Where You Can Find Additional Information................................ 72
Index To Consolidated Financial Statements............................... F-1
</TABLE>
---------------------
Extricity, Extricity Alliance and the Extricity logo are our trademarks. Each
other trademark or service mark of any other company appearing in this
prospectus is the property of its holder.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information in this prospectus, including "Risk Factors," and our financial
statements and notes to those statements appearing elsewhere in this prospectus
regarding our company and the common stock being sold in this offering.
Extricity, Inc.
We are a leading provider of business-to-business, or B2B, software products
that allow companies to manage the internal and external sharing of information
and the execution of interactions among software applications and business
partners over the Internet. We refer to this exchange and management of
information among groups of companies over the Internet as business-to-business
relationship management, or B2BRM. Our eXtensible Markup Language, or XML,
based platform provides an open, standards-based solution that allows diverse
information systems and businesses to work together more effectively by
automating and synchronizing the flow of information and execution of
processes. We have filed an application for a patent that covers our unique
architecture for B2BRM. Our platform supports a process-based flow of mission-
critical information that enables organizations to achieve operational
efficiencies and to collaborate without having to change their internal
processes or information technology, or IT, environments regardless of size,
sophistication or existing software applications.
Over the last decade, companies have attempted to gain competitive advantages
by investing in IT with the goal of improving their internal operations and
efficiencies. With the emergence of the Internet as a widely available
communications infrastructure, companies now have the opportunity to realize
new competitive advantages by assembling highly coordinated networks of
business partners, including suppliers, customers and distributors to work
together to rapidly bring goods and services to market. Companies are becoming
increasingly dependent on these cooperative relationships with business
partners to integrate supply chains, enable e-commerce fulfillment and deploy
electronic markets. Since our inception, we have worked to provide a packaged
technology framework that uses the Internet to allow companies to engage in a
wide range of collaboration to increase the efficiencies of their business,
implement new business models and create greater levels of customer service and
loyalty.
Our comprehensive B2BRM platform:
. allows companies to communicate internally and externally with their
business partners regardless of existing technology infrastructure;
. is open and scalable to support simple data exchange as well as complex
collaboration arrangements among numerous partners;
. provides high-level security and availability necessary to support the
large transaction volumes enabled by the Internet;
. allows companies to easily add or change processes or applications
without the need for complex programming or significant interruption; and
. provides pre-packaged industry and market-focused solutions tailored to
specific industries and markets.
Our objective is to be the leading platform provider for B2BRM powering the
interactions within B2B e-commerce environments. Key elements of our strategy
include leveraging and
3
<PAGE>
expanding business relationships, proliferating our products through network
effect, offering market- focused B2B solutions, extending product and
technology leadership, offering our customers multiple ways of acquiring our
technology and expanding our international presence.
We license our products and sell services through direct and reseller sales
channels, including the selling assistance of system integrators. Our customers
use our products to optimize three main business functions: supply chain
management, e-commerce fulfillment and electronic markets. Our current
customers include Adaptec, Inc., Advanced Micro Devices, IBM, MarketFusion,
Inc., MaryKay, Inc., Need2Buy.com, Inc., Softlab Limited, a BMW company,
Solectron Corporation and Taiwan Semiconductor Manufacturing Corporation.
Corporate Information
We were incorporated in California in April 1996, under the name Augmentum
Software, Inc. We changed our name to CrossRoute Software, Inc. in July 1996,
to Extricity Software, Inc. in September 1998, and to Extricity, Inc. in May
2000. We will reincorporate in Delaware under the name Extricity, Inc. prior to
the completion of this offering. Our principal executive offices are located at
555 Twin Dolphin Drive, Suite 600, Redwood Shores, California 94065. Our
telephone number is (650) 596-1300. Our worldwide website is located at
http://www.extricity.com. We are providing an inactive textual reference only
to our website because it does not constitute part of this prospectus.
4
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered............................... shares
Common stock to be outstanding after the offering.. shares
Use of proceeds.................................... For general corporate
purposes, including
expansion of sales and
marketing activities,
product development,
facilities expansion and
other capital expenditures
and working capital. See
"Use of Proceeds" on page
21.
Proposed Nasdaq National Market Symbol............. EXTY
</TABLE>
The number of shares that will be outstanding after the offering is based on
36,587,835 shares outstanding as of May 9, 2000 and excludes:
. 2,457,200 shares of common stock issuable upon exercise of options
outstanding under our 1996 stock option plan;
. 4,814,379 shares of common stock reserved for issuance pursuant to future
grants under our 1996 stock option plan;
. shares of common stock reserved for issuance under our 2000
employee stock purchase plan immediately following our initial public
offering; and
. 268,312 shares of common stock issuable through the exercise and
conversion of warrants outstanding at a weighted average exercise price
of $3.17 per share.
Except as otherwise indicated, all information in this prospectus:
. gives effect to the conversion of all outstanding shares of preferred
stock into 26,131,746 shares of common stock upon the closing of our
initial public offering;
. assumes no exercise of the underwriters' over-allotment option; and
. gives effect to the Delaware reincorporation that will occur prior to the
completion of this offering and amendments to our certificate of
incorporation and bylaws to be effective upon completion of this
offering.
5
<PAGE>
Summary Consolidated Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Period from
April 3, 1996
(Inception) to Year Ended March 31,
March 31, --------------------------
1997 1998 1999 2000
-------------- ------- ------- --------
<S> <C> <C> <C> <C>
Consolidated Statements of
Operations Data:
Total revenues..................... $ 11 $ 503 $ 3,035 $ 9,185
Gross profit....................... 5 266 1,973 4,267
Loss from operations............... (1,475) (6,117) (9,357) (20,185)
Net loss........................... (1,393) (5,973) (9,097) (19,889)
Pro forma basic net loss per share
(unaudited)....................... $ (0.93)
Shares used to compute pro forma
basic net loss per share
(unaudited)....................... 21,300
</TABLE>
<TABLE>
<CAPTION>
March 31, 2000
-----------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(unaudited)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term
investments.................................... $ 7,861 $57,761
Working capital................................. 1,826 51,726
Total assets.................................... 14,196 64,096
Long term debt, less current portion............ 373 373
Total stockholders' equity...................... 2,310 52,210
</TABLE>
See Note 2 of notes to financial statements for the determination of the
number of shares used in computing pro forma net loss per share amounts.
The pro forma balance sheet data above reflects the sale of 7,751,938 shares
of our Series F preferred stock in May 2000 for net proceeds of approximately
$49.9 million. The pro forma as adjusted balance sheet data above also reflects
the receipt of the net proceeds from the sale of shares of common
stock offered by us at an assumed initial public offering price of $ per
share, after deducting the estimated underwriting discounts and commissions and
offering expenses payable by us.
6
<PAGE>
RISK FACTORS
You should carefully consider the following risks before you decide to buy
our common stock. The risks and uncertainties described below are not the only
ones facing our company. Additional risks and uncertainties may also adversely
affect our business. If any of the following risks actually occur, our business
could be harmed. If our business is harmed, the trading price of our common
stock could decline, and you could lose all or part of the money you paid to
buy our common stock.
Risks Related to Our Operations
We expect to incur losses in the future.
We have incurred significant net losses since our inception, including losses
of approximately $6.0 million for fiscal year 1998, approximately $9.1 million
for fiscal year 1999 and approximately $19.9 million for fiscal year 2000. At
March 31, 2000, we had an accumulated deficit of approximately $36.4 million.
We expect to substantially increase our expenses in each of the foreseeable
quarters primarily to fund the continued development of our products and
technologies and to expand our sales and marketing organizations. As a result,
we will need to generate significant additional revenues to achieve and
maintain profitability in the future. We expect quarterly operating losses to
increase for the fiscal year ended March 31, 2001 and are not certain when we
will become profitable, if ever. See "Selected Consolidated Financial Data."
Even if we do achieve profitability, we may not sustain or increase
profitability on a quarterly or annual basis. Failure to achieve or maintain
profitability will materially and adversely affect the market price of our
common stock.
We have a limited operating history, so it is difficult to evaluate our
business and prospects.
We incorporated in April 1996 and began shipping products in the fourth
quarter of calendar year 1997. Because of our limited operating history, it is
difficult or impossible to predict our future results. We are subject to the
risks inherent in the operation of a new business enterprise, and we cannot
assure you that we will be able to successfully address these risks. We are
generally unable to significantly reduce expenses in the short term to
compensate for any unexpected revenue shortfall. Accordingly, any significant
shortfall of revenues in relation to our expectations, any material delay of
customer orders or material delays in product releases would immediately harm
our business, operating results and financial condition. Additional risks we
face include our ability to:
. attract and retain a broad customer base;
. negotiate and maintain favorable business relationships; and
. plan and manage our growth effectively.
If we fail to manage these risks successfully, our business and operating
results could be harmed. We cannot assure you that we will be profitable in any
future period, and recent operating results should not be considered indicative
of future financial performance.
Our quarterly operating results are volatile and difficult to predict. If we
fail to meet the expectations of public market analysts and investors, the
market price of our common stock may decrease significantly.
Our significant revenue growth in recent quarters may not be sustainable and
prospective investors should not use these past results to predict future
operating margins or results. Our
7
<PAGE>
quarterly operating results have fluctuated significantly in the past and may
vary significantly in the future. This quarter-to-quarter fluctuation is due to
a number of factors, including the following:
. the amount and timing of operating costs relating to expansion of our
business, operations and infrastructure;
. the complexity of our selling process which can cause potential revenue
transactions to be delayed, postponed or cancelled;
. the ability to acquire expansion facility space at economical rates;
. the number and timing of new hires;
. our mix of license and professional services revenue;
. the rate of adoption of B2B e-commerce infrastructure within the overall
economy;
. our utilization rate for our professional services personnel;
. the success of our business relationships;
. changes in our pricing policies or our competitors' pricing policies;
. the announcement and introduction of new products or product enhancements
by us or our competitors; and
. our mix of domestic and international sales.
Our revenues and operating results depend upon the volume and timing of
customer orders and payments, the type of license acquired and the success of
our systems integrators and resellers in selling the product and the date of
product delivery. Historically, a substantial portion of revenues in a given
quarter have been recorded in the third month of that quarter, with a
concentration of these revenues in the last two weeks of the third month. We
expect this trend to continue and, therefore, any failure or delay in the
closing of orders would seriously harm our quarterly operating results. Since
our operating expenses are based on anticipated revenues and because a high
percentage of these expenses are relatively fixed, a delay in the recognition
of revenue from one or more license transactions could cause significant
variations in operating results from quarter-to-quarter and cause unexpected
results.
Due to these and other factors, we believe that period-to-period comparisons
of our results of operations are not meaningful and should not be relied upon
as indicators of our future performance. It is possible that in some future
periods our results of operations may be below the expectations of public
market analysts and investors. If this occurs, the price of our common stock
may decline.
A change in our anticipated mix of license types and selling channels could
cause significant variations in recognized revenue which could negatively
impact short-term operating results.
The average size of our license transactions ranges from just below $100,000
to over $1.0 million and is primarily a factor of the type of customer.
Historically, supply chain integration customers have purchased perpetual
enterprise-wide licenses which are recognized as revenue upon shipment while e-
commerce and supply chain fulfillment customers have purchased renewable term
licenses which are recognized as revenue ratably over the applicable license
term. The amount of the license fees which can be recognized as revenue depends
on whether a perpetual or subscription based license structure is involved, and
whether the license was sold through our direct
8
<PAGE>
or indirect channels. As a result, although we may achieve our anticipated
level of licensing activity, a change in the mix of license types and selling
channels could cause significant variations in recognized revenue which
significantly impacts our operating results from quarter-to-quarter and may
cause unexpected results.
Deferred revenue includes unearned license fees and prepaid services that
will be recognized as revenue in the future as we deliver licenses and perform
services. Since the amount of our revenues each quarter recognized from
deferred revenues can vary and is generally less than half of the license
revenue in a given quarter, our quarterly results will depend primarily upon
entering into new contracts to generate revenues for that quarter. New
contracts may not result in revenue in the quarter in which the contract was
signed, and we may not be able to predict accurately when revenues from these
contracts will be recognized. In addition, as noted above, different license
types will result in differing revenue recognition treatment which can cause
the amount of license fee recognized in a quarter to vary.
The market for our products is new, rapidly changing and competitive, and new
products developed by others could impair our ability to grow our business and
remain competitive.
The market for our products is competitive and subject to rapid technological
change. The intensity of competition is expected to increase in the future.
Increased competition may result in price reductions, reduced gross margins and
loss of market share, any one of which could seriously harm our business.
Today, our primary competition includes vendors providing their own B2B
solutions and companies attempting to build B2B integration solutions through
internal IT development. Although we believe that we do not currently face any
single direct competitor, there are many vendors in related markets that
address particular aspects of the features and functions that we provide.
Today, we face competition from:
. internal enterprise application integration software vendors, including
Active Software, Inc., Software Technologies, Inc., TIBCO Software Inc.
and Vitria Technology, Inc.;
. proprietary electronic data exchange vendors, such as GE Information
Systems, Harbinger Corporation, Sterling Commerce, Inc. and webMethods,
Inc; and
. supply chain vendors, such as i2 Technologies.
In the future, it is possible that we could face competition from vendors in
complementary markets, including enterprise resource planning, or ERP, vendors
such as SAP, Oracle Corporation, PeopleSoft, Inc., Baan Company, IBM, Microsoft
Corporation, OnDisplay, Inc., Viacore, Inc. and other vendors such as Ariba,
Inc. and Commerce One, Inc. or other large enterprise software companies such
as Siebel Systems, Inc. In addition, dozens of smaller software companies are
developing products which may compete with our products in the future.
Many of our competitors have more resources and broader customer
relationships than we do. In addition, many of these competitors have extensive
knowledge of our industry. Current and potential competitors have established
or may establish cooperative relationships among themselves or with third
parties to offer a single solution and increase the ability of their products
to address customer needs. In the past, we have lost potential customers to
competitors for various reasons, including lower prices for less complex
implementations. We may not be able to maintain our competitive position
against current and potential competitors, especially those with significantly
greater resources.
9
<PAGE>
The market for our products is in an early stage of development and customers
may not yet be ready to implement our products.
The market for B2B integration software is relatively new and rapidly
evolving, and there are a variety of integration methods available, including
electronic application integration, or EAI, electronic data interchange, or
EDI, and ERP. Some of these other integration methods are more established and
less expensive than our Extricity B2B software products. In addition,
application service providers, or ASPs, value added networks, or VANs, and
procurement networks have similar characteristics. At this early development
phase of the marketplace, a number of solutions will be attempted, any of which
could emerge as a preferred solution in a given industry or in general. If such
a standard or product type were to emerge and we could not make our products
compatible, our revenues would grow more slowly than anticipated. As a result,
we do not know if our target markets will widely adopt and deploy electronic
business integration products such as ours. If electronic business integration
products such as our Extricity B2B software products are not widely adopted by
our target markets, our operating results will suffer.
Our products are complex and generally involve capital expenditures by our
customers in excess of $250,000. As a result, these potential customers may
elect to pursue more inexpensive solutions rather than purchasing our products.
We do not have a long history of selling our Extricity B2B software products
and will have to continue to devote substantial resources in the future to
educate prospective customers about the benefits of our products. Our efforts
to educate potential customers may not result in our products achieving market
acceptance. In addition, our selling efforts frequently involve pilot projects
and proof of concept projects. These projects are typically provided at or
below cost and can have a negative impact on our gross profit. Many of our
prospective customers have made significant investments in internally-developed
or customized systems and would incur significant costs in switching to third-
party products such as ours. Furthermore, even if our products are effective,
our target customers may not choose them for technical, cost, support or other
reasons. If the market for our products fails to grow or grows more slowly than
we anticipate, our business could suffer.
If we fail to introduce new versions and releases of our product in a timely
manner, our revenues may decline.
We may fail to introduce or deliver new products or versions of our software
on a timely basis, if at all. The complexity of our software, internal quality
assurance testing and customer testing may reveal product performance issues or
desirable feature enhancements that could lead us to postpone the release of
new versions of our software. We may not be able to successfully complete the
development of currently planned or future enhancements in a timely and
efficient manner. The reallocation of resources associated with any
postponement could cause delays in the development and release of future
enhancements to our currently available software. Any such failure or delay
could harm our operating results.
Our products might not integrate with third-party applications, which would
inhibit sales.
We currently serve a customer base with a wide variety of constantly changing
hardware, operating system software, packaged software applications and
networking platforms. If our product fails to gain broad market acceptance due
to its inability to support a variety of these platforms, our operating results
may suffer. Our business depends, in part, on the following factors:
. our ability to integrate our product with multiple platforms and existing
systems and to modify our product as new versions of packaged
applications are introduced;
10
<PAGE>
. access to application program interface, or APIs, used for communication
between external software products and packaged application software;
. our ability to anticipate and support new standards; and
. our management of software being developed by third parties for our
customers or for use with our product.
Our access to APIs is controlled by the provider of these applications. If
the application provider denies or delays our access to APIs, our business may
be harmed. Some application providers may become competitors or establish
alliances with our competitors, increasing the likelihood that we would not be
granted access to their APIs. Furthermore, we may need to modify our Extricity
B2B software products or develop new adapters in the future as new applications
or newer versions of
existing applications are introduced. If we fail to continue to develop
adapters or respond to new applications or newer versions of existing
applications in a timely manner, our business could suffer.
Loss of key customers could significantly impact our revenues.
We have generated a substantial portion of our annual and quarterly
historical revenues from a limited number of customers. In addition, a
significant amount of our revenues is generated from selling our software
products to customers and suppliers of our customers. As a result, if we lose a
major customer within any given supply chain or fail to maintain a significant
base of accounts, our current and future potential revenues could suffer. In
fiscal year 2000, sales to our five largest customers accounted for
approximately 44.3% of total revenues. We expect that revenues from a limited
number of customers will continue to account for a large percentage of our
total revenues in future quarters. Our ability to attract new customers will
depend on a variety of factors, including the performance, quality, breadth and
depth of our current and future products. Our failure to add new customers that
make significant purchases of our products and services could reduce our future
revenues.
If our customers do not renew their licenses, our revenue may decline.
Although most of our current revenue is derived from sales of perpetual
software licenses and related services, in the future we expect that
approximately 25% of our revenue will be derived from sales of software
licenses sold on an annual renewal basis. We first sold renewable licenses in
the fourth quarter of fiscal year 2000 and, to date, none of our initial one-
year licenses have reached their renewal date. If a significant portion of our
customers who purchased renewal licenses elect not to renew their licenses for
our software, we would lose a recurring revenue stream on which we base part of
our business model and our business, operating results and financial condition
could be harmed.
If our business relationships terminate or if our resellers, system integrators
and consulting firms fail to perform as expected, we may lose important sales
and marketing opportunities.
We have established business relationships with system integrators, resellers
and consulting firms that sell, install and deploy our products and perform
custom integrations of systems and applications on a non-exclusive basis. Some
system integrators and resellers engage in joint marketing and sales efforts
with us and these relationships expose our software to many potential customers
to which we may not otherwise have access. In addition, these relationships
provide us with insights into new technology and with third-party service
providers that our customers can use
11
<PAGE>
for implementation services. We anticipate that we will derive a significant
portion of our revenues from customers that purchase products or services from
these system integrators and resellers. Our future growth will be limited if we
fail to optimize these business relationships.
We do not have written contracts with many of our system integrators,
resellers and consulting firms. Our business relationships with these system
integrators, resellers and consulting firms do not require them to market or
promote our products and impose no restrictions in connection with working with
competing software companies. Accordingly, our success will depend on their
willingness and ability to devote sufficient resources and efforts to marketing
our Extricity B2B software products rather than the products of others. We are
currently investing, and plan to continue to invest, significant resources to
develop these relationships.
We anticipate that system integrators and consulting firms will provide an
increasing level of system implementation services for our customers. If we are
unable to engage a sufficient number of system integrators and consulting firms
needed to service our customers' implementation requirements, our relations
with our customers could be harmed and we might be required to hire additional
personnel to provide these implementation services ourselves. In addition, if
the system integrators and consulting firms fail to provide adequate and timely
implementation services, our relations with our customers and our operating and
financial results could be harmed.
A number of our competitors have more established relationships with these
system integrators and resellers and, as a result, these system integrators or
resellers may be more likely to recommend competitors' products and services.
In addition, a number of our competitors have relationships with a greater
number of system integrators and resellers than we do and therefore, have
access to a broader base of enterprise customers. Our failure to establish or
maintain these relationships would significantly harm our ability to license
and successfully implement our product line. If we are not successful in
establishing new business relationships or fail to maintain existing business
relationships, we will have to devote substantially more resources to the
distribution, sales and marketing, implementation and support of our products
than we would otherwise, which could harm our business.
We may distribute our technology via application service providers, which may
result in a negative impact on revenues generated via our existing sales
channels.
In the future we may choose to offer our technology via ASPs, which will
allow customers to use our technology without a substantial investment in
infrastructure. The distribution of our technology via these service providers
may have a short-term negative impact on our existing sales channels and may
harm our relationships with our direct sales partners. The use of this
distribution model could harm our short-term operating results and financial
condition.
We are dependent on the acceptance of our core product, and if it does not
achieve market acceptance our revenue could decline.
We derived substantially all of our revenues in fiscal year 2000 from
software licenses and service fees from our Extricity B2B product line. We
expect that this suite of products will continue to account for the substantial
majority of our total revenues for the foreseeable future. Accordingly, our
future operating results significantly depend on the market acceptance and
growth of our product line and enhancements of these products and services. We
may not be able to successfully market our Extricity B2B product line or
develop extensions and enhancements to this product line on a long-term basis.
We have only licensed our product to a small number of customers and only a
portion of these customers have commenced commercial deployment. The deployment
of our Extricity B2B
12
<PAGE>
product line requires interoperability with a variety of software applications
and systems and, in some cases, requires the processing of a high number of
transactions per second. If our products fail to satisfy these demanding
technological objectives, our customers may become dissatisfied and we may be
unable to generate future sales. Failure to establish a significant base of
customer references will significantly reduce our ability to license our
products to additional customers.
Our lengthy and variable sales cycle makes it difficult for us to predict when
or if sales will be made.
Our products have a lengthy and unpredictable sales cycle that could cause
our revenues to fluctuate widely from period-to-period. Our sales cycle can
range from two weeks to nine months. We spend significant time educating and
providing information to our prospective customers regarding the use and
benefits of our products. These customers often view the purchase of our
products as a significant and strategic decision and may take two weeks to four
months to evaluate our products. As a result, the average sales cycle for our
products has typically ranged from three to four months, but can be much longer
for larger opportunities with new customers. In addition, a number of
organizations within a company, such as procurement, manufacturing, IT and
supply chain management, frequently become involved in the decision-making
process. This increases the difficulties in forecasting our sales cycle, since
a customer may commit to purchase our products but may want to further review
the amount of their purchase as the solution is offered to additional potential
users within their extended enterprise.
We depend on key personnel whose knowledge and expertise may be difficult to
replace.
We have recently hired new managers and we intend to continue to hire key
management personnel. All of our employees are at-will and may terminate their
employment with us at any time. We may not successfully assimilate our recently
hired managers or successfully locate, hire and retain qualified key management
personnel. Furthermore, our continued success largely depends on the personal
efforts and abilities of our senior management, including Mr. Barry M. Ariko,
our chairman and chief executive officer, Dr. Gregory Olsen, our vice president
and chief technology officer, Ms. Laura Ferrell, our vice president of
engineering, and other key personnel. The loss of employees could seriously
harm our results of operations and financial condition. We have not obtained
and do not expect to obtain key person life insurance on any of our senior
managers.
Because of competition for additional qualified personnel, we may be unable to
recruit or retain necessary personnel, which could impact development or sales
of our products.
Our future success also depends on our ability to attract, train and retain
highly qualified sales, research and development and managerial personnel.
Competition for qualified personnel in our industry and in the San Francisco
Bay Area, as well as other areas in which we recruit, is extremely intense and
characterized by rapidly escalating salaries, which may increase our operating
expenses or impair our ability to recruit qualified candidates. We have at
times experienced, and we continue to experience, difficulty in recruiting
qualified sales and research and development personnel, and we anticipate these
difficulties will continue in the future.
We have experienced significant growth in our business in recent periods and
failure to manage this growth could harm our business.
We have been experiencing a period of rapid growth over recent years. Our
total revenues have grown from approximately $500,000 during fiscal year 1998
to approximately $9.2 million during fiscal year 2000. The number of our
employees has grown from approximately 39 at the end of fiscal year 1998 to 158
at the end of fiscal year 2000. This growth has placed, and we expect that any
13
<PAGE>
future growth we experience will continue to place, a significant strain on our
management, systems and resources. To manage the anticipated growth of our
operations, we will be required to:
. improve existing and implement new operational, financial and management
information controls, reporting systems and procedures;
. acquire new facilities at an economically acceptable price;
. hire, train, retain and manage additional qualified personnel; and
. manage our relationships with our customers, suppliers and partners.
We may not be able to install management information and control systems in
an efficient and timely manner, and our current or planned personnel, systems,
procedures and controls may not be adequate to support our future operations.
If we do not manage growth effectively, it could harm our business, operating
results and financial condition.
If we are unable to protect our intellectual property we may lose a valuable
asset, experience reduced market share or incur costs of litigation to protect
our rights.
We depend on our ability to develop and protect our proprietary technology
and intellectual property rights to distinguish our products from those of our
competitors. We have filed patent applications in the United States and 12
foreign countries with respect to several elements of our architecture. Despite
our efforts, we may be unable to prevent others from infringing upon or
misappropriating our intellectual property, which could harm our business.
It is possible that no patents will issue from our currently pending patent
applications. Moreover, new patent applications may not result in issued
patents and may not provide us with any competitive advantages over, or may be
challenged by, others. Legal standards relating to the validity, enforceability
and scope of protection of intellectual property rights in Internet-related
industries are uncertain and still evolving, and the future viability or value
of any of our intellectual property rights is uncertain. Effective trademark,
copyright and trade secret protection may not be available in every country in
which our products are distributed or made available. Furthermore, our
competitors may independently develop similar technology that substantially
limits the value of our intellectual property, or they may design around
patents issued to us.
In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. We expect that we
could become subject to intellectual property infringement claims as the number
of our competitors grows and our services overlap with competitive offerings.
These claims, even if not meritorious, could be expensive and divert
management's attention from operating our company. If we become liable to
others for infringing their intellectual property rights, we would be required
to pay a substantial damage award and to develop non-infringing technology,
obtain a license or cease selling the services that contain the infringing
intellectual property. We may be unable to develop non-infringing technology or
to obtain a license on commercially reasonable terms, if at all.
We also license certain technology from third parties as part of our product
offering. We cannot assure you that our technology licenses will not infringe
the proprietary rights of others or will continue to be available to us on
commercially reasonable terms, if at all. The loss of this technology could
require us to obtain or develop substitute technology of lower quality or
performance standards or at greater cost. If we do not obtain or develop
substitute technology, we could be unable to offer all of the features or
functionality that we desire to include in our services.
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<PAGE>
If our software contains defects, we could lose customers and revenue.
Our products and their interactions with customers' software applications and
IT systems are complex and, accordingly, there may be undetected errors or
failures when products are introduced or as new versions are released. We have
in the past discovered software errors in our new releases and new products
after their introduction which has resulted in additional research and
development expenses. To date, these additional expenses have not been
material. These errors have resulted in product release delays, delayed
revenues and customer dissatisfaction. We may in the future discover errors,
including performance limitations, in new releases or new products after the
commencement of commercial shipments. In addition, if our products fail to
provide a secure pathway for communications, we may be sued by our customers.
Since many customers are using our products for mission-critical business
operations, any of these occurrences could seriously harm our business and
generate negative publicity.
We may be unsuccessful in establishing a brand name, which could harm our
business.
We believe that maintaining and strengthening the Extricity brand is an
important aspect of our business and an important element in attracting new
customers. We recently changed our corporate name to Extricity, Inc. and
renamed our products. Establishing a brand name in this marketplace is
difficult due to the dominance of certain established technologies such as the
major ERP and supply chain optimization vendors. As a result, our efforts to
build our brand will involve significant expense. To promote our brand, we may
increase our marketing budget or increase our financial commitment to building
our brand. If our brand-building strategy is unsuccessful, we may fail to
attract enough new customers or retain our existing customers to the extent
necessary to realize a sufficient return on our brand-building efforts.
If we are not successful in expanding our international operations, we may not
achieve projected revenue growth.
We believe that expansion of our international operations is important to our
future success, and a key aspect to our business strategy is to expand our
sales and support organizations internationally. International revenues
accounted for approximately 10.8% of our total revenues in fiscal year 2000. We
have recently hired a general manager for Europe, Middle East and Africa and we
have entered into a distribution relationship with a company in Taiwan.
However, if we fail to sell our products in international markets, we could
experience slower revenue growth and our business could be harmed. There are a
number of risks to establishing operations outside of the United States,
including:
. competing with larger, more established local operations from U.S. and
European corporations, as well as smaller local companies;
. unexpected changes in regulatory requirements, taxes, trade laws and
tariffs;
. potentially adverse tax consequences, including restrictions on
repatriation of earnings;
. reduced protection for intellectual property rights in some countries;
. differing labor regulations;
. changes in a specific country's or region's political or economic
conditions;
. greater difficulty in staffing and managing international operations; and
. fluctuating currency exchange rates.
We anticipate devoting significant resources and management attention to
expanding international opportunities. However, we can give you no assurance
that we will be able to successfully establish international operations.
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<PAGE>
We may require additional financing which may result in additional dilution.
To date, we have required substantial amounts of capital to design, develop,
market and sell our products. Our future capital requirements will depend on
many factors, including but not limited to the evolution of the market for B2B
integration software, the market acceptance of our products, competitive
pressure on the price of our products, the levels of promotion and marketing
required to launch such products and attain a competitive position in the
marketplace, the extent to which we invest in new technology and improvements
on our existing technology, and the response of competitors to our products. We
believe that the net proceeds of this offering, existing cash balances and
funds generated from operations, if any, will provide us with sufficient funds
to finance our operations for at least the next 18 months. If the funds
generated by this offering, together with existing resources, are insufficient
to fund our activities over the long-term, we may need to raise additional
funds through equity or debt financing or from other sources at a time when we
may not be profitable. The sale of additional equity or convertible debt may
result in additional dilution to our stockholders and such securities may have
rights, preferences or privileges senior to those of the common stock. To the
extent that we rely upon debt financing, we will incur the obligation to repay
the funds borrowed with interest and may become subject to covenants and
restrictions that restrict operating flexibility. We cannot assure you that
additional equity or debt financing will be available or that, if available, it
can be obtained on terms favorable to us or our stockholders.
Future acquisitions may be difficult to integrate, disrupt our business, dilute
stockholder value and divert management attention.
As part of our business strategy, we may find it desirable or necessary to
acquire or invest in additional businesses, products or technologies that we
feel could complement or expand our business, increase our market coverage,
enhance our technical capabilities or offer other types of growth
opportunities. If we identify an appropriate acquisition candidate, we may not
be able to successfully negotiate the terms of the acquisition, finance the
acquisition, or integrate the acquired business, products or technologies into
our existing business and operations. Furthermore, completing a potential
acquisition and integrating an acquired business will cause significant
diversions of management time and other resources. Since we have never acquired
another business, we may experience unexpected difficulties and obstacles in
acquiring and integrating new operations.
If we consummate a significant acquisition in which the consideration
consists of stock or other securities, your equity could be significantly
diluted. If we were to proceed with a significant acquisition in which the
consideration included cash, we could be required to use a substantial portion
of our available cash, including proceeds of this offering, to consummate that
acquisition. Acquisition financing may not be available on favorable terms, if
at all. In addition, we may be required to amortize significant amounts of
goodwill and other intangible assets in connection with future acquisitions,
which would seriously harm our operating results.
Our executive officers, directors and major stockholders will retain
significant control after this offering, which may lead to conflicts with other
stockholders over corporate governance matters.
Upon completion of this offering, our executive officers, directors and
principal stockholders will beneficially own approximately % of our
outstanding common stock. As a result, these stockholders will be able to
exercise control over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions, which
could have the effect of delaying or preventing a third party from acquiring
control over or merging with us.
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<PAGE>
Risks Related To Our Industry
Continued adoption of the Internet as a method of conducting business is
necessary for our future growth.
The market for Internet-based, B2B integration software is relatively new and
is evolving rapidly. Our future revenues and any future profits depend upon the
widespread acceptance and use of the Internet as an effective medium for B2B e-
commerce and B2BRM. The failure of the Internet to continue to develop as a
commercial or business medium could harm our business, operating results and
financial condition. The acceptance and use of the Internet for B2B commerce
could be limited by a number of factors, such as the growth and use of the
Internet in general, the relative ease of conducting business on the Internet,
the efficiencies and improvements that conducting commerce on the Internet
provides, concerns about transaction security and taxation of transactions on
the Internet.
We depend on the speed and reliability of the Internet and our customers'
internal networks.
If Internet usage continues to grow rapidly, its infrastructure may not be
able to support these demands and its performance and reliability may decline.
If outages or delays on the Internet occur frequently or increase in frequency,
B2B e-commerce could grow more slowly or decline, which may reduce the demand
for our software. The ability of our products to satisfy our customers' needs
is ultimately limited by and depends upon the speed and reliability of both the
Internet and our customers' internal networks. Consequently, the emergence and
growth of the market for our software depends upon improvements being made to
the entire Internet as well as to our individual customers' networking
infrastructures to alleviate overloading and congestion. If these improvements
are not made, the ability of our customers to utilize our solution will be
hindered, and our business, operating results and financial condition may
suffer.
Increased security risks of online commerce may deter future use of our
software and services.
A fundamental requirement to conduct B2B e-commerce is the secure
transmission of confidential information over public networks. Advances in
computer capabilities, new discoveries in the field of cryptography, or other
developments may result in a compromise or breach of the security features
contained in our software or the algorithms used by our customers and their
business partners to protect content and transactions on Internet e-commerce
marketplaces or proprietary information in our customers' and their business
partners' databases. Anyone who is able to circumvent security measures could
misappropriate proprietary, confidential customer information or cause
interruptions in our customers' and their business partners' operations. Our
customers and their business partners may be required to incur significant
costs to protect against security breaches or to alleviate problems caused by
breaches, reducing their demand for our software. Further, a well-publicized
compromise of security could deter businesses from using the Internet to
conduct transactions that involve transmitting confidential information. The
failure of the security features of our software to prevent security breaches,
or well publicized security breaches affecting the Web in general, could
significantly harm our business, operating results and financial condition.
Internet-related laws could adversely affect our business.
Regulation of the Internet is largely unsettled. The adoption of laws or
regulations that increase the costs or administrative burdens of doing business
using the Internet could cause companies to seek an alternative means of
transacting business. If the adoption of new Internet laws or regulations
causes companies to seek alternative methods for conducting business, the
demand for our software could decrease and our business could be adversely
affected.
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<PAGE>
Risks Related to This Offering
Future sales of our common stock may depress our stock price.
Upon completion of this offering, there will be shares of our
common stock outstanding. All of the shares sold in this offering
will be freely tradable without restrictions or further registration under the
Securities Act, unless such shares are purchased by our "affiliates," as that
term is defined under the Securities Act. The remaining 36,587,835 shares of
common stock held by existing stockholders will be "restricted securities" as
that term is defined in Rule 144 of the Securities Act and can be sold in the
public market upon the expiration of lock-up agreements between the holders and
the representatives of the underwriters beginning 180 days after the completion
of this offering. These restricted shares will be available for sale in the
public market as follows:
. restricted shares will be eligible for sale on the date of this
prospectus pursuant to Rule 144(k) of the Securities Act;
. restricted shares will be eligible for sale 90 days after the
date of this prospectus pursuant to Rule 144 of the Securities Act; and
. the remainder of the restricted shares will be eligible for sale from
time to time thereafter upon expiration of one-year holding periods and
subject to the requirements of Rule 144.
After the completion of this offering, we intend to file a registration
statement on Form S-8 under the Securities Act to register 11,840,000 shares
reserved for issuance under our 1996 stock option plan and shares
reserved for issuance under our 2000 employee stock purchase plan. Upon
registration, all of these shares will be freely tradable when issued. If
substantial amounts of our common stock were to be sold in the public market
following this offering, the market price of our common stock could fall. In
addition, such sales could create the perception to the public of difficulties
or problems with our software and services. As a result, these sales also might
make it more difficult for us to sell equity or equity-related securities in
the future at a time and price that we deem appropriate. For a more detailed
discussion of shares eligible for sale after the offering, see "Shares Eligible
for Future Sale."
Internet-related stock prices are especially volatile and this volatility may
lead to losses by investors and securities litigation.
The stock market, and specifically the stock prices of Internet-related
companies, has been very volatile. This volatility is often not related to the
operating performance of the companies. This broad market volatility and
industry volatility may reduce the price of our common stock, without regard to
our operating performance. Due to this volatility, the market price of our
common stock could significantly decrease.
Fluctuations in our common stock's price may affect our visibility and
credibility in the B2B e-commerce solutions market. In the event of broad
fluctuations in the market price of our common stock, you may be unable to
resell your shares at or above the offering price.
Securities class action litigation has often been brought against companies
that experience volatility in the market price of their securities. Litigation
brought against us could result in substantial costs to us in defending against
a lawsuit and management's attention could be diverted from our business.
18
<PAGE>
We have broad discretion to use the offering proceeds, and the investment of
these proceeds may not yield a favorable return.
The net proceeds of this offering are not allocated for specific purposes.
Thus, our management has broad discretion over how these proceeds are used and
could spend most of these proceeds in ways with which our stockholders may not
agree. The proceeds may be invested in ways that do not yield favorable
returns. See "Use of Proceeds" for more information about how we plan to use
our proceeds from this offering.
Our securities have no prior market, and our stock price may decline after the
offering.
While we have applied to list our common stock on the Nasdaq National Market,
a trading market for our common stock may not develop or, if a market does
develop, the common stock may still be difficult to trade. You may not be able
to resell your shares at or above the initial public offering price. See "Plan
of Distribution" for more detailed information. The initial public offering
price has been determined by negotiations between representatives of the
underwriters and us. The trading prices of many technology companies have
declined from their historical highs, but continue to reflect high price to
earnings ratios. We cannot be certain that these trading prices or price to
earnings ratios will be sustained. The trading market price of our common stock
may decline below our initial public offering price.
As a new investor, you will experience immediate and substantial dilution in
the value of the common stock.
If you purchase shares of our common stock in this offering, you will incur
immediate and substantial dilution in pro forma net tangible book value. If the
holders of outstanding options and warrants exercise those options and
warrants, you will incur further dilution. See "Dilution" for a calculation of
the amount of dilution you will incur.
We have implemented certain anti-takeover provisions.
Provisions of our certificate of incorporation and our bylaws, as well as
Delaware law, could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. See "Description of
Capital Stock--Delaware Anti-Takeover Law and Certain Charter and Bylaw
Provisions" for a description of these provisions.
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<PAGE>
SPECIAL 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. In some cases, you can identify forward-looking statements by terms
such as may, will, should, expect, plan, intend, forecast, anticipate, believe,
estimate, predict, potential, continue or the negative of these terms or other
comparable terminology. The forward-looking statements contained in this
prospectus involve known and unknown risks, uncertainties and situations that
may cause our or our industry's actual results, level of activity, performance
or achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these statements.
These factors include those listed under "Risk Factors" and elsewhere in this
prospectus.
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. You should not place undue reliance on
these forward-looking statements.
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<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the shares of common
stock in this offering will be approximately $ , based on the initial
public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses. If the
underwriters' over-allotment option is exercised in full, we estimate that our
net proceeds will be approximately $ .
The principal purposes of this offering are to obtain additional capital, to
create a public market for our common stock, to enhance our ability to acquire
other businesses, products or technologies, and to facilitate future access to
public equity markets. We intend to use the proceeds for sales and marketing
activities, product development, facilities expansion and other capital
expenditures, working capital and other general corporate purposes. We may also
use a portion of the net proceeds from this offering to acquire or invest in
businesses, technologies or products that are complementary to our business. We
currently have no commitments or agreements for any acquisitions. Pending our
use of the net proceeds, we intend to invest them in short-term, interest
bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock and do
not currently anticipate paying any cash dividends. We currently anticipate
that we will retain all of our future earnings for use in the development and
expansion of our business and for general corporate purposes. Any determination
to pay dividends in the future will be at the discretion of our board of
directors and will depend upon our financial condition, operating results and
other relevant factors as determined by the board of directors, in its
discretion. Additionally, we have entered into loan agreements with creditors
that restrict our ability to pay dividends.
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CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2000:
. on an actual basis;
. on a pro forma basis to reflect the sale of 7,751,938 shares of Series F
preferred stock in May 2000 for net proceeds of approximately $49.9
million, the conversion of all outstanding shares of preferred stock into
26,131,746 shares of common stock and the reincorporation in Delaware;
and
. on a pro forma as adjusted basis to reflect the application of the net
proceeds from the sale of shares of common stock in this
offering, including the repayment of approximately $ million of
indebtedness under our , after deducting the
underwriting discounts and commissions and estimated offering expenses.
You should read this table in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and the related notes to the consolidated financial
statements.
<TABLE>
<CAPTION>
March 31, 2000
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Long-term debt, less current portion........... $ 373 $ 373
-------- -------- ---
Stockholders' equity:
Convertible preferred stock, no par value;
10,424,804 shares authorized, 10,205,827
shares issued and outstanding, actual; no
shares authorized, issued or outstanding, pro
forma and pro forma as adjusted.............. 35,168 --
Common Stock, no par value, 40,000,000 shares
authorized, 8,858,422 issued and outstanding,
actual; $0.00001 par value, 200,000,000
shares authorized, 34,990,168 shares issued
and outstanding, pro forma, and 200,000,000
shares authorized, shares issued and
outstanding pro forma as adjusted............ 18,450 --
Additional paid-in capital..................... -- 103,518
Warrants....................................... 478 478
Notes receivable from stockholders............. (2,062) (2,062)
Deferred stock-based compensation.............. (13,372) (13,372)
Accumulated deficit............................ (36,352) (36,352)
-------- -------- ---
Total stockholders' equity..................... 2,310 52,210
-------- -------- ---
Total capitalization........................... $ 2,683 $ 52,583
======== ======== ===
</TABLE>
The common stock outstanding as shown above is based on shares outstanding as
of March 31, 2000 and excludes:
. 1,934,477 shares of common stock issuable upon exercise of options
outstanding under our 1996 stock option plan;
. 3,020,031 shares of common stock reserved for issuance pursuant to future
grants under our 1996 stock option plan; and
. 293,312 shares of common stock issuable through the exercise and
conversion of warrants outstanding at a weighted average exercise price
of $3.05 per share.
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DILUTION
Our pro forma net tangible book value at March 31, 2000 was approximately
$52.2 million or approximately $1.49 per share. Pro forma net tangible book
value per share represents total tangible assets less total liabilities,
divided by the number of shares outstanding as of March 31, 2000, after giving
effect to the sale of 7,751,938 shares of our Series F preferred stock in May
2000 for net proceeds of approximately $49.9 million and the conversion into
common stock of all of our outstanding shares of preferred stock.
After giving effect to our sale of shares of common stock in this
offering and deducting the underwriting discounts and commissions and estimated
offering expenses payable by us, our pro forma net tangible book value as of
March 31, 2000 would have been approximately $ million, or $ per
share. This represents an immediate increase in net tangible book value of
$ per share to existing stockholders and an immediate dilution in net
tangible book value of $ per share to new investors purchasing shares in
this offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $
----
Pro forma net tangible book value per share..................... $
Increase per share attributable to new investors................
----
Pro forma net tangible book value per share after this offering...
----
Dilution per share to new investors in this offering.............. $
====
</TABLE>
The following table assumes conversion into common stock of all of our
outstanding shares of preferred stock, and sets forth, on a pro forma basis as
of March 31, 2000, the difference between the existing stockholders and the
purchasers of shares in this offering with respect to the number of shares of
common stock purchased from us, the total consideration paid to us and the
average price per share paid by existing stockholders and by new investors,
before deduction of the underwriting discounts and commissions and estimated
offering expenses payable by us.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..... 34,990,168 % $103,518,000 % $2.96
New investors.............
---------- ----- ------------ -----
Total................... 100.0% $ 100.0%
========== ===== ============ =====
</TABLE>
This information is based on pro forma shares outstanding as of March 31,
2000 and excludes:
. 1,934,477 shares of common stock issuable upon exercise of options
outstanding under our 1996 stock option plan at a weighted average
exercise price of $0.70 per share;
. 3,020,031 shares of common stock reserved for issuance pursuant to future
grants under our 1996 stock option plan; and
. 293,312 shares of common stock issuable through the exercise and
conversion of warrants outstanding at a weighted average exercise price
of $3.05 per share.
To the extent outstanding options or warrants are exercised, there will be
further dilution to new investors. See "Management--Benefit Plans" and notes 8
and 9 to our financial statements.
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with, and are qualified by reference to, our consolidated financial
statements and related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The selected consolidated
statement of operations data for each of the three years in the period ended
March 31, 2000, and the selected consolidated balance sheet data at March 31,
1999 and 2000 are derived from, and are qualified by reference to, our audited
consolidated financial statements included elsewhere in this prospectus. The
selected consolidated statement of operations data for the period from
inception on April 3, 1996 to March 31, 1997 and the selected consolidated
balance sheet data as of March 31, 1997 and 1998 are derived from audited
consolidated financial statements not included in this prospectus. The
historical results are not necessarily indicative of results to be expected in
any future period.
<TABLE>
<CAPTION>
Period from Fiscal Year Ended
April 3, 1996 March 31,
(Inception) to --------------------------
March 31, 1997 1998 1999 2000
-------------- ------- ------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Revenues:
License fees...................... $ -- $ 250 $ 2,302 $ 4,554
Services.......................... 11 253 733 4,631
------- ------- ------- --------
Total revenues.................. 11 503 3,035 9,185
------- ------- ------- --------
Cost of revenues:
License fees...................... -- 51 238 349
Services.......................... 6 186 824 4,569
------- ------- ------- --------
Total cost of revenues.......... 6 237 1,062 4,918
------- ------- ------- --------
Gross profit....................... 5 266 1,973 4,267
------- ------- ------- --------
Operating expenses:
Research and development.......... 773 2,766 4,262 7,245
Sales and marketing............... 263 2,788 6,177 12,238
General and administrative........ 444 829 891 2,622
Amortization of deferred stock-
based compensation (1)........... -- -- -- 2,347
------- ------- ------- --------
Total operating expenses........ 1,480 6,383 11,330 24,452
------- ------- ------- --------
Loss from operations............... (1,475) (6,117) (9,357) (20,185)
Interest income.................... 88 184 324 371
Interest expense................... (6) (40) (64) (75)
------- ------- ------- --------
Net loss........................... $(1,393) $(5,973) $(9,097) $(19,889)
======= ======= ======= ========
Basic and diluted net loss per
share............................. $ (8.24) $ (4.21) $ (3.32) $ (4.64)
======= ======= ======= ========
Shares used in computing basic and
diluted net loss per share........ 169 1,418 2,738 4,289
======= ======= ======= ========
Pro forma basic net loss per share
(unaudited)....................... $ (0.93)
========
Shares used to compute pro forma
basic net loss per share
(unaudited)....................... 21,300
========
</TABLE>
- --------
(1) Amortization of deferred stock-based compensation includes $322 related to
cost of services revenues, $428 related to research and development, $850
related to sales and marketing and $747 related to general and
administrative.
<TABLE>
<CAPTION>
As of March 31,
----------------------------
1997 1998 1999 2000
------ ------ ------ -------
(In thousands)
<S> <C> <C> <C> <C>
Balance sheet data:
Cash, cash equivalents and short-term
investments..................................... $1,674 $1,915 $2,779 $ 7,861
Working capital.................................. 1,436 756 1,676 1,826
Total assets..................................... 1,979 2,889 6,150 14,196
Long-term debt, less current portion............. 87 448 526 373
Total stockholders' equity....................... 1,644 1,065 2,065 2,310
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results
of operation should be read in conjunction with the financial statements and
related notes included elsewhere in this prospectus. In addition to historical
information, the discussion in this prospectus contains certain forward-looking
statements that involve risks and uncertainties. Our actual results may differ
significantly from those anticipated by these forward-looking statements due to
factors discussed under "Risk Factors," "Business" and elsewhere in this
prospectus.
Overview
We are a leading provider of B2B software products that allow companies to
manage the internal and external sharing of information and the execution of
interactions among software applications and business partners over the
Internet. We refer to this exchange and management of information among groups
of companies over the Internet as B2B relationship management, or B2BRM. Our
XML-based platform provides an open, standards-based solution that allows
diverse information systems and businesses to work together more effectively by
automating and synchronizing the flow of information and execution of
processes. Our platform supports a process-based flow of mission critical
information that enables organizations to achieve operational efficiencies and
to collaborate without having to change their internal processes or IT
environments regardless of size, sophistication or existing software
applications.
We were incorporated in California on April 3, 1996. From inception through
the fourth calendar quarter of 1998, we focused our resources primarily on
developing our software and recruiting and hiring personnel. Since that time,
our focus has expanded to include broadening and deepening our product line as
well as creating a worldwide selling presence through a combination of direct
sales and resellers.
We derive revenue from sales of licenses of our Extricity B2B software,
professional services and software maintenance contracts. We license our
software on a perpetual basis or on an annual renewable basis. License fees are
generally billed upon shipment. First-year software maintenance is generally
included in the first-year license fee and is renewable annually thereafter. To
date, our license revenue has predominantly been through our direct sales user
channel. We offer implementation and other professional services on a time-and-
materials basis and training on a fixed-fee basis. We began our international
direct sales efforts in October 1999.
Revenue from the sale of perpetual software licenses is recognized upon
shipment of our software, provided that the fee is fixed or determinable,
persuasive evidence of an arrangement exists and collection of the resulting
receivable is considered probable. Historically, we have not experienced
significant returns or exchanges of our software. We presently recognize
software license revenue ratably over the term of the license for all renewable
term licenses. Maintenance revenue is recognized ratably over the maintenance
period. Billed receivables and payments received in advance of revenue
recognition are recorded as deferred revenue. Professional service revenue is
recognized as the service is performed. Our revenue recognition practices are
in accordance with Statement of Position, or SOP, 97-2, as modified by SOP 98-
9.
25
<PAGE>
Our cost of revenue includes the costs of license and professional services.
Our costs of license consists of royalties payable to third parties for
software shipped with our software and the costs of manuals, freight and
handling. Our cost of services revenue includes salaries and related expenses
for our professional services and technical support organizations, costs of
third-party consultants we use to provide professional services to our
customers and an allocation of overhead costs.
Although revenue has generally increased from quarter to quarter, we have
incurred significant costs to develop our technology and products and to
recruit and train personnel for our research and development, sales, marketing,
professional services and administration departments. As a result, we have
incurred significant losses since inception, and as of March 31, 2000, had an
accumulated deficit of approximately $36.4 million. We believe our success will
depend on rapidly increasing our customer base, further developing our
Extricity B2B software and introducing new product enhancements into the
marketplace. We intend to continue to invest heavily in research and
development, sales, marketing, professional support and general and
administrative services.
In May 2000, we sold 7,751,938 shares of our Series F convertible preferred
stock for net proceeds of approximately $49.9 million.
Through March 31, 2000, we have recorded aggregate deferred stock
compensation of approximately $15.7 million in connection with stock option
grants. Deferred stock compensation is being amortized on an accelerated basis
over the vesting period of the options.
Results of Operations
The following table sets forth our results of operations expressed as a
percentage of total revenue:
<TABLE>
<CAPTION>
Years Ended
March 31,
--------------------
1998 1999 2000
------ ---- ----
<S> <C> <C> <C>
Revenues:
License fees ............. 50 % 76 % 50 %
Services.................. 50 24 50
------ ---- ----
Total revenues.......... 100 100 100
------ ---- ----
Cost of revenues:
License fees.............. 10 8 4
Services.................. 37 27 50
------ ---- ----
Total cost of revenues.. 47 35 54
------ ---- ----
Gross profit................ 53 65 46
------ ---- ----
Operating expenses:
Research and development.. 550 140 79
Sales and marketing....... 554 204 133
General and
administrative........... 165 29 28
Amortization of deferred
stock-based
compensation............. -- -- 26
------ ---- ----
Total operating
expenses............... 1,269 373 266
------ ---- ----
Loss from operations........ (1,216) (308) (220)
Interest income............. 37 10 4
Interest expense............ (8) (2) (1)
------ ---- ----
Net loss.................... (1,187)% (300)% (217)%
====== ==== ====
</TABLE>
26
<PAGE>
Fiscal Years Ended March 31, 1999 and 2000
Revenues
Total Revenues. Our revenues were approximately $3.0 million for the fiscal
year ended March 31, 1999 and approximately $9.2 million for the fiscal year
ended March 31, 2000. In fiscal year 1999, four customers each accounted for
more than 10% of our revenues. In fiscal year 2000, only one customer accounted
for more than 10% of our revenues. License fees as a percentage of total
revenue decreased from 76% in fiscal year 1999 to 50% in fiscal year 2000. This
shift in revenue mix is attributable to increased sales of software licenses in
the second half of fiscal year 1999 which generated services revenue, including
software maintenance and implementation assistance in fiscal year 2000, as well
as new services revenue from the additional sales of software licenses
generated in fiscal year 2000.
License Fees. Our license fees increased by approximately $2.3 million, or
98%, to approximately $4.6 million for fiscal year 2000 from approximately $2.3
million for fiscal year 1999. This increase is attributable to growing
acceptance of our software, increased sales force headcount and increased sales
momentum generated from successful deployment of our software by our customers.
During fiscal year 2000, we reduced our average selling price per transaction
from approximately $420,000 to $275,000 due to our expanded product line and
focus on e-commerce fulfillment and net market makers. This resulted in an
increase in customer growth which more than offset the lower average selling
price. The number of customers from which license fee revenue was recognized
increased from six at the end of fiscal year 1999 to 19 at the end of fiscal
year 2000.
Services. Services revenue increased by approximately $3.9 million to
approximately $4.6 million for fiscal year 2000 from approximately $733,000 for
fiscal year 1999. This increase is attributable to an increase in our
professional services staff, both in consulting and training, increased follow-
on services as a result of higher license activity, increased use of
subcontractors to perform professional services for customers and increased
maintenance revenue due to a larger installed base.
Cost of Revenues
License Fees. Cost of license fees revenue increased from approximately
$238,000 for fiscal year 1999 to approximately $349,000 for fiscal year 2000.
This increase is due to increased sales volume, license fees paid to third-
party software vendors for software products embedded in and shipped within our
software products and the cost of documentation associated with such shipments.
Services. Cost of services revenue increased from approximately $824,000 for
fiscal year 1999 to approximately $4.6 million for fiscal year 2000. This
increase is attributable to increases in the number of consulting
professionals, consulting subcontractors and technical support personnel in
fiscal year 2000 as compared to fiscal year 1999. Services personnel increased
from 14 at the end of fiscal year 1999 to 28 at the end of fiscal year 2000. In
addition, higher travel and recruiting expenses contributed to the increase in
cost of professional services and maintenance for fiscal year 2000. Gross
margin on services increased from a negative 12% in fiscal year 1999 to 1% in
fiscal year 2000. This increase in the gross margin on services is attributable
to an increase in our consulting services billable rates, increased utilization
of our professional services staff in revenue generating activities such as
developing and performing quality assurance and a greater number of billable
transactions in fiscal year 2000.
27
<PAGE>
Operating Expenses
Research and Development. Research and development expenses increased from
approximately $4.3 million for fiscal year 1999 to approximately $7.2 million
for fiscal year 2000. This increase is attributable to increases in the number
of software development, quality assurance and documentation personnel from 24
at the end of fiscal year 1999 to 53 at the end of fiscal year 2000, plus
associated overhead and occupancy costs. To date, all research and development
expenses have been expensed in the period incurred. We believe that continued
investment in research and development is critical to attaining our strategic
objectives, and, as a result, we expect research and development expenses to
increase significantly in future periods.
Sales and Marketing. Sales and marketing expenses increased by approximately
$6.0 million, or 98%, to $12.2 million for fiscal year 2000, from approximately
$6.2 million for fiscal year 1999. This increase is attributable to an increase
in the number of sales and marketing employees, higher incentive payments due
to increased revenue growth and an increase in the number and scope of our
marketing programs. Additionally, a sales and marketing subsidiary was formed
in the United Kingdom during October 1999. As of March 31, 2000, our European
organization had 10 employees located in the U.K. We believe that these
expenses will continue to increase in absolute dollar amounts in future periods
as we expect to continue to expand our sales and marketing efforts in Europe
and internationally.
General and Administrative. General and administrative expenses increased by
approximately $1.7 million, or 194%, to approximately $2.6 million for fiscal
year 2000 from approximately $891,000 for fiscal year 1999. This increase is
attributable to increases in the number of accounting and finance, human
resources and office administration personnel. In addition, we increased our
provision for bad debt expense due to specifically identifiable receivables for
which collectibility is uncertain. The number of finance and administration
employees increased from six at the end of fiscal year 1999 to 13 at the end of
fiscal year 2000. In addition, professional service fees, corporate insurance
and other general corporate costs increased to support organizational growth.
We expect general and administrative costs to continue to increase in absolute
dollars, as we expect to add personnel to support our expanding operations,
incur additional costs related to the growth of our business and assume the
responsibilities of managing a public company.
Amortization of Deferred Stock-Based Compensation. During fiscal year 2000,
we recorded deferred stock-based compensation of approximately $15.7 million in
connection with stock option grants to employees. We are amortizing this amount
over the vesting periods of the applicable options using the accelerated method
of amortization prescribed by Financial Accounting Standards Board
Interpretation No. 28, resulting in amortization expense of approximately $2.3
million in fiscal year 2000.
Interest Income
Interest income increased from approximately $324,000 in fiscal year 1999 to
$371,000 in fiscal year 2000. This increase is attributable to an increase in
interest-bearing short-term investments from March 31, 1999 to March 31, 2000
resulting from the proceeds of the Series D and E preferred stock financings,
offset by the use of proceeds to fund the operations of the Company.
Interest Expense
Interest expense increased from approximately $64,000 in fiscal year 1999 to
$75,000 in fiscal year 2000. This increase is attributable to an increase in
net borrowings on the line of credit from fiscal year 1999 to fiscal year 2000.
28
<PAGE>
Fiscal Years Ended March 31, 1998 and 1999
Revenues
Total Revenues. Our revenues were approximately $503,000 for fiscal year 1998
and approximately $3.0 million for fiscal year 1999. Our first license sales
took place during fiscal year 1998 and two customers each accounted for more
than 10% of our total revenues. In fiscal year 1999, four customers each
accounted for more than 10% of our total revenues.
License fees. License fees increased from approximately $250,000 for fiscal
year 1998 to approximately $2.3 million for fiscal year 1999. This increase is
attributable to increased sales of licenses for our software, which was first
introduced in the third quarter of fiscal year 1998.
Services. Services revenue increased from $253,000 for fiscal year 1998 to
$733,000 for fiscal year 1999. This increase is attributable to the increased
license activity described above, which resulted in maintenance and customer
implementation revenue and follow-on professional services.
Cost of Revenues
License fees. Costs of license fees increased from approximately $51,000 for
fiscal year 1998 to approximately $238,000 for fiscal year 1999. This increase
is due to additional license fees paid to new third-party software vendors for
software products embedded in and shipped within our software products and the
cost of documentation associated with such shipments.
Services. Cost of services revenue increased from approximately $186,000 for
fiscal year 1998 to approximately $824,000 for fiscal year 1999. This increase
is primarily attributable to increases in the number of professionals and
technical support personnel in fiscal year 1999 as compared to fiscal year
1998. Services personnel increased from seven at the end of fiscal year 1998 to
14 at the end of fiscal year 1999.
Operating Expenses
Research and Development. Research and development expenses increased from
approximately $2.8 million for fiscal year 1998 to approximately $4.3 million
for fiscal year 1999. This increase is primarily attributable to increases in
the number of software development, quality assurance and documentation
personnel, which increased from 17 at the end of fiscal year 1998 to 24 at the
end of fiscal year 1999.
Sales and Marketing. Sales and marketing expenses increased from
approximately $2.8 million for fiscal year 1998 to approximately $6.2 million
for fiscal year 1999. This increase is primarily attributable to an increase in
the number of sales and marketing employees which increased from 10 at the end
of fiscal year 1998 to 23 at the end of fiscal year 1999. In addition, this
increase is attributable to an increase in the number and scope of marketing
programs.
General and Administrative. General and administrative expenses increased by
approximately $62,000, or 8%, to $891,000 for fiscal year 1999 from $829,000
for fiscal year 1998. This increase is primarily attributable to increases in
professional service fees and other general corporate expenses to support
organizational growth. The number of finance and administration employees
increased from five at the end of fiscal year 1998 to six at the end of fiscal
year 1999.
29
<PAGE>
Interest Income
Interest income increased from approximately $184,000 for fiscal year 1998 to
$324,000 for fiscal year 1999. This increase is attributable to an increase in
interest-bearing short-term investments resulting from the proceeds of a
preferred stock financing.
Interest Expense
Interest expense increased from approximately $40,000 for fiscal year 1998 to
$64,000 for fiscal year 1999. This increase is attributable to an increase in
net borrowings on the line of credit from 1998 to 1999.
30
<PAGE>
Selected Quarterly Results of Operations
The following table presents our results of operations for each of the last
eight quarters. In the opinion of management, this information has been
prepared substantially on the same basis as the audited financial statements
appearing elsewhere in this prospectus, and all necessary adjustments,
consisting only of normal recurring adjustments, have been included in the
amounts stated below to present fairly the unaudited quarterly results of
operations. This quarterly data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this prospectus.
The operating results for any quarter are not necessarily indicative of the
operating results for any future period.
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------------------------------
June 30, Sept 30, Dec 31, March 31, June 30, Sept 30, Dec 31, March 31,
1998 1998 1998 1999 1999 1999 1999 2000
-------- -------- ------- --------- -------- -------- ------- ---------
(in thousands, except as a percentage of total revenue)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues:
License fees.......... $ 39 $ 118 $ 365 $ 1,780 $ 199 $ 752 $ 1,309 $ 2,294
Services.............. 70 52 168 443 930 1,069 1,450 1,182
------- ------- ------- ------- ------- ------- ------- -------
Total revenues....... 109 170 533 2,223 1,129 1,821 2,759 3,476
------- ------- ------- ------- ------- ------- ------- -------
Cost of revenues:
License fees.......... 2 3 64 169 41 66 78 164
Services.............. 136 127 197 364 875 925 1,348 1,421
------- ------- ------- ------- ------- ------- ------- -------
Total cost of
revenues............ 138 130 261 533 916 991 1,426 1,585
------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ (29) 40 272 1,690 213 830 1,333 1,891
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development.......... 857 975 1,190 1,240 1,270 1,647 1,866 2,462
Sales and marketing... 1,009 1,416 1,909 1,843 2,525 2,699 2,697 4,317
General and
administrative....... 210 205 206 270 447 576 572 1,027
Amortization of
deferred stock-based
compensation......... -- -- -- -- 23 210 422 1,692
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 2,076 2,596 3,305 3,353 4,265 5,132 5,557 9,498
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.... (2,105) (2,556) (3,033) (1,663) (4,052) (4,302) (4,224) (7,607)
Interest income......... 69 101 102 52 75 88 78 130
Interest expense........ (15) (16) (15) (18) (17) (18) (20) (20)
------- ------- ------- ------- ------- ------- ------- -------
Net loss............. $(2,051) $(2,471) $(2,946) $(1,629) $(3,994) $(4,232) $(4,166) $(7,497)
======= ======= ======= ======= ======= ======= ======= =======
As a Percentage of Total
Revenues:
Revenues:
License fees.......... 36 % 69 % 68 % 80 % 18 % 41 % 47 % 66 %
Services.............. 64 31 32 20 82 59 53 34
------- ------- ------- ------- ------- ------- ------- -------
Total revenues....... 100 100 100 100 100 100 100 100
------- ------- ------- ------- ------- ------- ------- -------
Cost of revenues:
License fees.......... 2 2 12 8 4 3 3 5
Services.............. 125 75 37 16 77 51 49 41
------- ------- ------- ------- ------- ------- ------- -------
Total cost of
revenues............ 127 77 49 24 81 54 52 46
------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ (27) 23 51 76 19 46 48 54
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development.......... 786 574 223 56 112 90 67 71
Sales and marketing... 926 833 358 83 224 148 98 124
General and
administrative....... 192 120 39 12 40 32 21 29
Amortization of
deferred stock-based
compensation......... -- -- -- -- 2 12 15 49
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 1,904 1,527 620 151 378 282 201 273
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.... (1,931) (1,504) (569) (75) (359) (236) (153) (219)
Interest income......... 63 59 19 3 7 5 3 4
Interest expense........ (14) (9) (3) (1) (2) (1) (1) (1)
------- ------- ------- ------- ------- ------- ------- -------
Net loss............. (1,882)% (1,454)% (553)% (73)% (354)% (232)% (151)% (216)%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
31
<PAGE>
Revenues. Our total revenues increased in each of the eight quarterly periods
ended March 31, 2000, except during the quarter ended June 30, 1999. This
increase is due to growing acceptance of our software, increased sales force
headcount and increased sales momentum generated from successful deployment of
our software by our customers. The increase in total revenues from
approximately $533,000 in the quarter ended December 31, 1998 to approximately
$2.2 million in the quarter ended March 31, 1999 is primarily attributable to
the sale of a large enterprise license agreement in March 1999. Revenues were
lower in the quarter ended June 30, 1999 due to the reorganization and
restructuring of our sales force which resulted in increased license revenues
in the quarter ended September 30, 1999. Historically, our services revenues
have increased in connection with increases in our license fee revenues.
However, services revenues decreased in the quarter ended March 31, 2000 due to
the transition of a consulting and implementation project to a third-party
system integrator. In the future, we expect that our services revenue will not
grow as rapidly as our license fees revenues due to increased outsourcing of
the professional services, maintenance and training services arising out of our
license fee arrangements to system integrators and consulting firms. Failure to
outsource our services projects in a timely and effective manner could have a
negative impact on our customer relationships and continued growth of our
license fee revenues.
Cost of revenues. Our cost of revenues increased in each of the eight quarterly
periods ended March 31, 2000 as a result of the growth in revenues.
Historically, cost of services revenue has been the primary component of total
cost of revenues. The increase in revenue in the quarter ended March 31, 1999,
was largely due to the sale of a large enterprise license agreement in March
1999. As a result, cost of revenues did not increase in the same proportion to
the increase in revenue in the quarter ended March 31, 1999.
Operating Expenses. Operating expenses increased in each of the eight quarterly
periods ended March 31, 2000 as a result of increased expenses in each
department associated with higher numbers of personnel, use of consultants,
related hiring and recruiting expenses, and the increase in the size of our
facilities. Sales and marketing expenses increased significantly in the third
and fourth quarters of fiscal year 2000 due to the opening of a sales office in
the U.K. in October 1999. In addition, quarterly amounts beginning in June 30,
1999 reflect the amortization of deferred stock-based compensation.
Our quarterly operating results have varied widely in the past, and we expect
that they will continue to fluctuate in the future as a result of a number of
factors, many of which are outside of our control. We believe that our period-
to-period operating results are not meaningful, and you should not rely on them
as indicative of our future performance. You should also evaluate our prospects
in light of the risks, expenses and difficulties commonly encountered by
comparable early-stage companies in new and rapidly emerging markets. We may
not successfully address the risks and challenges that face us. In addition,
although we have experienced significant revenue growth recently, our revenue
might not continue to grow and we might not become or remain profitable in the
future. Our future operating results will depend on many factors, including:
. size and timing of sales and installations of our software;
. entry of new competitors into our market, or the announcement of new
products or product enhancements by competitors;
. our ability to successfully expand our direct sales force and our
international sales organization;
. unexpected delays in developing and marketing new and enhanced products;
. deferral of customer orders in anticipation of product enhancements or
new products;
32
<PAGE>
. unexpected decline in purchases by our existing customers, including
purchases of additional licenses and maintenance contracts;
. variability in the mix of our license and professional service revenues;
and
. our ability to establish and maintain relationships with our third-party
resellers and system integrators.
Liquidity and Capital Resources
Through March 31, 2000, we have funded our operations primarily through sales
of equity securities, with net proceeds of approximately $35.2 million, and to
a lesser extent, the use of borrowings under our line of credit facility. In
May 2000, we received proceeds of approximately $49.9 million, net of offering
expenses, from the sale of preferred stock, raising the total amount of
proceeds generated through sales of equity securities to approximately $85.1
million.
Net cash used in operations was approximately $5.0 million in fiscal year
1998, approximately $8.8 million in fiscal year 1999 and approximately $10.9
million in fiscal year 2000. During these periods, net cash used by operating
activities was primarily a result of funding ongoing operations.
To date, our investing activities have consisted of purchases of equipment
and leasehold improvements to our facilities. Capital expenditures totaled
approximately $470,000 in fiscal year 1998, approximately $474,000 in fiscal
year 1999 and approximately $1.1 million in fiscal year 2000.
Net cash from financing activities was approximately $5.7 million in fiscal
year 1998, approximately $10.1 million in fiscal year 1999 and approximately
$17.1 million in fiscal year 2000. For fiscal year 1998, proceeds from
financing activities were primarily from the private sale of preferred stock of
approximately $5.4 million and approximately $457,000 in net borrowings under
our line of credit. For fiscal year 1999, proceeds from financing activities
were primarily from the private sale of preferred stock of approximately $9.9
million and approximately $167,000 in net borrowings under our line of credit.
For fiscal year 2000, proceeds from financing activities were primarily from
the private sale of preferred stock of approximately $16.9 million.
We expect to experience significant growth in our operating expenses in the
future, particularly in sales and marketing and research and development, in
order to execute our business plan. As a result, we anticipate that these
operating expenses, as well as planned capital expenditures, will constitute a
material use of cash resources. In addition, we may utilize cash resources to
fund acquisitions or investments in complementary businesses, technologies or
product lines. We believe that the net proceeds of this offering, existing cash
balances and funds generated from operations, if any, will be sufficient to
meet our operational and capital expenditure requirements for at least the next
18 months. We may find it necessary to obtain additional equity or debt
financing at a time when we are not profitable. In the event additional
financing is required, we may not be able to raise it on acceptable terms if at
all.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards, or SFAS, No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133, as amended,
requires certain accounting and reporting standards for derivative financial
instruments and hedging activities and is effective for fiscal years beginning
after June 15, 2000. SFAS No. 133 will be effective for us on April 1, 2001.
Because we do not currently hold any derivative instruments and do not engage
in hedging activities, management does not believe that the adoption of this
statement will have a material impact on our financial position or results of
operations.
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In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition," or SAB 101, which provides
guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the Securities and Exchange Commission. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. SAB 101 is
effective for the fiscal quarter beginning April 1, 2000, however, early
adoption is permitted. We are currently evaluating SAB 101 and do not expect
that the pronouncement will have a material effect on our financial position or
results of operations.
In March 2000, the Emerging Issues Task Force or EITF, reached a consensus on
Issue 00-2, "Accounting for the Costs of Developing a Web Site" or EITF 00-2,
EITF 00-2 states that for specific web site development costs, the accounting
for such costs should be based generally on a model consistent with the
American Institute of Certified Public Accountants Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", or SOP 98-1. All costs incurred in the planning stage should be
expensed as incurred. For the web site application and development stage, all
costs relating to software used to operate a web site should be accounted for
pursuant to SOP 98-1, unless a plan exists to market the software externally,
in which case the costs should be accounted for pursuant to SFAS No. 86. Web
site hosting fees should be expensed over the period of benefit and web site
graphics should be capitalized in accordance with SOP 98-1. This consensus will
be applicable to all web site development costs incurred for the quarter
beginning after June 30, 2000, even for costs relating to projects that are in
progress as of that date. We are currently evaluating EITF 00-02 and do not
expect that the abstract will have a material effect on our financial position
or results of operations.
In March 2000, the FASB issued Financial Accounting Standards Board
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation--an Interpretation of APB Opinion No. 25", or FIN No. 44. FIN No.
44 addresses the application of APB No. 25 to clarify, among other issues, (a)
the definition of employee for purposes of applying APB No. 25, (b) the
criteria for determining whether a plan qualifies as a noncompensatory plan,
(c) the accounting consequence of various modifications to the terms of a
previously fixed stock option or award, and (d) the accounting for an exchange
of stock compensation awards in a business combination. FIN No. 44 is effective
July 1, 2000, but certain conclusions cover specific events that occur after
either December 15, 1998, or January 12, 2000. To the extent FIN No. 44 covers
events occurring during the period after December 15, 1998, or January 12,
2000, but before the effective date of July 1, 2000, the effects of applying
the interpretation will recognized on a prospective basis from July 1, 2000. We
are currently evaluating FIN No. 44 and do not expect that it will have a
material effect on our financial position or results of operations.
Qualitative and Quantitative Disclosures about Market Risks
We are developing products in the United States and currently market our
products in North America, Europe and Taiwan. As a result, our financial
results could be affected by factors including changes in foreign currency
exchange rates or weak economic conditions in foreign markets. As all sales are
currently made in U.S. dollars, a strengthening of the dollar could make our
product less competitive in foreign markets. Our interest income is sensitive
to changes in the general level of U.S. interest rates, particularly since the
majority of our investments are in short-term instruments. However, due to the
short-term nature of our investments, we believe that there is no material risk
exposure. Therefore, no quantitative tabular disclosures are required.
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BUSINESS
Overview
We are a leading provider of B2B software products that allow companies to
manage the internal and external sharing of information and the execution of
interactions among software applications and business partners over the
Internet. We refer to this exchange and management of information and execution
of business processes among groups of companies over the Internet as B2B
relationship management, or B2BRM. Our XML-based platform provides an open,
standards-based solution that allows diverse information systems and businesses
to work together more effectively by automating and synchronizing the flow of
information and execution of processes. Our platform supports a process-based
flow of mission-critical information that enables organizations to achieve
operational efficiencies and to collaborate without having to change their
internal processes or IT environments regardless of size, sophistication or
existing software applications. Our current customers include Adaptec, Inc.,
Advanced Micro Devices, IBM, MarketFusion, Inc., MaryKay, Inc., Need2Buy.com,
Inc. Softlab Limited, A BMW company, Solectron Corporation and Taiwan
Semiconductor Manufacturing Corporation.
Industry Background
Over the last decade, companies have attempted to gain competitive advantages
by investing in IT with the goal of improving their internal operations and
efficiencies. With the emergence of the Internet as a widely available
communications infrastructure, companies now have the opportunity to realize
new competitive advantages by assembling highly coordinated networks of
business partners, including suppliers, customers and distributors working
together to rapidly bring goods and services to market. Companies are becoming
increasingly dependent on these cooperative relationships with business
partners to integrate supply chains, enable e-commerce fulfillment and deploy
electronic markets. The exchange of information and the execution of business
transactions among companies over the Internet is referred to as business-to-
business, or B2B, e-commerce. Forrester Research estimates that B2B
transactions will total approximately $406.2 billion in 2000. The Gartner Group
estimates that B2B transactions will grow to approximately $7.3 trillion by
2004.
B2B e-commerce involves multiple activities among diverse businesses, each
with different information technology infrastructures and applications, often
spanning multiple geographies and languages. Although the nature of B2B
environments may vary significantly depending on the collaborating businesses'
relationships with one another, B2B e-commerce can be categorized into three
main areas.
. Supply chain integration. Supply chain integration involves interactions,
such as collaborative planning and forecasting, design collaboration,
coordinated manufacturing and coordinated distribution management, among
partners in a supply chain. Supply chain integration also occurs among
business units within large, distributed companies.
. E-commerce fulfillment. Every company that sells products over the
Internet must coordinate with external organizations, such as suppliers
and distributors, for various activities such as order fulfillment,
catalog information and pricing updates, inventory and shipping
information. E-commerce fulfillment represents the integration and
coordination of a company's processes and existing software associated
with fulfilling business-to-consumer, or B2C, orders.
. Electronic markets. Electronic markets consist of on-line trading
exchanges, auctions and portals. Electronic markets are communities of
buyers and sellers that use the Internet as a medium to manage
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and execute various interactions among community members, such as catalog
and pricing information management, order management and shipping
coordination. Electronic markets can be focused on the supply chain of a
single enterprise, the supply chain of a particular industry or a specific
function that is applicable to multiple industry segments.
Companies engaged in B2B e-commerce operate in an environment characterized
by rapid change and increasingly complex business transactions. The business
processes that define these transactions often span numerous software
applications within groups of Internet-enabled companies and their suppliers
and partners, which is sometimes referred to as an extended enterprise.
Integrating and managing information among the independent and interdependent
organizations contained within an extended enterprise present several
challenges.
. Independent IT systems. The information systems among diverse businesses
within an extended enterprise may be composed of a variety of IT
infrastructures and applications, including enterprise resource planning,
or ERP, advanced planning systems, or APS, product data management, or
PDM, and web-based Intranet applications. An effective B2B platform
should support emerging standards and enable companies to integrate
disparate internal applications while offering their business partners
the ability to exchange information and conduct transactions regardless
of the installed technology infrastructure and without substantial
modification to their existing information systems.
. Diverse business processes. The logical and sequential flow of
information within a company and between internal systems to support
activities such as procurement, inventory management and distribution,
will vary based on a company's industry, size, sophistication, pre-
existing approaches and specific business relationships with external
partners. An effective B2B platform should enable real-time sharing of
information and provide the flexibility necessary to support a wide
variety of business processes ranging from simple procurement or catalog
management to complex business collaboration arrangements, without
requiring the user or its partners to substantially modify their existing
processes.
. Security, reliability and availability. Managing interactions among
multiple companies increases the exposure for breaches in security and
system outages. Secure and reliable communication pathways must exist
before any interaction among systems can take place. An effective B2B
platform should provide the security and reliability necessary to build
partnerships and other collaborative relationships, and manage these
relationships with the high degree of operational availability required.
. Evolving technology and business processes. B2B e-commerce is
characterized by constantly evolving information technology and business
processes. An effective B2B platform should provide the necessary
flexibility to efficiently accommodate evolving technology and future
system modifications enabling companies within an extended enterprise to
work together and evolve their relationships, while maintaining control
over their IT environment.
We believe that current approaches to deliver B2B integration do not provide
a complete solution for enabling B2B e-commerce. First-generation efforts at
B2B e-commerce involve primarily point-to-point electronic communications
between two companies to streamline operations or engage in simple activities
such as procurement. The B2B tools used to accomplish these interactions,
including facsimile and electronic data interchange, or EDI, do not provide the
adaptability required to efficiently accommodate different independent IT
systems without substantial modifications. Enterprise application integration
products, EAI, are tools built to integrate applications inside a
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controlled environment and lack the scalability to extend beyond point-to-point
interactions required to support more complex collaborative information sharing
arrangements. Business application suites, such as ERP, and supply chain
management systems, built to work within a single organization, are typically
unable to extend their business processes to work with other businesses and do
not adapt well to a constantly evolving technology environment. Other attempts
at developing a system from multiple point tools have proved to be difficult,
time-consuming and costly to maintain.
Business use of the Internet has increased the demands on B2B e-commerce
beyond the initial requirements of basic point-to-point data exchange and
connectivity. Today's B2B needs have evolved to include dynamic collaboration
and communications among interdependent groups of businesses and information
sharing within electronic markets to support activities ranging from sourcing
to procurement, collaborative design to logistics, inventory and credit to
returns management. Managing the flow of information and the execution of
business processes among companies, their people and diverse IT systems over
the Internet is what we refer to as B2B relationship management or B2BRM. B2BRM
represents a major advancement from simple B2B integration, which delivered
largely point-to-point connectivity, to true collaboration among business
partners, supporting a more complete set of interactions among companies.
Extricity Solution
Our platform for B2BRM enables companies to manage the internal and external
sharing of information and the execution of interactions among software
applications and business partners over the Internet. Our solution assists
companies in automating and synchronizing the flow of information and execution
of business processes needed to enable organizations to collaborate regardless
of size, sophistication or existing software applications. Businesses utilizing
our B2BRM platform are able to integrate internal systems, share information
and work together over the Internet without sacrificing existing business
practices or control over their environment. Our product family combines, in a
single solution, five elements essential for B2BRM.
Integration of independent IT systems. Our B2B platform allows companies to
communicate internally among their existing software applications and
externally with their business partners regardless of existing technology
infrastructure. Our platform supports emerging technology standards, such as
XML, HTTP and Java, as well as B2B process standards such as RosettaNet. Our
B2B products allow companies to extend their investments in enterprise
applications by integrating with a broad range of applications and tools,
including those offered by Baan, i2 Technology, IBM MQSeries, Oracle,
PeopleSoft, SAP and TIBCO. This ability to communicate effectively and
integrate with existing information systems allows our customers to optimize
their internal efficiencies and external business relationships.
Extension of business processes. Our IT architecture provides the ability to
extend a company's business processes to work with those of its partners. Our
platform may be applied to support simple data exchange and content aggregation
as well as sophisticated process execution enabling businesses to support a
range of transactions from basic procurement to complex business collaboration
arrangements among numerous partners. Our platform supports full-service B2BRM
by providing flexibility and integration capabilities without requiring the
user or its business partners to substantially change their internal or
external information sharing processes.
Security, reliability and availability. Our platform provides the features
necessary to implement B2BRM in a secure environment, such as encryption,
authorization, non-repudiation,
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guaranteed message delivery and process recovery. Our software has been
designed to provide a high performance, highly available secure pathway capable
of supporting the large transaction volumes enabled by the Internet.
Adaptability to evolving technology and business processes. Our unique
architecture enables business partners to easily add or change processes or
applications without the need for complex programming or significant
interruption. In addition, our platform enables our customers to extend
existing IT investments in areas such as enterprise and supply chain management
applications, to work together more efficiently and to support more complex and
potentially valuable collaborative interactions with business partners.
Market-focused solutions. Our products include market-focused solutions which
offer out-of-the-box templates tailored to the specific needs of customers in a
variety of industries and markets and provide significant time-to-market
benefits by reducing their deployment time and their implementation and
maintenance costs. These products also provide us with additional revenue
opportunities and further market differentiation from products offered by other
companies.
Extricity Strategy
Our objective is to be the leading platform provider for B2BRM powering the
interactions within B2B e-commerce environments. Key elements of our strategy
include:
Leverage and expand relationships. We intend to access new markets and
distribution channels by leveraging business relationships that we have formed
with leading resellers and system integrators such as Aspen Technology, CSC,
IBM, Manugistics and PricewaterhouseCoopers and Unitopia, our distributor
located in Taiwan. We believe that these reseller and system integrators
provide geographic coverage and domain expertise that should favorably
introduce our B2B platform in a variety of markets. We also intend to leverage
our relationships with leading consulting firms such as CSC, IBM Global
Services and PricewaterhouseCoopers to extend our reach and provide
comprehensive solutions to our customers. We believe that these firms'
deployment expertise and industry knowledge shortens implementation time and
helps us to secure add-on business.
Proliferate our products through network effect. As our existing customers
deploy our software throughout their extended enterprise, including their
supply chains and electronic markets, their customers, suppliers and partners
will be exposed to our solution and the functionality provided by our products.
We license our B2B software to leading companies such as IBM and Taiwan
Semiconductor Manufacturing Corporation that are sponsoring the integration of
their supply chain of partners and suppliers as well as other businesses that
act as intermediaries of new electronic markets. We believe that this exposure,
which allows non-customer participants in the supply chain to benefit from our
solution first-hand, creates a network effect that may accelerate industry
recognition and adoption of our products.
Offer market-focused B2B solutions. We intend to leverage the expertise of
system integrators, customers and our knowledge of specific market segments to
build market-focused solutions. Market-focused solutions offer out-of-the box
solution templates tailored to the specific needs of customers in a variety of
industries and markets and provide significant time-to-market benefits by
reducing their deployment time and their implementation and maintenance costs.
This initiative also provides us with additional revenue opportunities and
further market differentiation of products.
Extend product and technology leadership. We intend to continue to introduce
enhancements to our existing products that enable our customers to efficiently
deploy effective B2BRM solutions.
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We also intend to extend our position as a leader in technology by continuing
to invest significantly in research and development and by acquiring
technologies through strategic acquisitions. We have assembled a team of
experienced developers and engineers with expertise in Internet technology,
e-commerce, B2B process engineering, and enterprise software and have
established a corporate culture designed to promote product innovation with the
highest quality standards.
Offer our customers multiple ways of acquiring our technology. In addition to
perpetual licenses and annual renewal licenses, we intend to provide our
customers with the ability to acquire our technology on a services contract
basis. We intend to accomplish this primarily through our relationships with
service providers.
Expand our international presence. We plan to aggressively pursue a global
distribution strategy that combines building a direct sales force with
leveraging our relationships with resellers, system integrators and
international distributors. We currently distribute products through a
distributor located in Taiwan and our wholly-owned subsidiary located in the
U.K. We plan to expand our international presence by continuing to establish
indirect sales channels in Europe and Asia.
Products
Our products provide a comprehensive platform for B2BRM to support all
aspects of rapidly deploying and easily managing an Internet-based business
partner environment. Our products integrate diverse internal applications and
support the full spectrum of external collaborative requirements among business
partners ranging from simple data exchange and content aggregation to the
execution of sophisticated B2BRM processes among companies in order to work
together more efficiently over the Internet. Our products are suitable for a
wide variety of industries and market segments, such as high-tech
manufacturing, automotive, healthcare, consumer packaged goods, distribution
and financial services. Our Extricity Software Components for B2B product
family includes the following:
. Extricity Alliance Manager. Extricity Alliance Manager is our core
software server that supports the design and execution of business
processes and the flow of information, manages the integration of back-
end systems, and coordinates interactions with external organizations and
business partners. Our Alliance Manager provides a comprehensive
management environment for businesses and their partners by providing
real-time visibility and control over the flow of information and the
execution of business processes among groups of businesses and their
existing IT systems. We also provide a special packaging of multiple
Extricity Alliance Manager products specifically tailored for IBM
MQSeries customers.
. Extricity Integration Adapters. Extricity Integration Adapters include a
series of products that act as a bridge between Extricity Alliance
Manager and targeted business applications, including applications
offered by Baan, i2 Technologies, Oracle, PeopleSoft and SAP. Our
products also include integration adapters for middleware, which enable
companies to extend investments in existing internal middleware products,
such as Active Software, IBM MQSeries and TIBCO Software to work in a B2B
environment.
. Extricity Partner Channels. Extricity Partner Channels coordinate
interactions with external organizations, trading partners or electronic
markets regardless of business size, sophistication or existing
applications. The Extricity Partner Channels enable customers to build
their B2B solutions as their needs grow by supporting a broad range of
collaborative interactions
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including file transfer, XML data exchange, EDI, web browser interactions
and RosettaNet through shared process execution.
. Extricity Process Paks. Extricity Process Paks include a series of
software products that can be used out of the box or as a template to
meet an organization's specific needs. Our Process Paks are focused on
ensuring rapid deployment and easy management of a B2B environment and
can be customized to integrate with a variety of industries, markets and
processes, such as semiconductor, consumer packaged goods, logistics,
eRetailers, electronic markets and RosettaNet.
. Extricity Partner Kit. Extricity Partner Kits consist of a restricted
access version of the Extricity Alliance Manager that allows business
partners to engage in the full capabilities of B2BRM with hosting or
sponsoring business organizations.
Our Extricity Software Components for B2B products may also be combined to
form customized software solutions tailored to a specific industry, market or
process including high tech manufacturing, consumer packaged goods, logistics,
electronic markets, eRetailers and RosettaNet. These customized software
solutions can be supplemented by our pre-packaged Process Paks to address the
specific functionality and integration requirements of a specific business.
Product Graphic:
The far upper left hand side of the graphic reads in bold:
EXTRICITY B2B
The far lower left hand side of the graphic reads:
Internal
The upper center title of the graphic reads:
Extricity Alliance Manager
The lower center title of the graphic reads:
United Management Environment
On the far-left hand side of the graphic there are three vertical computer
servers. The top computer server is connected to the bottom computer server by
a line. To the left of the 3 vertical computer servers reads vertically:
Internal
Business
Applications
And Tools
Each of the three computer servers is connected by a line to three small
rectangle boxes titled Adapters. The three adapters are connected to a large
square. In the middle of the large square, there is a circle which is labeled:
Process Manager. Within the square, there are thin lines, which flow from the
adapters to the Process Manager. Within the square, there are thin lines, which
flow from the Process Manager towards the Channels. In the top of the square,
there are four overlapping squares labeled: Process Paks. On the right hand
side of the square, four vertical rectangle boxes are attached and labeled:
Channels. Each vertical rectangular box is connected by a thin line to four
vertical pictures located on the right side of the graphic. Above the four
vertical pictures reads: External Business Partners. The top vertical picture
is a unisex stick figure representing a customer standing in front of a
computer screen. Below the customer is a picture of a building, which
represents a warehouse. Below the building is a picture of a large truck, which
represents distribution. Below the truck is a picture of a building, which
represents a supplier. Below the supplier is a picture of a circle with people
and buildings around the perimeter, which represents a net market.
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Service and Support
Our Client Services organization provides a complete set of services focused
on ensuring the success of our customers and partners. The organization is
comprised of three distinct groups consisting of consulting, training and
support.
Consulting. Our consulting organization assists customers with all aspects of
implementing the Extricity B2B products. From solution architecture to program
and project management to implementation services, our consulting team provides
the skills and experience required to ensure the success of our customers'
Extricity B2B implementation projects. In addition to our personnel located in
the United States and Europe, our consulting team works with a number of system
integrator partners to provide the geographic coverage and resources for the
global marketplace in which our customers operate. Finally, as a means of
leveraging our internal knowledge to partners and customers and ensuring
consistent, high quality Extricity B2B deployments, we have invested and will
continue to invest in the area of practice development. Such efforts include
continual refinement of our consulting methodology and implementation
guidelines.
Training. Our training organization provides a comprehensive training program
for our customers and partners as well as for our employees. Our curriculum
includes product-focused training and implementation training courses.
Support. Our support organization is founded on the premises that our
customers and resellers are using our products in mission-critical applications
and that our ability to provide high quality maintenance and support services
is one of the factors that distinguishes us from our competition. We provide
support to customers and resellers on a round-the-clock basis.
Technology
The Extricity B2B platform provides a broad spectrum of capabilities to
support information coordination among separate organizations. These
capabilities range from the ability to support simple data exchange between two
partners to complex collaboration processes among many partners. Collaboration
can include conversational interactions between organizations that involve
multi-step interdependent communications, exception handling and other feedback
mechanisms. In addition, the flexibility provided by our B2B platform enables
our customers to extend the platform to support B2B application areas such as
procurement, collaborative design and planning, logistics management, catalog
information management and returns management. Our platform supports a process-
based flow of mission-critical information that enables organizations to
collaborate with each other and achieve operational efficiencies. In addition,
our platform allows companies to change their internal processes or IT
environments regardless of size, sophistication or existing software
applications.
Extricity's B2B software is written in the Java programming language and
makes extensive use of the eXtensible Markup Language, or XML. The use of Java
provides several advantages including enhanced operating system and hardware
platform portability and access to a growing list of Java language features.
XML is used as a base representation language for data and process definitions
managed within Extricity B2B software products.
Our B2B product architecture consists of four major elements:
. Process Engine. The process engine is the heart of our B2B platform and
controls the execution of processes running in a server. Our process
engine distinguishes between external communications, or public
processes, and internal communications, or private processes. Public
processes govern interactions between organizations and can involve any
number of
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partners. Public processes can represent custom processes created by users
of our software or imported standards-based processes such as RosettaNet
partner interface processes, or PIPs. Private processes govern
interactions within organizations that use our B2B platform and serve as
the means by which our software implementation executes its associated
steps in a public process. Private processes specify various types of
dependent actions such as calls to application systems via Adapters, data
transformation actions, email notifications, sub-process calls, script
block executions and user approval steps.
. Integration Adapters. Adapters act as the bridge between Extricity B2B
processes and targeted business applications. Each adapter exposes a
specific set of application functionality. An Adapter Manager manages and
provides services to a set of Adapters and serves as the internal
communications interface to the process engine. Key functions performed
by the Adapter Manager include management of Adapter
install/uninstall/start/stop as well checkpoint, logging and queuing
services for Adapters.
. Channels. Channels are the mechanism by which our B2B platform manages
multiple external communication requirements such as EDI, RosettaNet and
other combinations of standards-based and ad hoc agreements. Channels
isolate communication details such as network protocol support, security
arrangements, and data format conversion from the other components of the
system. A Channel Manager manages and provides execution services to
installed channels.
. Management Framework. The Extricity B2B product family is built on a
common management framework that simplifies control of system components,
information and behaviors. Key functions supported by the framework
include channel management, adapter management, partner management,
process definition and business object definition management and user
management.
Our B2B products contain a variety of features to maximize reliability,
including assured message delivery, mutually assured process completion,
communications service failover, such as Internet connection to telephone dial-
up, process check-point and failure recovery capabilities, support for high
availability hardware/software configurations, and comprehensive logging and
audit capabilities. Our B2B platform provides comprehensive security management
capabilities to address a broad range of security issues including external
communications security, systems security, user access control and application
security management. External communications support includes X.509
certificate, secure socket layer, or SSL, and S/MIME. Specific support is
provided for non-repudiation of origin and delivery of individual messages. The
Extricity Alliance Manager can be configured to operate in a variety of
firewall environments and to use a variety of cryptographic algorithms.
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Technology Graphic:
The graphic is rectangular in shape. The far-left hand side of the graphic
reads vertically: Integration Adapters
On the far-left hand side of the graphic are 9 vertical thin rectangles. These
rectangles read top to bottom:
SAP Adapter
Baan Adapter
Oracle Adapter
PeopleSoft Adapter
i2Adapter
Tibco Adapter
IBM MQSeries
Custom Developed
More...
These 9 thin rectangles are connected to a large square. The far-left hand side
of the square reads vertically: Adapter Manager. Inside the large square are
two boxes. The top box reads: B2B Process Paks. Underneath the B2B Process Pak
title reads: RosettaNet, eRetailers, Net Markets, Semi Conductor, Logistics
Services, Consumer Packaged Goods. The bottom box reads: Process Manager. The
far right hand side of the square reads vertically: Channel Manager. The far
right hand side of the graphic contains 7 vertical thin rectangles which read
from top to bottom:
Extricity Partner Channel
WebAgent Channel
Web App Channel
EDI Channel
RosettaNet Channel
Custom Developed Channel
More...
These 7 vertical thin lines are connected to the large square.
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Customers
We provide our products and services to customers worldwide. Customers
utilize our software either as a direct licensee or as a sublicensee, or as a
customer, supplier or vendor along the extended enterprise of one of our direct
licensees. In fiscal year 2000, the North Face, Inc. accounted for
approximately 14.5% of our total revenue and was the only customer which
represented more than 10% of our total revenue. In fiscal year 1999, Ingram
Micro, Inc., the North Face, Inc., Solectron Corporation and Taiwan
Semiconductor Manufacturing Company each represented more than 10% of our total
revenue. In fiscal year 1998, Adaptec, Inc. and Taiwan Semiconductor
Manufacturing Company each represented more than 10% of our total revenue.
The following is a list of current direct licensees of our products from whom
we have received consent to name them in this prospectus.
<TABLE>
<S> <C>
Supply Chain
Adaptec, Inc. IBM
Advanced Micro Devices Jabil Circuit Inc.
Amkor Technology, Inc. Motorola SPS
Arrow Electronics, Inc. NABS, Inc.
Aspen Technology, Inc. Solectron Corporation
Bourns, Inc. Stratus Computer, Inc.
Taiwan Semiconductor Manufacturing Corporation
eBusiness
MaryKay, Inc.
Softlab Limited, a BMW Corporation
Trading Exchanges/Electronic Markets
Edaflow Corporation Need2Buy.com, Inc.
MarketFusion, Inc. RightFreight.com, Inc.
MetaPack Limited
</TABLE>
As of March 31, 2000, we have 35 licensees of our software, of which 9 are
sublicensees. As of March 31, 2000, we have recognized license fee revenue from
19 licensees.
Customer Case Studies
Enabling Supply Chain Integration--Solectron Corporation
Solectron is the world's largest technology contract manufacturing company
and two time winner of the Malcolm Baldridge award for its quality standards.
As a contract manufacturer, Solectron must tightly integrate its internal
operations internally with those of its customers. In November 1998, Solectron
selected our B2B products as its business-to-business integration platform. As
of March 31, 2000, Solectron has deployed Extricity B2B products internally to
manage the integration between its enterprise resource planning, manufacturing
execution, and warehouse management systems and externally with several of its
key customers to automate the complex processes required to support an
outsourced manufacturing model. Such processes include managing sales orders
and acknowledgements, bills of materials, entitlement data, item master
requests, work-in-progress status, inventory availability, and shipment
notifications between Solectron and its customers. For some external
interactions, Solectron has utilized the Extricity Partner Channel for
RosettaNet to communicate with several of its partners. By utilizing our B2B
products to automate
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these intercompany interactions over the Internet, Solectron has removed the
inefficiencies inherent historically when integrating companies and enabled its
customers to focus on their own core competencies while leveraging Solectron's
manufacturing competency. As a result, Solectron and its customers have
established new business models and created competitive advantages.
Enabling Electronic Markets--RightFreight.com
RightFreight.com, a leading provider of logistics management solutions,
operates two global airfreight service exchanges. These exchanges enable air
carriers to provide capacity information and accept reservation bids from
freight forwarders and allow shippers to request transportation service quotes
from freight forwarders. As is typical of electronic market makers, these
exchanges must be able to efficiently and automatically handle the dynamic
interactions between RightFreight and its exchange members. RightFreight plans
to implement Extricity B2B for its electronic markets as a B2B platform to
integrate the backend auction, web and logistics management applications of the
exchanges, manage the processes with participants in the exchanges and
communicate through various modes of interaction, from simple data exchange to
sophisticated business processes that integrate RightFreight's systems with
those of its partners. In addition to integrating with participants in its own
exchanges, RightFreight plans to use the Extricity B2B electronic markets
platform to integrate with the leading ground-based freight exchange, thus
providing a multi-modal transportation and logistics service solution.
Utilizing the Extricity B2B platform, RightFreight expects to provide an
efficient, end-to-end logistics management solution that reduces transportation
search costs, accelerates logistics decision-making and improves communication
among all parties in a supply chain.
Enabling E-Commerce Fulfillment--Mary Kay, Inc.
Mary Kay is a leading provider of facial skin care and color cosmetics in the
United States. As part of its strategic e-business initiative, Mary Kay has
selected Extricity as its B2B platform to integrate with its supply chain
partners. The initial deployment of Extricity's products will be focused on
integrating Mary Kay's internal inventory and order management applications
with those of its third-party fulfillment centers. Through automated processes
tied directly into back-end systems at Mary Kay and its partners, Mary Kay will
be able to provide new product information to track inventory levels at, share
order information with, and coordinate shipments with its distribution
partners. As a result, Mary Kay will be able to fulfill more efficiently the
orders from its approximately 500,000 independent Mary Kay Beauty Consultants
and from its MyMK.com e-commerce website. In addition to integrating with its
distribution partners, Mary Kay's long term vision is to extend its Extricity
infrastructure to integrate with its suppliers and its third-party logistics
providers such that they can further reduce inventory levels throughout the
supply chain while fulfilling orders with shorter lead times.
Business Relationships
To enhance the productivity of our sales and service organizations, we have
established business relationships with resellers and system integrators.
Resellers. In addition to our direct sales force, we also distribute our
products through various reseller organizations that enable us to leverage our
sales resources and provide solutions targeted to specific markets. Other
resellers provide sales support coverage in specific geographical areas. We
intend to leverage industry expertise of these organizations to deliver
solutions that accelerate our penetration into key markets. Aspen Technologies,
Inc. is the leading provider of software for
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process design and plant control, management and optimization, business
integration and supply chain solutions to end-user customers in various process
industries worldwide. We have a reseller relationship with Manugistics, a
leading provider of solutions for customer-centric supply chain optimization.
IBM is a reseller of the entire Extricity B2B product family through its direct
and indirect sales channels. While cross-industry in scope, IBM's initial
efforts will focus on high-tech, automotive, aerospace, finance and electronic
market segments. In addition, CSC, while a system integration firm, has the
ability to resell our Extricity B2B products as a part of their net market
offerings. Unitopia, Inc. is a distributor for our products in Taiwan, mainland
China, Singapore, Hong Kong and Malaysia and provides sales, implementation and
support services.
System Integrators. We have established strategic relationships with a number
of major system integrators including CSC, IBM Global Services and
PricewaterhouseCoopers. Many of our system integrators have deep relationships
across a broad range of enterprise customers and our relationships with these
system integrators often enable us to reach key decision makers within these
enterprises more quickly. The significant financial and technical resources of
many of our system integrators can help us deliver large, mission-critical
engagements. Working with system integrators enables us to leverage our service
organization and shorten solution implementation time. In addition, by
leveraging the domain expertise of our system integrators and resellers, we can
more effectively and rapidly build custom templates which codify business
process solutions for vertical markets.
Sales and Marketing
We license our products and sell services through both direct and reseller
sales channels, including the selling assistance and support efforts of system
integrators. As of March 31, 2000, our sales force consisted of 44 sales
professionals and technical sales engineers located in our headquarters in
Redwood Shores, California and in regional sales locations in the greater
metropolitan areas of Atlanta, Boston, Chicago, Cincinnati, Dallas, Los
Angeles, New York, Toronto, Washington, D.C., and London, England. We plan to
significantly expand the size of both our direct and reseller sales
organizations and to establish additional sales offices domestically and
internationally.
We have expanded the sales and licensing of our products through OEMs,
resellers and systems integrators, including those described above. These
organizations provide solutions targeted to specific market segments or
geographical areas. We believe that working with these organizations will
provide us with increased sales force leverage as well as the ability to sell
into vertical markets and geographical areas that we would otherwise be unable
to penetrate.
Our marketing efforts are focused on developing greater awareness among
target customers for the Extricity B2B products and the benefits we offer our
customers. We market our products and services through targeted events
including tradeshows, conferences and seminars. We also regularly promote our
products through a variety of public relations activities and industry analyst
briefings, and our executives are frequent speakers at industry conferences and
forums. We have developed a wide range of collateral materials and sales and
promotional tools, including product brochures, data sheets, technical and
business white papers, case studies and press releases.
Research and Development
We believe that our future success will depend in large part upon our ability
to enhance our Extricity B2B suite of products, develop new products and
capitalize on our technological leadership
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<PAGE>
in the provision of B2B solutions. Since early 1996, we have devoted a
significant portion of our resources to product engineering. We plan to
continue to invest substantial resources in research and development activities
in support of both product maintenance and expansion.
Our research and development expenses were approximately $4.3 million for
fiscal year 1999 and approximately $7.2 million for fiscal year 2000 and we
expect to continue to invest significantly in research and development in the
future. We have actively recruited experienced technical leadership in the
areas of object oriented analysis and design, Java, XML, Internet and network
security programming, application integration and test automation.
The market for our products and services is characterized by rapid
technological change, frequent new product introductions and enhancements,
evolving industry standards, and rapidly changing customer requirements. The
introduction of products incorporating new technologies and the emergence of
new industry standards could render existing products obsolete and
unmarketable. Our future success will depend in part on our ability to
anticipate changes, enhance our current products, develop and introduce new
products that keep pace with technological advancements and address the
increasingly sophisticated needs of our customers.
Competition
The market for our products is competitive, evolving and subject to rapid
technological change. We expect competition to increase in the future which may
result in price reductions, reduced gross margins and loss of market share, any
one of which could seriously harm our business. Today, our primary competition
includes vendors providing their own B2B solutions and companies attempting to
build B2B e-commerce solutions through internal IT development. We believe that
we do not currently face any single direct competitor. There are, however, many
vendors in related markets that address particular aspects of the features and
functions that we provide. Today, we face competition from:
. internal enterprise application integration software vendors, including
Active Software, Software Technologies Inc., TIBCO Software and Vitria;
. proprietary electronic data exchange vendors, such as GE Information
Systems Harbinger, Sterling Commerce,and webMethods; and
. supply chain vendors, such as i2 Technologies.
In the future, it is possible that we could face competition from vendors in
complementary markets, including ERP vendors such as SAP, Oracle, PeopleSoft,
Baan, IBM, Microsoft, OnDisplay, Viacore and other vendors such as Ariba and
Commerce One, and other large enterprise software companies such as Siebel
Systems.
We believe that the principal competitive factors in our market include: the
breadth and depth of solutions; product quality and performance; the ability of
products to operate between multiple businesses with multiple software
applications; ability to easily implement and manage solutions; customer
service; relationships with system integrators; establishment of a significant
base of reference customers in production with measurable benefits; strength
and differentiation of core technology and product price.
Although we believe that our solutions compete favorably with respect to
these factors, our market is relatively new and is evolving rapidly. In the
past, we have lost potential customers to
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competitors for various reasons, including lower prices for less complex
implementations and lack of availability on specific Unix platforms. We may not
be able to maintain our competitive position against current and potential
competitors, especially those with significantly greater resources.
Proprietary Rights
Our success and ability to compete are substantially dependent on our
internally developed technology and software applications. We have filed patent
applications in the United States and over 12 foreign countries with respect to
several aspects of our unique architecture for B2BRM. While we rely on patent,
trademark, service mark, copyright and trade secret laws and restrictions in
the United States and other jurisdictions, together with contractual
restrictions, to protect our proprietary rights, such patent, trademark,
copyright and trade secret protection may not be available in every country in
which we distribute our products.
We have entered into confidentiality and invention assignment agreements with
our employees and contractors, and nondisclosure agreements with our customers,
suppliers and strategic partners in order to limit access to and distribution
and disclosure of our proprietary information. However, despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain and use our products or technology or to develop products with
the same functionality as our products. Policing unauthorized use is difficult,
and we cannot be certain that the steps we have taken will prevent
misappropriation of our technology, particularly in foreign jurisdictions,
where the laws may provide less protection of proprietary rights than do the
laws of the United States.
Substantial litigation regarding intellectual property rights exists in the
software industry. We expect that software products may increasingly be subject
to third-party infringement claims as the number of competitors supplying
advanced e-commerce applications and solutions grows, and the functionality in
other industry segments overlaps. Some of our competitors may have filed or
intend to file patent applications covering aspects of their technology that
they claim our technology infringes. We cannot be certain that any of our
competitors will not make a claim of infringement against us with respect to
our products and technology. Any such claims could result in litigation
subjecting us to significant liability for damages, or in invalidation of our
proprietary rights. Any such claims, with or without merit, could be time
consuming to defend, result in costly litigation, divert management's attention
and resources, or require us to enter into royalty or licensing agreements.
Employees
As of March 31, 2000, we employed approximately 158 full time employees, of
which 64 were engaged in sales and marketing, 53 were engaged in research and
development, 28 were engaged in client services, and 13 were engaged in general
and administrative functions. None of our employees are represented by a labor
union and we have never had a work stoppage. We believe our relations with our
employees are good.
Properties
Our principal and executive offices are located at 555 Twin Dolphin Drive,
Redwood Shores, California, 94065 where we lease approximately 25,000 square
feet under office leases expiring between 2002 and 2004. In addition we have
sales offices located in Atlanta, Boston, Chicago, Cincinnati, Dallas, and
London, England.
Legal Proceedings
We are not currently a party to any material legal proceedings.
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MANAGEMENT
The directors and executive officers of the Company and their ages as of
March 31, 2000 are as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- ----------
<C> <C> <S>
Barry M. Ariko......... 54 Chairman of the Board, Chief Executive Officer and
President
Stephen J. Albertolle.. 43 Vice President of Finance and Administration,
Chief Financial Officer and Secretary
David Cope............. 39 Vice President of Marketing
Laura Ferrell.......... 38 Vice President of Engineering
Richard Fitchen........ 36 Vice President of Client Services
James Lochry........... 45 Vice President of Worldwide Sales
Gregory Olsen.......... 38 Vice President and Chief Technology Officer
Bruce Bourbon.......... 57 Director
B.J. Cassin............ 65 Director
Neal Dempsey........... 58 Director
Kenneth Ross........... 57 Director
</TABLE>
Executive Officers and Board Members
Barry M. Ariko has served as our President and Chief Executive Officer since
February 2000 and as Chairman of the Board since March 2000. From March 1999 to
January 2000, Mr. Ariko was a Senior Vice President at America Online, Inc.,
where he had responsibility for the Netscape Enterprise Group. Prior to the
acquisition of Netscape Communications Corp. by AOL in March 1999, Mr. Ariko
served as Executive Vice-President and Chief Operating Officer of Netscape
Communications Corp. From 1994 to August 1998, Mr. Ariko served as Executive
Vice President and as a member of the Executive Management Committee at Oracle
Corp. Mr. Ariko currently serves as a director of Autonomy Corporation PLC and
on the boards of directors of a number of private companies. Mr. Ariko holds a
B.S. in Management from Golden Gate University and completed the Executive
Management Program at Northwestern University's Kellogg School of Business.
Stephen J. Albertolle has served as our Vice President of Finance and
Administration and Chief Financial Officer since March 1999 and as our
Secretary since February 2000. From November 1997 to March 1999, Mr. Albertolle
was employed at PeopleSoft, Inc. where he most recently served as Vice
President of Business Operations. From December 1993 until February 1995, Mr.
Albertolle served as Vice President and Corporate Controller at OpenVision
Technologies, Inc. Mr. Albertolle holds a B.S. from the University of
California, Berkeley.
David Cope has served as our Vice President of Marketing since May 1998. From
March 1997 to January 1998, Mr. Cope served as Vice President of Marketing at
Marimba, Inc. From January 1996 to April 1997, Mr. Cope served as Vice
President of Marketing and Operations and General Manager of DataBlade Business
Development at Illustra/Informix. From July 1981 to January 1996, Mr. Cope
served as Worldwide Executive for IBM's Electronics Industry Sales and
Marketing Organization. Mr. Cope holds a B.A. from San Jose State University
and attended Harvard Business School's Advanced Management Program.
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Laura Ferrell has served as our Vice President of Engineering since October
1996. From November 1992 to September 1996, Ms. Ferrell served as Senior
Consultant to Sun Microsystems working on their global deployment of Oracle
Applications. From January 1989 to May 1992, Ms. Ferrell was a Director in the
Applications Division at Oracle Corporation. Ms. Ferrell holds a B.A. in
Sociology from Stanford University.
Richard Fitchen has served as our Vice President of Client Services since
January 1997. From May 1993 to January 1997, Mr. Fitchen served as Director of
Consulting at CAP Gemini, where he led large-scale ERP implementations and
developed the company's ERP implementation methodology. Mr. Fitchen holds a
B.S. in Engineering from University of California, Berkeley, and an M.B.A. from
the University of Michigan.
Jim Lochry has served as our Vice President of Sales since February 1999.
From August 1996 to February 1999, Mr. Lochry served as the Vice President of
Worldwide Sales for Versant Corporation. From June 1995 to August 1996, Mr.
Lochry served as Vice President of North American Sales at n-Cube Corporation.
Mr. Lochry holds a B.A. from Southern Methodist University and an M.B.A. from
the University of Detroit.
Gregory Olsen, a co-founder of Extricity, has served as our Vice President
and Chief Technology Officer since June 1996. From June 1995 to June 1996, Dr.
Olsen served as Technical Manager at the Internet Commerce Division of
Verifone, formerly EIT. Dr. Olsen holds a Ph.D. in Mechanical Engineering and a
M.S. in Computer Science from Stanford University, as well as a M.S. and B.S.
in Mechanical Engineering from the University of California, Santa Barbara.
Bruce Bourbon has served on our Board of Directors of Extricity since April
1996. Mr. Bourbon has been a general partner at Telos Venture Partners, L.P.
since December 1995. He currently serves on the board of directors of Preview
Systems, Inc., as well as on the boards of directors of several private
companies. Mr. Bourbon holds a B.S.E.E. from California State Polytechnic
University and a M.S.E.E. from the University of California, Los Angeles.
B.J. Cassin has served on our Board of Directors of Extricity since April
1996. Mr. Cassin has been a private venture capitalist since 1979. Mr. Cassin
currently serves on the boards of directors of Cerus Corporation and Symphonix
Devices, Inc., as well as on the boards of directors of several private
companies. Mr. Cassin holds an A.B. in Economics from Holy Cross University.
Neal Dempsey has served on our Board of Directors of Extricity since May
1996. Mr. Dempsey is currently a General Partner of Bay Partners, a venture
capital firm, which he joined in 1989. Prior to joining Bay Partners, Mr.
Dempsey acted in various management positions, including Chief Executive
Officer of Qubix Graphics Systems, Chief Executive of Envision Technology, and
senior management positions with Zentec and Harris Corporation. Mr. Dempsey
currently serves on the board of directors of Brocade Communications Systems,
Inc. as well as on the boards of directors of several private companies. Mr.
Dempsey holds a B.A. in Business from the University of Washington.
Kenneth Ross, a co-founder of Extricity, has served on our Board of Directors
since April 1996. Mr. Ross served as our President and Chief Executive Officer
from April 1996 to February 2000 and as Chairman of the Board from February
2000 to March 2000. From 1991 to 1995, Mr. Ross served as President and Chief
Executive Officer of Pillar Software, an enterprise budgeting software company.
From May 1995 to April 1996, Mr. Ross was an independent consultant. Mr. Ross
currently serves on the boards of directors of a number of private companies.
Mr. Ross holds a B.S. in Industrial Management from the Massachusetts Institute
of Technology and a M.B.A. from Stanford University.
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<PAGE>
Number, Term and Election of Directors
Our Board of Directors currently consists of five members. Each director
holds office until his or her term expires or until his or her successor is
duly elected and qualified. Our non-employee directors devote the time to our
affairs that is necessary to perform their duties. There are no family
relationships among any of our directors, officers or key employees.
Compensation of Directors
Our directors do not receive compensation for their services as directors or
members of committees of the board of directors.
Board Committees
We have established an audit committee and a compensation committee.
The audit committee consists of B.J. Cassin, Neal Dempsey and Bruce Bourbon.
The audit committee makes recommendations to the board of directors regarding
the selection of independent auditors, reviews the results and the scope of
audit and other services provided by our independent auditors and reviews and
evaluates our internal controls.
The compensation committee consists of B.J. Cassin, Neal Dempsey and Bruce
Bourbon. The compensation committee reviews and makes recommendations regarding
our stock plans and makes decisions concerning the compensation and benefits
for our executive officers.
Compensation Committee Interlocks and Insider Participation
None of the members of the compensation committee has at any time since our
formation been one of our officers or employees. No executive officer currently
serves or in the past has served as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of our board of directors or the compensation committee.
Before the creation of our compensation committee, all compensation decisions
were made by our full board of directors.
Employment Contracts, Termination of Employment and Change of Control
Arrangements
Employment Contracts. None of the executive officers has an employment
agreement with us. These officers may resign or we may terminate their
employment at any time.
Change in Control Arrangements. We have entered into employment arrangements
with our senior management executives which provide for the immediate vesting
of 50% of all unvested shares or options in the event of either:
. a merger or acquisition resulting in our shareholders owning less than a
majority of the surviving corporation, or
. the sale of all or substantially of our assets.
In February 2000, we extended an employment offer to Barry M. Ariko, our
chairman and chief executive officer, which provides for immediate vesting of
50% of all of his unvested shares or options owned immediately prior to the
consummation of a merger or acquisition resulting in a change in control or the
sale of all or substantially all of Extricity's assets. This offer letter also
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<PAGE>
provides that, in the event of a change in control and termination of Mr.
Ariko's employment, other than for cause or as a result of constructive
termination, 100% of Mr. Ariko's unvested shares or options will immediately
vest. In addition, the offer letter provided that we would grant additional
options to Mr. Ariko so as to enable him to achieve a seven percent (7%) equity
interest in Extricity, on a fully diluted basis, following an equity financing
prior to our initial public offering. Following the closing of the sale of
Series F Preferred Stock, we granted Mr. Ariko an option to purchase 789,736
shares of common stock at an exercise price of $5.48 per share.
In May 1998, we entered into an arrangement with David Cope, our vice
president of marketing, which provides for immediate vesting of 50% of all of
his unvested shares or options owned immediately prior to the consummation of a
merger or acquisition resulting in a change in control or a sale of all or
substantially all of Extricity's assets. In addition, in the event of a change
in control Mr. Cope will receive an additional year of vesting in any unvested
shares or options if his employment is terminated or if he voluntarily
terminates his employment because his position has suffered a significant
decrease in either responsibility, salary or reporting position.
Executive Officers
Our executive officers are appointed by our Board of Directors and serve
until their successors are elected or appointed.
Executive Compensation
The following table sets forth information concerning the compensation paid
during the fiscal year ended March 31, 2000 to all individuals serving as our
President and Chief Executive Officer, and each of our four (4) other most
highly compensated officers whose total annual salary and bonus exceeded
$100,000 for the period.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------- ------------
Number of
Securities
Other Annual Underlying
Name and Principal Position Salary Compensation* Options
- --------------------------- -------- ------------- ------------
<S> <C> <C> <C>
Barry M. Ariko........................... $ 34,103 $ -- 2,712,668
Chairman of the Board, Chief Executive
Officer and President (began February
2000)
Kenneth Ross............................. 180,000 $40,000 --
President and Chief Executive Officer
(ended February 2000)
James Lochry............................. 177,019 41,827 50,000
Vice President of Worldwide Sales
David Cope............................... 175,000 36,384 40,000
Vice President of Marketing
Laura Ferrell............................ 161,314 39,510 50,000
Vice President of Engineering
Richard Fitchen.......................... 148,050 26,880 40,000
Vice President of Client Services
</TABLE>
- --------
* Other Annual Compensation refers to year-end bonuses.
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<PAGE>
Option Grants
The following table sets forth information concerning stock options granted
to the executive officers named in the summary compensation table above who
received stock options during the fiscal year ended March 31, 2000. Except for
the options granted to Barry M. Ariko, all of these options were granted under
our 1996 Stock Option Plan. Options granted under the 1996 Stock Option Plan
generally vest over a four-year period with 25% of the shares vesting on the
first anniversary of the employee's start date and the remaining shares vesting
in equal monthly installments over the next 36 months. Mr. Ariko's options,
which were granted outside the 1996 Stock Option Plan, vest over a four-year
period with 12.5% of the shares vesting on the six-month anniversary of his
start date and the remaining shares vesting in equal monthly installments over
the next 42 months. The percent of the total options set forth below is based
on an aggregate of 3,916,811 options granted to employees during the year ended
March 31, 2000. All options were granted at the fair market value as determined
by our Board of Directors on the date of grant.
The potential realizable value is calculated based on the ten-year term of
the option at the date of grant. For purposes of these columns, we assumed
stock appreciation of 5% and 10% as required by the Securities and Exchange
Commission. These rates of appreciation do not represent our prediction of our
stock price performance. The potential realizable values at 5% and 10%
appreciation are calculated by assuming that the fair market value on the date
of grant, based upon an assumed initial public offering price of $ ,
appreciates at the indicated rate for the entire term of the options and that
the option is exercised at the exercise price and sold on the last day of its
term at the appreciated price.
Option Grants in Fiscal Year Ended March 31, 2000
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------
Potential
Realizable
Value At
Assumed
Annual Rates
% of Total of Stock
Number of Options Appreciation
Securities Granted to For Option
Underlying Employees Exercise Term
Options in Fiscal Price Expiration -------------
Name Granted 2000 ($/share) Date 5%($) 10%($)
- ---- ---------- ---------- --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Barry M. Ariko........ 1,922,932 49.1 .8183 2/28/10
James Lochry.......... 50,000 1.3 .4925 7/21/09
David Cope............ 40,000 1.0 .4925 7/21/09
Laura Ferrell......... 50,000 1.3 .4925 7/21/09
Richard Fitchen....... 40,000 1.0 .4925 7/21/09
</TABLE>
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<PAGE>
Option Exercises and Option Values
The following table sets forth information regarding option exercises, and
the fiscal year-end values of stock options held, by the executive officers
named in the summary compensation table above during the fiscal year ended
March 31, 2000. The options vest over four years and generally conform to the
terms of our 1996 Stock Option Plan with the exception of the options granted
to Mr. Ariko, which vest with respect to 12.5% of the shares on the six-month
anniversary of his start date and in equal monthly installments over the
following 42 months. The value realized upon exercise of the options is based
on the initial public offering price of $ per share, less the exercise
price.
Aggregated Option Exercises in Fiscal Year Ended March 31, 2000 and Year-End
Option Values
<TABLE>
<CAPTION>
Value of Value of
Unexercised Unexercised
Number of Securities In-the-Money In-the-Money
Underlying Unexercised Options Options based
Number of Options at at March 31, on Offering
Shares Value Realized March 31, 2000 2000 Price
Acquired (Market Price at ---------------------- ------------- -------------
On Exercise Less Exercisable/ Exercisable/ Exercisable/
Name Exercise Exercise Price) Unexercisable Unexercisable Unexercisable
- ---- --------- ---------------- ---------------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Barry M. Ariko.......... 1,922,932 $ -- 0/0 $ 0 $ --
James Lochry............ 400,000 -- 50,000/0 62,375 --
David Cope.............. -- -- 40,000/0 49,900 --
Laura Ferrell........... -- -- 50,000/0 62,375 --
Richard Fitchen......... -- -- 40,000/0 49,900 --
</TABLE>
Benefit Plans
1996 Stock Option Plan
Our 1996 Stock Option Plan was adopted by our Board of Directors on June 13,
1996 and has been amended from time to time. A total of 11,840,000 shares have
been reserved for issuance under the 1996 Stock Option Plan. In addition, the
share reserve of the 1996 Stock Option Plan will automatically be increased on
the first day of each fiscal year beginning on and after December 31, 2000 by
the lessor of:
. shares;
. 5% of the number of shares of our common stock that was issued and
outstanding on the last day of the immediately preceding fiscal year; or
. a lesser number of shares as determined by our board of directors.
The 1996 Stock Option Plan allows the grant of incentive stock options,
within the meaning of Section 422 of the United States tax code, to employees,
including officers and employee directors. In addition, it allows grants of
nonstatutory options to employees, non-employee directors, and consultants. The
1996 Stock Option Plan is administered by our board of directors, which selects
the persons who will receive options, determines the number of shares subject
to each option and prescribes other terms and conditions, including the type of
consideration to be paid to us upon exercise and vesting schedules, in
connection with each option. However, this responsibility may be delegated to a
committe of our board of directors.
The exercise price of nonstatutory stock options granted under the 1996 Stock
Option Plan cannot be less than 85% of the fair market value of a share of
common stock on the date of grant.
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In the case of incentive stock options, the exercise price cannot be less than
the fair market value of share of common stock on the date of grant. With
respect to any optionee who owns stock representing more than 10% of the voting
power of all classes of our outstanding capital stock, the exercise price of
any incentive stock option has to be equal to at least 110% of the fair market
value of a share of the common stock on the date of grant, and the term of the
option cannot not exceed five years. The terms of all other options cannot
exceed ten years. The aggregate fair market value, determined as of the date of
option grant, of the common stock for which an incentive stock option can
become exercisable for the first time cannot exceed $100,000 in any calendar
year.
In the event of a change in control of Extricity, the acquiring or successor
corporation may assume or substitute for the outstanding options granted under
the 1996 stock option plan. The outstanding options will terminate to the
extent that the options are not exercised or assumed or substituted for by the
acquiring or successor corporation.
As of March 31, 2000, 3,785,492 shares of common stock had been issued upon
exercise of options under our 1996 Stock Option Plan, options to purchase
1,934,477 shares of common stock with a weighted average exercise price of
$0.70 were outstanding and 3,020,031 shares were available for future grant
under this plan. Of the 5,719,969 shares which had been issued upon exercise of
options or were subject to outstanding options, 1,717,267 shares were subject
to a repurchase option in our favor.
2000 Employee Stock Purchase Plan
Our 2000 Employee Stock Purchase Plan was adopted by our board of directors
in , 2000 and is expected to be approved by our stockholders in , 2000.
This plan will be effective upon the completion of this offering. Initially, a
total of shares of common stock will be reserved for issuance under the
2000 Employee Stock Purchase Plan, none of which will be issued as of the
effective date of this offering. The share reserve will automatically increase
on January 1, 2001, and on each following January 1 until and including January
1, 2010, by an amount equal to the lesser of:
. shares;
. 2% of the number of shares of our common stock that was issued and
outstanding on the last day of the immediately preceding fiscal year; or
. a lesser number of shares as determined by our board of directors or a
committee of our board of directors.
The 2000 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the United States tax code, will be administered by our board of
directors or by a committee of our board of directors. Employees, including our
officers and directors who are also employees, of Extricity or any subsidiary
designated by our board of directors for participation in the 2000 Employee
Stock Purchase Plan, will be eligible to participate in the 2000 Employee Stock
Purchase Plan if they are customarily employed for more than 20 hours per week
and more than five months per year.
The first offering period under the 2000 Employee Stock Purchase Plan will
commence on the date of this prospectus and will end on the last day of July
2002. This initial offering period will be comprised of 4 six-month purchase
periods, although the first purchase period will commence on the date of this
prospectus and end on January 31, 2001. Each subsequent offering of common
stock under the 2000 Employee Stock Purchase Plan will be for a period of 12
months, and will be comprised of 2 six-month purchase periods. An offering
period will generally commence on the first days of February and August of each
year and end on the last days of the following January and
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July. Shares are purchased on the last day of each purchase period. The board
may establish a different term for one or more offerings or purchase periods or
different commencement or ending dates for an offering or a purchase period.
The 2000 Employee Stock Purchase Plan will permit eligible employees to
purchase shares of common stock through payroll deductions at a price equal to
85% of the lower of the fair market value of our common stock on (a) the first
day of the offering period or (b) the purchase date. Participants generally may
not purchase more than 2,500 shares on any purchase date or purchase stock
having a value, measured at the beginning of the offering period, greater than
$25,000 in any calendar year. In the event of a change in control of Extricity,
our board of directors may adjust the last day of the then current offering
period to a date on or before the change in control, or the acquiring
corporation may assume or replace the outstanding purchase rights under the
purchase plan.
401(k) Plan
We have established an employee savings and retirement plan commonly known as
a 401(k) Plan. The 401(k) Plan provides that each participant may contribute
between 1% and 20% of her or his pre-tax gross compensation up to a statutorily
prescribed annual limit of $10,500 in 2000. The 401(k) Plan is intended to
qualify under Section 401(k) of the United States tax code, so that
contributions to the 401(k) Plan by employees or by us and the investment
earnings on those contributions are not taxable to the employees until
withdrawn. Employees are eligible to participate on the first day of the first
month following commencement as an employee. All amounts contributed by
employee participants and earnings on these contributions are fully vested at
all times. Employee participants may elect to invest their contributions in
various established funds. While we have the option of matching our employee's
contributions with a discretionary employer contribution, we currently do not
do so. If our 401(k) Plan qualifies under Section 401(k) of the United States
tax code, any contributions we make will be deductible by us.
Limitation of Liability and Indemnification
As permitted by the Delaware General Corporation Law, we have adopted
provisions in our certificate of incorporation and bylaws that limit or
eliminate the personal liability of our directors for a breach of their
fiduciary duty of care as a director. The duty of care generally requires, when
acting on behalf of the corporation, directors exercise an informed business
judgment based on all material information reasonably available to them.
Consequently, a director will not be personally liable to us or our
stockholders for monetary damages or breach of fiduciary duty as a director,
except for liability for:
. any breach of the director's duty of loyalty to us or our stockholders;
. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases, redemptions
or other distributions; or
. any transaction from which the director derived an improper personal
benefit.
Our certificate of incorporation allows us to indemnify our officers,
directors and other agents to the full extent permitted by Delaware law. We
intend to enter into indemnification agreements with each of our directors and
officers that are, in some cases, broader than the specific indemnification
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provisions permitted by in Delaware law, and that may provide additional
procedural protection. The indemnification agreements require us, among other
things, to:
. indemnify officers and directors against certain liabilities that may
arise because of their status as officers or directors;
. advance expenses, as incurred, to officers and directors in connection
with a legal proceeding, subject to limited exceptions; or
. obtain directors' and officers' insurance.
Our bylaws also permit us to purchase insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions in such capacity, regardless of whether Delaware law would permit
indemnification, and to provide indemnification in circumstances in which
indemnification is otherwise discretionary under Delaware law.
At present, there is no pending litigation or proceeding involving any of our
directors, officers or employees in which indemnification is sought, nor are we
aware of any threatened litigation that may result in claims for
indemnification.
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RELATED-PARTY TRANSACTIONS
Other than the transactions described below, since we were formed there has
not been nor is there currently proposed, any transaction or series of similar
transactions to which we were or will be a party:
. in which the amount involved exceed or will exceed $60,000; and
. in which any director, executive officer, holder of more than 5% of our
common stock or any member of their immediate family had or will have a
direct or indirect material interest.
Preferred Stock Financings
In May 1996, we sold an aggregate of 3,055,000 shares of Series A preferred
stock at a purchase price of $1.00 per share, representing 6,110,000 shares on
an as-converted to common stock basis, at a conversion price of $0.50 per
share. In June 1997, we sold an aggregate of 1,976,469 shares of Series B
preferred stock at a purchase price of $2.75 per share, representing 3,952,938
shares on an as-converted to common stock basis, at a conversion price of
$1.375 per share. In April and August 1998, we sold an aggregate of 1,954,937
shares of Series C preferred stock at a purchase price of $5.10 per share,
representing 3,909,874 shares on an as-converted to common stock basis, at a
conversion price of $2.55 per share. In April 1999, we sold an aggregate of
1,187,575 shares of Series D preferred stock at a purchase price of $5.91 per
share, representing 2,375,150 shares on an as-converted to common stock basis,
at a conversion price of $2.955 per share. In November 1999, we sold an
aggregate of 2,031,846 shares of Series E preferred stock at a purchase price
of $4.91 per share. In May 2000, we sold an aggregate of 7,751,938 shares of
Series F preferred Stock at a purchase price of $6.45 per share. Also in April
1999, entities associated with RRE Investors, L.P. and Invesco Private Capital,
Inc. purchased an aggregate of 196,078 shares, representing 392,156 shares on
an as-converted to common stock basis, of Series C preferred stock from a prior
purchaser of the Series C preferred stock at a price per share of $5.91.
Stock Option Grants
As of May 9, 2000, 4,568,421 shares of common stock exercised pursuant to
options granted under our 1996 Stock Option Plan at prices ranging from $0.05
to $1.74 per share were issued and outstanding. In addition, 2,712,668 shares
of common stock exercised pursuant to non-qualified stock options granted to an
officer of Extricity at an exercise price of $5.48 were issued and outstanding.
Purchasers of our preferred and common stock include, among others, the
following of our directors, executive officers, and holders of more than 5% of
our outstanding stock. The number of shares of preferred stock set forth in the
table below are on an as-converted to common stock basis:
<TABLE>
<CAPTION>
Series A Series B Series C Series D Series E Series F
preferred preferred preferred preferred preferred preferred Common
Stockholder stock stock stock stock stock stock stock
- ------------------------ --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Telos Venture Partners,
L.P. (1)............... 1,600,000 654,546 263,582 175,624 161,355 192,258 --
Bay Partners
Extricity(2)
Bay Partners SBIC,
L.P................... 1,600,000 654,546 263,582 175,624 161,355 264,900 --
Bay Partners LS Fund,
L.P................... -- -- -- -- 1,018,330 -- --
Charter Growth Capital
II, L.P. Entities(3)
Charter Growth Capital
II, L.P............... -- -- -- -- -- 1,767,442 --
CGC Investors II QP,
L.P................... -- -- -- -- -- 69,767 --
CGC Investors II A,
L.P................... -- -- -- -- -- 23,256 --
Barry M. Ariko.......... -- -- -- -- -- -- 2,712,668
Stephen J. Albertolle... -- -- -- -- -- -- 297,000
David Cope.............. -- -- -- -- -- -- 400,000
Laura Ferrell........... -- -- -- -- -- -- 390,000
James Lochry............ -- -- -- -- -- -- 400,000
Kenneth Ross (4)........ 180,000 38,188 25,508 -- -- -- 2,370,000
B.J. Cassin (5)......... 550,000 189,976 86,510 57,642 106,647 -- --
</TABLE>
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- --------
(1) Mr. Bourbon, one of our directors, is a general partner of Telos Venture
Partners, L.P.
(2) Bay Partners SBIC, L.P. and Bay Partners LS Fund, L.P. are affiliated
entities and together are considered a 5% stockholder. Mr. Dempsey, one of
our current directors, is a general partner of Bay Management Company 1995,
the general partner of Bay Partners SBIC, L.P. and Bay Partners LS Fund,
L.P.
(3) Charter Growth Capital II, L.P., CGC Investors II QP, L.P., and CGC
Investors II A, L.P. are affiliated entities and together are considered a
5% stockholder.
(4) Includes:
(a) 1,870,000 shares of common stock held by The Kenneth Ross Trust dated
December 3, 1980, of which Mr. Ross is a trustee; and
(b) 300,000 shares of common stock held by the Ross ACD Irrevocable Trust
Rtd April 17, 1997; and
(c) 100,000 shares of common stock held by the Ross EAR Irrevocable Trust
dated July 29, 1999; and
(d) 100,000 shares of common stock held by the Ross BMR Irrevocable Trust
dated August 13, 1997; and
(e) 150,000 shares of series A preferred stock; 27,274 shares of series B
preferred stock; and 20,726 shares of series C preferred stock, all on
an as-converted basis, held by Alison Ross. Alison Ross is the wife of
Kenneth Ross; and
(f) 10,000 shares of series A preferred stock; 3,638 shares of series B
preferred stock; and 1,594 shares of series C preferred stock, all on
an as-converted basis, held by Aaron Ross. Aaron Ross is the son of
Kenneth Ross; and
(g) 10,000 shares of series A preferred stock; 3,638 shares of series B
preferred stock; and 1,594 shares of series C preferred stock, all on
an as-converted basis, held by Catherine Ross. Catherine Ross is the
daughter of Kenneth Ross; and
(h) 10,000 shares of series A preferred stock; 3,638 shares of series B
preferred stock; and 1,594 shares of series C preferred stock, all on
an as-converted basis, held by David Ross. David Ross is the son of
Kenneth Ross.
(5) Includes:
(a) 500,000 shares of series A preferred stock; 172,706 shares of series B
preferred stock; 78,646 shares of series C preferred stock; 52,402
shares of series D preferred stock; and 101,833 shares of series E
preferred stock, all on an as-converted basis, held by the Cassin
Family Trust U/T/D dated January 31, 1996, of which Mr. Cassin is a
trustee; and
(b) 50,000 shares of series A preferred stock; 17,270 shares of series B
preferred stock; 7,864 shares of series C preferred stock; 5,240 shares
of series D preferred stock; and 4,814 shares of series E preferred
stock; all on an as-converted basis, held by the Robert Sean Cassin
Trust U/T/D dated February 20, 1997, of which Mr. Cassin is a trustee.
Loans to Executive Officers
Barry M. Ariko. In February 2000 and May 2000, we loaned an aggregate of
approximately $5.9 million to Mr. Ariko, our chairman and chief executive
officer, in connection with his exercise of options to purchase shares of
common stock. These loans are evidenced by full recourse promissory notes and
are secured by a pledge of the shares of stock being purchased. The loan
accrues interest at 5.61% per year and is due five years from the date of
issuance or upon the occurrence of specific liquidation or sale event.
James Lochry. In August 1999, we loaned $146,000 to Mr. Lochry, our vice
president of worldwide sales, in connection with his exercise of options to
purchase shares of common stock. The
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<PAGE>
loan is evidenced by a full recourse promissory note and is secured by a pledge
of the shares of stock being purchased. The loan accrues interest at 5.61% per
year and is due five years from the date of issuance or upon the occurrence of
specific liquidation or sale events.
Stephen J. Albertolle. In April 1999, we loaned $109,500 to Mr. Albertolle,
our vice president of finance and administration and chief financial officer,
in connection with his exercise of options to purchase shares of common stock.
The loan is evidenced by a full recourse promissory note and is secured by a
pledge of the shares of stock being purchased. The loan accrues interest at
5.61% per year and is due five years from the date of issuance or upon the
occurrence of specific liquidation or sale events.
David Cope. In August 1998, we loaned $102,000 to Mr. Cope, our vice
president of marketing, in connection with his exercise of options to purchase
shares of common stock. The loan is evidenced by a full recourse promissory
note and is secured by a pledge of the shares of stock being purchased. The
loan accrues interest at 5.61% per year and is due five years from the date of
issuance or upon the occurrence of specific liquidation or sale events.
Reseller Agreement
On September 30, 1999, the Company entered into a Reseller/OEM Agreement with
Aspen Technologies, Inc. for our software, which was amended on March 13, 2000.
Alison Ross, the wife of Kenneth Ross, one of our directors, is on the board of
Aspen Tech.
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PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our common stock
as of May 9, 2000 and as adjusted to reflect the sale of the shares of common
stock offered hereby by:
. the chief executive officer, each of the executive officers named in the
summary compensation table and each of our directors;
. all executive officers and directors as a group; and
. each person or entity who is known by us to beneficially own more than 5%
of our outstanding common stock.
Unless otherwise indicated, the address for each of the named individuals is
c/o Extricity, Inc. 555 Twin Dolphin Drive, Suite 600, Redwood Shores,
California 94065. Except as otherwise indicated, and subject to applicable
community property laws, based on information provided by the persons named in
the table, those persons have sole voting and investment power with respect to
all shares of common stock shown as beneficially owned by them.
Applicable percentage ownership in the table is based on 36,587,835 shares of
common stock outstanding as of May 9, 2000 and shares outstanding
immediately following the completion of this offering. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. Shares of common stock subject to options or warrants that are
presently exercisable or exercisable within 60 days of May 9, 2000 are deemed
outstanding for the purpose of computing the percentage ownership of the person
or entity holding options or warrants, but are not treated as outstanding for
the purpose of computing the percentage ownership of any other person or
entity. If any shares are issued upon exercise of options, warrants or other
rights to acquire our capital stock that are presently outstanding or granted
in the future or reserved for future issuance under our stock plans, there will
be further dilution to new public investors.
<TABLE>
<CAPTION>
Percentage of
Shares
Beneficially
Owned
Number of Shares -----------------
Beneficially Owned Before After
Name of Beneficial Owner Prior to Offering Offering Offering
- ------------------------ ------------------ -------- --------
<S> <C> <C> <C>
Other 5% Stockholders:
Telos Venture Partners, L.P. (1)........ 3,047,365 8.3% %
2350 Mission College Blvd., Suite 1070
Santa Clara, CA 95054
Entities affiliated with Bay Partners
SBIC, L.P. (2)......................... 4,138,337 11.3
10600 No. DeAnza Blvd., Suite 100
Cupertino, CA 95014
Entities affiliated with Charter Growth
Capital II, L.P. (3)................... 1,860,465 5.1
525 University Avenue
Suite 1500
Palo Alto, CA 94301
Named executive officer and directors:
Barry M. Ariko (4)...................... 2,712,668 7.4
c/o Extricity, Inc.
555 Twin Dolphin Drive
Redwood Shores, CA 94065
James Lochry (5)........................ 480,000 1.3
David Cope (6).......................... 470,000 1.3
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares
Outstanding
Number of Shares -----------------
Beneficially Owned Before After
Name of Beneficial Owner Prior to Offering Offering Offering
- ------------------------ ------------------ -------- --------
<S> <C> <C> <C>
Laura Ferrell (7)....................... 430,000 1.2
Richard Fitchen (8)..................... 340,000 *
Bruce Bourbon (1)....................... 3,047,365 8.3
c/o Telos Venture Partners, L.P.
2350 Mission College Blvd., Suite 1070
Santa Clara, CA 95054
Neal Dempsey (2)........................ 4,138,337 11.3
c/o Bay Partners SBIC, L.P.
10600 No. De Anza Blvd., Suite 100
Cupertino, CA 95014
Kenneth Ross (9)........................ 2,613,696 7.1
B.J. Cassin (10)........................ 990,775 2.7
All directors and executive officers as
a group (11 persons) (11).............. 17,187,778 47.0
</TABLE>
- --------
* Less than one percent.
(1) Includes 3,047,365 shares held by Telos Venture Partners, L.P. of which
Mr. Bourbon is a general partner. Mr. Bourbon disclaims beneficial
ownership of the shares held by this entity except to the extent of his
proportionate interest therein.
(2) Includes 3,120,007 shares owned by Bay Partners SBIC, L.P. and 1,018,330
shares owned by Bay Partners LS Fund, L.P. Mr. Dempsey is a general
partner of Bay Management Company 1995, the general partner of Bay
Partners SBIC, L.P., Bay Partners LS Fund, L.P. and disclaims beneficial
ownership of the shares held by these entities except to the extent of his
proportionate interest therein.
(3) Includes:
(a) 1,767,442 shares owned by Charter Growth Capital II, L.P.
(b) 69,767 shares owned by CGC Investors II QP, L.P.
(c) 23,256 shares owned by CGC Investors II A, L.P.
(4) Includes: 2,712,668 shares subject to a repurchase option in favor of
Extricity which lapses over time.
(5) Includes:
(a) 283,333 shares subject to a repurchase option in favor of Extricity
which lapses over time; and
(b) immediately exercisable options to purchase 80,000 shares of common
stock that are subject to a right of repurchase which lapses over
time.
(6) Includes:
(a) 200,000 shares subject to a repurchase option in favor of Extricity
which lapses over time; and
(b) immediately exercisable options to purchase 70,000 shares of common
stock that are subject to a right of repurchase which lapses over
time.
(7) Includes:
(a) 163,126 shares subject to a repurchase option in favor of Extricity
which lapses over time; and
(b) immediately exercisable options to purchase 40,000 shares of common
stock that are subject to a right of repurchase which lapses over
time.
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<PAGE>
(8) Includes:
(a) 95,416 shares subject to a repurchase option in favor of Extricity
which lapses over time; and
(b) immediately exercisable options to purchase 40,000 shares of common
stock that are subject to a right of repurchase which lapses over
time.
(9) Includes:
(a) 1,870,000 shares held by The Kenneth Ross Trust dated December 3,
1980, of which Mr. Ross is a trustee;
(b) 300,000 shares held by the Ross ACD Irrevocable Trust Rtd dated April
17, 1997, of which Mr. Ross is a trustee;
(c) 100,000 shares held by the Ross EAR Irrevocable Trust dated July 29,
1999, of which Mr. Ross is a trustee;
(d) 100,000 shares held by the Ross BMR Irrevocable Trust dated August 13,
1997, of which Mr. Ross is a trustee;
(e) 198,000 shares held by Alison Ross, the wife of Mr. Ross. Mr. Ross
disclaims beneficial ownership of these securities;
(f) 15,232 shares held by Aaron Ross, a son of Mr. Ross. Mr. Ross
disclaims beneficial ownership of these securities;
(g) 15,232 shares held by Catherine Ross, a daughter of Mr. Ross. Mr. Ross
disclaims beneficial ownership of these securities; and
(h) 15,232 shares held by David Ross, a son of Mr. Ross. Mr. Ross
disclaims beneficial ownership of these securities.
(10) Includes:
(a) 905,587 shares held by Cassin Family Trust U/T/D dated January 31,
1996, of which Mr. Cassin is a trustee. Mr. Cassin disclaims
beneficial ownership of these securities, except to the extent of his
proportionate interest therein.
(b) 85,188 shares held by the Robert Sean Cassin Trust U/T/D dated
February 20, 1997, of which Mr. Cassin is a trustee. Mr. Cassin
disclaims beneficial ownership of these securities, except to the
extent of his proportionate interest therein.
(11) Includes:
(a) 3,697,918 shares subject to a repurchase option in favor of Extricity;
and
(b) immediately exercisable options to purchase 438,201 shares of common
stock that are subject to a right of repurchase which lapses over
time.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, we will be authorized to issue
220,000,000 shares, $0.00001 par value per share, to be divided into two
classes to be designated common stock and preferred stock. Of the shares
authorized, 200,000,000 shares shall be designated as common stock and
20,000,000 shares shall be designated as preferred stock. The following
description of our capital stock is only a summary. You should refer to our
certificate of incorporation and bylaws as in effect upon the closing of this
offering, which are included as exhibits to the registration statement of which
this prospectus forms a part, and by the provisions of applicable Delaware law.
Common Stock
As of May 9, 2000, there were 36,587,835 shares of common stock outstanding
which were held of record by approximately 255 stockholders. There will be
shares of common stock outstanding (assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options
after , 2000) after giving effect to the sale of our common stock in
this offering. There are outstanding unexercised options to purchase a total of
shares of our common stock.
The holders of our common stock are entitled to one vote per share held of
record on all matters submitted to a vote of the stockholders. Our amended and
restated certificate of incorporation to be filed concurrently with completion
of this offering does not provide for cumulative voting in the election of
directors. Subject to preferences that may be applicable to any outstanding
preferred stock, the holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by our Board of
Directors out of funds legally available for that purpose. In the event of our
liquidation, dissolution or winding up, holders of our common stock are
entitled to share ratably in all assets remaining after payment of liabilities,
subject to prior distribution rights of preferred stock, if any, then
outstanding. Holders of our common stock have no preemptive or other
subscription or conversion rights. There are no redemption or sinking fund
provisions applicable to our common stock.
Preferred Stock
Upon the completion of this offering and filing of our amended and restated
certificate of incorporation, our Board of Directors will be authorized,
without action by the stockholders, to issue 20,000,000 shares of preferred
stock in one or more series and to fix the rights, preferences, privileges and
restrictions of these shares. These rights, preferences and privileges may
include dividend rights, conversion rights, voting rights, terms of redemption,
liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of any series, all or any of which
may be greater than the rights of the common stock. It is not possible to state
the actual effect of the issuance of all shares of preferred stock upon the
right of holders of our common stock until our Board of Directors determines
the specific rights of the holders of any preferred stock that may be issued.
However, the effect might include, among other things:
. restricting dividends on the common stock;
. diluting the voting power of the common stock;
. impairing the liquidation rights of the common stock; and
. delaying or preventing a change in our control without further action by
the stockholders.
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Upon the closing of this offering, no shares of preferred stock will be
outstanding and we have no present plans to issue any shares of preferred
stock.
Registration Rights
The holders of approximately 26,131,746 shares of preferred stock, on an as-
converted basis, have the right to require us to register their shares with the
Securities and Exchange Commission so that those shares may be publicly resold
or to include their shares in any registration statement we file.
Demand registration rights
. At any time after December 31, 2000 the holders of at least 40% of the
shares having registration rights have the right to demand on two
separate occasions that we file a registration statement on a form other
than Form S-3 so that they can publicly sell their shares, as long as the
aggregate market value of the shares to be sold under the registration
statement is at least $5.0 million. The underwriters of any underwritten
offering will have the right to limit the number of shares to be included
in the registration.
. If we are eligible to file a registration statement on Form S-3, any
holders of the shares having registration rights have the right to demand
at any time that we file a registration statement on Form S-3, as long as
the aggregate market value of the shares to be sold under the
registration statement exceeds $1.0 million.
Piggyback registration rights
If we register any shares for public sale, stockholders with registration
rights will have the right to include their shares in the registration. The
underwriters of any underwritten offering will have the right to limit the
number of shares to be included in the registration; provided that the number
of shares to be included by holders with registration rights in the
registration shall not be reduced below 30% of the total number of shares to be
included in the registration. In addition, the underwriters of this offering
have the right to exclude all shares held by holders with registration rights.
Expenses of registration
We will pay all expenses relating to any demand or piggyback registration.
However, we will not pay for the expenses of any demand registration if the
request is subsequently withdrawn by the holders of a majority of the shares
having registration rights, subject to very limited exceptions.
Expiration of registration rights
The registration rights described above will expire five years after this
offering is completed. The registration rights will terminate earlier for a
particular stockholder if that holder can resell all of its shares pursuant to
Rule 144 of the Securities Act.
Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions
Certain provisions of Delaware law and our certificate of incorporation and
bylaws could make our acquisition more difficult by means of a tender offer, a
proxy contest or otherwise and could also make the removal of incumbent
officers and directors more difficult. These provisions, summarized below, may
discourage certain types of coercive takeover practices and inadequate takeover
bids and
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to encourage persons seeking to acquire control of us to first negotiate with
us. We believe that the benefits of increased protection of our potential
ability to negotiate with the proponent of an unfriendly or unsolicited
proposal to acquire or restructure us outweighs the disadvantages of
discouraging such proposals because, among other things, negotiation of such
proposals could result in an improvement of their terms. The amendment of any
of the following provisions would require approval by holders of at least a
majority of our outstanding common stock.
Board of Directors
Our amended and restated certificate of incorporation and bylaws do not
provide for cumulative voting in the election of directors.
Stockholder Meetings
Under our amended and restated certificate of incorporation and bylaws, only
our Board of Directors, Chairman of the Board or Chief Executive Officer, and
the holders of shares entitled to cast not less than percent of the votes
at the meeting may call special meetings of stockholders.
Undesignated Preferred Stock
The authorization of undesignated preferred stock makes it possible for the
Board of Directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to effect a change of
control of us. These and other provisions may have the effect of deferring
hostile takeovers or delaying changes in control or management.
Section 203
We are subject to Section 203 of the Delaware General Corporation Law. In
general, the statute prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder for a period of three
years following the date that the stockholder became an interested stockholder
unless:
. prior to the date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
. upon consummation of the transaction that resulted in the stockholders
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who
are directors and also officers, and employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
. on or subsequent to the date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines "business combination" to include:
. any merger or consolidation involving the corporation and the interested
stockholder;
66
<PAGE>
. any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
. subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested stockholder; or
. the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
Warrants
As of May 9, 2000, we had outstanding warrants to purchase 268,312 shares of
common stock on an as-converted basis. Warrants to purchase 16,666 shares of
common stock at $0.365 per share will expire in 2002. Warrants to purchase
30,000 shares of common stock at $0.365 per share will expire in 2001. Warrants
to purchase 84,000 shares of common stock at $2.55 per share will expire in
2002. Warrants to purchase 117,646 shares of common stock at $2.55 per share
will expire in 2003. Warrants to purchase 20,000 shares of common stock at
$16.00 per share will expire in 2004.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be Boston
EquiServe.
67
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there was no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect the market price of our common stock.
Upon completion of this offering, based on shares outstanding as of May 9,
2000, we will have outstanding shares of common stock, assuming (1) the
issuance of shares of common stock in this offering, (2) no exercise of
the underwriters' over-allotment option, and (3) no exercise of options after
May 9, 2000.
All of the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act. However, the sale
of any of these shares if purchased by "affiliates" as that term is defined in
Rule 144 are subject to the limitations and restrictions that are described
below.
The remaining 36,587,835 shares of common stock and mandatorily redeemable
convertible preferred stock held by existing stockholders were issued and sold
by us in reliance on exemptions from the registration requirements of the
Securities Act. These shares are "restricted shares" as that term is defined in
Rule 144 and therefore may not be sold publicly unless they are registered
under the Securities Act or are sold pursuant to Rule 144 or another exemption
from registration. In addition, our directors and officers as well as other
stockholders and optionholders have entered into "lock-up agreements" with the
underwriters. These lock-up agreements provide that, except under limited
exceptions, the stockholder may not offer, sell, contract to sell, pledge or
otherwise dispose of any of our common stock or securities that are convertible
into or exchangeable for, or that represent the right to receive, our common
stock for a period of 180 days after the date of this prospectus. Robertson
Stephens may, however, in its sole discretion, at any time without notice,
release all or any portion of the shares subject to lock-up agreements.
Accordingly, of the remaining 36,587,835 shares, shares will become
eligible for sale 180 days after the effective date subject to Rules 144 and
701, subject in some cases to repurchase rights in favor of Extricity.
Immediately after the completion of the offering, we intend to file
registration statements on Form S-8 under the Securities Act to register all of
the shares of common stock issued or reserved for future issuance under our
1996 Stock Option Plan and our 2000 Employee Stock Purchase Plan. On the date
180 days after the effective date of the offering, the date that the lock-up
agreements expire, a total of shares of our common stock subject to
outstanding options will be vested. After the effective dates of the
registration statements on Form S-8, shares purchased upon exercise of options
granted pursuant to our 1996 Stock Option Plan and our 2000 Employee Stock
Purchase Plan generally would be available for resale in the public market.
Rule 144
In general, under Rule 144 beginning 90 days after the date of this
prospectus, a person who has beneficially owned shares of our common stock for
at least one year would be entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of:
. 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering; or
. the average weekly trading volume of the common stock on the Nasdaq Stock
Market's National Market during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to such sale.
68
<PAGE>
Sales under Rule 144 are also subject to other requirements regarding the
manner of sale, notice filing and the availability of current public
information about us.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our
"affiliates" at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
generally including the holding period of any prior owner other than an
"affiliate," is entitled to sell such shares without complying with the manner
of sale, notice filing, volume limitation or notice provisions of Rule 144.
Therefore, unless otherwise restricted, "144(k) shares" may be sold immediately
upon the completion of this offering.
Rule 701
In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchase shares from us in connection with a
compensatory stock or option plan or other written agreement before the
effective date of this offering is entitled to resell such shares 90 days after
the effective date of this offering in reliance on Rule 144, without having to
comply with certain restrictions, including the holding period, contained in
Rule 144.
The SEC has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of such options (including exercises after the date of this
prospectus). Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual lock-up restrictions described
above, beginning 90 days after the date of this prospectus, may be sold by
persons other than "affiliates," as defined in Rule 144, subject only to the
manner of sale provisions of Rule 144. Securities issued in reliance on Rule
701 may be sold by "affiliates" under Rule 144 without compliance with its one-
year minimum holding period requirement.
69
<PAGE>
UNDERWRITING
The underwriters named below have entered into an underwriting agreement with
us to purchase the number of shares of common stock listed opposite their names
below. The underwriters are obligated to purchase and pay for all the shares
listed below if any are purchased.
<TABLE>
<CAPTION>
Number
of
Underwriters Shares
------------ ------
<S> <C>
FleetBoston Robertson Stephens Inc. ..................................
SG Cowen Securities Corporation.......................................
Banc of America Securities LLC........................................
------
Total...............................................................
======
</TABLE>
The underwriters initially propose to offer the shares of common stock
directly to the public at the initial public offering price presented on the
cover page of this prospectus. Any shares sold by the underwriters to
securities dealers may be sold at a discount of up to $ per share from the
initial public offering price. The underwriters may allow, and the dealers may
re-allow, to other dealers a discount of up to $ per share from the initial
public offering price. After the initial offering of the common stock, the
public offering price and other selling terms may be changed by the
representatives of the underwriters at any time without notice. The
underwriters 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 additional shares of common stock at the same price per
share as we will receive for the shares that the underwriters have agreed
to purchase. To the extent this option is exercised, each of the underwriters
will become obligated, subject to various conditions, to purchase approximately
the same percentage of these additional shares that the number of shares of
common stock to be purchased by it shown in the above table represents as a
percentage of the shares in this offering. If purchased, these additional
shares will be sold by the underwriters on the same terms as those on which the
shares are being sold.
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against specified civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement. In
addition, the underwriting agreement requires us to name Robertson Stephens as
an additional insured under our directors and officers liability insurance
policy and to cause the policy to be amended to provide that up to $500,000 of
the costs incurred by Robertson Stephens in connection with a claim for
indemnification will be paid by the policy.
Lock-Up Agreements. Each of our officers, directors and substantially all
security holders, including option holders, have agreed with the
representatives and us, for a period of 180 days after the effective date of
this prospectus, not to dispose of or hedge any shares of common stock, or
securities convertible into or exchangeable for shares of common stock, now
owned or later acquired by them without the prior written consent of
FleetBoston Robertson Stephens Inc. FleetBoston Robertson Stephens may, in its
sole discretion and at any time without notice, release all or any portion of
the securities subject to lock-up agreements. All of the shares of common stock
subject to the lock-up agreements will be eligible for sale in the public
market upon the expiration of the lock-up agreements, subject to holding
period, volume limitations and other conditions of Rule 144.
70
<PAGE>
Future Sales. In addition, we have agreed that for 180 days following the
effective date of this prospectus, we will not, without the prior written
consent of FleetBoston Robertson Stephens, dispose of or hedge any shares of
common stock, or any securities convertible into, exercisable for or
exchangeable for shares of common stock. However, the following are examples of
exceptions to this agreement:
. sale of shares in this offering;
. the issuance of common stock upon the exercise of outstanding options;
. our issuance of options or shares under existing stock option or stock
purchase plans; and
. issuances of stock in connection with acquisitions.
Listing. We have applied to list our common stock on the Nasdaq National
Market under the symbol "EXTY."
No Prior Public Market. Before this offering, there was no public market for
our common stock. Consequently, the initial public offering price for the
common stock in this offering was determined through negotiations among us and
the representatives of the underwriters. The factors considered in these
negotiations included prevailing market conditions, our financial information,
the market valuation of other companies that we and the representatives believe
to be comparable to us, estimates of our business potential and the business
potential of the industry in which we compete, an assessment of our management,
our past and present operation and the prospects for our future revenues.
Stabilization. The representatives have advised us that, based on Regulation
M under the Exchange Act, some persons participating in this offering may
engage in any of the following transactions:
. stabilizing bid, a bid for or the purchase of common stock on behalf of
the underwriters that is intended to fix or maintain the price of the
common stock;
. syndicate covering transaction, a bid for the purchase of common stock on
behalf of the underwriters to reduce a short position incurred by the
underwriters in connection with the offering; and
. penalty bid, an arrangement that permits the representatives to reclaim
the selling concession otherwise accruing to an underwriter or syndicate
member in connection with the offering if the common stock originally
sold by the underwriter or syndicate member is purchased by the
representatives in a syndicate covering transaction, and has therefore
not been effectively placed by this underwriter or syndicate member.
These transactions may be effected on the Nasdaq National Market and, if
commenced, may be discontinued at any time.
Directed Shares. The underwriters have reserved for sale at the initial
public offering price up to % of the common stock in this offering for
individuals designated by us who have expressed an interest in purchasing
shares of common stock in this offering. The number of shares available for
sale to the general public will be reduced to the extent these persons purchase
the reserved shares. The underwriters will offer any reserved shares not so
purchased to the general public on the same basis as other shares in this
offering described above.
71
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed upon
for us by Gray Cary Ware & Freidenrich LLP, Palo Alto, California. As of the
date of this prospectus, Gray Cary Ware & Freidenrich LLP, GCWF Investment
Partners II, an investment partnership composed of some current and former
members of and persons associated with Gray Cary Ware & Freidenrich LLP, and
some individual members of Gray Cary Ware & Freidenrich LLP, beneficially own
an aggregate of 35,542 shares of our common stock. Certain legal matters in
connection with the offering will be passed upon for the underwriters by
Brobeck, Phleger & Harrison LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements and schedule included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
WHERE TO FIND ADDITIONAL INFORMATION ABOUT EXTRICITY
We have filed with the SEC a registration statement on form S-1 under the
Securities Act with respect to the shares of common stock offered by this
prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the
registration statement and the exhibits and schedules filed therewith. For
further information with respect to us and our common stock, reference is made
to the registration statement and the exhibits and schedules filed with it.
With respect to statements contained in this prospectus regarding the contents
of any agreement or any other document, in each instance, reference is made to
the copy of such agreement or other document filed as an exhibit to the
registration statement. Each statement is qualified in all respects by the
exhibits and schedules.
For further information with respect to Extricity and the common stock,
reference is made to the registration statement and its exhibits and schedules.
You may read and copy any document Extricity files at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information about the public
reference rooms. Extricity's SEC filings are also available to the public from
the SEC's website at http://www.sec.gov.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Exchange Act, and will file periodic
reports, proxy statements and other information with the SEC. These periodic
reports, proxy statements and other information will be available for
inspection and copying at the SEC's public reference rooms and the SEC's
website, which is described above.
72
<PAGE>
EXTRICITY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................... F-2
Consolidated Balance Sheets................................................. F-3
Consolidated Statements of Operations....................................... F-4
Consolidated Statements of Stockholders' Equity............................. F-5
Consolidated Statements of Cash Flows....................................... F-6
Notes to Consolidated Financial Statements.................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
After the reincorporation discussed in Note 12 to Extricity, Inc.'s
consolidated financial statements, we expect to be in a position to render the
following audit report:
/s/ Arthur Andersen LLP
San Jose, California
April 27, 2000
- --------------------------------------------------------------------------------
To the Board of Directors of
Extricity, Inc.:
We have audited the accompanying consolidated balance sheets of Extricity,
Inc., (a Delaware corporation, formerly known as Extricity Software, Inc.), and
subsidiary as of March 31, 1999 and 2000, and the related consolidated
statements of operations, stockholders' equity and cash flows for the three
years in the period ended March 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Extricity, Inc. and subsidiary
as of March 31, 1999 and 2000, and the results of their operations and their
cash flows for the three years in the period ended March 31, 2000 in conformity
with accounting principles generally accepted in the United States.
San Jose, California
April 27, 2000 (except for the matters
discussed in Note 12, as to
which the date is , 2000)
F-2
<PAGE>
EXTRICITY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
March 31, Equity at
------------------ March 31,
1999 2000 2000
-------- -------- -------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 1,938 $ 6,587
Short-term investments..................... 841 1,274
Accounts receivable, net of allowance for
doubtful accounts of $45 and $801,
respectively.............................. 2,273 4,261
Prepaid expenses and other current assets.. 183 431
-------- --------
Total current assets..................... 5,235 12,553
Property and equipment, net.................. 674 1,268
Other assets................................. 241 375
-------- --------
Total assets............................. $ 6,150 $ 14,196
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................... $ 567 $ 1,824
Accrued expenses........................... 1,902 4,853
Deferred revenue........................... 819 3,691
Current portion of long-term debt.......... 271 359
-------- --------
Total current liabilities................ 3,559 10,727
Long-term deferred revenue................... -- 786
Long-term debt, less current portion......... 526 373
-------- --------
Total liabilities........................ 4,085 11,886
-------- --------
Commitments and contingencies (Note 7)
Stockholders' equity:
Convertible preferred stock, no par value,
aggregate liquidation preference of
$35,455 at March 31, 2000; 10,424,804
shares authorized; 6,986,406 shares and
10,205,827 shares issued and outstanding
at March 31, 1999 and 2000, respectively;
no shares issued and outstanding pro forma
(unaudited)............................... 18,303 35,168 $ --
Common stock, no par value; 40,000,000
shares authorized; 5,057,678 and 8,858,422
shares issued and outstanding at March 31,
1999 and 2000, respectively; $.00001 par
value, 27,238,230 shares issued and
outstanding pro forma (unaudited)......... 260 18,450 --
Additional paid-in capital................. -- -- 53,618
Warrants................................... 124 478 478
Notes receivable from stockholders......... (159) (2,062) (2,062)
Deferred stock-based compensation.......... -- (13,372) (13,372)
Accumulated deficit........................ (16,463) (36,352) (36,352)
-------- -------- --------
Total stockholders' equity............... 2,065 2,310 $ 2,310
-------- -------- ========
Total liabilities and stockholders'
equity.................................. $ 6,150 $ 14,196
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
EXTRICITY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended March 31,
--------------------------
1998 1999 2000
------- ------- --------
<S> <C> <C> <C>
Revenues:
License fees.................................... $ 250 $ 2,302 $ 4,554
Services........................................ 253 733 4,631
------- ------- --------
Total revenues................................ 503 3,035 9,185
------- ------- --------
Cost of revenues:
License fees.................................... 51 238 349
Services........................................ 186 824 4,569
------- ------- --------
Total cost of revenues........................ 237 1,062 4,918
------- ------- --------
Gross profit...................................... 266 1,973 4,267
------- ------- --------
Operating expenses:
Research and development........................ 2,766 4,262 7,245
Sales and marketing............................. 2,788 6,177 12,238
General and administrative...................... 829 891 2,622
Amortization of deferred stock-based
compensation (1)............................... -- -- 2,347
------- ------- --------
Total operating expenses...................... 6,383 11,330 24,452
------- ------- --------
Loss from operations.............................. (6,117) (9,357) (20,185)
Interest income................................... 184 324 371
Interest expense.................................. (40) (64) (75)
------- ------- --------
Net loss.......................................... $(5,973) $(9,097) $(19,889)
======= ======= ========
Basic and diluted net loss per share.............. $ (4.21) $ (3.32) $ (4.64)
======= ======= ========
Shares used in computing basic and diluted net
loss per share................................... 1,418 2,738 4,289
======= ======= ========
Pro forma basic net loss per share (unaudited).... $ (0.93)
========
Shares used to compute pro forma basic net loss
per share (unaudited)............................ 21,300
========
</TABLE>
- --------
(1) Amortization of deferred stock-based compensation includes $322 related to
cost of services revenues, $428 related to research and development, $850
related to sales and marketing and $747 related to general and
administrative.
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
EXTRICITY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Convertible
Preferred Notes
Stock Common Stock Receivable Deferred Total
-------------- --------------- from Stock-Based Accumulated Stockholders'
Shares Amount Shares Amount Warrants Stockholders Compensation Deficit Equity
------ ------- ------ ------- -------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of March 31,
1997.................... 3,055 $ 3,035 3,368 $ 2 $ -- $ -- $ -- $ (1,393) $ 1,644
Repurchase of common
stock................... -- -- (210) -- -- -- -- -- --
Issuance of Series B
convertible preferred
stock, net.............. 1,976 5,388 -- -- -- -- -- -- 5,388
Issuance of common stock
on exercise of stock
options................. -- -- 646 80 -- (74) -- -- 6
Net loss................ -- -- -- -- -- -- -- (5,973) (5,973)
------ ------- ----- ------- ---- ------- -------- -------- --------
Balance as of March 31,
1998.................... 5,031 8,423 3,804 82 -- (74) -- (7,366) 1,065
Repurchase of common
stock................... -- -- (360) (47) -- -- -- -- (47)
Issuance of Series C
convertible preferred
stock, net.............. 1,955 9,880 -- -- -- -- -- -- 9,880
Issuance of Series C
convertible preferred
stock warrants.......... -- -- -- -- 124 -- -- -- 124
Issuance of common stock
on exercise of stock
options................. -- -- 1,614 225 -- (85) -- -- 140
Net loss................ -- -- -- -- -- -- -- (9,097) (9,097)
------ ------- ----- ------- ---- ------- -------- -------- --------
Balance as of March 31,
1999.................... 6,986 18,303 5,058 260 124 (159) -- (16,463) 2,065
Repurchase of common
stock................... -- -- (50) (14) -- -- -- -- (14)
Issuance of Series D
convertible preferred
stock, net.............. 1,188 6,944 -- -- -- -- -- -- 6,944
Issuance of Series E
convertible preferred
stock, net.............. 2,032 9,921 -- -- -- -- -- -- 9,921
Issuance of Series C
convertible preferred
stock warrants.......... -- -- -- -- 59 -- -- -- 59
Issuance of Series E
convertible preferred
stock warrants.......... -- -- -- -- 108 -- -- -- 108
Issuance of common stock
on exercise of stock
options................. -- -- 3,850 2,288 -- (1,903) -- -- 385
Issuance of common stock
warrants for services... -- -- -- -- 187 -- -- -- 187
Issuance of common stock
options for services.... -- -- -- 197 -- -- -- -- 197
Deferred stock-based
compensation............ -- -- -- 15,719 -- -- (15,719) -- --
Amortization of deferred
stock-based
compensation............ -- -- -- -- -- -- 2,347 -- 2,347
Net loss................ -- -- -- -- -- -- -- (19,889) (19,889)
------ ------- ----- ------- ---- ------- -------- -------- --------
Balance as of March 31,
2000.................... 10,206 $35,168 8,858 $18,450 $478 $(2,062) $(13,372) $(36,352) $ 2,310
====== ======= ===== ======= ==== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
EXTRICITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------
1998 1999 2000
------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................... $(5,973) $(9,097) $(19,889)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization.................... 168 295 484
Provision for doubtful accounts.................. 25 20 756
Write-off of property and equipment.............. -- 21 --
Issuance of convertible preferred stock
warrants........................................ -- 124 167
Issuance of common stock warrants................ -- -- 84
Issuance of stock options for services........... -- -- 197
Amortization of deferred stock-based
compensation.................................... -- -- 2,347
Changes in operating assets and liabilities:
Accounts receivable.............................. (82) (2,236) (2,744)
Prepaid expenses and other current assets........ (150) (23) (145)
Other assets..................................... 20 -- (14)
Accounts payable................................. 151 413 1,257
Accrued expenses................................. 881 871 2,951
Deferred revenue................................. -- 810 3,658
------- ------- --------
Net cash used in operating activities........... (4,960) (8,802) (10,891)
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment............. (470) (474) (1,078)
Purchases of short-term investments............... -- (841) (433)
------- ------- --------
Net cash used in investing activities........... (470) (1,315) (1,511)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in restricted cash....................... (180) -- (120)
Proceeds from issuance of Series B convertible
preferred stock, net............................. 5,388 -- --
Proceeds from issuance of Series C convertible
preferred stock, net............................. -- 9,880 --
Proceeds from issuance of Series D convertible
preferred stock, net............................. -- -- 6,944
Proceeds from issuance of Series E convertible
preferred stock, net............................. -- -- 9,921
Proceeds from issuance of common stock............ 6 140 385
Repurchase of common stock........................ -- (47) (14)
Proceeds from long-term debt...................... 526 270 266
Repayments of long-term debt...................... (69) (103) (331)
------- ------- --------
Net cash provided by financing activities....... 5,671 10,140 17,051
------- ------- --------
Net increase in cash and cash equivalents.......... 241 23 4,649
Cash and cash equivalents, beginning of year....... 1,674 1,915 1,938
------- ------- --------
Cash and cash equivalents, end of year............. $ 1,915 $ 1,938 $ 6,587
======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest............ $ 40 $ 64 $ 75
======= ======= ========
NONCASH FINANCING ACTIVITIES:
Notes receivable from stockholders................ $ 74 $ 85 $ 1,903
======= ======= ========
Issuance of common stock warrants for prepaid
stock issuance costs............................. $ -- $ -- $ 103
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company
Extricity Inc. ("Extricity" or the "Company") was incorporated on April 3,
1996 in California, and subsequently reincorporated in May 2000 in the state of
Delaware. The Company is a provider of infrastructure software and services for
achieving business-to-business relationship management ("B2BRM"). The Company
develops and markets software that enables companies to extend business
processes beyond corporate boundaries to forge tighter relationships and
collaborate more efficiently with customers, partners and suppliers. The
Extricity platform features a business-to-business server, a broad line of
integration adapters, communication channel components and packaged business
process solutions for specific industries to provide a comprehensive B2BRM
platform. Companies can implement the Extricity products to power trading
communities, establish net market exchanges and to provide back end fulfillment
for their e-commerce activities. The Company's products, which are based on
open standards such as XML, allow users to reduce costs, shorten lead cycle
times, simplify extended operations, gain visibility and control, increase
customer and partner service levels, increase profitability and extend
investments in existing information technology.
In October 1999, the Company established a wholly-owned subsidiary in the
U.K., Extricity Software, Limited.
The Company is subject to a number of risks associated with companies in a
similar stage of development, including a history of net losses and the
expectation to continue to incur losses; volatility of and rapid change in the
B2B software integration industry; potential competition from larger, more
established companies; and dependence on key employees for technology and
support.
2. Summary of significant accounting policies
Principles of consolidation
The consolidated financial statements include the accounts of Extricity, Inc.
and its wholly-owned subsidiary. All material intercompany accounts and
transactions have been eliminated.
Management estimates
The preparation of these consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the period. Actual results could differ from
these estimates.
Fair value information
The carrying amount of current assets and current liabilities approximates
fair value because of the short maturity of these instruments. The carrying
amount of the Company's debt approximates fair value based on the floating
interest rates.
Cash and cash equivalents
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
F-7
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Short-term investments
The Company's short-term investments consist of corporate bonds with original
maturities at date of purchase beyond three months and less than one year. The
Company classifies its short-term investments as "available-for-sale." The
difference between the cost basis and the market value of the Company's
investments and unrealized gross holding gains and losses was not material as
of March 31, 1999 and 2000. Realized gains and losses are recorded on the
specific identification method.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed on the
straight-line method over the estimated useful lives of the related assets,
ranging from three to five years. Leasehold improvements are amortized over the
shorter of the term of the related lease or the estimated useful life of the
asset.
Restricted cash
In October 1997, the Company entered into a facilities operating lease
agreement. As part of the agreement, the Company is required to hold a
certificate of deposit as a form of security. As of March 31, 1999, the
certificate of deposit amounted to $180,000. In January 2000, the Company
entered into an additional facilities operating lease which increased the
security requirement and certificate of deposit to $300,000 as of March 31,
2000. The certificate of deposit is included in other assets in the
accompanying consolidated balance sheets.
Software development costs
The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,"
whereby costs for the development of new software product and substantial
enhancements to existing software products are expensed as incurred until
technological feasibility has been established, at which time any additional
costs are capitalized until the product is commercially available. The Company
has defined technological feasibility as the completion of beta testing of a
working product. Through March 31, 2000, software development costs incurred
subsequent to the establishment of technological feasibility and prior to
commercial availability have not been significant and, accordingly, all
software development costs have been charged to research and development
expense in the accompanying consolidated statements of operations.
Deferred revenue
Deferred revenue includes unearned license fees and prepaid services that
will be recognized as revenue in the future as the Company delivers licenses
and performs services.
Income taxes
Deferred tax assets and liabilities are recognized for the estimated future
tax consequences of temporary differences and income tax credits. Temporary
differences are primarily the result of the
F-8
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
differences between the tax basis of assets and liabilities and their financial
reporting amounts. Deferred tax assets and liabilities are measured by applying
enacted statutory tax rates applicable to the future years in which deferred
tax assets or liabilities are expected to be settled or realized. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
Revenue recognition
The Company's revenues are derived from two sources, license fees and
services. Services include consulting, software maintenance and training.
Revenue from the sale of software licenses is generally recognized upon
shipment of product, provided that the fee is fixed or determinable, persuasive
evidence of an arrangement exists and collection of the resulting receivable is
considered probable. Historically, the Company has not experienced significant
returns or exchanges of its products from direct sales to customers.
The timing of recognizing license fees as revenue is affected by the type of
license sold. Certain licenses grant perpetual rights while others are
available on an annual renewable basis. Revenue recognition related to
perpetual licenses is affected by whether the Company performs consulting
services in the arrangement and the nature of those services. In the majority
of cases, the Company either performs no consulting services at all or performs
standard implementation services that are not essential to the functionality of
the software. In these cases, the Company recognizes license fees revenue
either upon delivery of the software or on customer acceptance, if the
arrangement has acceptance criteria (which occurs infrequently). When the
Company performs consulting services that are essential to the functionality of
the software, both the license fees and services revenue are recognized based
on the percentage of completion method of accounting. Revenue on annual
renewable licenses is recognized ratably over the term of the agreement.
License fees from value-added resellers are recognized when the product has
been sold through to an end user and such sell-through has been reported to the
Company.
Many of the Company's arrangements include multiple elements. In such cases,
the Company allocates revenue to the different elements of a contract based on
vendor-specific objective evidence of fair value as determined by the price
charged for the individual elements when they are sold separately.
Services revenues include consulting, maintenance and training. Training and
consulting revenue are recognized as the services are performed. Revenue from
maintenance contracts, which include the rights to unspecified upgrades and
technical support, is recognized ratably over the term of the applicable
agreement.
Stock-based compensation
The Company measures compensation expense for its employee stock-based
compensation using the intrinsic value method in accordance with Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees," and provides pro forma disclosures of net loss as if the fair value
method had been applied in measuring compensation expense in accordance with
F-9
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
SFAS No. 123, "Accounting for Stock-Based Compensation." Under the intrinsic
value method of accounting for stock-based compensation, when the exercise
price of options granted to employees is less than the fair value of the
underlying stock on the grant date, compensation expense is recognized over the
applicable vesting period.
Foreign currency translation
The functional currency of the Company's foreign subsidiary is deemed to be
the local country's currency. Consequently, assets and liabilities outside the
United States are translated into United States dollars using current exchange
rates as of the applicable balance sheet date. Revenues and expenses are
translated at the average exchange rate prevailing during the period. The
impact of foreign currency translation was not material for any of the periods
presented.
Net loss per share and pro forma net loss per share
Historical basic net loss per share is computed based on the weighted average
number of outstanding shares of common stock, less shares subject to
repurchase. Diluted net loss per share adjusts the weighted average number of
outstanding shares of common stock for the potential dilution that could occur
if stock options, warrants or convertible securities were exercised or
converted into common stock. Diluted net loss per share is the same as basic
net loss per share for all periods presented because the effects of such items
were antidilutive given the Company's losses.
Pro forma basic net loss per share has been calculated assuming the
conversion of preferred stock into common stock, based on the respective
conversion ratios, as if the shares had been converted on the original dates of
their issuance.
The following table presents the calculation of basic and diluted net loss
per share and pro forma basic net loss per share (in thousands, except per
share data):
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------
1998 1999 2000
------- ------- --------
<S> <C> <C> <C>
Net loss....................................... $(5,973) $(9,097) $(19,889)
======= ======= ========
Historical:
Weighted average shares of common stock
outstanding................................. 3,393 4,836 6,179
Less: Weighted average shares of common stock
subject to repurchase....................... (1,975) (2,098) (1,890)
------- ------- --------
Weighted average shares used in computing
basic and diluted net loss per share........ 1,418 2,738 4,289
======= ======= ========
Basic and diluted net loss per share........... $ (4.21) $ (3.32) $ (4.64)
======= ======= ========
Pro forma:
Shares used above............................ 4,289
Pro forma adjustment to reflect assumed
conversion of convertible preferred stock... 17,011
--------
Weighted average shares used in computing pro
forma basic net loss per share.............. 21,300
========
Pro forma basic net loss per share............. $ (0.93)
========
</TABLE>
F-10
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company has excluded all convertible preferred stock, outstanding stock
options, warrants and shares subject to repurchase by the Company from the
calculation of historical diluted net loss per share because these securities
are anti-dilutive for all years presented. Common shares excluded from the
calculation of diluted net loss per share are detailed in the table below (in
thousands).
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
1998 1999 2000
------ ------ ------
<S> <C> <C> <C>
Conversion of convertible preferred stock............... 10,063 13,973 18,380
Outstanding stock options............................... 1,886 2,195 1,934
Warrants................................................ -- 218 293
Common shares subject to repurchase..................... 291 489 3,640
------ ------ ------
12,240 16,875 24,247
====== ====== ======
</TABLE>
See Notes 8 and 9 for further information on these securities.
Comprehensive income
In fiscal 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and displaying
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. Such items may include
foreign currency translation adjustments and unrealized gains/losses from
investing and hedging activities. Comprehensive loss is the same as net loss
for all periods presented in the accompanying consolidated financial
statements.
Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133, as amended, requires certain accounting and reporting standards for
derivative financial instruments and hedging activities and is effective for
fiscal years beginning after June 15, 2000. SFAS No. 133 will be effective for
the Company on April 1, 2001. Because the Company does not currently hold any
derivative instruments and does not engage in hedging activities, management
does not believe that the adoption of this statement will have a material
impact on the Company's financial position or results of operations.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition," which provides
guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provides guidance for disclosures
related to revenue recognition policies. SAB 101 is effective for the fiscal
quarter beginning April 1, 2000, however, early adoption is permitted. The
Company is currently evaluating SAB 101 and does not expect that the
pronouncement will have a material effect on its financial position or results
of operations.
In March 2000, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue 00-2, "Accounting for the Costs of Developing a Web Site" ("EITF 00-2").
EITF 00-2 states that for
F-11
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
specific web site development costs, the accounting for such costs should be
based generally on a model consistent with the American Institute of Certified
Public Accountants Statement of Position ("SOP") 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use." All costs
incurred in the planning stage should be expensed as incurred. For the web site
application and development stage, all costs relating to software used to
operate a web site should be accounted for pursuant to SOP 98-1, unless a plan
exists to market the software externally, in which case the costs should be
accounted for pursuant to SFAS No. 86. Web site hosting fees should be expensed
over the period of benefit and web site graphics should be capitalized in
accordance with SOP 98-1. This consensus will be applicable to all web site
development costs incurred for quarters beginning after June 30, 2000, even for
costs relating to projects that are in progress as of that date. The Company is
currently evaluating EITF 00-2 and does not expect that the abstract will have
a material effect on its financial position or results of operations.
In March 2000, the FASB issued Financial Standards Board Interpretation No.
44, "Accounting for Certain Transactions involving Stock Compensation--an
Interpretation of APB Opinion No. 25" ("FIN No. 44"). FIN No. 44 addresses the
application of APB No. 25 to clarify, among other issues, (a) the definition of
employee for purposes of applying APB No. 25, (b) the criteria for determining
whether a plan qualifies as a noncompensatory plan, (c) the accounting
consequence of various modifications to the terms of a previously fixed stock
option or award, and (d) the accounting for an exchange of stock compensation
awards in a business combination. FIN No. 44 is effective July 1, 2000, but
certain conclusions cover specific events that occur after either December 15,
1998, or January 12, 2000. To the extent FIN No. 44 covers events occurring
during the period after December 15, 1998, or January 12, 2000, but before the
effective date of July 1, 2000, the effects of applying the interpretation will
be recognized on a prospective basis from July 1, 2000. The Company is
currently evaluating FIN No. 44 and does not expect that it will have a
material effect on its financial position or results of operations.
3. Significant Concentrations
Financial instruments which potentially expose the Company to concentration
of credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company maintains its cash and cash equivalents in bank
accounts which, at times, may exceed federally insured limits. The Company has
not experienced any losses on such accounts. Accounts receivable consists
principally of amounts due from large, credit-worthy companies. The Company
monitors the balances of individual accounts to assess any collectibility
issues. The Company has not experienced significant losses related to
receivables in the past.
At March 31, 1999, three individual customers accounted for 56%, 16% and 15%
of accounts receivable, respectively. At March 31, 2000, three individual
customers accounted for 21%, 13% and 12% of accounts receivable, respectively.
F-12
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Several customers have accounted for more than 10% of the Company's revenues.
The amount of revenue from these customers as a percentage of total revenues is
included in the table below.
<TABLE>
<CAPTION>
Year Ended
March 31,
----------------
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Customer A....................................................... 49% 15% *
Customer B....................................................... 44% * *
Customer C....................................................... -- 44% *
Customer D....................................................... -- 13% 15%
Customer E....................................................... -- 12% *
</TABLE>
*Less than 10% of revenue.
4. Consolidated Balance Sheets Detail
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31,
--------------
1999 2000
------ ------
<S> <C> <C>
Computer equipment........................................... $ 889 $1,722
Furniture and equipment...................................... 270 493
Leasehold improvements....................................... 14 36
------ ------
1,173 2,251
Less: Accumulated depreciation and amortization.............. (499) (983)
------ ------
$ 674 $1,268
====== ======
</TABLE>
Accrued expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31,
-------------
1999 2000
------ ------
<S> <C> <C>
Accrued payroll and employee benefits......................... $1,144 $3,131
Accrued travel expenses....................................... 89 431
Accrued marketing expenses.................................... 159 374
Other accrued expenses........................................ 510 917
------ ------
$1,902 $4,853
====== ======
</TABLE>
Deferred revenue consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31,
-----------
1999 2000
---- ------
<S> <C> <C>
License fees..................................................... $603 $2,064
Services......................................................... 216 2,413
---- ------
$819 $4,477
==== ======
</TABLE>
F-13
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Credit Facility
The Company has entered into an Amended and Restated Loan Agreement dated
September 8, 1998 (the "Loan Agreement") with a bank that transforms into a
term loan after drawdown, with the exception of Facility B, under which the
Company may borrow up to an aggregate of $2,250,000 consisting of three credit
facilities: Facility A, expiring October 5, 2001, which provides $750,000 for
assets acquired after April 1, 1997; Facility B, expiring December 7, 2000,
which provides $750,000 (which will increase to $1,500,000 upon the receipt of
proceeds by the Company greater than $10,000,000 in association with any equity
financing) based on eligible receivables to be used for general corporate
purposes; and Facility C, expiring September 7, 2002, which provides for
$750,000 for assets acquired after January 1, 1998. Pursuant to the Loan
Agreement and an Amended and Restated General Security Agreement dated
September 8, 1998, entered into in connection therewith, the Company has
granted the bank a security interest in all of the Company's property including
intellectual property rights. Borrowings under the arrangements bear interest
at the bank's prime rate (9.0% at March 31, 2000) plus 1%, 0.5% and 0.75% for
Facility A, B and C, respectively. Available borrowings are contingent upon
satisfaction of certain loan covenants consisting of financial ratios and
levels of net worth and profitability and also prohibit the Company from paying
cash dividends. At March 31, 2000, the Company was in violation of a financial
covenant set forth in the Loan Agreement. In April 2000, the Company received a
waiver of the violation under the Loan Agreement for the period ended March 31,
2000. As of March 31, 2000, the Company had an outstanding $285,000 term loan
due October 2001 under Facility A and a $447,000 term loan due September 2002
under Facility C.
Maturities of long-term debt are as follows at March 31, 2000 (in thousands):
<TABLE>
<CAPTION>
Year Ending
-----------
<S> <C>
2001................................................................. $359
2002................................................................. 284
2003................................................................. 89
----
Total................................................................ $732
====
</TABLE>
6. Income taxes
The effective tax rate differs from the amount computed by applying the U.S.
Federal corporate tax rate of 35% to the net loss as follows:
<TABLE>
<CAPTION>
Year Ended
March 31,
------------------
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Statutory Federal tax rate.............................. (35)% (35)% (35)%
State tax rate, net of Federal tax benefit.............. (6) (6) (6)
Change in valuation allowance........................... 41 41 41
--- --- ---
-- % -- % -- %
=== === ===
</TABLE>
F-14
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The temporary differences that give rise to the Company's deferred tax assets
are as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
-----------------
1999 2000
------- --------
<S> <C> <C>
Net operating loss carryforwards.......................... $ 5,914 $ 13,384
Research and development credits.......................... 736 1,218
Allowance for doubtful accounts........................... 18 438
Accrued expenses.......................................... 301 200
Deferred revenue.......................................... 97 200
------- --------
7,066 15,440
Valuation allowance....................................... (7,066) (15,440)
------- --------
Net deferred tax asset.................................... $ -- $ --
======= ========
</TABLE>
At March 31, 1999 and 2000, the deferred tax assets have been fully offset by
valuation allowances. In assessing the ultimate realization of deferred tax
assets, management considers the likelihood that some or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which the temporary differences become deductible. Management
considers the scheduled reversal of any deferred tax assets, projected future
taxable income and tax planning strategies in making this assessment. The
amount of the deferred tax assets considered realizable could change in the
near term if estimates of future taxable income during the carryforward periods
are increased. In addition, utilization of the net operating losses may be
subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986, as amended, and
similar state provisions. The annual limitation may result in the expiration of
net operating losses before utilization.
At March 31, 2000, the Company had net operating loss carryforwards of
approximately $33,600,000 each for federal and state tax purposes, which expire
in varying amounts beginning 2005 through 2020.
At March 31, 2000, the Company also had tax credit carryforwards of
approximately $740,000 for federal and $478,000 for California income tax
purposes. The federal credit will expire on various dates beginning in 2012
through 2020, while the California credit may be carried forward indefinitely.
F-15
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Commitments and Contingencies
The Company leases its facilities under noncancellable operating leases,
which expire at various dates through December 31, 2004. Future minimum lease
payments under these leases are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ending March 31,
---------------------
<S> <C>
2001.................................................................. $1,269
2002.................................................................. 1,303
2003.................................................................. 902
2004.................................................................. 318
2005.................................................................. 243
------
$4,035
======
</TABLE>
Rent expense for the years ended March 31, 1998, 1999 and 2000, was $468,000,
$790,000 and, $1,199,000, respectively.
The Company is subject to various claims which arise in the normal course of
business. In the opinion of management, the ultimate disposition of such claims
will not have a material adverse effect on the consolidated financial position
or results of operations of the Company.
8. Convertible Preferred Stock
Convertible preferred stock
On May 10, 1996, the Company issued 3,055,000 shares of Series A Convertible
Preferred Stock ("Series A") at a purchase price of $1.00 per share for
proceeds of $3,035,000, net of issuance costs of $20,000. On June 18, 1997 the
Company issued 1,976,469 shares of Series B Convertible Preferred Stock
("Series B") at a purchase price of $2.75 per share for proceeds of $5,388,000,
net of issuance costs of $47,000. On April 24 and August 28, 1998, the Company
issued an aggregate of 1,954,937 shares of Series C Convertible Preferred Stock
("Series C") at a purchase price of $5.10 per share for proceeds of $9,880,000,
net of issuance costs of $90,000. On April 28, 1999, the Company issued
1,187,575 shares of Series D Convertible Preferred Stock ("Series D") at a
purchase price of $5.91 per share for proceeds of $6,944,000, net of issuance
costs of $75,000. On November 29, 1999, the Company issued 2,031,846 shares of
Series E Convertible Preferred Stock ("Series E") at a purchase price of $4.91
per share for proceeds of $9,921,000, net of issuance costs of $55,000.
F-16
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company has authorized the total number of shares of each series of
convertible preferred stock as follows:
<TABLE>
<CAPTION>
Outstanding at March 31, 2000
----------------------------------
Shares Liquidation
Designated Shares Amount Preference
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Series A preferred stock..... 3,055,000 3,055,000 $ 3,035,000 $ 3,055,000
Series B preferred stock..... 1,976,469 1,976,469 5,388,000 5,435,290
Series C preferred stock..... 2,055,760 1,954,937 9,880,000 9,970,179
Series D preferred stock..... 1,187,575 1,187,575 6,944,000 7,018,568
Series E preferred stock..... 2,150,000 2,031,846 9,921,000 9,976,364
---------- ---------- ----------- -----------
10,424,804 10,205,827 $35,168,000 $35,455,401
========== ========== =========== ===========
</TABLE>
The rights, restrictions and preferences of convertible preferred stock are
as follows:
. Each share of Series A, B, C and D is convertible, at the right and
option of the stockholder, into two shares of common stock. The
conversion ratio is subject to adjustment in the event of stock splits
and stock dividends.
. Each share of Series E is convertible, at the right and option of the
stockholder, into one share of common stock. The conversion ratio is
subject to adjustment in the event of stock splits and stock dividends.
. Each holder of Series A, B, C, D and E is entitled to the number of votes
equal to the number of shares of common stock into which the shares of
preferred stock could be converted.
. Each share of Series A, B, C, D and E shall automatically be converted
into shares of common stock at the then effective conversion rate for
each series immediately prior to the closing of a firm commitment
underwritten initial public offering ("IPO") of the Company's common
stock at a price per share of not less than $9.00 and aggregate gross
proceeds of not less than $25,000,000, exclusive of underwriting
discounts and offering expenses.
. Each holder of Series A, B, C, D and E is entitled to noncumulative
dividends, if and when declared by the Board of Directors, equal to $0.05
per share per annum, prior and in preference to any distribution on the
common stock. No dividends have been declared to date.
. In the event of any liquidation, dissolution or winding up of the
Company, the holders of the Series D and E shall be entitled to receive,
prior and in preference to any distribution to the holders of the common
stock, Series A and B and on an equal priority with the holders of Series
C, the amount of $5.91 and $4.91, respectively, per share, plus an amount
equal to all declared but unpaid dividends on such shares. The holders of
Series A, B and C shall be entitled to receive, prior and in preference
to any distribution to the holders of the common stock, the amount of
$1.00, $2.75 and $5.10 per share, respectively, plus an amount equal to
all declared but unpaid dividends on such shares.
Series C convertible preferred stock warrants
In April 1998, the Company issued warrants to purchase 58,823 shares of
Series C for $5.10 per share in connection with the issuance of Series C
convertible preferred stock to a certain stockholder.
F-17
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Such warrants are exercisable on the date when a joint team of this stockholder
and Company engineers achieve certain performance benchmarks as defined in a
Collaboration Agreement. During fiscal 2000, the benchmarks were achieved, and
the warrants became fully exercisable. Such warrants expire on August 17, 2003.
In accordance with EITF 96-18, "Accounting For Equity Instruments That Are
Issued To Other Than Employees For Acquiring, Or In Conjunction With Selling,
Goods Or Services," the Company estimated the fair value of the warrants to be
approximately $59,000 on the date at which a commitment for performance was
obtained, using the Black-Scholes model with the following assumptions: risk-
free interest rate of 5.5%, term of 4 years, expected volatility of 72% and no
expected dividends. The fair value of the warrants was recorded as research and
development expenses in the accompanying consolidated statement of operations
in fiscal 2000.
In March 1999, in connection with a revenue transaction, the Company issued
fully exercisable warrants to purchase 42,000 shares of Series C for $5.10 per
share, which expire in April 2002. The fair value of the warrants at the date
of issuance was determined to be $124,000 and was estimated using the Black-
Scholes model with the following assumptions: risk-free interest rate of 5.6%,
term of 4 years, expected volatility of 72% and no expected dividends. The fair
value of the warrants was offset against license fees in fiscal 1999.
Series E convertible preferred stock warrants
In March 2000, in connection with a revenue transaction, the Company issued
fully exercisable warrants to purchase 20,000 shares of Series E for $16.00 per
share, which expire in March 2004. The fair value of the warrants at the date
of issuance was determined to be $108,000 and was estimated using the Black-
Scholes model with the following assumptions: risk-free interest rate of 6.5%,
term of 4 years, expected volatility of 82% and no expected dividends. The fair
value of the warrants was offset against license fees in fiscal 2000.
Unaudited pro forma stockholders' equity
In May 2000, the Company's Board of Directors authorized the filing of a
registration statement with the SEC to register shares of its common stock in
connection with a proposed IPO. If the IPO is consummated under the terms
presently anticipated, all of the outstanding convertible preferred stock at
March 31, 2000, will be converted into 18,379,808 shares of common stock upon
the closing of the IPO. In addition, as discussed in Note 12, in June 2000 the
Company reincorporated in Delaware and established a par value for its common
stock of $.00001. The effect of both the conversion and the reincorporation has
been reflected in pro forma stockholders' equity in the accompanying
consolidated balance sheet as of March 31, 2000.
9. Common Stock
On April 21, 1999, the Company's Board of Directors approved a two for one
stock split for each share of common stock which was effective as of June 7,
1999. All share and per share data in the accompanying financial statements
have been retroactively restated to reflect the split.
In December 1998, the Company issued fully exercisable warrants to purchase
16,666 shares of common stock for $0.365 per share to a vendor in conjunction
with services performed. The warrants expire in December 2002. The fair value
of the warrants at the date of issuance was estimated using
F-18
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
the Black-Scholes model with the following assumptions: risk-free interest rate
of 4.55%, term of 4 years, expected volatility of 72% and no expected
dividends. The value of the common stock warrants was determined to be
immaterial.
In May 1999, the Company issued fully exercisable warrants to purchase 30,000
shares of common stock for $0.365 per share to a charitable organization. The
warrants expire in May 2001. The fair value of the warrants at the date of
issuance was determined to be $84,000 and was estimated using the Black-Scholes
model with the following assumptions: risk-free interest rate of 5.2%, term of
2 years, expected volatility of 82% and no expected dividends. The fair value
of the warrants was included in general and administrative expenses in the
accompanying consolidated statements of operations.
In March 2000, the Company issued fully exercisable warrants to purchase
25,000 shares of common stock for $1.74 per share in conjunction with legal
services to be provided. In April 2000, all of the warrants were exercised. The
Company estimated the fair value of the warrants to be approximately $103,000
as of March 31, 2000, using the Black-Scholes model with the following
assumptions: risk-free interest rate of 6.63%, term of 2 years, expected
volatility of 82% and no expected dividends. This fair value of the warrants
was included in prepaid expenses in the accompanying consolidated balance
sheets. The warrants will continue to be revalued over the performance period.
The Company's Articles of Incorporation designate and authorize 40,000,000
shares of common stock. As of March 31, 2000, the Company had reserved shares
of its common stock for future issuance as follows (in thousands):
<TABLE>
<S> <C>
Conversion of Series A preferred stock................................ 6,110
Conversion of Series B preferred stock................................ 3,953
Conversion of Series C preferred stock................................ 3,910
Conversion of Series D preferred stock................................ 2,375
Conversion of Series E preferred stock................................ 2,032
Conversion of preferred stock upon exercise of stock warrants......... 222
Exercise of common stock warrants..................................... 72
Issuance and exercise of common stock options......................... 4,955
------
Total shares reserved............................................... 23,629
======
</TABLE>
Stock-based compensation
In connection with the grant of certain stock options to employees during the
year ended March 31, 2000, the Company recorded deferred compensation of
approximately $15.7 million, representing the difference between the deemed
value of the common stock for accounting purposes and the option exercise price
at the date of the option grant. Such amount is presented as a reduction of
stockholders' equity and will be amortized over the vesting period of the
applicable options in a manner consistent with Financial Standards Board
Interpretation No. 28, "Accounting for Stock Appreciation Rights and Other
Variable Stock Option or Award Plans." Approximately $2.3 million was expensed
during the year ended March 31, 2000 and is included in amortization of
deferred stock-based compensation in the accompanying consolidated statement of
operations. Compensation
F-19
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
expense is decreased in the period of forfeiture for any accrued but unvested
compensation arising from the early termination of an option holder's services.
Notes receivable from stockholders
The Company has issued nine full recourse notes to seven stockholders for the
purchase of common stock upon the exercise of stock options totaling $2,062,000
that are secured by 3,353,000 shares of the Company's common stock. The notes
bear interest at an annual rate of 5.61%. Principal and accrued interest are
repayable prior to maturity, or upon termination of the respective employee.
Maturity dates range from June 21, 2003 to February 28, 2005.
Stock options
In 1996, the Company adopted an incentive and nonstatutory stock option plan
(the "1996 Stock Option Plan") for which 8,740,000 shares have been reserved
for issuance. Options granted under the 1996 Stock Option Plan are for periods
not to exceed ten years from the date of grant. Exercise prices of incentive
stock option grants under the 1996 Stock Option Plan will not be less than 100%
of the fair market value of the stock at the date of grant and exercise price
for nonstatutory stock options will not be less than 85% of the fair market
value of the stock at the date of grant, all as determined by the Board of
Directors. Options granted to stockholders who own more than 10% of the
outstanding stock of the Company are for periods not to exceed five years from
the date of grant and must be issued at prices not less than 110% of the fair
market value of the stock on the date of grant as determined by the Board of
Directors. Incentive options granted to employees generally vest over four
years, with 25% vesting upon the first anniversary of the vesting commencement
date, and the balance vesting ratably each month over a thirty-six month period
or shorter period as determined by the Board of Directors. The 1996 Stock
Option Plan provides that the options may be exercised prior to the options
becoming vested. If the optionee's employment is terminated for any reason, the
Company has the right to repurchase any unvested shares.
In February 2000, the Company granted 1,922,932 nonstatutory stock options to
an officer of the Company outside of the 1996 Stock Option Plan. These options,
which the Company has reserved for separately, were granted at an exercise
price of $0.82 per share and will vest with respect to 12.5% of the options on
the six-month anniversary of the officer's start date and the balance vesting
ratably each month over a forty-two month period.
During the years ended March 31, 1998, 1999, and 2000, the Company granted
options to purchase 27,786, 47,316 and 68,279 shares, respectively, of common
stock in exchange for services at a range of exercise prices between $0.05 and
$0.82 per share. In fiscal years 1998 and 1999, the estimated fair value of the
options using the Black-Scholes model was immaterial. In fiscal 2000 the
estimated fair value of the options was determined to be approximately $197,000
and was recorded as $12,000 as research and development expense, $28,000 as
sales and marketing expense and $157,000 as general and administrative expense
in the accompanying consolidated statements of operations.
F-20
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company's stock option activity is summarized below:
<TABLE>
<CAPTION>
1996 Stock
Option
Plan Weighted
Shares Average
Available Options Exercise
for Grant Outstanding Price
---------- ----------- --------
<S> <C> <C> <C>
Balance as of March 31,1997.............. 1,586,992 1,044,960 $0.05
Granted under the 1996 Stock Option
Plan.................................. (1,592,286) 1,592,286 $0.12
Exercised.............................. -- (645,906) $0.12
Cancelled.............................. 105,840 (105,840) $0.05
---------- ----------
Balance as of March 31,1998.............. 100,546 1,885,500 $0.09
Additional shares authorized........... 2,100,000 -- --
Repurchase of restricted common stock.. 360,000 -- --
Granted under the 1996 Stock Option
Plan.................................. (2,154,382) 2,154,382 $0.33
Exercised.............................. -- (1,613,724) $0.14
Cancelled.............................. 230,794 (230,794) $0.13
---------- ----------
Balance as of March 31, 1999............. 636,958 2,195,364 $0.28
Additional shares authorized........... 4,000,000 -- --
Repurchase of restricted common stock.. 49,868 -- --
Granted under the 1996 Stock Option
Plan.................................. (1,993,879) 1,993,879 $0.78
Granted outside of the 1996 Stock
Option Plan........................... -- 1,922,932 $0.82
Exercised.............................. -- (3,850,614) $0.59
Cancelled.............................. 327,084 (327,084) $0.32
---------- ----------
Balance as of March 31,2000.............. 3,020,031 1,934,477 $0.70
========== ========== =====
</TABLE>
At March 31, 2000, a total of 348,950 options were vested and unexercised and
3,640,199 shares purchased through early exercise of stock options were subject
to repurchase.
Options outstanding at March 31, 2000, and related weighted average exercise
price and contractual life information are as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Vested
--------------------------------- ------------------------
Number Number
Outstanding Weighted Weighted Vested as
as of Average Average of Weighted
March 31, Contractual Exercise March 31, Average
Range of Exercise Price 2000 Life (Years) Price 2000 Exercise Price
----------------------- ----------- ----------- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
$0.05-$0.14............. 195,000 7.20 $0.12 173,124 $0.12
$0.26-$0.49............. 1,052,573 9.13 $0.43 172,882 $0.33
$0.82................... 356,004 9.84 $0.82 2,944 $0.82
$1.74................... 330,900 9.98 $1.74 -- $ --
--------- -------
1,934,477 9.21 $0.69 348,950 $0.23
========= =======
</TABLE>
In April 2000, the Board of Directors authorized 3,100,000 additional shares
for the 1996 Stock Option Plan.
F-21
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Fair value disclosure
Had compensation expense for stock options granted to employees been
determined based on the fair value of the related options at the grant dates,
consistent with SFAS No. 123, the Company's net loss and net loss per share
would have increased by the pro forma amounts indicated below (in thousands,
except per share data):
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------
1998 1999 2000
------- ------- --------
<S> <C> <C> <C>
Net loss, as reported.......................... $(5,973) $(9,097) $(19,889)
Net loss, pro forma............................ $(5,981) $(9,272) $(20,418)
Basic and diluted net loss per share, as
reported...................................... $ (4.21) $ (3.32) $ (4.64)
Basic and diluted net loss per share, pro
forma......................................... $ (4.22) $ (3.39) $ (4.76)
</TABLE>
The weighted average fair value of options granted during 1998, 1999 and 2000
was $0.03, $0.06 and $0.27, respectively.
The Company calculated the fair value of each option on the date of grant
using the Black-Scholes option valuation model with the following assumptions:
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------
1998 1999 2000
--------- --------- ---------
<S> <C> <C> <C>
Expected life (years)....................... 4 4 4
Risk-free interest rate..................... 6.09-6.41% 4.52-5.62% 5.19-6.63%
Volatility.................................. 0.0% 0.0% 82.0%
Dividend yield.............................. 0.0% 0.0% 0.0%
</TABLE>
10. Segment Reporting
In fiscal 1999, the Company adopted the provisions of SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131 establishes standards for the way companies report information about
operating segments in financial statements. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly
by the chief operating decision maker, or decision making group, in deciding
how to allocate resources and in assessing performance. The Company's chief
operating decision maker is the Chief Executive Officer of the Company.
The Company has two operating segments: licenses and services. Revenues and
cost of revenues for the segments are identical to those presented on the
accompanying consolidated statements of operations. The company does not
allocate or report financial operations by segment beyond revenues and cost of
revenues.
Sales of licenses and services through March 31, 2000 occurred through
partners and direct sales representatives located in the Company's headquarters
in Redwood City, California, and in other locations. These sales were supported
through the Redwood City location. The Company does not separately report costs
by region internally. Additionally, long-lived assets in locations other than
Redwood City are not significant for any period presented.
F-22
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
International revenues are based on the country in which the end-user is
located. The following is a summary of international license fees and services
revenue by geographic region (in thousands):
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
1998 1999 2000
---- ------- -------
<S> <C> <C> <C>
License fees:
United States......................................... $ 70 $ 1,828 $ 3,669
Europe................................................ -- 95 370
Asia-Pacific.......................................... 180 379 515
---- ------- -------
Total............................................... $250 $ 2,302 $ 4,554
==== ======= =======
Services:
United States......................................... $188 $ 652 $ 4,526
Europe................................................ -- 17 13
Asia-Pacific.......................................... 65 64 92
---- ------- -------
Total............................................... $253 $ 733 $ 4,631
==== ======= =======
</TABLE>
11. 401(k) Plan
The Company has a defined contribution saving plan under Section 401(k) of
the Internal Revenue Code. The plan provides that each participant may
contribute between 1% and 20% of their pre-tax gross compensation up to a
statutorily prescribed annual limit. Employees are eligible to participate on
the first day of the first month following commencement as an employee. All
amounts contributed by employee participants and earnings on those
contributions are fully vested at all times. Employee participants may elect to
invest their contributions in various established funds. The Company has the
option of matching the employee's contributions with a discretionary employer
contribution. The Company made no such contributions in fiscal 1998, 1999 and
2000.
12. Subsequent Events
Loan agreement amendment
On May 1, 2000, the Company amended the Loan Agreement discussed in Note 5.
Changes made to the Loan Agreement included (i) an increase of the commitment
under Facility B from $750,000 to $1,500,000, (ii) an extension of the term on
Facility B through May 1, 2001 and (iii) the revision of certain financial
covenants.
Employee stock purchase plan
In May 2000, the Board of Directors approved the Company's 2000 Employee
Stock Purchase Plan ("ESPP"). The ESPP will become effective upon the
completion of the IPO. The plan permits participants to purchase common stock
through payroll deductions of up to 20% of the participant's base salary and
commissions. Such amounts are applied to the purchase by the Company of shares
of common stock at the end of each offering period at a price which is
generally 85% of the lower of the fair market value of the common stock on
either the first or last day of the offering period. The maximum number of
shares a participant may purchase in any six-month offering period is the
lesser of 1,000 shares or a number of shares determined by dividing $12,500 by
the fair market value of a
F-23
<PAGE>
EXTRICITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
share of common stock at the beginning of the offering period. Participants may
voluntarily end their participation at any time during an offering period, and
participation ends automatically upon termination of employment.
Issuance of Series F convertible preferred stock
On May 8, 2000, the Company issued 7,751,938 shares of Series F Convertible
Preferred Stock ("Series F") at a purchase price of $6.45 for proceeds of
$49,900,000, net of issuance costs of $100,000, 68% of which were issued to new
investors and 32% of which were issued to existing investors.
Holders of Series F are entitled to noncumulative dividends, if and when
declared by the Board of Directors, equal to $0.05 per share per annum, prior
to and in preference to any distribution on the common stock.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Series F shall be entitled to receive, prior and in preference
to any distribution to the holders of the common stock, Series A and B and on
an equal priority with the holders of Series C, D and E, the amount of $6.45
per share plus an amount equal to all declared but unpaid dividends on such
shares.
Each share of Series F shall automatically be converted into one share of
common stock at $6.45 per share, immediately prior to the closing of a firm
commitment underwritten initial public offering of the Company's common stock
at a price per share of not less than $9.00 and aggregate gross proceeds of not
less than $25,000,000, exclusive of underwriting discounts and offering
expenses.
Each holder of Series F is entitled to the number of votes equal to the
number of shares of common stock into which the shares of preferred stock could
be converted.
Note receivable from stockholder
On May 8, 2000, the Company issued a full recourse note to an officer of the
Company for the purchase of common stock upon the exercise of their stock
options totaling $4,328,000 that is secured by 789,736 shares of the Company's
common stock. The note bears interest at an annual rate of 5.61% and principal
and accrued interest are repayable prior to maturity, termination of the
employee, or five years from the issuance date of the note.
Reincorporation
In June 2000, the Company was reincorporated in Delaware in connection with
the Company's proposed IPO.
Initial public offering
On , 2000, the Company filed a registration statement with the SEC
for an IPO of shares of common stock, priced at a range of $ to
$ per share.
F-24
<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 these securities and we are not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 15, 2000
[EXTRICITY LOGO]
Shares
Common Stock
Extricity, Inc. is offering shares of its common stock. This is our
initial public offering and no public market exists for our shares. We
anticipate that the initial public offering price will be between $ and
$ per share. We have applied to list our common stock for quotation on
the Nasdaq National Market under the symbol "EXTY".
--------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 7.
--------------
<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public Offering Price............................................... $ $
Underwriting Discounts and Commissions.............................. $ $
Proceeds to Extricity............................................... $ $
</TABLE>
The United States 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.
Extricity has granted the underwriters a 30-day option to purchase up to an
additional shares of our common stock to cover over-allotments.
FleetBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 2000.
--------------
Robertson Stephens International
SG Cowen
Bank of America International Limited
The date of this Prospectus is , 2000.
<PAGE>
UNDERWRITING
The underwriters named below have entered into an underwriting agreement with
us to purchase the number of shares of common stock listed opposite their names
below. The underwriters are obligated to purchase and pay for all the shares
listed below if any are purchased.
<TABLE>
<CAPTION>
Number of
International Underwriters Shares
-------------------------- ---------
<S> <C>
FleetBoston Robertson Stephens International Limited................
Societe Generale....................................................
Bank of America International Limited...............................
------
Total.............................................................
======
</TABLE>
The underwriters initially propose to offer the shares of common stock
directly to the public at the initial public offering price presented on the
cover page of this prospectus. Any shares sold by the underwriters to
securities dealers may be sold at a discount of up to $ per share from the
initial public offering price. The underwriters may allow, and the dealers may
re-allow, to other dealers a discount of up to $ per share from the initial
public offering price. After the initial offering of the common stock, the
public offering price and other selling terms may be changed by the
representatives of the underwriters at any time without notice. The
underwriters 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 additional shares of common stock at the same price per
share as we will receive for the shares that the underwriters have agreed
to purchase. To the extent this option is exercised, each of the underwriters
will become obligated, subject to various conditions, to purchase approximately
the same percentage of these additional shares that the number of shares of
common stock to be purchased by it shown in the above table represents as a
percentage of the shares in this offering. If purchased, these additional
shares will be sold by the underwriters on the same terms as those on which the
shares are being sold.
Indemnity. The underwriting agreement contains covenants of indemnity among the
underwriters and us against specified civil liabilities, including liabilities
under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement. In
addition, the underwriting agreement requires us to name Robertson Stephens as
an additional insured under our directors and officers liability insurance
policy and to cause the policy to be amended to provide that up to $500,000 of
the costs incurred by Robertson Stephens in connection with a claim for
indemnification will be paid by the policy.
Lock-Up Agreements. Each of our officers, directors and substantially all
security holders, including option holders, have agreed with the
representatives and us, for a period of 180 days after the effective date of
this prospectus, not to dispose of or hedge any shares of common stock, or
securities convertible into or exchangeable for shares of common stock, now
owned or later acquired by them without the prior written consent of
FleetBoston Robertson Stephens Inc. FleetBoston Robertson Stephens may, in its
sole discretion and at any time without notice, release all or any portion of
the securities subject to lock-up agreements. All of the shares of common stock
subject to the lock-up agreements will be eligible for sale in the public
market upon the expiration of the lock-up agreements, subject to holding
period, volume limitations and other conditions of Rule 144.
70
<PAGE>
Future Sales. In addition, we have agreed that for 180 days following the
effective date of this prospectus, we will not, without the prior written
consent of FleetBoston Robertson Stephens, dispose of or hedge any shares of
common stock, or any securities convertible into, exercisable for or
exchangeable for shares of common stock. However, the following are examples of
exceptions to this agreement:
. sale of shares in this offering;
. the issuance of common stock upon the exercise of outstanding options;
. our issuance of options or shares under existing stock option or stock
purchase plans; and
. issuances of stock in connection with acquisitions.
Listing. We have applied to list our common stock on the Nasdaq National
Market under the symbol "EXTY."
No Prior Public Market. Before this offering, there was no public market for
our common stock. Consequently, the initial public offering price for the
common stock in this offering was determined through negotiations among us and
the representatives of the underwriters. The factors considered in these
negotiations included prevailing market conditions, our financial information,
the market valuation of other companies that we and the representatives believe
to be comparable to us, estimates of our business potential and the business
potential of the industry in which we compete, an assessment of our management,
our past and present operation and the prospects for our future revenues.
Stabilization. The representatives have advised us that, based on Regulation
M under the Exchange Act, some persons participating in this offering may
engage in any of the following transactions:
. stabilizing bid, a bid for or the purchase of common stock on behalf of
the underwriters that is intended to fix or maintain the price of the
common stock;
. syndicate covering transaction, a bid for the purchase of common stock on
behalf of the underwriters to reduce a short position incurred by the
underwriters in connection with the offering; and
. penalty bid, an arrangement that permits the representatives to reclaim
the selling concession otherwise accruing to an underwriter or syndicate
member in connection with the offering if the common stock originally
sold by the underwriter or syndicate member is purchased by the
representatives in a syndicate covering transaction, and has therefore
not been effectively placed by this underwriter or syndicate member.
These transactions may be effected on the Nasdaq National Market and, if
commenced, may be discontinued at any time.
Directed Shares. The underwriters have reserved for sale at the initial
public offering price up to % of the common stock in this offering for
individuals designated by us who have expressed an interest in purchasing
shares of common stock in this offering. The number of shares available for
sale to the general public will be reduced to the extent these persons purchase
the reserved shares. The underwriters will offer any reserved shares not so
purchased to the general public on the same basis as other shares in this
offering described above.
71
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth all expenses to be paid by the Registrant,
other than the underwriting discounts and commissions payable by the Registrant
in connection with the sale of the common stock being registered. All amounts
shown are estimates except for the registration fee, the NASD filing fee and
the Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
Amount
to be
Paid
--------
<S> <C>
Securities and Exchange Commission registration fee................... $ 13,200
NASD filing fee....................................................... 5,500
Nasdaq National Market listing fee.................................... 95,000
Legal fees and expenses...............................................
Accounting fees and expenses..........................................
Blue Sky fees and expenses............................................
Printing and engraving expenses.......................................
Transfer Agent and Registrar fees.....................................
Miscellaneous fees and expenses.......................................
Total............................................................... $
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law permits indemnification
of officers, directors and other corporate agents under certain circumstances
and subject to certain limitations. The Registrant's Certificate of
Incorporation and Bylaws provide that the Registrant shall indemnify its
directors, officers, employees and agents to the full extent permitted by
Delaware General Corporation Law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law. In addition, the
Registrant intends to enter into separate indemnification agreements with its
directors, officers and certain employees which would require the Registrant,
among other things, to indemnify them against certain liabilities which may
arise by reason of their status or service (other than liabilities arising from
willful misconduct of a culpable nature). We have obtained officer and director
liability insurance with respect to liabilities arising out of certain matters,
including matters arising under the Securities Act.
We also have entered into agreements with our directors and executive
officers that, among other things, indemnify them for certain expenses
(including attorneys' fees), judgments, fines and settlement amounts incurred
by them in any action or proceeding, including any action by or in the right of
Extricity, arising out of such person's services as a director or officer of
Extricity, any subsidiary of Extricity or any other company or enterprise to
which the person provides services at our request.
Reference is also made to Section 7 of the Form of Underwriting Agreement to
be filed as Exhibit 1.1 to this Registration Statement for certain provisions
regarding the indemnification of officers and directors of Extricity by the
Underwriters.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities
Since April 1, 1997, we have issued and sold unregistered securities as
follows:
*1. From April 1, 1997 through May 9, 2000, we granted options to purchase
an aggregate of 8,453,215 shares of common stock, 663,718 of which were
canceled in the same period, and issued an aggregate of 6,899,980
shares of common stock upon the exercise of stock options, 409,868 of
which were repurchased in the same time period.
2. In June 1997, we sold 1,976,469 shares of our Series B preferred stock
to certain investors at a purchase price of $2.75 per share for a total
purchase price of $5,435,289.75.
3. In April and August 1998, we sold an aggregate of 1,954,937 shares of
our Series C preferred stock to certain investors at a purchase price
of $5.10 per share for a total purchase price of $9,970,178.70.
4. In April 1998, we issued a warrant, which will expire on August 17,
2003, to purchase 58,823 shares of Series C preferred stock at a price
of $5.10 per share for a total purchase price of $299,997.30.
*5. In December 1998, we issued a warrant, which will expire on December
18, 2002 to purchase 16,666 shares of common stock at a purchase price
of $0.365 per share for a total purchase price of $6,083.09.
6. In March 1999, we issued a warrant, which will expire on April 21,
2002, to purchase 42,000 shares of Series C preferred stock at a price
of $5.10 per share for a total purchase price of $214,200.00.
7. In April 1999, we sold 1,187,575 shares of our Series D preferred stock
to certain investors at a purchase price of $5.91 per share for a total
purchase price of $7,018,568.25.
8. In May 1999, we issued a warrant, which will expire on May 19, 2001, to
purchase 30,000 shares of common stock at a purchase price of $0.365
per share for a total purchase price of $10,950.00.
9. In November 1999, we sold 2,031,846 shares of our Series E preferred
stock to certain investors at a purchase price of $4.91 per share for a
total purchase price of $9,976,363.86.
10. In March 2000, we issued a warrant, which will expire on March 29,
2004, to purchase 20,000 shares of Series E preferred stock at a
purchase price of $16.00 per share for a total purchase price of
$320,000.00.
11. In March 2000, we issued a warrant, which will expire on March 13,
2005, to purchase 25,000 shares of common stock, at a purchase price of
$1.74 per share for a total purchase price of $43,500.00.
No underwriters were engaged in connection with these issuances and sales.
Each of the transactions noted above was made in reliance upon the exemption
from registration provided by either Section 3(b) or 4(2) of the Securities
Act.
For additional information concerning these equity investment transactions,
see the section entitled "Related Party Transactions" in the prospectus.
- --------
* Equity instruments were issued prior to a 2-for-1 stock split effected by
Extricity in June 1999. Amounts above have been adjusted to give effect to
the stock split.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation
3.2 Bylaws
*3.3 Certificate of Incorporation (Delaware)
*3.4 Bylaws (Delaware)
*4.1 Specimen Stock Certificate
4.2 Series F Preferred Stock Purchase Agreement
4.3 Fifth Restated Investors' Rights Agreement
*5.1 Opinion of Gray Cary Ware & Freidenrich LLP
10.1 Form of Indemnification Agreement between Registrant and Registrant's
directors and officers
*10.2 1996 Stock Option Plan
*10.3 2000 Employee Stock Purchase Plan
10.4 Offer letter between Registrant and Registrant's Chairman and Chief
Executive Officer, as amended
10.5 Offer letter between Registrant and Registrant's Vice President of
Finance and Administration, Chief Financial Officer and Secretary
10.6 Offer letter between Registrant and Registrant's Vice President of
Marketing
10.7 Offer letter between Registrant and Registrant's Vice President of
Engineering, as amended
10.8 Offer letter between Registrant and Registrant's Vice President of
Client Services, as amended
10.9 Offer letter between Registrant and Registrant's Vice President of
Worldwide Sales
10.10 Offer letter between Registrant and Registrant's Vice President and
Chief Technology Officer, as amended
10.11 Lease Agreement dated March 28, 1997, as amended, between Spieker
Properties, L.P. and Registrant
10.12 Loan Agreement dated October 6, 1997, as amended, between Imperial Bank
and Registrant
21.1 Subsidiaries of the Registrant
*23.1 Consent of Gray Cary Ware & Freidenrich LLP (included in its opinion to
be filed as Exhibit 5.1 hereto)
23.2 Consent of Arthur Andersen LLP
24.1 Power of Attorney (see Page II--5 of the Registration Statement)
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information required
to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
II-3
<PAGE>
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Extricity pursuant to the foregoing provisions, or otherwise, we have 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 us of expenses incurred or
paid by a director, officer or controlling person of Extricity 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, we 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 us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Extricity 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.
Extricity hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be a part of this Registration Statement as of the time it
was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Extricity, Inc. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Redwood
City, State of California, on May 12, 2000.
EXTRICITY, INC.
By: /s/ Barry M. Ariko
----------------------------------
Barry M. Ariko
Chairman and Chief Executive
Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each of the persons whose names
appear below hereby appoint and constitute Barry M. Ariko, Stephen J.
Albertolle and Vicki L. Randall, Esq. and each of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to execute
any and all amendments to the within Registration Statement, and to sign any
and all registration statements relating to the same offering of securities as
this Registration Statement that are filed pursuant to Rule 462(b) of the
Securities Act of 1933, as amended, and to file the same, together with all
exhibits thereto, with the Securities and Exchange Commission, the National
Association of Securities Dealers, Inc., and such other agencies, offices and
persons as may be required by applicable law, granting unto each said attorney-
in-fact and agent, full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each said attorney-in-fact and agent may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ Barry M. Ariko Chairman of the Board, Chief May 12, 2000
____________________________________ Executive Officer and
Barry M. Ariko President (chief executive
officer)
/s/ Stephen J. Albertolle Vice President--Finance and May 12, 2000
____________________________________ Administration, Chief
Stephen J. Albertolle Financial Officer (principal
financial and accounting
officer) and Secretary
/s/ Bruce R. Bourbon Director May 12, 2000
____________________________________
Bruce R. Bourbon
/s/ B.J.Cassin Director May 12, 2000
____________________________________
B. J. Cassin
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
Director
____________________________________
Neal Dempsey
/s/ Kenneth Ross Director May 12, 2000
____________________________________
Kenneth Ross
</TABLE>
II-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Extricity, Inc.
We have audited in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements of Extricity, Inc. and
subsidiary included in this registration statement and have issued our report
thereon dated April 27, 2000 (except for the matters discussed in Note 12, as
to which the date is , 2000). Our audit was made for the purpose of forming
an opinion on the basic financial statements taken as a whole. The schedule
listed in the index above is the responsibility of the company's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
San Jose, California
April 27, 2000
<PAGE>
SCHEDULE II
EXTRICITY, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance Additions Balance
at Charged At End
Beginning To Of
Description Of Period Operations Write-offs Period
- ----------- --------- ---------- ---------- --------
(In thousands)
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts Year
Ended:
March 31, 1998..................... $ -- $ 25,000 $ -- $ 25,000
======= ======== ===== ========
March 31, 1999..................... $25,000 $ 20,000 $ -- $ 45,000
======= ======== ===== ========
March 31, 2000..................... $45,000 $756,000 $ -- $801,000
======= ======== ===== ========
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation
3.2 Bylaws
*3.3 Certificate of Incorporation (Delaware)
*3.4 Bylaws (Delaware)
*4.1 Specimen Stock Certificate
4.2 Series F Preferred Stock Purchase Agreement
4.3 Fifth Restated Investors' Rights Agreement
*5.1 Opinion of Gray Cary Ware & Freidenrich LLP
10.1 Form of Indemnification Agreement between Registrant and Registrant's
directors and officers
*10.2 1996 Stock Option Plan
*10.3 2000 Employee Stock Purchase Plan
10.4 Offer letter between Registrant and Registrant's Chairman and Chief
Executive Officer, as amended
10.5 Offer letter between Registrant and Registrant's Vice President of
Finance and Administration, Chief Financial Officer and Secretary
10.6 Offer letter between Registrant and Registrant's Vice President of
Marketing
10.7 Offer letter between Registrant and Registrant's Vice President of
Engineering, as amended
10.8 Offer letter between Registrant and Registrant's Vice President of
Client Services, as amended
10.9 Offer letter between Registrant and Registrant's Vice President of
Worldwide Sales
10.10 Offer letter between Registrant and Registrant's Vice President and
Chief Technology Officer, as amended
10.11 Lease Agreement dated March 28, 1997, as amended, between Spieker
Properties, L.P. and Registrant
10.12 Loan Agreement dated October 6, 1997, as amended, between Imperial Bank
and Registrant
21.1 Subsidiaries of the Registrant
*23.1 Consent of Gray Cary Ware & Freidenrich LLP (included in its opinion to
be filed as Exhibit 5.1 hereto)
23.2 Consent of Arthur Andersen LLP
24.1 Power of Attorney (see Page II--5 of the Registration Statement)
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
Exhibit 1.01
May 2, 2000 DRAFT
Underwriting Agreement
_________, 2000
FleetBoston Robertson Stephens Inc.
SG Cowen Securities Corporation
Banc of America Securities LLC
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. Extricity, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
Schedule A (the "Underwriters") an aggregate of [___] shares (the "Firm Shares")
- ----------
of its Common Stock, par value $[___] per share (the "Common Shares"). In
addition, the Company has granted to the Underwriters an option to purchase up
to an additional [___] Common Shares (the "Option Shares") as provided in
Section 2. The Firm Shares and, if and to the extent such option is exercised,
the Option Shares are collectively called the "Shares". FleetBoston Robertson
Stephens Inc. ("Robertson Stephens"), SG Cowen Securities Corporation and Banc
of America Securities LLC 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.
As a part of this offering contemplated by this Agreement, Robertson
Stephens has agreed to reserve out of the Shares set forth opposite its name on
the Schedule II to this Agreement, up to ____________ shares, for sale to the
Company's employees, officers, and directors and other parties associated with
the Company (collectively, "Participants"), as set forth in the Prospectus under
the heading "Underwriting" (the "Directed Share Program"). The Shares to be sold
by Robertson Stephens pursuant to the Directed Share Program (the "Directed
Shares") will be sold by Robertson Stephens pursuant to this Agreement at the
public offering price. Any Directed Shares not orally confirmed for purchase by
any Participants as of 7:00 am New York time on the first day trading of the
shares commences will be offered to the public by Robertson Stephens as set
forth in the Prospectus.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File No.
333-[___]), which contains a form of prospectus, subject to completion, to be
used in connection with the public offering and sale of the Shares. Each such
prospectus, subject to completion, used in connection with such public offering
is called a "preliminary prospectus". 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 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
<PAGE>
"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 Robertson Stephens, 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 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 of the Company.
The Company hereby represents, warrants and covenants to each
Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration Statement
and any Rule 462(b) Registration Statement have been declared effective by the
Commission under the Securities Act. The Company has complied to the
Commission's satisfaction with all requests of the Commission for additional
or supplemental information. No stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement is in effect
and no proceedings for such purpose have been instituted or are pending or, to
the best knowledge of the Company, are contemplated or threatened by the
Commission. Each preliminary prospectus and the Prospectus when filed complied
in all material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Shares. Each
of the Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto, at the time it became effective and at all
subsequent times, complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading. Each preliminary
prospectus, as of its date, and the Prospectus, as amended or supplemented, as
of its date and at all subsequent times through the 30th day after the date
hereof, 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
Representative expressly for use therein. There are no contracts or other
documents required to be described in the Prospectus or to be filed as
exhibits to the Registration Statement which have not been described or filed
as required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to each Representative one complete conformed copy of the
Registration Statement and of each consent and certificate of experts filed as
a part thereof, and conformed copies of the Registration Statement (without
exhibits) and preliminary prospectuses and the Prospectus, as amended or
supplemented, in such quantities and at such places as the Representatives
reasonably requested for each of the Underwriters.
2.
<PAGE>
(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.
(h) Independent Accountants. Arthur Andersen 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 "Summary--
Summary Selected Financial Data", "Selected Financial Data" and
"Capitalization" fairly present the information set forth therein on a basis
consistent with that of the audited financial statements contained in the
Registration Statement.
(j) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with
3.
<PAGE>
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, except
as set forth in Exhibit 21 to the Registration Statement.
(l) Incorporation and Good Standing. Each of the Company and its
subsidiaries has been duly organized and is validly existing as a corporation
or limited liability company, as the case may be, in good standing under the
laws of the jurisdiction in which it is organized with full corporate power
and authority to own its properties and conduct its business as described in
the prospectus, and is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction which requires
such qualification.
(m) Capitalization 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.
(n) 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.
(o) 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.
(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
4.
<PAGE>
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 of the other
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to,
(i) the charter, by-laws or other similar organizational documents 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 of its
subsidiaries 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 any of its subsidiaries or any of its or their properties, as
applicable, except any such violation or default which would not, singly or in
the aggregate, result in a Material Adverse Change.
(t) No Actions, Suits or Proceedings. Except to the extent otherwise
disclosed in the Prospectus, no action, suit or proceeding by or before any
court or governmental agency, authority or body or any arbitrator involving
the Company or any of its subsidiaries or any of 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. Except to the extent otherwise disclosed
in the Prospectus, each of the Company and its subsidiaries possesses 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 of its
subsidiaries 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. Except to the extent otherwise disclosed in the
Prospectus, each of the Company and 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 (or elsewhere in the Prospectus),
in each case free and clear of any security interests, mortgages, liens,
encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not
materially interfere with the use made or proposed to be made of such property
by the Company and its subsidiaries. The real property, improvements,
equipment and personal property held under lease by the Company or any
subsidiary are held under valid and enforceable leases, with such exceptions
as are not material and do not materially interfere with the use made or
proposed to be made of such real property, improvements, equipment or personal
property by the Company or such subsidiary.
(w) Tax Law Compliance. Each of the Company and its subsidiaries has
filed all necessary federal, state and foreign income and franchise tax
returns or has properly requested extensions thereof and has paid all taxes
required to be paid by it, and, if due and payable, any related or similar
assessment, fine or penalty levied against it, except as may be being
contested in good faith and by appropriate proceedings. The Company has made
adequate charges, accruals and reserves in the
5.
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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 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 or any of its subsidiaries 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; neither the Company nor any of subsidiaries has received any
notice of, and has no knowledge of, any infringement of or conflict with
asserted rights of the Company or any of its subsidiaries by others with
respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights; and neither the Company
nor any of subsidiaries has received any notice of, and has no knowledge of,
any infringement of or conflict with asserted rights of others with respect to
any patent, patent rights, inventions, trade secrets, know-how, trademarks,
service marks, trade names or copyrights which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, might have a
Material Adverse Change. There is no claim being made against the Company or
any of its subsidiaries regarding patents, patent rights or licenses,
inventions, collaborative research, trade secrets, know-how, trademarks,
service marks, trade names or copyrights. The Company and its subsidiaries do
not in the conduct of their business as now or proposed to be conducted as
described in the Prospectus infringe or conflict with any right or patent of
any third party, or any discovery, invention, product or process which is the
subject of a patent application filed by any third party, known to the
Company, which such infringement or conflict is reasonably likely to result in
a Material Adverse Change.
(y) Year 2000 Preparedness ("Y2K"). There are no Y2K issues related to
the preparedness of the Company, or any of its subsidiaries, that (i) are of a
character required to be described or referred to in the Registration
Statement or Prospectus by the Securities Act which have not been accurately
described in the Registration Statement or Prospectus or (ii) might reasonably
be expected to result in any Material Adverse Change or that might materially
affect their properties, assets or rights.
(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. 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 of its
subsidiaries 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. The Company has not been denied any insurance coverage which
it has sought or for which it has applied.
6.
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(cc) Labor Matters. To the best of the 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, vendors,
resellers, subcontractors, authorized dealers or distributors that might
reasonably be expected to result in a Material Adverse Change.
(dd) No Price Stabilization or Manipulation. The Company has not taken and
will not take, directly or indirectly, any action designed to or that might be
reasonably expected to cause or result in stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of the Shares.
(ee) Lock-Up Agreements. Each officer and director of the Company and each
beneficial owner of one or more percent of the outstanding issued share
capital of the Company has agreed to sign an agreement substantially in the
form attached hereto as Exhibit A (the "Lock-up Agreements"). The Company has
provided to counsel for the Underwriters a complete and accurate list of all
securityholders of the Company and the amount and type of securities held by
each securityholder. The Company has provided to counsel for the Underwriters
true, accurate and complete copies of all of the Lock-up Agreements presently
in effect or effected hereby. The Company hereby represents and warrants that
it will not release any of its officers, directors or other stockholders from
any Lock-up Agreements currently existing or hereafter effected without the
prior written consent of Robertson Stephens.
(ff) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any of its subsidiaries 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. The Company has not,
nor, to the best of the Company's knowledge, has any employee or agent of the
Company or any subsidiaries, made any contribution or other payment to any
official of, or candidate for, any federal, state or foreign office in
violation of any law or of the character required to be disclosed in the
Prospectus.
(hh) Environmental Laws. (i) The Company and its subsidiaries are in
compliance with all rules, laws and regulations relating to the use,
treatment, storage and disposal of toxic substances and protection of health
or the environment ("Environmental Laws") which are applicable to its or their
business, except where the failure to comply would not result in a Material
Adverse Change, (ii) neither the Company nor any of its subsidiaries has
received any notice from any governmental authority or third party of an
asserted claim under Environmental Laws, which claim is required to be
disclosed in the Registration Statement and the Prospectus, (iii) to the best
of its knowledge the Company will not be required to make future material
capital expenditures to comply with Environmental Laws and (iv) no property
which is owned, leased or occupied by the Company has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. (S) 9601, et seq.), or otherwise
designated as a contaminated site under applicable state or local law.
(ii) Periodic Review of Costs of Environmental Compliance. In the ordinary
course of its business, the Company conducts a periodic review of the effect
of Environmental Laws on the business, operations and properties of the
Company and its subsidiaries, in the course of which it identifies and
evaluates associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean-up, closure of properties
or compliance with Environmental Laws or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to
third parties). On the basis of such review and the amount of its established
reserves, the Company has reasonably concluded that such associated costs and
liabilities would not, individually or in the aggregate, result in a Material
Adverse Change.
(jj) ERISA Compliance. The Company 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
7.
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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, 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 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 or any of its ERISA
Affiliates. No "employee benefit plan" established or maintained by the
Company or any of its ERISA Affiliates, if such "employee benefit plan" were
terminated, would have any "amount of unfounded benefit liabilities" (as
defined under ERISA). Neither the Company nor any of its ERISA Affiliates has
incurred or reasonably expects to incur any liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any "employee
benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each
"employee benefit plan" established or maintained by the Company or any of its
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.
[To the extent the Registration Statement Contains Financial Projections:
(kk) Financial Projections. The statements, (including the assumptions
described therein) included in the Registration Statement and the Prospectus
under the headings "Summary of Significant Projections and Assumptions" and
"Financial Projections" (i) are within the coverage of Rule 175(b) under the
Act to the extent such data constitute forward looking statements as defined
in Rule 175(c) and (ii) were made by the Company with a reasonable basis and
reflect the Company's good faith estimate of the matters described therein.]
(ll) 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.
(mm) No Improper Influence in Connection with the Directed Share Program.
The Company has not offered, or caused Robertson Stephens 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
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 Gray Cary
Ware & Freidenrich LLP, 400 Hamilton Avenue, Palo Alto, CA (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
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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 2(g) and 3(e)
hereof, the Representatives may, in their sole discretion, postpone the
Closing Date until no later than two (2) full business days following delivery
of copies of the Prospectus to the Representatives.
(c) The Option Shares; the Second Closing Date. In addition, on the basis
of the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Company hereby grants
an option to the several Underwriters to purchase, severally and not jointly, up
to an aggregate of [___] Option Shares from the Company at the purchase price
per share to be paid by the Underwriters for the Firm Shares. The option
granted hereunder is for use by the Underwriters solely in covering any over-
allotments in connection with the sale and distribution of the Firm Shares. The
option granted hereunder may be exercised at any time upon notice by the
Representatives to the Company, which notice may be given at any time within 30
days from the date of this Agreement. The time and date of delivery of the
Option Shares, if subsequent to the First Closing Date, is called the "Second
Closing Date" and shall be determined by the Representatives and shall not be
earlier than three nor later than five full business days after delivery of such
notice of exercise. If any Option Shares are to be purchased, each Underwriter
agrees, severally and not jointly, to purchase the number of Option Shares
(subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Option Shares to be purchased as the number of Firm Shares set forth
on Schedule A opposite the name of such Underwriter bears to the total number of
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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 account and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Shares and any Option Shares the Underwriters have agreed to purchase.
Robertson Stephens, 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.
9.
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(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.
A. Covenants of the Company. The Company further covenants and agrees with
each Underwriter as follows:
(a) Registration Statement Matters. The Company will (i) use its best
efforts to cause a registration statement on Form 8-A (the "Form 8-A
Registration Statement") as required by the Securities Exchange Act of 1934
(the "Exchange Act") to become effective simultaneously with the Registration
Statement, (ii) use its best efforts to cause the Registration Statement to
become effective or, if the procedure in Rule 430A of the Securities Act is
followed, to prepare and timely file with the Commission under Rule 424(b)
under the Securities Act a Prospectus in a form approved by the
Representatives containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rule 430A of the
Securities Act and (iii) not file any amendment to the Registration Statement
or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Securities Act. If the Company elects to rely on Rule
462(b) under the Securities Act, the Company shall file a Rule 462(b)
Registration Statement with the Commission in compliance with Rule 462(b)
under the Securities Act prior to the time confirmations are sent or given, as
specified by Rule 462(b)(2) under the Securities Act, and shall pay the
applicable fees in accordance with Rule 111 under the Securities Act.
(b) Securities Act Compliance. The Company will advise the
Representatives promptly (i) when the Registration Statement or any post-
effective amendment thereto shall have become effective, (ii) of receipt of
any comments from the Commission, (iii) of any request of the Commission for
amendment of the Registration Statement or for supplement to the Prospectus or
for any additional information and (iv) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement or
the use of the Prospectus or of the institution of any proceedings for that
purpose. The Company will use its best efforts to prevent the issuance of any
such stop order preventing or suspending the use of the Prospectus and to
obtain as soon as possible the lifting thereof, if issued.
(c) Blue Sky Compliance. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the
Company shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction where it is not now
so qualified or required to file such a consent. The Company will, from time
to time, prepare and file such statements, reports and other documents, as are
or may be required to continue such qualifications in effect for so long a
period as the Representatives may reasonably request for distribution of the
Shares.
(d) Amendments and Supplements to the Prospectus and Other Securities Act
Matters. The Company will comply with the Securities Act and the Exchange Act,
and the rules and regulations of the Commission thereunder, so as to permit
the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the
reasonable opinion of the Representatives or counsel for the Underwriters, it
becomes necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances existing at the time the
Prospectus is delivered to a purchaser, not misleading, or, if it is necessary
at any time to amend or supplement the Prospectus to comply with any law, the
Company promptly will prepare and file with the Commission, and furnish at its
own expense to the Underwriters and to dealers, an appropriate amendment to
the Registration Statement or supplement to the
10.
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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 and (ii) cause Robertson Stephens 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) shall cause Robertson
Stephens to be added as an additional insured to such policy in respect of the
offering contemplated hereby.
(g) Notice of Subsequent Events. If at any time during the ninety (90)
day period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which, in your opinion, the market price of the Company Shares has
been or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(h) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Shares sold by it in the manner described under the caption "Use
of Proceeds" in the Prospectus.
(i) Transfer Agent. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Company Shares.
(j) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month
period ending the date of the end of the first quarter ending one year
following the effective date that satisfies the provisions of Section 11(a) of
the Securities Act.
(k) Periodic Reporting Obligations. During the Prospectus Delivery Period
the Company shall file, on a timely basis, with the Commission and the Nasdaq
National Market all reports and documents required to be filed under the
Exchange Act.
(l) Agreement Not to Offer or Sell Additional Securities. The Company
will not, without the prior written consent of Robertson Stephens, 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, stock purchase
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
11.
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Prospectus. These restrictions terminate after the close of trading of the
Shares on the 180th day of (and including) the day the Shares commenced
trading on the Nasdaq National Market (the "Lock-Up Period").
(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) Exchange Act Compliance. During the Prospectus Delivery Period, the
Company will file all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Act in the manner and within
the time periods required by the Exchange Act.
(o) Directed Share Program. The Company (i) will indemnify Robertson
Stephens 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 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 counsel for the Underwriters; 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 counsel for
the Underwriters, 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 your sole judgment, is
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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.
(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 Gray Cary Ware & Freidenrich LLP, counsel for the Company, substantially in
the form of Exhibit B attached hereto, dated the First Closing Date, or the
Second Closing Date, addressed to the Underwriters and with reproduced copies
or signed counterparts thereof for each of the Underwriters.
Counsel rendering the opinion contained in Exhibit B may rely as to
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questions of law not involving the laws of the United States, the State of
California or general corporate laws of the State of Delaware upon opinions of
local counsel, and as to questions of fact upon representations or certificates
of officers of the Company, and of government officials, in which case their
opinion is to state that they are so relying and that they have no knowledge of
any material misstatement or inaccuracy in any such opinion, representation or
certificate. Copies of any opinion, representation or certificate so relied
upon shall be delivered to you, as Representatives of the Underwriters, and to
counsel for the Underwriters.
(e) Opinion of Intellectual property Counsel for the Company. You shall
have received on the First Closing Date, or the Second Closing Date, as the
case may be, an opinion of [NAME OF PATENT COUNSEL], intellectual property
counsel for the Company substantially in the form of Exhibit C attached hereto.
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(f) Opinion of Counsel for the Underwriters. You shall have received on
the First Closing Date or the Second Closing Date, as the case may be, an
opinion of Brobeck, Phleger & Harrison LLP, substantially in the form of
Exhibit D hereto. The Company shall have furnished to such counsel such
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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
Arthur Andersen 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 Securities 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 Arthur Andersen 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 Securities 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, stockholders'
equity, and cash flows for the twelve (12) months ended December 31, 1999,
(iii) state that Arthur Andersen LLP has performed the procedures set out in
Statement on Auditing Standards No. 71 ("SAS 71") for a review of interim
financial information and providing the report of Arthur Andersen LLP as
described in SAS 71 on the financial statements for each of the quarters in
the quarter ended March 31, 2000 (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
13.
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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 Arthur Andersen LLP and you. In addition,
you shall have received from Arthur Andersen 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 threatened under the Securities Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to be
included therein by the Securities Act and in all material respects
conformed to the requirements of the Securities Act, the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
did not and does not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and, since the effective
date of the Registration Statement, there has occurred no event required
to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
(iv) Subsequent to the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been (a) any
material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and
its subsidiaries considered as one enterprise, (b) any transaction that is
material to the Company and its subsidiaries considered as one enterprise,
except transactions entered into in the ordinary course of business, (c)
any obligation, direct or contingent, that is material to the Company and
its subsidiaries considered as one enterprise, incurred by the Company or
its subsidiaries, except obligations incurred in the ordinary course of
business, (d) any change in the capital stock or outstanding indebtedness
of the Company or any of its subsidiaries that is material to the Company
and its subsidiaries considered as one enterprise, (e) any dividend or
distribution of any kind declared, paid or made on the capital stock of
the Company or any of its subsidiaries, or (f) any loss or damage (whether
or not insured) to the property of the Company or any of its subsidiaries
which has been sustained or will have been sustained which has a material
adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise.
(i) Lock-up Agreement from Certain Stockholders of the Company. The
Company shall have obtained and delivered to you an agreement substantially in
the form of Exhibit A attached hereto from each officer and director of the
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Company, and each beneficial owner of one or more percent of the outstanding
issued share capital of the Company.
14.
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(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 Shares (including all printing and engraving costs), (ii) all
fees and expenses of the registrar and transfer agent of the Common Stock,
(iii) all necessary issue, transfer and other stamp taxes in connection with
the issuance and sale of the Shares to the Underwriters, (iv) all fees and
expenses of the Company's counsel, independent public or certified public
accountants and other advisors, (v) all costs and expenses incurred in
connection with the preparation, printing, filing, shipping and distribution
of the Registration Statement (including financial statements, exhibits,
schedules, consents and certificates of experts), each preliminary prospectus
and the Prospectus, and all amendments and supplements thereto, and this
Agreement, (vi) all costs and expenses incurred by counsel for the
Underwriters in connection with the Directed Share Program, (vii) 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, (viii) 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, (ix) the fees and expenses
associated with including the Common Shares on the Nasdaq National Market, (x)
all costs and expenses incident to the travel and accommodation of the
Company's employees on the "roadshow", and (xi) all other fees, costs and
expenses referred to in Item 13 Item 14 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, Section 9
or Section 15, 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
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but not limited to fees and disbursements of counsel, printing expenses,
travel and accommodation expenses, postage, facsimile and telephone charges.
Section 7. Indemnification and Contribution.
(a) Indemnification of the Underwriters. The Company shall indemnify and
hold harmless each Underwriter, its officers and employees, and each person,
if any, who controls any Underwriter within the meaning of the Securities Act
and the Exchange Act against any loss, claim, damage, liability or expense, as
incurred, to which such Underwriter or such controlling person may become
subject, under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company, which consent shall not be unreasonably withheld),
insofar as such loss, claim, damage, liability or expense (or actions in
respect thereof as contemplated below) arises out of or is based (i) upon any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, or any amendment thereto, including any
information deemed to be a part thereof pursuant to Rule 430A or Rule 434
under the Securities Act, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading; or (ii) upon any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; or (iii) in whole or in part upon any
inaccuracy in the representations and warranties of the Company contained
herein; or (iv) in whole or in part upon any failure of the Company to perform
its obligations hereunder or under law; or (v) any 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 Robertson Stephens) as such expenses are reasonably incurred by such
Underwriter or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the foregoing indemnity
agreement shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by the Representatives expressly for use in the Registration
Statement, any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); and provided, further, that with respect to any
preliminary prospectus, the foregoing indemnity agreement shall not inure to
the benefit of any Underwriter from whom the person asserting any loss, claim,
damage, liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to
the written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The indemnity
agreement set forth in this Section 7(a) shall be in addition to any
liabilities that the Company may otherwise have. Notwithstanding the
foregoing, any amounts to be paid by an indemnifying party shall be offset by
any amounts paid to the indemnified parties pursuant to the insurance
described in Section 1(z).
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(b) Indemnification of the Company, its Directors, Officers and Selling
Stockholders. Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act, against
any loss, claim, damage, liability or expense, as incurred, to which the
Company, or any such director, officer or controlling person may become
subject, under the Securities Act, the Exchange Act, or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such loss, claim, damage, liability
or expense (or actions in respect thereof as contemplated below) arises out of
or is based upon any untrue or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereto, including
any information deemed to be a part thereof pursuant to Rule 430 or Rule 434
under the Securities Act or, 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 and each
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act, 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 paragraph and [_] 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 on advice of counsel that a conflict may arise
between the positions of the indemnifying party and the indemnified party in
conducting the defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of such indemnifying party's
election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
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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 (Robertson Stephens 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 60 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 or such party on the one hand and
the Underwriters on the other hand 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 or such party on the one hand and the Underwriters on the
other hand 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 hand
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
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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 forty-
five (45) days of invoice to the indemnifying party.
(h) Survival. The indemnity and contribution agreements contained in this
Section 7 and the representation and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor
to any Underwriter, or to the Company, its directors or officers, or any
person controlling the Company, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
7.
(i) Acknowledgements of Parties. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented
by counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7, and are fully informed
regarding said provisions. They further acknowledge that the provisions of
this Section 7 fairly allocate the risks in light of the ability of the
parties to investigate the Company and its business in order to assure that
adequate disclosure is made in the Registration Statement and Prospectus as
required by the Securities Act and the Exchange Act.
Section 8. Default of One or More of the Several Underwriters. If, on the
First Closing Date or the Second Closing Date, as the case may be, any one or
more of the several Underwriters shall fail or refuse to purchase Shares that
it or they have agreed to purchase hereunder on such date, and the aggregate
number of Common Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused 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
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the aggregate number of Firm Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as may be specified
by the Representatives with the consent of the non-defaulting Underwriters, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase on such date. If, on the First Closing Date
or the Second Closing Date, as the case may be, any one or more of the
Underwriters shall fail or refuse to purchase Shares and the aggregate number
of Shares with respect to which such default occurs exceeds 10% of the
aggregate number of Shares to be purchased on such date, and arrangements
satisfactory to the Representatives and the Company for the purchase of such
Shares are not made within 48 hours after such default, this Agreement shall
terminate without liability of any party to any other party except that the
provisions of Section 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.
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Section 9. Termination of this Agreement. This Agreement may be
terminated by the Representatives by notice given to the Company if (a) at any
time after the execution and delivery of this Agreement and prior to the First
Closing Date (i) trading or quotation in any of the Company's securities shall
have been suspended or limited by the Commission or by the Nasdaq Stock
Market, or trading in securities generally on either the Nasdaq Stock Market
or the New York Stock Exchange shall have been suspended or limited, or
minimum or maximum prices shall have been generally established on any of such
stock exchanges by the Commission or the National Association of Securities
Dealers, LLC; (ii) a general banking moratorium shall have been declared by
any of federal, New York, Delaware or California authorities; (iii) there
shall have occurred any outbreak or escalation of national or international
hostilities or any crisis or calamity, or any change in the United States or
international financial markets, or any substantial change or development
involving a prospective change in United States' or international political,
financial or economic conditions, as in the judgment of the Representatives is
material and adverse and makes it impracticable or inadvisable to market the
Common Shares in the manner and on the terms described in the Prospectus or to
enforce contracts for the sale of securities; (iv) in the judgment of the
Representatives there shall have occurred any Material Adverse Change; or (v)
the Company shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as in the judgment of the
Representatives may interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have
been insured or (b) in the case of any of the events specified 9(a)(i)-(v),
such event singly or together with any other event, makes it, in your
judgement, impracticable or inadvisable to market the Common Shares in the
manner and on the terms contemplated in the Prospectus. Any termination
pursuant to this Section 9 shall be without liability on the part of (x) 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, (y) any Underwriter to the Company or any person
controlling the Company or, or (z) 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 or any person controlling the Company, of its
officers, and of the several Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
its or their partners, officers or directors or any controlling person, as the
case may be, and will survive delivery of and payment for the Shares sold
hereunder and any termination of this Agreement.
Section 11. Notices. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
FLEETBOSTON ROBERTSON STEPHENS INC.
555 California Street
San Francisco, California 94104
Facsimile: (415) 676-2675
Attention: General Counsel
If to the Company:
Extricity, Inc.
555 Twin Dolphin Drive
Redwood Shores, California 94065
Facsimile: (650) 596-1300
Attention: [___________]
With a copy to:
20.
<PAGE>
Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, California 94301-1825
Facsimile: (650) 327-3699
Attention: [___________]
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 8 hereof, and to the benefit of the employees, officers
and directors and controlling persons referred to in Section 7, and to their
respective successors, and no other person will have any right or obligation
hereunder. The term "successors" shall not include any purchaser of the Shares
as such from any of the Underwriters merely by reason of such purchase.
Section 13. Partial Unenforceability. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision
hereof. If any Section, paragraph or provision of this Agreement is for any
reason determined to be invalid or unenforceable, there shall be deemed to be
made such minor changes (and only such minor changes) as are necessary to make
it valid and enforceable.
Section 14. Governing Law Provisions.
(a) Governing Law. This agreement shall be governed by and construed in
accordance with the internal laws of the state of New York applicable to
agreements made and to be performed in such state.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding arising
out of or based upon this Agreement or the transactions contemplated hereby
("Related Proceedings") may be instituted in the federal courts of the United
States of America located in the City and County of San Francisco or the
courts of the State of California in each case located in the City and County
of San Francisco (collectively, the "Specified Courts"), and each party
irrevocably submits to the exclusive jurisdiction (except for proceedings
instituted in regard to the enforcement of a judgment of any such court (a
"Related Judgment"), as to which such jurisdiction is non-exclusive) of such
courts in any such suit, action or proceeding. Service of any process,
summons, notice or document by mail to such party's address set forth above
shall be effective service of process for any suit, action or other proceeding
brought in any such court. The parties irrevocably and unconditionally waive
any objection to the laying of venue of any suit, action or other proceeding
in the Specified Courts and irrevocably and unconditionally waive and agree
not to plead or claim in any such court that any such suit, action or other
proceeding brought in any such court has been brought in an inconvenient
forum. Each party not located in the United States irrevocably appoints CT
Corporation System, which currently maintains a San Francisco office at 49
Stevenson Street, San Francisco, California 94105, United States of America,
as its agent to receive service of process or other legal summons for purposes
of any such suit, action or proceeding that may be instituted in any state or
federal court in the City and County of San Francisco.
(c) Waiver of Immunity. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law,
all immunity (whether on the basis of sovereignty or otherwise) from
jurisdiction, service of process, attachment (both before and after judgment)
and execution to which it might otherwise 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.
21.
<PAGE>
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. Section headings herein are for the convenience of the parties only
and shall not affect the construction or interpretation of this Agreement.
[The remainder of this page has been intentionally left blank.]
22.
<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,
EXTRICITY, 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.
SG COWEN SECURITIES CORPORATION
BANC OF AMERICA SECURITIES LLC
On their behalf and on behalf of each of the several underwriters named in
Schedule A hereto.
- ----------
By FLEETBOSTON ROBERTSON STEPHENS INC.
By:
----------------------------------------
Name:
23.
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Firm Common
Underwriters Shares To be Purchased
- ----------------------------------------------------------------------------------- ----------------------
<S> <C>
FLEETBOSTON ROBERTSON STEPHENS INC................................................. [___]
SG COWEN SECURITIES CORPORATION.................................................... [___]
BANC OF AMERICA SECURITIES LLC..................................................... [___]
[___].............................................................................. [___]
[___].............................................................................. [___]
[___].............................................................................. [___]
[___].............................................................................. [___]
Total......................................................................... [___]
</TABLE>
S-A
<PAGE>
Exhibit A
Lock-Up Agreement
FleetBoston Robertson Stephens Inc.
SG Cowen Securities Corporation
Banc of America Securities LLC
As Representatives of the Several Underwriters
c/o FleetBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, California 94104
RE: Initial Public Offering for Extricity, Inc. (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain
shares of Common Stock of the Company ("Common Stock") or securities convertible
into or exchangeable or exercisable for Common Stock. The Company proposes to
carry out a public offering of Common Stock (the "Offering") for which you will
act as the representatives (the "Representatives") of the underwriters. The
undersigned recognizes that the Offering will be of benefit to the undersigned
and will benefit the Company by, among other things, raising additional capital
for its operations. The undersigned acknowledges that you and the other
underwriters are relying on the representations and agreements of the
undersigned contained in this letter in carrying out the Offering and in
entering into underwriting arrangements with the Company with respect to the
Offering.
In consideration of the foregoing, the undersigned hereby agrees that
the undersigned will not offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to (collectively, a
"Disposition") any shares of Common Stock, any options or warrants to purchase
any shares of Common Stock or any securities convertible into or exchangeable
for shares of Common Stock (collectively, "Securities") now owned or hereafter
acquired directly by such person or with respect to which such person has or
hereafter acquires the power of disposition, otherwise than (i) as a bona fide
gift or gifts, provided the donee or donees thereof agree in writing to be bound
by this restriction, (ii) as a distribution to partners or shareholders of such
person, provided that the distributees thereof agree in writing to be bound by
the terms of this restriction, (iii) with respect to sales or purchases of
Common Stock acquired on the open market or (iv) with the prior written consent
of FleetBoston Robertson Stephens Inc. The foregoing restrictions will terminate
after the close of trading of the Common Stock on the 180th day of (and
including) the day the Common Stock commenced trading on the Nasdaq National
Market (the "Lock-Up Period"). The foregoing restriction has been expressly
agreed to preclude the holder of the Securities from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than such holder. Such
prohibited hedging or other transactions would include, without limitation, any
short sale (whether or not against the box) or any purchase, sale or grant of
any right (including, without limitation, any put or call option) with respect
to any Securities or with respect to any security (other than a broad-based
market basket or index) that included, relates to or derives any significant
part of its value from Securities. The undersigned also agrees and consents to
the entry of stop transfer instructions with the Company's transfer agent and
registrar against the transfer of shares of Common Stock or Securities held by
the undersigned except in compliance with the foregoing restrictions.
This agreement is irrevocable and will be binding on the undersigned
and the respective successors, heirs, personal representatives, and assigns of
the undersigned. In the event the Offering has not occurred on or before
September 30, 2000 this Lock-Up Agreement shall be of no further force or
effect.
A-1
<PAGE>
Dated
----------------------------------------
---------------------------------------------
Printed Name of Holder
By:
------------------------------------------
--------------------------------------------
Printed Name of Person Signing
(and indicate capacity of person signing if
signing as custodian, trustee, or on behalf
of an entity)
A-2
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
EXTRICITY SOFTWARE, INC.
Barry M. Ariko and Vicki L. Randall certify that:
1. They are the President and Assistant Secretary, respectively, of
Extricity Software, Inc., a California corporation.
2. The Articles of Incorporation of the corporation, as amended to the
date of the filing of this certificate, including amendments set forth herein
but not separately filed (and with the omissions required by Section 910 of the
California Corporations Code), are restated in their entirety as set forth in
Exhibit "1" attached hereto and made a part hereof by this reference.
- -----------
3. The Amended and Restated Articles of Incorporation set forth herein
have been duly approved by the Board of Directors of the corporation.
4. The amendments to and restatement of the Articles of Incorporation
included in the Amended and Restated Articles of Incorporation set forth herein
(other than omissions required by Section 910 of the Corporations Code) have
been duly approved by the required vote of the shareholders of the corporation
in accordance with Sections 902 and 903 of the California Corporations Code. The
corporation has two classes of stock, Common Stock and Preferred Stock. The
number of outstanding shares on the record date for the vote of the shareholders
of the corporation on this matter was 9,638,036 shares of Common Stock,
3,055,000 shares of Series A Preferred Stock, 1,976,469 shares of Series B
Preferred Stock, 1,954,937 shares of Series C Preferred Stock, 1,187,575 shares
of Series D Preferred Stock, and 2,031,846 shares of Series E Preferred Stock.
The number of shares voting in favor of the Amended and Restated Articles of
Incorporation set forth herein equaled or exceeded the vote required. The
percentage vote required was (i) more than 50% of the outstanding shares of
Common Stock, voting as a single class, (ii) more than 50% of the outstanding
shares of all series of Preferred Stock, voting together as a single class,
(iii) more than 50% of the outstanding shares of Series E Preferred Stock,
voting together as a single class, (iv) more than 50% of the outstanding shares
of Series D Preferred Stock, voting as a single class, (v) more than 50% of the
outstanding shares of Series C Preferred Stock, voting as a single class, (vi)
more than 50% of the outstanding shares of Common Stock and Preferred Stock (on
an as-converted to Common Stock basis), voting together as a single class, and
(vii) more than 50% of the outstanding shares of Series A Preferred Stock and
Series B Preferred Stock, voting together as a single class.
1
<PAGE>
The undersigned further declare under penalty of perjury under the laws of
the State of California that the matters set forth in this certificate are true
and correct of the undersigned's knowledge.
Dated: April __, 2000
_____________________________________
Barry M. Ariko, President
_____________________________________
Vicki L. Randall, Assistant Secretary
2
<PAGE>
EXHIBIT "1"
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
EXTRICITY SOFTWARE, INC.
ARTICLE I
The name of the corporation is Extricity, Inc.
ARTICLE II
The purpose of the corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
Unless applicable law otherwise provides, any amendment, repeal or modification
of this Article III shall not adversely affect any right or protection of a
director under this Article III that existed at or prior to the time of such
amendment, repeal or modification.
ARTICLE IV
The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, by agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the applicable
limits on such excess indemnification set forth in Section 204 of the California
Corporations Code. Unless applicable law otherwise provides, any amendment,
repeal or modification of any provision of this Article IV shall not adversely
affect any contract or other right to indemnification of an agent of the
corporation that existed at or prior to the time of such amendment, repeal or
modification.
ARTICLE V
This corporation is authorized to issue two classes of shares, designated
"Common Stock" and "Preferred Stock," respectively, both of which shall have no
par value. The number of shares of Common Stock authorized to be issued is
fifty million (50,000,000) shares. The number of shares of Preferred Stock
authorized to be issued is eighteen million one hundred twenty six thousand six
hundred fifty (18,126,650) shares, 3,055,000 of which are designated as "Series
A Preferred Stock", 1,976,469 of which are designated as "Series B Preferred
Stock", 2,055,760 of which are designated as "Series C Preferred Stock",
1,187,575 of which are
3
<PAGE>
designated as "Series D Preferred Stock", 2,051,846 of which are designated as
"Series E Preferred Stock", and 7,800,000 of which are designated as "Series F
Preferred Stock".
ARTICLE VI
The rights, preferences, privileges and restrictions granted to and imposed
on the Preferred Stock and the Common Stock are as follows:
1. Definitions. For purposes of this Article VI, the following
-----------
definitions shall apply:
1.1. "Board" shall mean the Board of Directors of the Company.
-----
1.2. "Company" shall mean this corporation.
-------
1.3. "Common Stock" shall mean the Common Stock, no par value, of the
------------
Company.
1.4. "Common Stock Dividend" shall mean a stock dividend declared and
---------------------
paid on the Common Stock that is payable in shares of Common Stock.
1.5. "Dividend Rate" shall mean $0.05 per share per annum for the
-------------
Series A Preferred Stock, $0.05 per share per annum for the Series B Preferred
Stock, $0.05 per share per annum for the Series C Preferred Stock, $0.05 per
share per annum for the Series D Preferred Stock, $0.05 per share per annum for
the Series E Preferred Stock, and $0.05 per share per annum for the Series F
Preferred Stock, as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares.
1.6. "Liquidation Preference" for the Series A Preferred Stock shall
----------------------
mean an amount per share equal to the Original Issue Price of the Series A
Preferred Stock plus all declared but unpaid dividends on the Series A Preferred
Stock, for the Series B Preferred Stock shall mean an amount per share equal to
the Original Issue Price of the Series B Preferred Stock plus all declared but
unpaid dividends on the Series B Preferred Stock, for the Series C Preferred
Stock shall mean an amount per share equal to the Original Issue Price of the
Series C Preferred Stock plus all declared but unpaid dividends on the Series C
Preferred Stock, for the Series D Preferred Stock shall mean an amount per share
equal to the Original Issue Price of the Series D Preferred Stock plus all
declared but unpaid dividends on the Series D Preferred Stock, for the Series E
Preferred Stock shall mean an amount per share equal to the Original Issue Price
of the Series E Preferred Stock plus all declared but unpaid dividends on the
Series E Preferred Stock, and for the Series F Preferred Stock shall mean an
amount per share equal to the Original Issue Price of the Series F Preferred
Stock plus all declared but unpaid dividends on the Series F Preferred Stock, as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares.
1.7. "Original Issue Date" shall mean the date on which the first
-------------------
share of Series F Preferred Stock is issued by the Company.
1.8. "Original Issue Price" shall mean $1.00 per share for the
--------------------
Series A Preferred Stock, $2.75 per share for the Series B Preferred Stock,
$5.10 for the Series C
4
<PAGE>
Preferred Stock, $5.91 for the Series D Preferred Stock, $4.91 for the Series E
Preferred Stock, and $6.45 for the Series F Preferred Stock.
1.9. "Permitted Repurchases" shall mean the repurchase by the
---------------------
Company of shares of Common Stock held by employees, officers, directors,
consultants, independent contractors, advisors, or other persons performing
services for the Company or a subsidiary that are subject to restricted stock
purchase agreements or stock option exercise agreements under which the Company
has the option to repurchase such shares: (i) at cost, upon the occurrence of
certain events, such as the termination of employment or services; or (ii) at
any price pursuant to the Company's exercise of a right of first refusal to
repurchase such shares.
1.10. "Preferred Stock" shall mean the Series A Preferred Stock, the
---------------
Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock, the Series E Preferred Stock and the Series F Preferred Stock,
collectively.
1.11. "Series A Preferred Stock" shall mean the Series A Preferred
------------------------
Stock, no par value, of the Company.
1.12. "Series B Preferred Stock" shall mean the Series B Preferred
------------------------
Stock, no par value, of the Company.
1.13. "Series C Preferred Stock" shall mean the Series C Preferred
------------------------
Stock, no par value, of the Company.
1.14. "Series D Preferred Stock" shall mean the Series D Preferred
------------------------
Stock, no par value, of the Company.
1.15. "Series E Preferred Stock" shall mean the Series E Preferred
------------------------
Stock, no par value, of the Company.
1.16. "Series F Preferred Stock" shall mean the Series F Preferred
------------------------
Stock, no par value, of the Company.
1.17. "Subsidiary" shall mean any corporation of which at least fifty
----------
percent (50%) of the outstanding voting stock is at the time owned directly or
indirectly by the Company or by one or more of such subsidiary corporations.
2. Dividend Rights.
---------------
2.1. Preferred Stock. In each calendar year, the holders of the then
---------------
outstanding Preferred Stock shall be entitled to receive, when and as declared
by the Board, out of any funds and assets of the Company legally available
therefor, noncumulative dividends at the annual Dividend Rate for each such
series of Preferred Stock, prior and in preference to the payment of any
dividends on the Common Stock in such calendar year (other than a Common Stock
Dividend). No dividends (other than a Common Stock Dividend) shall be paid,
with respect to the Common Stock during any calendar year unless dividends in
the total amount of the annual Dividend Rate for each series of Preferred Stock
shall have first been paid or declared and set apart for payment to the holders
of such series of Preferred Stock, respectively, during that calendar year;
provided, however, that this restriction shall not apply to Permitted
- -------- -------
Repurchases.
5
<PAGE>
Payments of any dividends to the holders of each series of Preferred Stock shall
be paid pro rata, on an equal priority, pari passu basis according to their
respective dividend preferences as set forth herein. Dividends on each series of
Preferred Stock shall not be mandatory or cumulative, and no rights or interest
shall accrue to the holders of such series of Preferred Stock by reason of the
fact that the Company shall fail to declare or pay dividends on such series of
Preferred Stock in the amount of the annual Dividend Rate for each such series
or in any other amount in any calendar year or any fiscal year of the Company,
whether or not the earnings of the Company in any calendar year or fiscal year
were sufficient to pay such dividends in whole or in part.
2.2. Participation Rights. If, after dividends in the full
--------------------
preferential amounts specified in this Section 2 for each series of Preferred
Stock have been paid or declared and set apart for such payment in any calendar
year of the Company, the Board shall declare additional dividends out of funds
legally available therefor in that calendar year, then such additional dividends
shall be declared pro rata on the Common Stock and the Preferred Stock on a pari
passu basis according to the number of shares of Common Stock held by such
holders, where each holder of shares of Preferred Stock is to be treated for
this purpose as holding the greatest whole number of shares of Common Stock then
issuable upon conversion of all shares of Preferred Stock held by such holder
under Section 5 hereof.
2.3. Non-Cash Dividends. Whenever a dividend provided for in this
------------------
Section 2 shall be payable in property other than cash, the value of such
dividend shall be deemed to be the fair market value of such property as
determined in good faith by the Board.
3. Liquidation Rights. In the event of any liquidation, dissolution or
------------------
winding up of the Company, whether voluntary or involuntary, the funds and
assets of the Company that may be legally distributed to the Company's
shareholders (the "Available Funds and Assets") shall be distributed to
--------------------------
shareholders in the following manner:
3.1. Liquidation Preferences. The holders of each share of Series C
-----------------------
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock then outstanding shall be entitled to be paid, out of the
Available Funds and Assets, and prior and in preference to any payment or
distribution (or any setting apart of any payment or distribution) of any
Available Funds and Assets on any shares of Common Stock, Series A Preferred
Stock or Series B Preferred Stock, the Liquidation Preference for such Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock. If upon any liquidation, dissolution or winding up of the
Company, the Available Funds and Assets shall be insufficient to permit the
payment to holders of the Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock of their full preferential
amount described in this subsection, then all of the Available Funds and Assets
shall be distributed among the holders of the then outstanding Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock pro rata, on an equal priority, pari passu basis, according to
the respective Liquidation Preferences of the Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Series F Preferred Stock held by
each such holder. If there are any Available Funds and Assets remaining after
the payment or distribution (or the setting aside for payment or distribution)
to the holders of the Series C Preferred Stock, Series D Preferred Stock, Series
E Preferred Stock and Series F Preferred Stock of their full preferential
amounts described above in this Section 3, the holders of each share of Series A
Preferred Stock and Series B Preferred Stock then outstanding shall be entitled
to be paid, out of the Available Funds and Assets, and prior and in preference
to any payment or distribution (or any setting apart
6
<PAGE>
of any payment or distribution) of any Available Funds and Assets on any shares
of Common Stock, the Liquidation Preference for each such series of Preferred
Stock, respectively. If upon any liquidation, dissolution or winding up of the
Company, the Available Funds and Assets (after payments required to be made to
the holders of the Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock) shall be insufficient to permit
the payment to holders of the Series A Preferred Stock and Series B Preferred
Stock of their full preferential amount described in this subsection, then all
of such remaining Available Funds and Assets shall be distributed among the
holders of the then outstanding Series A Preferred Stock and Series B Preferred
Stock pro rata, on an equal priority, pari passu basis, according to the
respective Liquidation Preferences of the Series A Preferred Stock and Series B
Preferred Stock held by each such holder.
3.2. Remaining Assets. If there are any Available Funds and Assets
----------------
remaining after the payment or distribution (or the setting aside for payment or
distribution) to the holders of the Preferred Stock of their full preferential
amounts described above in this Section 3, then all such remaining Available
Funds and Assets shall be distributed among the holders of the then outstanding
Common Stock pro rata according to the number of shares of Common Stock held by
each holder thereof.
3.3. Merger or Sale of Assets. A (i) consolidation or merger of the
------------------------
Company with or into any other corporation or corporations in which the holders
of the Company's outstanding shares immediately before such consolidation or
merger do not, immediately after such consolidation or merger, retain stock
representing a majority of the voting power of the surviving corporation of such
consolidation or merger; or (ii) a transaction or series of transactions in
which shareholders transfer more than fifty percent (50%) of the voting power of
the Company; or (iii) a sale of all or substantially all of the assets of the
Company, shall each be deemed to be a liquidation, dissolution or winding up of
the Company as those terms are used in this Section 3.
3.4. Non-Cash Consideration. If any assets of the Company
----------------------
distributed to shareholders in connection with any liquidation, dissolution, or
winding up ofthe Company are other than cash, then the value of such assets
shall be their fair market value as determined in good faith by the Board,
except that any securities to be distributed to shareholders in a liquidation,
- ------ ----
dissolution, or winding up of the Company shall be valued as follows:
(a) The method of valuation of securities not subject to
investment letter or other similar restrictions on free marketability shall be
as follows:
(i) if the securities are then traded on a national
securities exchange or the Nasdaq National Market (or a similar national
quotation system), then the value shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the 30-day
period ending three (3) days prior to the distribution; and
(ii) if actively traded over-the-counter, then the value
shall be deemed to be the average of the closing bid prices over the 30-day
period ending three (3) days prior to the distribution; and
7
<PAGE>
(iii) if there is no active public market, then the value
shall be the fair market value thereof, as determined in good faith by the Board
of Directors of the Company.
(b) The method of valuation of securities subject to investment
letter or other restrictions on free marketability shall be to make an
appropriate discount from the market value determined as above in subparagraphs
(a)(i),(ii) or (iii) of this subsection to reflect the approximate fair market
value thereof, as determined in good faith by the Board.
4. Voting Rights.
-------------
4.1. Common Stock. Each holder of shares of Common Stock shall be
------------
entitled to one (1) vote for each share thereof held.
4.2. Preferred Stock. Each holder of shares of Preferred Stock
---------------
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which such shares of Preferred Stock could be converted
pursuant to the provisions of Section 5 below at the record date for the
determination of the shareholders entitled to vote on such matters or, if no
such record date is established, the date such vote is taken or any written
consent of shareholders is solicited.
4.3. General. Subject to the foregoing provisions of this Section 4,
-------
each holder of Preferred Stock shall have full voting rights and powers equal to
the voting rights and powers of the holders of Common Stock, and shall be
entitled to notice of any shareholders' meeting in accordance with the bylaws of
the Company (as in effect at the time in question) and applicable law, and shall
be entitled to vote, together with the holders of Common Stock, with respect to
any question upon which holders of Common Stock have the right to vote, except
as may be otherwise provided by applicable law. Except as otherwise expressly
provided herein or as required by law, the holders of Preferred Stock and the
holders of Common Stock shall vote together and not as separate classes.
4.4. Board of Directors Election and Removal.
---------------------------------------
(a) Election.
--------
(i) So long as any shares of Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock
are outstanding, the holders of the Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock, voting together as
a separate class (with cumulative voting rights as among themselves in
accordance with Section 708 of the California Corporations Code), shall be
entitled to elect one (1) director of the Company;
(ii) so long as an aggregate of at least 2,000,000 shares of
Series A Preferred Stock and Series B Preferred Stock are outstanding (such
number of shares being subject to proportional adjustment to reflect
combinations or subdivisions of such series of Preferred Stock or dividends
declared in shares of such stock), the holders of the Series A Preferred Stock
and Series B Preferred, voting together as a separate class (with cumulative
voting rights as among themselves in accordance with Section 708 of the
California Corporations Code), shall be entitled to elect three (3) directors of
the Company; and
8
<PAGE>
(iii) the holders of the Common Stock, voting as a separate
class (with cumulative voting rights as among themselves in accordance with
Section 708 of the California Corporations Code), shall be entitled to elect two
(2) directors of the Company.
(b) Quorum; Required Vote.
---------------------
(i) Quorum. At any meeting held for the purpose of
------
electing directors, the presence in person or by proxy of the holders of a
majority of the shares of the Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock, together, a
majority of the Series A Preferred Stock and Series B Preferred Stock, together,
or a majority of the Common Stock then outstanding, respectively, shall
constitute a quorum of the Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock, together, Series A
Preferred Stock and Series B Preferred Stock, together, or Common Stock, as the
case may be, for the election of directors to be elected solely by the holders
of the Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock, together, Series A Preferred Stock and
Series B Preferred Stock, together, or Common Stock, respectively.
(ii) Required Vote. With respect to the election of any
-------------
director or directors by the holders of the outstanding shares of a specified
class of stock given the right to elect such director or directors pursuant to
subsection 4.4(a) above ("Specified Stock"), that candidate or those candidates
(as applicable) shall be elected who either: (i) in the case of any such vote
conducted at a meeting of the holders of such Specified Stock, receive the
---------------
highest number of affirmative votes of the outstanding shares of such Specified
Stock, up to the number of directors to be elected by such Specified Stock; or
(ii) in the case of any such vote taken by written consent without a meeting,
are elected by the unanimous written consent of the holders of shares of such
Specified Stock.
(c) Vacancy. If there shall be any vacancy in the office of a
-------
director elected by the holders of any Specified Stock pursuant to subsection
4.4(a), then a successor to hold office for the unexpired term of the office of
such director may be elected by either: (i) the remaining director or directors
(if any) in office that were so elected by the holders of such Specified Stock,
by the affirmative vote of a majority of such directors (or by the sole
remaining director elected by the holders of such Specified Stock if there be
but one), or (ii) the affirmative vote of holders of the shares of such
Specified Stock that are entitled to elect such director under subsections
4.4(a) and 4.4(b).
(d) Removal. Subject to Section 303 of the Corporations Code,
-------
any director who shall have been elected to the Board by the holders of any
Specified Stock pursuant to subsection 4.4(a) or by any director or directors
elected by holders of any Specified Stock as provided in subsection 4.4(c), may
be removed during his or her term of office, either with or without cause, by,
and only by, the affirmative vote of shares representing a majority of the
voting power of all the outstanding shares of such Specified Stock entitled to
vote, given either at a meeting of such shareholders duly called for that
purpose or pursuant to a written consent of shareholders without a meeting, and
any vacancy created by such removal may be filled only in the manner provided in
subsection 4.4(c).
(e) Procedures. Any meeting of the holders of any Specified
----------
Stock, and any action taken by the holders of any Specified Stock by written
consent without a meeting,
9
<PAGE>
in order to elect or remove a director under this subsection 4.4, shall be held
in accordance with the procedures and provisions of the Company's Bylaws, the
California Corporations Code and applicable law regarding shareholder meetings
and shareholder actions by written consent, as such are then in effect
(including but not limited to procedures and provisions for determining the
record date for shares entitled to vote).
(f) Termination. Notwithstanding anything in this subsection
-----------
4.4 to the contrary:
(i) the provisions of subsection 4.4(a)(i) shall cease to
be of any further force or effect upon the first date that there are no longer
any outstanding shares of Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock or Series F Preferred Stock;
(ii) the provisions of subsection 4.4(a)(ii) shall cease to
be of any further force or effect upon the first date that the total number of
outstanding shares of Series A Preferred Stock and Series B Preferred Stock is
less than 2,000,000 shares (such number of shares being subject to proportional
adjustment to reflect combination or subdivisions of such series of Preferred
Stock or dividends declared in shares of such stock); and
(iii) the provisions of this subsection 4.4 shall cease to
be of any further force or effect upon the earlier to occur of: (A) a merger or
consolidation of the Company with or into any other corporation or corporations
if such consolidation or merger is approved by the shareholders of the Company
in compliance with applicable law and the Articles of Incorporation and Bylaws
of the Company; or (B) a sale of all or substantially all of the Company's
assets.
5. Conversion Rights. The outstanding shares of Preferred Stock shall be
-----------------
convertible into Common Stock as follows:
5.1. Optional Conversion.
-------------------
(a) At the option of the holder thereof, each share of Preferred
Stock shall be convertible, at any time or from time to time, into fully paid
and nonassessable shares of Common Stock as provided herein.
(b) Each holder of Preferred Stock who elects to convert the
same into shares of Common Stock shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company or any transfer agent for
the Preferred Stock or Common Stock, and shall give written notice to the
Company at such office that such holder elects to convert the same and shall
state therein the number of shares of Preferred Stock being converted. Thereupon
the Company shall promptly issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Common Stock to which
such holder is entitled upon such conversion. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the certificate or certificates representing the shares of
Preferred Stock to be converted, and the person entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder of such shares of Common Stock on such date.
10
<PAGE>
5.2. Automatic Conversion.
--------------------
(a) Each share of Preferred Stock shall automatically be
converted into fully paid and nonassessable shares of Common Stock, as provided
herein: (i) immediately prior to the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement filed under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Company in which the aggregate public offering price
(before deduction of underwriters' discounts and commissions) equals or exceeds
$25,000,000 and in which the public offering price per share equals or exceeds
$9.00 per share before deduction of underwriters' discounts and commissions
(such price per share of Common Stock to be appropriately adjusted to reflect
Common Stock Events (as defined in subsection 5.4)); or (ii) upon the Company's
receipt of the written consent of the holders of not less than a majority of the
then outstanding shares of Preferred Stock to the conversion of all then
outstanding Preferred Stock under this Section 5.
(b) Upon the occurrence of any event specified in subparagraph
5.2(a) (i) or (ii) above, the outstanding shares of Preferred Stock shall be
converted into Common Stock automatically without the need for any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Company or its transfer agent;
provided, however, that the Company shall not be obligated to issue certificates
- -------- -------
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Preferred Stock are either delivered to
the Company or its transfer agent as provided below, or the holder notifies the
Company or its transfer agent that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with such certificates. Upon
the occurrence of such automatic conversion of the Preferred Stock, the holders
of Preferred Stock shall surrender the certificates representing such shares at
the office of the Company or any transfer agent for the Preferred Stock or
Common Stock. Thereupon, there shall be issued and delivered to such holder
promptly at such office and in its name as shown on such surrendered certificate
or certificates, a certificate or certificates for the number of shares of
Common Stock into which the shares of Preferred Stock surrendered were
convertible on the date on which such automatic conversion occurred.
5.3. Conversion Price. Each share of Preferred Stock shall be
----------------
convertible in accordance with subsection 5.1 or subsection 5.2 above into the
number of shares of Common Stock which results from dividing the Original Issue
Price for such series of Preferred Stock by the conversion price for such series
of Preferred Stock that is in effect at the time of conversion (the "Conversion
----------
Price"). The initial Conversion Price for the Series A Preferred Stock shall be
- -----
$0.50 per share, the initial conversion price for the Series B Preferred Stock
shall be $1.375 per share, the initial conversion price for the Series C
Preferred Stock shall be $2.55 per share, the initial conversion price for the
Series D Preferred Stock shall be $2.955 per share, the initial conversion price
for the Series E Preferred Stock shall be $4.91 per share, and the initial
conversion price for the Series F Preferred Stock shall be the Original Issue
Price for the Series F Preferred Stock. The Conversion Price of each series of
Preferred Stock shall be subject to adjustment from time to time as provided
below.
5.4. Adjustment Upon Common Stock Event. Upon the happening of a
----------------------------------
Common Stock Event (as hereinafter defined), the Conversion Price of the Series
A Preferred Stock, the Conversion Price of the Series B Preferred Stock, the
Conversion Price of the Series C
11
<PAGE>
Preferred Stock, the Conversion Price of the Series D Preferred Stock, the
Conversion Price of the Series E Preferred Stock and the Conversion Price of the
Series F Preferred Stock, simultaneously with the happening of such Common Stock
Event, be adjusted by multiplying the Conversion Price of such series of
Preferred Stock in effect immediately prior to such Common Stock Event by a
fraction, (i) the numerator of which shall be the number of shares of Common
Stock issued and outstanding immediately prior to such Common Stock Event, and
(ii) the denominator of which shall be the number of shares of Common Stock
issued and outstanding immediately after such Common Stock Event, and the
product so obtained shall thereafter be the Conversion Price for such series of
Preferred Stock. The Conversion Price for a series of Preferred Stock shall be
readjusted in the same manner upon the happening of each subsequent Common Stock
Event. As used herein, the term "Common Stock Event" shall mean, at any time or
------------------
from time to time after the Original Issue Date, (i) the issue by the Company of
additional shares of Common Stock as a dividend or other distribution on
outstanding Common Stock, (ii) a subdivision of the outstanding shares of Common
Stock into a greater number of shares of Common Stock, or (iii) a combination of
the outstanding shares of Common Stock into a smaller number of shares of Common
Stock.
5.5. Adjustments for Other Dividends and Distributions. If at any
-------------------------------------------------
time or from time to time after the Original Issue Date the Company pays a
dividend or makes another distribution to the holders of the Common Stock
payable in securities of the Company other than shares of Common Stock, then in
each such event provision shall be made so that the holders of Preferred Stock
shall receive upon conversion thereof, in addition to the number of shares of
Common Stock receivable upon conversion thereof, the amount of securities of the
Company which they would have received had their Preferred Stock been converted
into Common Stock on the date of such event (or such record date, as applicable)
and had they thereafter, during the period from the date of such event (or such
record date, as applicable) to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 5 with
respect to the rights of the holders of the Preferred Stock or with respect to
such other securities by their terms.
5.6. Adjustment for Reclassification, Exchange and Substitution. If
----------------------------------------------------------
at any time or from time to time after the Original Issue Date the Common Stock
issuable upon the conversion of the Preferred Stock is changed into the same or
a different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than by a Common Stock
----- ----
Event or a stock dividend, reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 5), then in any such event each
holder of Preferred Stock shall have the right thereafter to convert such stock
into the kind and amount of stock and other securities and property receivable
upon such recapitalization, reclassification or other change by holders of the
number of shares of Common Stock into which such shares of Preferred Stock could
have been converted immediately prior to such recapitalization, reclassification
or change, all subject to further adjustment as provided herein or with respect
to such other securities or property by the terms thereof.
5.7. Sale of Shares Below Conversion Price.
-------------------------------------
(a) Adjustment Formula. If at any time or from time to time
------------------
after the Original Issue Date the Company issues or sells, or is deemed by the
provisions of this subsection 5.7 to have issued or sold, Additional Shares of
Common Stock (as hereinafter
12
<PAGE>
defined), otherwise than in connection with a Common Stock Event as provided in
subsection 5.4, a dividend or distribution as provided in subsection 5.5 or a
recapitalization, reclassification or other change as provided in subsection
5.6, for an Effective Price (as hereinafter defined) that is less than the
Conversion Price for a series of Preferred Stock in effect immediately prior to
such issue or sale, then, and in each such case, the Conversion Price for such
series of Preferred Stock shall be reduced, as of the close of business on the
date of such issue or sale, to the price obtained by multiplying such Conversion
Price by a fraction:
(i) The numerator of which shall be the sum of (A) the
number of Common Stock Equivalents Outstanding (as hereinafter defined)
immediately prior to such issue or sale of Additional Shares of Common Stock
plus (B) the quotient obtained by dividing the Aggregate Consideration Received
(as hereinafter defined) by the Company for the total number of Additional
Shares of Common Stock so issued or sold (or deemed so issued and sold) by the
Conversion Price for such series of Preferred Stock in effect immediately prior
to such issue or sale; and
(ii) The denominator of which shall be the sum of (A) the
number of Common Stock Equivalents Outstanding immediately prior to such issue
of Additional Shares of Common Stock or sale plus (B) the number of Additional
Shares of Common Stock so issued or sold (or deemed so issued and sold).
(b) Certain Definitions. For the purpose of making any
-------------------
adjustment required under this subsection 5.7:
(i) "Additional Shares of Common Stock" shall mean all
---------------------------------
shares of Common Stock issued by the Company, whether or not subsequently
reacquired or retired by the Company, other than: (A) shares of Common Stock
issued or issuable upon conversion of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock; (B) any shares of the Company's
Common Stock (and/or options or warrants therefor) issued to employees,
officers, directors, contractors, advisors or consultants of the Company
pursuant to incentive agreements or plans unanimously approved by the Board of
Directors of the Company; (C) any shares of the Company's Common Stock or
Preferred Stock (and/or options or warrants therefor) issued or issuable in
connection with a key customer relationship of the Company or to parties
providing the Company with equipment leases, real property leases, loans, credit
lines, guaranties of indebtedness, cash price reductions or similar benefits
with non financing purposes unanimously approved by the Board of Directors of
the Company; or (D) securities issued pursuant to the acquisition of another
corporation or entity by the Company by consolidation, merger, purchase of all
or substantially all of the assets, or other reorganization in which the Company
acquires, in a single transaction or series of related transactions, all or
substantially all of the assets of such other corporation or entity or fifty
percent (50%) or more of the voting power of such other corporation or entity or
fifty percent (50%) or more of the equity ownership of such other entity.
(ii) The "Aggregate Consideration Received" by the Company
-------------------------------------
for any issue or sale (or deemed issue or sale) of securities shall (A) to the
extent it consists of cash, be computed at the gross amount of cash received by
the Company before deduction of any underwriting or similar commissions,
compensation or concessions paid or allowed by the Company in connection with
such issue or sale and without deduction of any expenses payable
13
<PAGE>
by the Company; (B) to the extent it consists of property other than cash, be
computed at the fair value of that property as determined in good faith by the
Board; and (C) if Additional Shares of Common Stock, Convertible Securities or
Rights or Options to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of the Company for a consideration which covers both,
be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or Rights or Options.
(iii) "Common Stock Equivalents Outstanding" shall mean the
------------------------------------
number of shares of Common Stock that is equal to the sum of (A) all shares of
Common Stock of the Company that are outstanding at the time in question, plus
(B) all shares of Common Stock of the Company issuable upon conversion of all
shares of Preferred Stock or other Convertible Securities that are outstanding
at the time in question, plus (C) all shares of Common Stock of the Company that
are issuable upon the exercise of Rights or Options that are outstanding at the
time in question assuming the full conversion or exchange into Common Stock of
all such Rights or Options that are Rights or Options to purchase or acquire
Convertible Securities into or for Common Stock.
(iv) "Convertible Securities" shall mean stock or other
----------------------
securities convertible into or exchangeable for shares of Common Stock.
(v) The "Effective Price" of Additional Shares of Common
--------------------
Stock shall mean the quotient determined by dividing the total number of
Additional Shares of Common Stock issued or sold, or deemed to have been issued
or sold, by the Company under this subsection 5.7, into the Aggregate
Consideration Received, or deemed to have been received, by the Company under
this subsection 5.7, for the issue of such Additional Shares of Common Stock;
and
(vi) "Rights or Options" shall mean warrants, options or
-----------------
other rights to purchase or acquire shares of Common Stock or Convertible
Securities.
(c) Deemed Issuances. For the purpose of making any adjustment
----------------
to theConversion Price of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock or Series F Preferred Stock required under this subsection 5.7, if the
Company issues or sells any Rights or Options or Convertible Securities and if
the Effective Price of the shares of Common Stock issuable upon exercise of such
Rights or Options and/or the conversion or exchange of Convertible Securities
(computed without reference to any additional or similar protective or
antidilution clauses) is less than the Conversion Price then in effect for a
series of Preferred Stock, then the Company shall be deemed to have issued, at
the time of the issuance of such Rights, Options or Convertible Securities, that
number of Additional Shares of Common Stock that is equal to the maximum number
of shares of Common Stock issuable upon exercise or conversion of such Rights,
Options or Convertible Securities upon their issuance and to have received, as
the Aggregate Consideration Received for the issuance of such shares, an amount
equal to the total amount of the consideration, if any, received by the Company
for the issuance of such Rights or Options or Convertible Securities, plus, in
the case of such Rights or Options, the minimum amounts of consideration, if
any, payable to the Company upon the exercise in full of such Rights or Options,
plus, in the case of Convertible Securities, the minimum amounts of
consideration, if
14
<PAGE>
any, payable to the Company (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the conversion or
exchange thereof; provided that:
-------- ----
(i) if the minimum amounts of such consideration cannot be
ascertained, but are a function of antidilution or similar protective clauses,
then the Company shall be deemed to have received the minimum amounts of
consideration without reference to such clauses;
(ii) if the minimum amount of consideration payable to the
Company upon the exercise of Rights or Options or the conversion or exchange of
Convertible Securities is reduced over time or upon the occurrence or non-
occurrence of specified events other than by reason of antidilution or similar
protective adjustments, then the Effective Price shall be recalculated using the
figure to which such minimum amount of consideration is reduced; and
(iii) if the minimum amount of consideration payable to the
Company upon the exercise of such Rights or Options or the conversion or
exchange of Convertible Securities is subsequently increased other than by
reason of antidilution or similar protective adjustments, then the Effective
Price shall again be recalculated using the increased minimum amount of
consideration payable to the Company upon the exercise of such Rights or Options
or the conversion or exchange of such Convertible Securities.
No further adjustment of the Conversion Price, adjusted upon the issuance
of such Rights or Options or Convertible Securities, shall be made as a result
of the actual issuance of shares of Common Stock on the exercise of any such
Rights or Options or the conversion or exchange of any such Convertible
Securities. If any such Rights or Options or the conversion rights represented
by any such Convertible Securities shall expire without having been fully
exercised, then the Conversion Price as adjusted upon the issuance of such
Rights or Options or Convertible Securities shall be readjusted to the
Conversion Price which would have been in effect had an adjustment been made on
the basis that the only shares of Common Stock so issued were the shares of
Common Stock, if any, that there actually issued or sold on the exercise of such
Rights or Options or rights of conversion or exchange of such Convertible
Securities, and such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all
such Rights or Options, whether or not exercised, plus the consideration
received for issuing or selling all such Convertible Securities actually
converted or exchanged, plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion or exchange of such Convertible
Securities, provided that such readjustment shall not apply to prior conversions
of Preferred Stock.
5.8. Certificate of Adjustment. In each case of an adjustment or
-------------------------
readjustment of the Conversion Price for a series of Preferred Stock, the
Company, at its expense, shall cause its Chief Financial Officer to compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
the Preferred Stock at the holder's address as shown in the Company's books.
15
<PAGE>
5.9. Fractional Shares. No fractional shares of Common Stock shall
-----------------
be issued upon any conversion of Preferred Stock. In lieu of any fractional
share to which the holder would otherwise be entitled, the Company shall pay the
holder cash equal to the product of such fraction multiplied by the Common
Stock's fair market value as determined in good faith by the Board as of the
date of conversion.
5.10. Reservation of Stock Issuable Upon Conversion. The Company
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
5.11. Notices. Any notice required by the provisions of this
-------
Section 5 to be given to the holders of shares of the Preferred Stock shall be
deemed given upon the earlier of actual receipt or deposit in the United States
mail, by certified or registered mail, return receipt requested, postage
prepaid, addressed to each holder of record at the address of such holder
appearing on the books of the Company.
5.12. No Impairment. The Company shall not avoid or seek to avoid the
-------------
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Preferred Stock
against impairment.
6. Restrictions and Limitations.
----------------------------
6.1. Class Protective Provisions. (a) The Company shall not,
---------------------------
without the approval, by vote or written consent, of the holders of a majority
of the Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock then outstanding, voting together as a single
class:
(1) redeem, repurchase, or otherwise acquire, directly or
indirectly, any shares of Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock or Series F Preferred Stock now or hereafter
outstanding;
(2) authorize or issue any other stock having rights or
preferences senior to or on a parity with the Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Series F Preferred Stock; or
(3) amend its Articles of Incorporation or Bylaws to
increase or decrease the authorized Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock or Series F Preferred Stock or to change the
rights, preferences, privileges, voting powers, qualifications, restrictions, or
limitations of the Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock or Series F Preferred Stock.
16
<PAGE>
(b) So long as 2,600,000 shares of Preferred Stock remain
outstanding (such number of shares being subject to proportional adjustment to
reflect combinations or subdivisions of such Preferred Stock or dividends
declared in shares of such stock), the Company shall not, without the approval,
by vote or written consent, of the holders of a majority of the Preferred Stock
then outstanding, voting as a single class:
(1) declare and/or pay any dividend on or declare or
make any other distribution (other than Permitted Repurchases), directly or
indirectly, on account of any shares of Common Stock now or hereafter
outstanding;
(2) authorize or issue any other stock having rights or
preferences senior to or on a parity with any series of Preferred Stock as to
dividend rights, redemption, voting or liquidation preferences;
(3) merge or consolidate with or into any corporation;
acquire all or substantially all of the assets or stock of another entity in
exchange for Company stock; or sell, convey, or otherwise encumber all or
substantially all the Company's assets in a single transaction or series of
related transactions; or engage in any other transaction or series of
transactions in which shareholders transfer more than fifty percent (50%) of the
voting power of the Company; or
(4) amend its Articles of Incorporation to increase or
decrease the authorized Preferred Stock or to change the rights, preferences,
privileges, voting powers, qualifications, restrictions, or limitations of the
Preferred Stock.
7. Miscellaneous
-------------
7.1. No Reissuance of Preferred Stock. No share or shares of
--------------------------------
Preferred Stock acquired by the Company by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Company shall be
authorized to issue.
7.2. Consent to Certain Transactions. Each holder of shares of
-------------------------------
Preferred Stock shall, by virtue of its acceptance of a stock certificate
evidencing Preferred Stock, be deemed to have consented, for purposes of
Sections 502, 503 and 506 of the California Corporations Code, to all Permitted
Repurchases.
7.3. Determination of "Fair Market Value" by the Board. In each case
-------------------------------------------------
herein where there is reference to the Board determining the fair market value
of property or assets, such reference shall be construed to mean that if holders
of a majority of the Preferred Stock object to the valuation set by the Board,
the Board shall appoint an independent appraiser, reasonably acceptable to the
holders of Preferred Stock, to determine the fair market value of such assets or
property.
17
<PAGE>
Exhibit 3.2
BYLAWS
OF
EXTRICITY SOFTWARE, INC.
(A California corporation)
As Adopted April 8, 1996 and amended April 17, 1998
<PAGE>
BYLAWS
OF
EXTRICITY SOFTWARE, INC.
A California Corporation
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Article I OFFICES................................................... 1
Section 1.1 Principal Office.................................. 1
Section 1.2: Other Offices..................................... 1
Article II DIRECTORS................................................ 1
Section 2.1: Exercise of Corporate Powers...................... 1
Section 2.2: Number............................................ 1
Section 2.3: Need Not Be Shareholders.......................... 2
Section 2.4: Compensation...................................... 2
Section 2.5: Election and Term of Office....................... 2
Section 2.6: Vacancies......................................... 2
Section 2.7: Removal........................................... 3
Section 2.8: Powers and Duties................................. 3
Article III MEETINGS OF DIRECTORS................................... 5
Section 3.1: Place of Meetings................................. 5
Section 3.2: Regular Meetings.................................. 6
Section 3.3: Special Meetings.................................. 6
Section 3.4: Notice of Special Meetings........................ 6
Section 3.5: Quorum............................................ 6
Section 3.6: Conference Telephone.............................. 6
</TABLE>
-1-
<PAGE>
BYLAWS
OF
EXTRICITY SOFTWARE, INC.
A California Corporation
TABLE OF CONTENTS (cont'd)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 3.7: Waiver of Notice and Consent........................ 7
Section 3.8: Action Without a Meeting............................ 7
Section 3.9: Committees.......................................... 7
Article IV COMMITTEES................................................. 7
Section 4.1: Appointment and Procedure........................... 7
Section 4.2: Executive Committee Powers.......................... 7
Section 4.3: Powers of Other Committees.......................... 7
Section 4.4: Limitations on Powers of Committees................. 7
Article V OFFICERS.................................................... 8
Section 5.1: Election and Qualifications......................... 8
Section 5.2: Term of Office and Compensation..................... 8
Section 5.3: Chief Executive Officer............................. 9
Section 5.4: Chairman of the Board............................... 9
Section 5.5: President........................................... 9
Section 5.6: President Pro Tem................................... 9
Section 5.7: Vice President...................................... 10
Section 5.8: Secretary........................................... 10
Section 5.9: Chief Financial Officer............................. 11
Section 5.10:Instruments in Writing.............................. 11
</TABLE>
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<PAGE>
BYLAWS
OF
EXTRICITY SOFTWARE, INC.
A California Corporation
TABLE OF CONTENTS (cont'd)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Article VI INDEMNIFICATION OF AGENTS..................................... 11
Section 6.1: Indemnification of Directors and Officers............ 11
Section 6.2: Advancement of Expenses.............................. 12
Section 6.3: Non-Exclusivity of Rights............................ 12
Section 6.4: Indemnification Contracts............................ 12
Section 6.5: Effect of Amendment.................................. 12
Article VII MEETINGS OF, AND REPORTS TO, SHAREHOLDERS.................... 13
Section 7.1: Place of Meetings.................................... 13
Section 7.2: Annual Meetings...................................... 13
Section 7.3: Special Meetings..................................... 13
Section 7.4: Notice of Meetings................................... 13
Section 7.5: Consent to Shareholders' Meetings.................... 14
Section 7.6: Quorum............................................... 15
Section 7.7: Adjourned Meetings................................... 15
Section 7.8: Voting Rights........................................ 15
Section 7.9: Action by Written Consents........................... 16
Section 7.10: Election of Directors................................ 16
Section 7.11: Proxies.............................................. 17
Section 7.12: Inspectors of Election............................... 17
</TABLE>
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<PAGE>
BYLAWS
OF
EXTRICITY SOFTWARE, INC.
A California Corporation
TABLE OF CONTENTS (cont'd)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 7.13: Annual Reports......................................... 18
Article VIII SHARES AND SHARE CERTIFICATES................................ 18
Section 8.1: Shares Held by Company................................. 18
Section 8.2: Certificates for Shares................................ 18
Section 8.3: Lost Certificates...................................... 18
Section 8.4: Restrictions on Transfer of Shares..................... 18
Article IX CONSTRUCTION OF BYLAWS WITH REFERENCE TO PROVISIONS OF LAW... 19
Section 9.1: Bylaw Provisions Construed as Additional and with
Provisions of Law...................................... 19
Section 9.2: Bylaw Provisions Contrary to or Inconsistent with
Provisions of Law...................................... 19
Article X CERTIFICATION, ADOPTION, AMENDMENT OR REPEAL OF BYLAWS....... 20
Section 10.1: By Shareholders........................................ 20
Section 10.2: By the Board of Directors.............................. 20
Section 10.3: Certification and Inspection of Bylaws................. 20
</TABLE>
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<PAGE>
BYLAWS
OF
EXTRICITY SOFTWARE, INC.
(a California corporation)
As Adopted April 8, 1996 and amended April 17, 1998
Article I
OFFICES
Section 1.1: Principal Office. The principal executive office for the
----------- ----------------
transaction of the business of this corporation (the "Company") shall be located
-------
at such place as the Board of Directors may from time to time decide. The Board
of Directors is hereby granted full power and authority to change the location
of the principal executive office from one location to another.
Section 1.2: Other Offices. One or more branch or other subordinate
----------- -------------
offices may at any time be fixed and located by the Board of Directors at such
place or places within or outside the State of California as it deems
appropriate.
Article II
DIRECTORS
Section 2.1: Exercise of Corporate Powers. Except as otherwise provided
----------- ----------------------------
by these Bylaws, by the Articles of Incorporation of the Company or by the laws
of the State of California now or hereafter in force, the business and affairs
of the Company shall be managed and all corporate powers shall be exercised by
or under the ultimate direction of a board of directors (the "Board of
--------
Directors").
- ---------
Section 2.2: Number. The authorized number of directors of the Company
----------- ------
shall be six (6). The authorized number of directors may be varied from time to
time by resolution of the Board of Directors, provided that the minimum
authorized number shall be not less than five (5) and the maximum authorized
number shall not be more than seven (7). Until changed by an amendment of this
Section by the shareholders of the Company, the authorized number of directors
of the Company may be varied by the Board of Directors, as opposed to being
fixed, within the range of the minimum and the maximum authorized numbers of
directors provided above. Any amendment to these Bylaws reducing such minimum
number of authorized directors to a number less than five (5) cannot be adopted
if the votes cast against its adoption at a
<PAGE>
meeting, or the shares not consenting in the case of action by written consent,
are equal to more than 16-2/3% of the outstanding shares entitled to vote.
Section 2.3: Need Not Be Shareholders. The directors of the Company need
----------- ------------------------
not be shareholders of this Company.
Section 2.4: Compensation. Directors and members of committees may
----------- ------------
receive such compensation, if any, for their services as may be fixed or
determined by resolution of the Board of Directors. Nothing herein contained
shall be construed to preclude any director from serving the Company in any
other capacity and receiving compensation therefor.
Section 2.5: Election and Term of Office. The directors shall he elected
----------- ---------------------------
annually by the shareholders at the annual meeting of the shareholders. The term
of office of the directors shall begin immediately after their election and
shall continue until the next annual meeting of the shareholders and until their
respective successors are elected. A reduction of the authorized number of
directors shall not shorten the term of any incumbent director or remove any
incumbent director prior to the expiration of such director's term of office.
Section 2.6: Vacancies. A vacancy or vacancies on the Board of Directors
----------- ---------
shall exist:
(a) in the case of the death of any director; or
(b) in the case of the resignation or removal of any director; or
(c) if the authorized number of directors is increased; or
(d) if the shareholders fail, at any annual meeting of shareholders at
which any director is elected, to elect the full authorized number of directors
at that meeting.
The Board of Directors may declare vacant the office of a director if he or she
is declared of unsound mind by an order of court or convicted of a felony or if,
within 60 days after notice of his or her election, he or she does not accept
the office. Any vacancy, except for a vacancy created by removal of a director
as provided in Section 2.7 hereof, may be filled by a person selected by a
majority of the remaining directors then in office, whether or not less than a
quorum, or by a sole remaining director, Vacancies occurring in the Board of
Directors by reason of removal of directors shall be filled only by approval of
shareholders. The shareholders may elect a director at any time to fill any
vacancy not filled by the directors. Any such election by the written consent of
shareholders, other than to fill a vacancy created by removal, requires the
consent of shareholders holding a majority of the outstanding shares entitled to
vote. If, after the filling of any vacancy by the directors, the directors then
in office who have been elected by the shareholders shall constitute less than a
majority of the directors then in office, any holder or holders of an aggregate
of 5% or more of the total number of shares at that time having the right to
vote for such directors may call a special meeting of shareholders to be held to
elect the entire Board of Directors. The term of office of any director then in
office shall terminate upon the election of such director's successor. Any
director may resign effective upon giving written notice to the Chairman of the
Board, if any, the President, the Secretary or the Board of
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<PAGE>
Directors, unless the notice specifies a later time for the effectiveness of
such resignation. After the notice is given and if the resignation is effective
at a future time, a successor may be elected or appointed to take office when
the resignation becomes effective.
Section 2.7: Removal. The entire Board of Directors or any individual
----------- -------
director may be removed from office without cause by an affirmative vote of
shareholders holding a majority of the outstanding shares entitled to vote. if
the entire Board of Directors is not removed, however, then no individual
director shall be removed if the votes cast against removal of that director,
plus the votes not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively in an election at which the following
were true:
(a) the same total number of votes were cast, or, if such action is taken
by written consent, all shares entitled to vote were voted; and
(b) the entire number of directors authorized at the time of the director's
most recent election were when being elected.
If any or all directors are so removed, new directors may be elected at the same
meeting or at a subsequent meeting. If at any time a class or series of shares
is entitled to elect one or more directors under authority granted by the
Articles of Incorporation, the provisions of this Section 2.7 shall apply to the
vote of that class or series and not to the vote of the outstanding shares as a
whole.
Section 2.8: Powers and Duties. Without limiting the generality or extent
----------- -----------------
of the general corporate powers to be exercised by the Board of Directors
pursuant to Section 2.1 of these Bylaws, it is hereby provided that the Board of
Directors shall have full power with respect to the following matters:
(a) To purchase, lease and acquire any and all kinds of property, real,
personal or mixed, and at its discretion to pay therefor in money, in property
and/or in stocks, bonds, debentures, or other securities of the Company.
(b) To enter into any and all contracts and agreements which in its
judgment may be beneficial to the interests and purposes of the Company.
(c) To fix and determine and to vary from time to time the amount or
amounts to be set aside or retained as reserve funds or as working capital of
the Company or for maintenance, repairs, replacements or enlargements of its
properties.
(d) To declare and pay dividends in cash, shares and/or property out of any
funds of the Company at the time legally available for the declaration and
payment of dividends on its shares.
(e) To adopt such rules and regulations for the conduct of its meetings and
the management of the affairs of the Company as it may deem proper.
-3-
<PAGE>
(f) To prescribe the manner in which and the person or persons by whom any
or all of the checks, drafts, notes, bills of exchange, contracts and other
corporate instruments shall be executed.
(g) To accept resignations of directors; to declare vacant the office of a
director as provided in Section 2.6 hereof; and, in case of vacancy in the
office of directors, to fill the same to the extent provided in Section 2.6
hereof.
(h) To create offices in addition to those for which provision is made by
law or these Bylaws; to elect and remove at pleasure all officers of the
Company, fix their terms of office, prescribe their titles, powers and duties,
limit their authority and fix their salaries in any way it may deem advisable
that is not contrary to law or these Bylaws.
(i) To designate one or more persons to perform the duties and exercise,
the powers of any officer of the Company during the temporary absence or
disability of such officer.
(j) To appoint or employ and to remove at pleasure such agents and
employees as it may see fit, to prescribe their titles, powers and duties, limit
their authority and fix their salaries in any way it may deem advisable that is
not contrary to law or these Bylaws.
(k) To fix a time in the future, which shall not be more than 60 days nor
less than 10 days prior to the date of the meeting nor more than 60 days prior
to any other action for which it is fixed, as a record date for the
determination of the shareholders entitled to notice of and to vote at any
meeting, or entitled to receive any payment of any dividend or other
distribution, or allotment of any rights, or entitled to exercise any rights in
respect of any other lawful action; and in such case only shareholders of record
on the date so fixed shall be entitled to notice of and to vote at the meeting
or to receive the dividend, distribution or allotment of rights or to exercise
the rights, as the case may be, notwithstanding any transfer of any shares on
the books of the Company after any record date fixed as aforesaid. The Board of
Directors may close the books of the Company against transfers of shares during
the whole or any part of such period.
(l) To fix and locate from time to time the principal office for the
transaction of the business of the Company and one or more branch or other
subordinate offices of the Company within or without the State of California; to
designate any place within or without the State of California for the holding of
any meeting or meetings of the shareholders or the Board of Directors, as
provided in Sections 3.1 and 7.1 hereof; to adopt, make and use a corporate
seal, and to prescribe the forms of certificates for shares and to alter the
form of such seal and of such certificates from time to time as in its judgment
it may deem best, provided such seal and such certificates shall at all times
comply with the provisions of law now or hereafter in effect.
(m) To authorize the issuance of shares of stock of the Company in
accordance with the laws of the State of California and the Articles of
Incorporation.
(n) Subject to the limitation provided in Section 10.2 hereof, to adopt,
amend or repeal from time to time and at any time these Bylaws and any and all
amendments thereof.
-4-
<PAGE>
(o) To borrow money, make guarantees of indebtedness or other obligations
of third parties (except to the extent such guarantees are not permitted by
Section 2.8 (p) of these Bylaws, Section 315 of the California Corporations Code
(or any successor provision) or other applicable law) and incur indebtedness on
behalf of the Company, including the power and authority to borrow money from
any of the shareholders, directors or officers of the Company; and to cause to
be executed and delivered therefor in the corporate name promissory notes,
bonds, debentures, deeds of trust, mortgages, pledges (or other transfers of
property as security or collateral for a debt), or other evidences of debt and
securities therefor; and the note or other obligation given for any indebtedness
of the Company, signed officially by any officer or officers thereunto duly
authorized by the Board of Directors, shall be binding on the Company.
(p) To approve a loan of money or property to any officer or director of
the Company or of any parent or subsidiary company, to guarantee the obligation
of any such officer or director or to approve an employee benefit plan
authorizing such a loan or guarantee to any such officer or director, but only
if (i) the loan or guarantee is made pursuant to a transaction, plan or
agreement (including a stock purchase plan or agreement or stock option plan or
agreement) permitted by Section 405 of the California Corporations Code; or (ii)
the transaction, or an employee benefit plan authorizing such loans or
guarantees after disclosure of the right under such plan to include officers or
directors thereunder, is approved by any vote of the shareholders of the Company
then required under Section 3.5 of the California Corporations Code (or any
successor provision) or other then applicable law; provided however, that
-------- -------
notwithstanding the foregoing, if the Company has outstanding shares held of
record by 100 or more persons (determined as provided in Section 605 of the
California Corporations Code or any successor provision) on the date of approval
by the Board of Directors of a loan or guarantee to an officer of the Company,
and this Section 2.8(p) has been approved by the outstanding shares (as defined
in Section 152 of the California Corporations Code or any successor provision),
then the Board of Directors alone (without the need for any further approval by
the Company's shareholders) may, by a vote of the Board of Directors sufficient
for approval without counting the vote of any interested director or directors,
approve such a loan or guarantee to an officer of the Company, whether or not
such officer is a director, or an employee benefit plan authorizing such a loan
or guarantee to an officer of the Company, if the Board of Directors determines
(without counting the vote of any interested director or directors) that such
loan, guarantee or plan may reasonably be expected to benefit the Company.
(q) Generally to do and perform every act and thing whatsoever that may
pertain to the office of a director or to a board of directors.
Article III
MEETINGS OF DIRECTORS
Section 3.1: Place of Meetings. Meetings (whether regular, special or
----------- -----------------
adjourned) of the Board of Directors of the Company shall be held at the
principal executive office of the Company or at any other place within or
outside the State of California which may be designated
-5-
<PAGE>
from time to time by resolution of the Board of Directors or which is designated
in the notice of the meeting.
Section 3.2: Regular Meetings. Regular meetings of the Board of Directors
----------- ----------------
shall be held after the adjournment of each annual meeting of the shareholders
(which regular directors' meeting shall be designated the "Regular Annual
Meeting") and at such other times as may be designated from time to time by
resolution of the Board of Directors. Notice of the time and place of all
regular meetings shall be given in the same manner as for special meetings,
except that no such notice need be given if (a) the time and place of such
meetings are fixed by the Board of Directors or (b) the Regular Annual Meeting
is held at the principal executive office of this Corporation and on the date
specified by the Board of Directors.
Section 3.3: Special Meetings. Special meetings of the Board of Directors
----------- ----------------
may be called at any time by the Chairman of the Board, if any, or the
President, or by any two or more
directors.
Section 3.4: Notice of Special Meetings. Special meetings of the Board of
----------- --------------------------
Directors shall be held upon no less than 4 days' notice by mail or 48 hours'
notice delivered personally or by telephone or telegraph to each director.
Notice need not be given to any director who signs a waiver of notice or a
consent to holding the meeting or an approval of the minutes thereof, whether
before or after the meeting, or who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to such director. All
such waivers, consents and approvals shall be filed with the corporate records
or made a part of the minutes of the meeting. Any oral notice given personally
or by telephone may be communicated either to the director or to a person at the
home or office of the director who the person giving the notice has reason to
believe will promptly communicate it to the director. A notice or waiver of
notice need not specify the purpose of any meeting of the Board of Directors. If
the address era director is not shown on the records of the Company and is not
readily ascertainable, notice shall be addressed to him or her at the city or
place in which meetings of the directors are regularly held. If a meeting is
adjourned for more than 24 hours, notice of any adjournment to another time or
place shall be given prior to the time of the adjourned meeting to all directors
not present at the time of adjournment.
Section 3.5: Quorum. A majority of the authorized number of directors
----------- ------
constitutes a quorum of the Board of Directors for the transaction of business.
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 is the act of the Board of
Directors subject to provisions of law relating to interested directors and
indemnification of agents of the Company. A majority of the directors present,
whether or not a quorum is present, may adjourn any meeting to another time and
place. A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for such meeting.
Section 3.6: Conference Telephone. Members of the Board of Directors may
----------- --------------------
participate in a meeting through use of conference telephone or similar
communications equipment, so long as
-6-
<PAGE>
all directors participating in such meeting can hear one another. Participation
in a meeting pursuant to this Section constitutes presence in person at such
meeting.
Section 3.7: Waiver of Notice and Consent. The transactions of any
----------- ----------------------------
meeting of the Board of Directors, however called and noticed or wherever held,
shall be as valid as though had at a meeting duly held after regular call and
notice if a quorum is present, and if, either before or after the meeting, each
of the directors not present signs a written waiver of notice, a Consent to
holding such meeting or an approval of the minutes thereof. All such waivers,
consents and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting:
Section 3.8: Action Without a Meeting. Any action required or permitted
----------- ------------------------
by law to be taken by the Board of Directors may be taken without a meeting, if
all members of the Board of Directors shall individually or collectively consent
in writing to the taking of such action. Such written consent or consents shall
be filed with the minutes of the proceedings of the Board of Directors. Such
action by written consent shall have the same force and effect as a unanimous
vote of such directors at a duly held meeting.
Section 3.9: Committees. The provisions of this Article apply also to
----------- ----------
committees of the Board of Directors and action by such committees.
Article IV
COMMITTEES
Section 4.1: Appointment and Procedure. The Board of Directors may, by
----------- -------------------------
resolution adopted by a majority of the authorized number of directors, appoint
from among its members one or more committees, including without limitation an
executive committee, an audit committee and a compensation committee, of two or
more directors. Each committee may make its own rules of procedure subject to
Section 3.9 hereof, and shall meet as provided by such rules or by a resolution
adopted by the Board of Directors (which resolution shall take precedence). A
majority of the members of the committee shall constitute a quorum, and in every
case the affirmative vote of a majority of all members of the committee shall be
necessary to the adoption of any resolution.
Section 4.2: Executive Committee Powers. During the intervals between the
----------- --------------------------
meetings of the Board of Directors, the Executive Committee, if any, in all
cases in which specific directions shall not have been given by the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Company in
such manner as the Executive Committee may deem best for the interests of the
Company.
Section 4.3: Powers of Other Committees. Other committees shall have such
----------- --------------------------
powers as are given them in a resolution of the Board of Directors.
Section 4.4: Limitations on Powers of Committees. No committee shall have
----------- -----------------------------------
the power to act with respect to:
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<PAGE>
(a) any action for which the laws of the Slate of California also require
shareholder approval or approval of the outstanding shares;
(b) the filling of vacancies on the Board of Directors or in any committee;
(c) the fixing of compensation of the directors for serving on the Board of
Directors or on any committee;
(d) the amendment or repeal of these Bylaws or the adoption of new Bylaws;
(e) the amendment or repeal of any resolution of the Board of Directors
which by its express terms is not amendable or repealable;
(f) a distribution to the shareholders of the Company, except at a rate or
in a periodic amount or within a price range as set forth in the Articles of
Incorporation or determined by the Board of Directors; and
(g) the appointment of other committees of the Board of Directors or the
members thereof.
Article V
OFFICERS
Section 5.1: Election and Qualifications. The officers of the Company
----------- ---------------------------
shall consist of a President and/or a Chief Executive Officer, a Secretary, a
Chief Financial Officer and such other officers, including, but not limited to,
a Chairman of the Board of Directors, one or more Vice Presidents, a Treasurer,
and Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers,
as the Board of Directors shall deem expedient, who shall be chosen in such
manner and hold their offices for such terms as the Board of Directors may
prescribe. Any number of offices may be held by the same person. Any Vice
President, Assistant Treasurer or Assistant Secretary, respectively, may
exercise any of the powers of the President, the Chief Financial Officer or the
Secretary, respectively, as directed by the Board of Directors, and shall
perform such other duties as are imposed upon him or her by these Bylaws or the
Board of Directors.
Section 5.2: Term of Office and Compensation. The term of office and
----------- -------------------------------
salary of each of said officers and the manner and time of the payment of such
salaries shall be fixed and determined by the Board of Directors and may be
altered by said Board of Directors from time to time at its pleasure, subject to
the rights, if any, of any officer under any contract of employment. Any officer
may resign at any time upon written notice to the Company, without prejudice to
the rights, if any, of the Company under any contract to which the officer is a
party. If any vacancy occurs in any office of the Company, the Board of
Directors may appoint a successor to fill such vacancy.
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<PAGE>
Section 5.3: Chief Executive Officer. Subject to the control of the Board
----------- -----------------------
of Directors and such supervisory powers, if any, as may be given by the Board
of Directors, the powers and duties of the Chief Executive Officer of the
Company are:
(a) To act as the general manager and, subject to the control of the Board
of Directors, to have general supervision, direction and control of the business
and affairs of the Company.
(d) To preside at all meetings of the shareholders and, in the absence of
the Chairman of the Board of Directors or if there be no Chairman, at all
meetings of the Board of Directors.
(c) To call meetings of the shareholders and meetings of the Board of
Directors to be held at such times and, subject to the limitations prescribed by
law or by these Bylaws, at such places as he or she shall deem proper.
(d) To affix the signature of the Company to all deeds, conveyances,
mortgages, leases, obligations, bonds, certificates and other papers and
instruments in writing which have been authorized by the Board of Directors or
which, in the judgment of the Chief Executive Officer, should be executed on
behalf of the Company; to sign certificates for shares of stock of the Company;
and, subject to the direction of the Board of Directors, to have general charge
of the property of the Company and to supervise and control all officers, agents
and employees of the Company.
The President shall be the Chief Executive Officer of the Company unless
the Board of Directors shall designate the Chairman of the Board or another
officer to be the Chief Executive Officer. If there is no President, then the
Chairman of the Board shall be the Chief Executive Officer.
Section 5.4: Chairman of the Board. The Chairman of the Board of
----------- ---------------------
Directors, if there be one, shall have the power to preside at all meetings of
the Board of Directors and shall have such other powers and shall be subject to
such other duties as the Board of Directors may from time to time prescribe.
Section 5.5: President. Subject to the supervisory powers of the Chief
----------- ---------
Executive Officer, if not the President, and to such supervisory powers as may
he given by the Board of Directors to the Chairman of the Board, if one is
elected, or to any other officer, the President shall have the general powers
and duties of management usually vested in the office of president of a
corporation and shall have such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws.
Section 5.6: President Pro Tem. If neither the Chairman of the Board of
----------- -----------------
Directors, the President, nor any Vice President is present at any meeting of
the Board of Directors, a President pro tem may be chosen by the directors
present at the meeting to preside and act at such meeting. If neither the
President nor any Vice President is present at any meeting of the shareholders,
a President pro tem may be chosen by the shareholders present at the meeting to
preside at such meeting.
-9-
<PAGE>
Section 5.7: Vice President. The titles, powers and duties of the Vice
----------- --------------
President or Vice Presidents, if any, shall be as prescribed by the Board of
Directors. In case of the resignation, disability or death of the President, the
Vice President, or one of the Vice Presidents, shall exercise all powers and
duties of the President. If there is more than one Vice President, the order in
which the Vice Presidents shall succeed to the powers and duties of the
President shall be as fixed by the Board of Directors.
Section 5.8: Secretary. The powers and duties of the Secretary are:
----------- ---------
(a) To keep a book of minutes at the principal executive office of the
Company, or such other place as the Board of Directors may order, of all
meetings of its directors and shareholders with the time and place of holding of
such meeting, whether regular or special, and, if special, how authorized, the
notice thereof given, the names of those present at directors' meetings, the
number of shares present or represented at shareholders' meetings and the
proceedings thereof.
(b) To keep the seal of the Company and to affix the same to all
instruments which may require it.
(c) To keep or cause to be kept at the principal executive office of the
Company, or at the office of the transfer agent or agents, a record of the
shareholders of the Company, giving the names and addresses of all shareholders
and the number and class of shares held by each, the number and date of
certificates issued for shares and the number and date of cancellation of every
certificate surrendered for cancellation.
(d) To keep a supply of certificates for shares of the Company, to fill in
all certificates issued, and to make a proper record of each such issuance;
provided that, so long as the Company shall have one or more duly appointed and
acting transfer agents of the shares, or any class or series of shares, of the
Company, such duties with respect to such shares shall be performed by such
transfer agent or transfer agents.
(e) To transfer upon the share books of the Company any and all shares of
the Company; provided that, so long as the Company shall have one or more duly
appointed and acting transfer agents of the shares, or any class or series of
shares, of the Company, such duties with respect to such shares shall be
performed by such transfer agent or transfer agents, and the method of transfer
of each certificate shall be subject to the reasonable regulations of the
transfer agent to whom the certificate is presented for transfer and, if the
Company then has one or more duly appointed and acting registrars, subject to
the reasonable regulations of the registrar to which a new certificate is
presented for registration; and, provided further, that no certificate for
shares of stock shall be issued or delivered or, if issued or delivered, shall
have any validity whatsoever until and unless it has been signed or
authenticated in the manner provided in Section 8.2 hereof.
(f) To make service and publication of all notices that may be necessary or
proper in connection with meetings of the Board of Directors of the shareholders
of the Company. In case of the absence, disability, refusal or neglect of the
Secretary to make service or publication of
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<PAGE>
any notices, then such notices may be served and/or published by the President
or a Vice President, or by any person thereunto authorized by either of them, or
by the Board of Directors, or by the holders of a majority of the outstanding
shares of the Company.
(g) Generally to do and perform all such duties as pertain to such office
and as may be required by the Board of Directors.
Section 5.9: Chief Financial Officer. The powers and duties of the Chief
----------- -----------------------
Financial Officer are:
(a) To supervise and control the keeping and maintaining of adequate and
correct accounts of the Company's properties and business transactions,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, surplus and shares. The books of account shall at all
reasonable times be open to inspection by any director.
(b) To have the custody of all funds, securities, evidences of
indebtedness and other valuable documents of the Company and, at his or her
discretion, to cause any or all thereof to be deposited for the account of the
Company with such depository as may be designated from time to time by the Board
of Directors.
(c) To receive or cause to be received, and to give or cause to be given,
receipts and acquittances for monies paid in for the account of the Company.
(d) To disburse, or cause to be disbursed, all funds of the Company as may
be directed by the President or the Board of Directors, taking proper vouchers
for such disbursements.
(e) To render to the President or to the Board of Directors, whenever
either may require, accounts of all transactions as Chief Financial Officer and
of the financial condition of the Company.
(l) Generally to do and perform all such duties as pertain to such office
and as may be required by the Board of Directors.
Section 5.10: Instruments in Writing. All checks, drafts, demands for
------------ ----------------------
money, notes and written contracts of the Company shall be signed by such
officer or officers, agent or agents, as the Board of Directors may from time to
time designate. No officer, agent, or employee of the Company shall have the
power to bind the Company by contract or otherwise unless authorized to do so by
these Bylaws or by the Board of Directors.
Article VI
INDEMNIFICATION
Section 6.1: Indemnification of Directors and Officers. The Company
----------- -----------------------------------------
shall indemnify each person who was or is a party, or is threatened to be made a
party, to any threatened, pending
-11-
<PAGE>
or completed action or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding") by reason of the fact that such person is or was
----------
a director or officer of the Company, or is or was serving at the request of the
Company as a director or officer of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or was a director or
officer of a foreign or domestic corporation which was a predecessor corporation
of the Company or of another enterprise at the request of such predecessor
corporation, to the fullest extent permitted by the California Corporations
Code, against all expenses, including, without limitation, attorneys' fees and
any expenses of establishing a right to indemnification, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with such Proceeding, and such indemnification shall continue as to a person who
has ceased to be such a director or officer, and shall inure to the benefit of
the heirs, executors and administrators of such person; provided, however, that
-------- -------
the Company shall indemnify any such person seeking indemnity in connection with
a Proceeding (or part thereof) initiated by such person only if such Proceeding
(or part thereof) was authorized by the Board of Directors of the Company.
Section 6.2: Advancement of Expenses. The Company shall pay all expenses
----------- -----------------------
incurred by such a director or officer in defending any Proceeding as they are
incurred in advance of its final disposition; provided, however, that the
payment of such expenses incurred by a director or officer in advance of the
final disposition of a Proceeding shall be made only upon receipt by the Company
of an agreement by or on behalf of such director or officer to repay such amount
if it shall be determined ultimately that such person is not entitled to be
indemnified under this Article VI or otherwise; and provided further that the
Company shall not be required to advance any expenses to a person against whom
the Company brings an action, alleging that such person committed an act or
omission not in good faith or that involved intentional misconduct or a knowing
violation of law, or that was contrary to the best interest of the Company, or
derived an improper personal benefit from a transaction.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any
----------- -------------------------
person in this Article VI shall not be deemed exclusive of any other rights that
such person may have or hereafter acquire under any statute, by law, agreement,
vote of shareholders or disinterested directors or otherwise, both as to action
in an official capacity and as to action in another capacity while holding such
office. Additionally, nothing in this Article VI shall limit the ability of the
Company, in its discretion, to indemnify or advance expenses to persons whom the
Company is not obligated to indemnify or advance expenses to pursuant to this
Article VI.
Section 6.4: Indemnification Contracts. The Board of Directors is
----------- -------------------------
authorized to cause the Company to enter into a contract with any director,
officer, employee or agent of the Company, or any person serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, providing for
indemnification rights equivalent to or, if the Board of Directors so
determines, greater than (to the extent permitted by the Company's Articles of
Incorporation and the California Corporations Code) those provided for in this
Article VI.
Section 6.5: Effect of Amendment. Any amendment, repeal or modification
----------- -------------------
of any provision of this Article VI shall be prospective only, and shall not
adversely affect any right or
-12-
<PAGE>
protection conferred on a person pursuant to this Article VI and existing at the
time of such amendment, repeal or modification.
Article VII
MEETINGS OF, AND REPORTS TO, SHAREHOLDERS
Section 7.1: Place of Meetings. Meetings (whether regular, special or
----------- -----------------
adjourned) of the shareholders of the Company shall be held at the principal
executive office for the transaction of business of the Company, or at any place
within or outside the State of California which may be designated by written
consent of all the shareholders entitled to vote thereat, or which may be
designated by resolution of the Board of Directors. Any meeting shall be valid
wherever held if held by the written consent of all the shareholders entitled to
vote thereat, given either before or after the meeting and filed with the
Secretary of the Company.
Section 7.2: Annual Meetings. The annual meetings of the shareholders
----------- ---------------
shall be held at the place provided pursuant to Section 7.1 hereof and at such
time in a particular year as may be designated by written consent of all the
shareholders entitled to vote thereat or which may be designated by resolution
of the Board of Directors of the Company. Said annual meetings shall be held for
the purpose of the election of directors, for the making of reports of the
affairs of the Company and for the transaction of such other business as may
properly come before the meeting.
Section 7.3: Special Meetings. Special meetings of the shareholders for
----------- ----------------
any purpose or purposes whatsoever may be called at any time by the President,
the Chairman of the Board of Directors or by the Board of Directors, or by two
or more members thereof, or by one or more holders of shares entitled to cast
not less than 10% of the votes at the meeting. Upon request in writing sent by
registered mail to the Chairman of the Board of Directors, President, Vice
President or Secretary, or delivered to any such officer in person, by any
person entitled to call a special meeting of shareholders, it shall be the duty
of such officer forthwith to cause notice to be given to the shareholders
entitled to vote that a meeting will be held at a time requested by the person
or persons calling the meeting, which (except where called by the Board of
Directors) shall be not less than 35 days nor more than 60 days after the
receipt of such request. If the notice is not given within 120 days after
receipt of the request, the person entitled to call the meeting may give the
notice. Notices of meetings called by the Board of Directors shall be given in
accordance with Section 7.4.
Section 7.4: Notice of Meetings. Notice of any meeting of shareholders
----------- ------------------
shall be given in writing not less than 10 (or, if sent by third-class mail, 30)
nor more than 60 days before the date of the meeting to each shareholder
entitled to vote thereat by the Secretary or an Assistant Secretary, or such
other person charged with that duty, or if there be no such officer or person,
or in case of his or her neglect or refusal, by any director or shareholder. The
notice shall state the place, date and hour of the meeting and (a) in the case
of a special meeting, the general nature of the business to be transacted, and
no other business may be transacted, or (b) in the case of the annual meeting,
those matters which the Board of Directors, at the time of the mailing of the
<PAGE>
notice, intends to present for action by the shareholders, but any proper matter
may be presented at the meeting for such action, except that notice must be
given or waived in writing of any proposal relating to approval of contracts
between the Company and any director of the Company, amendment of the Articles
of Incorporation, reorganization oft he Company or winding up of the affairs of
the Company. The notice of any meeting at which directors are to be elected
shall include the names of nominees intended at the time of the notice to be
presented by the Board of Directors for election. Notice of a shareholders'
meeting or any report shall be given to any shareholder, either (a) personally
or (b) by first-class mail, or, in case the Company has outstanding shares held
of record by 500 or more persons on the record date for the shareholders'
meeting, notice may be sent by third-class mail, or other means of written
communication, charges prepaid, addressed to such shareholder at such
shareholder's address appearing on the books of the Company or given by such
shareholder to the Company for the purpose of notice. If a shareholder gives no
address or no such address appears on the books of the Company, notice shall be
deemed to have been given if sent by mail or other means of written
communication addressed to the place where the principal executive office of the
Company is located, or if published at least once in a newspaper of general
circulation in the county in which such office is located. The notice or report
shall be deemed to have been given at the time when delivered personally or
deposited in the United States mail, postage prepaid, or sent by other means of
written communication and addressed as hereinbefore provided. An affidavit or
declaration of delivery or mailing of any notice or report in accordance with
the provisions of this Section 7.4, executed by the Secretary, Assistant
Secretary or any transfer agent, shall be prima facie evidence of the giving of
the notice or report. If any notice or report addressed to the shareholder at
the address of such shareholder appearing on the books of the Company is
returned to the Company by the United States Postal Service marked to indicate
that the United States Postal Service is unable to deliver the notice or report
to the shareholder at such address, all future notices or reports shall be
deemed to have been duly given without further mailing if the same shall be
available for the shareholder upon written demand of the shareholder at the
principal executive office of the Company for a period of one year from the date
of the giving of the notice or report to all other shareholders.
Section 7.5: Consent to Shareholders' Meetings. The transactions of any
----------- ---------------------------------
meeting of shareholders, however called and noticed, and wherever held, are as
valid as though they had taken place at a meeting duly held after regular call
and notice, if the following conditions are met:
(a) a quorum is present, either in person or by proxy, and
(b) either before or after the meeting, each of the shareholders entitled
to vote, who was not present in person or by proxy, signs a written waiver of
notice or a consent to the holding of such meeting or an approval of the minutes
thereof. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Attendance of a person at a meeting shall constitute both a waiver of notice of
and presence at such meeting, except: (a) when the person objects, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened; or (b) when
-14-
<PAGE>
the person expressly makes an objection at some time during the meeting to the
consideration of matters required by law to be included in the notice but not so
included.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of shareholders need be specified in any written waiver of
notice, consent to the holding of the meeting or approval of the minutes
thereof, except as to approval of contracts between the Company and any of its
directors, amendment of the Articles of Incorporation, reorganization of the
Company or winding up the affairs of the Company.
Section 7.6: Quorum. The presence in person or by proxy of the holders of
----------- ------
a majority of the shares entitled to vote at any meeting of the shareholders
shall constitute a quorum for the transaction of business. Shares shall not be
counted to make up a quorum for a meeting if voting of such shares at the
meeting has been enjoined or for any reason they cannot be lawfully voted at the
meeting. Shareholders present at a duly called or held meeting at which a quorum
is present may continue to transact business until adjournment notwithstanding
the withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum. Except as provided herein, the affirmative vote
of a majority of the shares represented and voting at a duly held meeting at
which a quorum is present (which shares voting affirmatively also constitute at
least a majority of the required quorum) shall be the act of the shareholders,
unless the vote of a greater number or voting by classes is required.
Section 7.7: Adjourned Meetings. Any shareholders' meeting, whether or
----------- ------------------
not a quorum is present, may be adjourned from time to time by the vote of a
majority of the shares, the holders of which are either present in person or
represented by proxy thereat, but, except as provided in Section 7.6 hereof, in
the absence of a quorum, no other business may be transacted at such meeting.
When a meeting is adjourned for more than 45 days or if after adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote at a
meeting. Except as aforesaid, it shall not be necessary to give any notice of
the time and place of the adjourned meeting or of the business to be transacted
thereat other than by announcement at the meeting at which such adjournment is
taken. At any adjourned meeting the shareholders may transact any business which
might have been transacted at the original meeting.
Section 7.8: Voting Rights. Only persons in whose names shares entitled
----------- -------------
to vote stand on the stock records of the Company at:
(a) the close of business on the business day immediately preceding the
day on which notice is given; or
(b) if notice is waived, at the close of business on the business day
immediately preceding the day on which the meeting is held; or
(c) if some other day be fixed for the determination of shareholders of
record pursuant to Section 2.8(k) hereof, then on such other day, shall be
entitled to vote at such meeting.
-15-
<PAGE>
The record date for determining shareholders entitled to give consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors has been taken, shall be the day on which the first written consent
is given. In the absence of any contrary provision in the Articles of
Incorporation or in any applicable statute relating to the election of directors
or to other particular matters, each such person shall be entitled to one vote
for each share.
Section 7.9: Action by Written' Consents. Any action which may be taken
----------- ---------------------------
at any annual or special meeting of shareholders may be taken without a meeting
and without prior notice, if a consent in writing, setting forth the action so
taken, shall be signed by holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Unless the consents of all shareholders entitled to vote have been
solicited in writing, the Company shall provide notice of any shareholder
approval obtained without a meeting by less than unanimous written consent to
those shareholders entitled to vote but who have not yet consented in writing at
least 10 days before the consummation of the following actions authorized by
such approval: (a) contracts between the Company and any of its directors; (b)
indemnification of any person; (c) reorganization of the Company; or (d)
distributions to shareholders upon the winding-up of the affairs of the Company.
In addition, the Company shall provide, to those shareholders entitled to vote
who have not consented in writing, prompt notice of the taking of any other
corporate action approved by the shareholders without a meeting by less than
unanimous written consent. All notices given hereunder shall conform to the
requirements of Section 7.4 hereto and applicable law. When written consents are
given with respect to any shares, the), shall be given by and accepted from the
persons in whose names such shares stand on the books of the Company at the time
such respective consents are given, or their proxies. Any shareholder giving a
written consent (including any shareholder's proxy holder, or a transferee of
the shares or a personal representative of the shareholder, or their respective
proxy holders) may revoke the consent by a writing. This writing must be
received by the Company prior to the time that written consents of the number of
shares required to authorize the proposed action have been filed with the
Secretary of the Company. Such revocation is effective upon its receipt by the
Secretary of the Company. Notwithstanding anything herein to the contrary, and
subject to Section 305(b) of the California Corporations Code, directors may not
be elected by written consent except by unanimous written consent of all shares
entitled to vote for the election of directors.
Section 7.10: Election of Directors. Every shareholder entitled to vote
------------ ---------------------
at any election of directors of the Company may cumulate such shareholder's
votes and give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of votes to which the shareholder's
shares are normally entitled, or distribute the shareholder's votes on the same
principle among as many candidates as such shareholder thinks fit. No
shareholder, however, may cumulate such shareholder's votes for one or more
candidates unless such candidate's or candidates' names have been placed in
nomination prior to the voting and the shareholder has given notice at the
meeting, prior to voting, of such shareholder's intention to cumulate such
shareholder's votes. If any one shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination. The
candidates receiving the highest number of affirmative votes of the shares
entitled to be voted for them up to the
-16-
<PAGE>
number of directors to be elected by such shares shall be declared elected.
Votes against the director and votes withheld shall have no legal effect.
Election of directors need not be by ballot except upon demand made by a
shareholder at the meeting and before the voting begins.
Section 7.11: Proxies. Every person entitled to vote or execute consents
------------ -------
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or such person's duly
authorized agent and filed with the Secretary of the Company. No proxy shall be
valid (a) after revocation thereof, unless the proxy is specifically made
irrevocable and otherwise conforms to this Section and applicable law, or (b)
after the expiration of eleven months from the date thereof, unless the person
executing it specifies therein the length of time for which such proxy is to
continue in force. Revocation may be effected by a writing delivered to the
Secretary of the Company stating that the proxy is revoked or by a subsequent
proxy executed by the person executing the prior proxy and presented to the
meeting, or as to any meeting by attendance at the meeting and voting in person
by the person executing the proxy. A proxy is not revoked by the death or
incapacity of the maker unless, before the vote is counted, a written notice of
such death or incapacity is received by the Secretary of the Company. In
addition, a proxy may be revoked, notwithstanding a provision making it
irrevocable, by a transferee of shares without knowledge of the existence of the
provision unless the existence of the proxy and its irrevocability appears on
the certificate representing such shares.
Section 7.12: Inspectors of Election. Before any meeting of shareholders,
------------ ----------------------
the Board of Directors may appoint any persons other than nominees for office as
inspectors of election. This appointment shall be valid at the meeting and at
any subsequent meeting that is a continuation of the meeting at which the
persons were originally appointed to be inspectors. If no inspectors of election
are so appointed, the Chairman of the meeting may, and on the request of any
shareholder or a shareholder's proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one or three. If
inspectors are appointed at a meeting on the request of one or more shareholders
or proxies, the holders of a majority of shares or their proxies present at the
meeting shall determine whether one or three inspectors are to be appointed, if
any person appointed as inspector fails to appear or fails or refuses to act,
the Chairman of the meeting may, and upon the request of any shareholder or a
shareholder's proxy shall, appoint a person to fill that vacancy. These
inspectors shall:
(a) determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum, and the
authenticity, validity, and effect of proxies;
(b) receive votes, ballots, or consents;
(c) hear and determine all challenges and questions in any way arising in
connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
-17-
<PAGE>
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or vote
with fairness to all shareholders.
Section 7.13: Annual Reports. Provided that the Company has 100 or fewer
------------ --------------
shareholders, the making of annual reports to the shareholders is dispensed with
and the requirement that such annual reports be made to shareholders is
expressly waived, except as may be directed from time to time by the Board of
Directors or the President.
Article VIII
SHARES AND SHARE CERTIFICATES
Section 8.1: Shares Held By the Company. Shares in other companies
----------- --------------------------
standing in the name of the Company may be voted or represented and all rights
incident thereto may be exercised on behalf of the Company by any officer of the
Company authorized to do so by resolution of the Board of Directors.
Section 8.2: Certificates for Shares. There shall be issued to every
----------- -----------------------
holder of shares in the Company a certificate or certificates signed in the name
of the Company by the Chairman of the Board, if any, or the President or a Vice
President and by the Chief Financial Officer or an Assistant Chief Financial
Officer or the Secretary or any Assistant Secretary, certifying the number of
shares and the class or series of shares owned by the shareholder. Any or all of
the signatures on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the Company
with the same effect as if such person were an officer, transfer agent or
registrar at the date of issue.
Section 8.3: Lost Certificates. Where the owner of any certificate for
----------- -----------------
shares of the Company claims that the certificate has been lost, stolen or
destroyed, a new certificate shall be issued in place of the original
certificate if the owner (a) so requests before the Company has notice that the
original certificate has been acquired by a bona fide purchaser and (b)
satisfies any reasonable requirements imposed by the Company, including without
limitation the filing with the Company of an indemnity bond or agreement in
such form and in such amount as shall be required by the President or a Vice
President of the Company. The Board of Directors may adopt such other provisions
and restrictions with reference to lost certificates, not inconsistent with
applicable law, as it shall in its discretion deem appropriate.
Section 8.4: Restrictions on Transfer of Shares.
----------- ----------------------------------
(a) Before any shareholder of the Company may sell, assign, gift, pledge
or otherwise transfer any shares of the Company's capital stock, such
shareholder shall first notify the Company in writing of such transfer and such
transfer may not be effected unless and until legal counsel for the Company has
concluded that such transfer, when effected as proposed by such
-18-
<PAGE>
shareholder (i) will comply with all applicable provisions of any applicable
state and federal securities laws, including but not limited to the Securities
Act of 1933, as amended, and the California Corporate Securities Law of 1968, as
amended, and (ii) will not jeopardize, terminate or adversely affect the
Company's status as an S Corporation, if applicable, as that term is defined in
the Internal Revenue Code of 1986, as amended. The Company may require that
certificates representing shares of stock of the Company be endorsed with a
legend describing the restrictions set forth in this Section.
(b) If (i) any two or more shareholders of the Company shall enter into
any agreement abridging, limiting or restricting the rights of any one or more
of them to sell, assign, transfer, mortgage, pledge, hypothecate or transfer on
the books of the Company any or all of the shares of the Company held by them,
and if a copy of said agreement shall be filed with the Company, or if (ii)
shareholders entitled to vote shall adopt any Bylaw provision abridging,
limiting or restricting the rights of any shareholders mentioned above, then,
and in either of such events, all certificates of shares of stock subject to
such abridgments, limitations or restrictions shall have a reference thereto
endorsed thereon by an officer of the Company and such certificates shall not
thereafter be transferred on the books of the Company except in accordance with
the terms and provisions of such as the case may be; however, no restriction
shall be binding with respect to shares issued prior to adoption of the
restriction unless the holders of such shares voted in favor of, or consented in
writing to, the restriction.
Article IX
CONSTRUCTION OF BYLAWS WITH
REFERENCE TO PROVISIONS OF LAW
Section 9.1: Bylaw Provisions Construed as Additional and Supplemental to
----------- ------------------------------------------------------------
Provisions of Law. All restrictions, limitations, requirements and other
- -----------------
provisions of these Bylaws shall be construed, insofar as possible, as
supplemental and additional to all provisions of law applicable to the subject
matter thereof and shall be fully complied with in addition to the said
provisions of law unless such compliance shall be illegal.
Section 9.2: Bylaw Provisions Contrary to or Inconsistent with Provisions
----------- ------------------------------------------------------------
of Law. Any article, section, subsection, subdivision, sentence, clause or
- ------
phrase of these Bylaws which, upon being construed in the manner provided in
Section 9.1 hereof, shall be contrary to or inconsistent with any applicable
provision of law, shall not apply so long as raid provisions of law shall remain
in effect, but such result shall not affect the validity or applicability of any
other portion of these Bylaws, it being hereby declared that these Bylaws, and
each article, section, subsection, subdivision, sentence, clause or phrase
thereof, would have been adopted irrespective of the fact that any one or more
articles, sections, subsections, subdivisions, sentences, clauses or phrases is
or are illegal.
-19-
<PAGE>
Article X
CERTIFICATION, ADOPTION, AMENDMENT OR REPEAL OF BYLAWS
Section 10.1: By Shareholders. Bylaws may be adopted, amended or repealed
------------ ---------------
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote. Bylaws specifying or changing a fixed number of
directors or the maximum or minimum number or changing from a fixed to a
variable board or vice versa may be adopted only by the shareholders.
Section 10.2: By the Board of Directors. Subject to the right of
------------ -------------------------
shareholders to adopt, amend or repeal Bylaws, and other than a Bylaw or
amendment thereof specifying or changing a fixed number of directors or the
maximum or minimum number or changing from a fixed to a variable board or vice
versa, these Bylaws may be adopted, amended or repealed by the Board of
Directors. A Bylaw adopted by the shareholders may restrict or eliminate the
power of the Board of Directors to adopt, amend or repeal Bylaws.
Section 10.3: Certification and Inspection of Bylaws. The Company shall
------------ --------------------------------------
keep at its principal executive office the original or a copy of these Bylaws as
amended or otherwise altered to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours.
-20-
<PAGE>
Exhibit 4.2
SERIES F PREFERRED STOCK PURCHASE AGREEMENT
This SERIES F PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is made
---------
and entered into as of May 3, 2000, by and among Extricity, Inc., a California
corporation (the "Company"), and the parties listed on the Schedule of Investors
-------
attached to this Agreement as Exhibit A (each hereinafter individually referred
---------
to as an "Investor" and collectively referred to as the "Investors").
-------- ---------
RECITALS
--------
WHEREAS, the Company desires to sell to the Investors, and the Investors
desire to purchase from the Company, shares of the Company's Series F Preferred
Stock on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Agreement to Purchase and Sell Stock.
------------------------------------
1.1 Authorization. As of the Closing (as defined below) the Company
-------------
will have authorized the issuance, pursuant to the terms and conditions of this
Agreement, of up to 7,751,938 shares of the Company's Series F Preferred Stock,
no par value (the "Series F Stock") having the rights, preferences, privileges
--------------
and restrictions set forth in the Amended and Restated Articles of Incorporation
of the Company attached to this Agreement as Exhibit B (the "Restated
--------- --------
Articles").
- --------
1.2 Agreement to Purchase and Sell. The Company agrees to sell to
------------------------------
each Investor at the Closing, and each Investor agrees severally and not
jointly, to purchase from the Company at the Closing, the number of shares of
Series F Stock set forth beside such Investor's name on Exhibit A, at a price of
---------
$6.45 per share. The shares of Series F Stock purchased and sold pursuant to
this Agreement will be collectively hereinafter referred to as the "Purchased
---------
Shares" and the shares of Common Stock issuable upon conversion of the Purchased
- ------
Shares will be collectively hereinafter referred to as the "Conversion Shares".
-----------------
2. Closing.
-------
2.1 The Closing. The purchase and sale of the Purchased Shares will
-----------
take place at the offices of Gray Cary Ware & Freidenrich LLP, 400 Hamilton
Avenue, Palo Alto, CA 94301-1825, at 10:00 a.m. Pacific Time, on May 2, 2000 or
at such other time and place as the Company and the Investors who have agreed to
purchase at least a majority of the Purchased Shares mutually agree upon (which
time and place are referred to in this Agreement as the "Closing"). At the
-------
Closing, the Company will deliver to each Investor a certificate representing
the number of Purchased Shares that such Investor has agreed to purchase
hereunder against delivery to the Company by such Investor of the full purchase
price of such Purchased Shares, paid by (i) a check payable to the Company's
order, (ii) wire transfer of funds to the Company, (iii) cancellation of
indebtedness of the Company to such Investor, or (iv) any combination of the
foregoing.
1
<PAGE>
2.2 Additional Closing(s)
---------------------
(a) Conditions of Additional Closing(s). At any time and from
-----------------------------------
time to time during the ninety (90) day period immediately following the
Closing (the "Additional Closing Period"), the Company may, at one or more
-------------------------
additional closings (each an "Additional Closing"), without obtaining the
------------------
signature, consent or permission of any of the Investors, offer and sell to
other investors ("New Investors"), at a price of $6.45, up to that number of
-------------
shares of Series F Stock that is equal to 7,751,938 shares of Series F Stock
less the number of shares of Series F Stock actually issued and sold by the
Company at the Closing. New Investors may include persons or entities who are
already Investors under this Agreement.
(b) Additional Signatories. The Company and the New Investors
----------------------
purchasing Series F Stock at each Additional Closing will execute counterpart
signature pages to this Agreement and the Investors' Rights Agreement (as
defined in Section 5.11). Such New Investors will, upon delivery to the Company
of such signature pages, become parties to, and be bound by, this Agreement and
the Investors' Rights Agreement each to the same extent as if they had been
Investors at the Closing. The Company will not be obligated to update its
Schedule of Exceptions, Compliance Certificate or Legal Opinion for the
Additional Closing.
(c) Status of New Investors. Upon completion of each Additional
-----------------------
Closing as provided in this Section 2, each New Investor will be deemed to be an
"Investor" for all purposes of this Agreement and the Investors' Rights
Agreement.
3. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Investors that, except as set forth in the
Schedule of Exceptions ("Schedule of Exceptions") attached to this Agreement as
----------------------
Exhibit C (which Schedule of Exceptions shall be deemed to be representations
- ---------
and warranties to the Investors by the Company under this Section 3), the
statements in the following paragraphs of this Section 3 are all true and
correct:
3.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California. The Company is qualified to do business as a
foreign corporation in each jurisdiction where failure to be so qualified would
have a material adverse effect on its financial condition, business, prospects
or operations. The Company has the corporate power and authority to enter into
and perform this Agreement and the Investors' Rights Agreement, to own and
operate its properties and assets and to carry on its business as currently
conducted and as presently proposed to be conducted.
3.2 Capitalization. Immediately prior to the Closing the
--------------
capitalization of the Company will consist of the following:
(a) Preferred Stock. A total of 18,046,756 authorized shares of
---------------
preferred stock, no par value per share (the "Preferred Stock"), consisting of
---------------
3,055,000 shares designated as Series A Preferred Stock ("Series A Stock"),
--------------
3,055,000 of which will be issued and outstanding, 1,976,469 shares designated
as Series B Preferred Stock ("Series B Stock"), 1,976,469 of which will be
--------------
issued and outstanding, 2,055,760 shares designated as Series C
2
<PAGE>
Preferred Stock ("Series C Stock"), 1,954,937 of which will be issued and
--------------
outstanding, 1,187,575 shares designated as Series D Preferred Stock ("Series D
--------
Stock"), 1,187,575 of which will be issued and outstanding, 2,051,846 shares
- -----
designated as Series E Stock ("Series E Stock"), 2,031,846 of which will be
--------------
issued and outstanding, and 7,800,000 shares designated as Series F Stock
("Series F Stock"), none of which will be issued and outstanding. The rights,
--------------
preferences and privileges of the Series A Stock, the Series B Stock, the Series
C Stock, the Series D Stock, the Series E Stock and the Series F Stock will be
as stated in the Restated Articles and as provided by law.
(b) Common Stock. A total of 50,000,000 authorized shares of common
------------
stock, no par value per share (the "Common Stock"), of which 9,638,036 shares
------------
will be issued and outstanding.
(c) Options, Warrants, Reserved Shares. Except for: (i) the
----------------------------------
conversion privileges of the Series A Stock, the Series B Stock, the Series C
Stock, the Series D Stock, the Series E Stock and the Series F Stock; (ii) the
8,740,000 shares of Common Stock reserved for issuance under the Company's 1996
Stock Option Plan, as amended, of which 6,904,656 shares of Common Stock were
granted and exercised (reflected in the number set forth in Section 3.2(b)
above), and options to purchase 1,482,955 shares are outstanding; (iii) the
46,666 shares of Common Stock subject to outstanding warrants; (iv) the 100,823
shares of Series C Preferred Stock subject to outstanding warrants; (v) the
20,000 shares of Series E Preferred Stock subject to an outstanding warrant; and
(vi) the rights of first refusal (the "Existing Refusal Rights") granted to
-----------------------
certain investors under Section 3 of that certain Fourth Investors' Rights
Agreement dated November 29, 1999 by and among the Company and such investors
(the "Existing Rights Agreement"); there are not outstanding any options,
-------------------------
warrants, rights (including conversion or preemptive rights) or agreements for
the purchase or acquisition from the Company of any shares of its capital stock
or any securities convertible into or ultimately exchangeable or exercisable for
any shares of the Company's capital stock. Apart from the exceptions noted in
this Section 3.2(c), and except for rights of first refusal and rights of
repurchase held by the Company to purchase shares of its stock issued under the
Company's 1996 Stock Option Plan, as amended, and stock purchase agreements, no
shares of the Company's outstanding capital stock, or stock issuable upon
exercise or exchange of any outstanding options, warrants or rights, or other
stock issuable by the Company, are subject to any rights of first refusal or
other rights to purchase such stock (whether in favor of the Company or any
other person), pursuant to any agreement or commitment of the Company.
(d) Section 3.2(d) of the Disclosure Schedule sets forth a complete
list of all outstanding shareholders, option holders and other security holders
of the Company as of the date hereof.
3.3 Subsidiaries. The Company does not presently own or control,
------------
directly or indirectly, any interest in any other corporation, partnership,
trust, joint venture, association, or other entity.
3.4 Due Authorization. All corporate action on the part of the Company,
-----------------
its officers, directors and shareholders necessary for the authorization,
execution, delivery of, and the performance of all obligations of the Company
under, this Agreement and the Investors'
3
<PAGE>
Rights Agreement and the authorization, issuance, reservation for issuance and
delivery of all of the Purchased Shares being sold under this Agreement and of
the Conversion Shares has been taken or will be taken prior to the Closing, and
this Agreement and the Investors' Rights Agreement constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except as may be limited by (i) applicable bankruptcy,
insolvency, reorganization or others laws of general application relating to or
affecting the enforcement of creditors' rights generally and (ii) the effect of
rules of law governing the availability of equitable remedies.
3.5 Valid Issuance of Stock.
-----------------------
(a) The Purchased Shares, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration provided for
herein, will be duly and validly issued, fully paid and nonassessable. The
Conversion Shares have been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Restated Articles, will be duly and
validly issued, fully paid and nonassessable. Except as otherwise set forth in
this Agreement, the Investors' Rights Agreement, and/or applicable state or
federal securities laws, the Purchased Shares when issued, sold and delivered,
and the Conversion Shares upon issuance, will have no other restrictions on
transfer imposed by the Company.
(b) Based in part on the representations made by the Investors in
Section 4 hereof, the Purchased Shares and (assuming no change in applicable law
and no unlawful distribution of Purchased Shares by Investors or other parties)
the Conversion Shares will be issued in full compliance with the registration
and prospectus delivery requirements of the U.S. Securities Act of 1933, as
amended (the "1933 Act") and the registration and qualification requirements of
--------
all applicable securities laws (provided that, with respect to the Conversion
-------- ----
Shares, no commission or other remuneration is paid or given, directly or
indirectly, for soliciting the issuance of Conversion Shares upon the conversion
of the Purchased Shares and no additional consideration is paid for the
Conversion Shares other than surrender of the applicable Purchased Shares upon
conversion thereof in accordance with the Restated Articles).
(c) The outstanding shares of Common Stock, Series A Stock,
Series B Stock, Series C Stock, Series D Stock and Series E Stock are all duly
and validly authorized and issued, fully paid and nonassessable, and were issued
in compliance with all applicable federal and state securities laws.
3.6 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement or the Investors' Rights Agreement except for:
------ ---
(i) the filing of a Notice of Transaction pursuant to Section 25102(f) of the
California Corporate Securities Law of 1968, as amended, and the rules
thereunder (the "Law"), which filing will be effected within the time prescribed
---
by law; and (ii) such other qualifications or filings under the 1933 Act and the
regulations thereunder and all other applicable securities laws as may be
required in connection with the transactions contemplated by this Agreement.
All such qualifications and filings will, in the case of qualifications, be
4
<PAGE>
effective on the Closing and will, in the case of filings, be made within the
time prescribed by law.
3.7 Litigation. There is no action, suit, proceeding, claim,
----------
arbitration or investigation ("Action") pending (or, to the best of the
------
Company's knowledge, currently threatened) against: (i) the Company, its
activities, properties or assets or (ii) to the best of the Company's knowledge,
against any officer, director or employee of the Company in connection with such
officer's, director's or employee's relationship with, or actions taken on
behalf of, the Company. The Company is not aware of any basis for any such
Action. The Company is not a party to or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality and there is no Action by the Company currently pending or which
the Company intends to initiate.
3.8 Invention Assignment and Confidentiality Agreement. Each former
--------------------------------------------------
and current officer, director, employee and consultant of the Company has
entered into and executed an Invention Assignment and Confidentiality Agreement
in the form attached to this Agreement as Exhibit D or an employment or
---------
consulting agreement containing substantially similar terms, and no exceptions
have been taken by any such former or current officer, director, employee or
consultant to the terms of such an agreement. The Company, after reasonable
inquiry, is not aware that any of its former or current officers, directors,
employees or consultants are in violation of such an agreement.
3.9 Status of Proprietary Assets.
----------------------------
(a) Status. The Company is not aware that any of its employees
------
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with their duties to
the Company or that would conflict with the Company's business as now conducted.
Neither the execution nor delivery of this Agreement, nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as now conducted, will, to the Company's knowledge, conflict
with or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under which any
employee is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions, trade secrets or proprietary information of
any of its employees made prior to their employment by the Company, except for
inventions, trade secrets or proprietary information that have been assigned to
the Company. The Company has full title and ownership of, or is duly licensed
under or otherwise authorized to use, all patents, patent applications,
trademarks, service marks, trade names, copyrights, mask works, trade secrets,
confidential and proprietary information, designs and proprietary rights (all of
the foregoing collectively hereinafter referred to as the "Proprietary Assets"),
------------------
necessary to enable it to carry on its business as now conducted and as proposed
to be conducted in its Business Plan without any conflict with or infringement
of the rights of others.
(b) Licenses; Other Agreements. The Company has not granted, and
--------------------------
there are not outstanding, any options, licenses or agreements of any kind
relating to any Proprietary Asset of the Company, nor is the Company bound by or
a party to any option, license or agreement of any kind with respect to any of
its Proprietary Assets. The Company is not
5
<PAGE>
obligated to pay any royalties or other payments to third parties with respect
to the marketing, sale, distribution, manufacture, license or use of any
Proprietary Asset or any other property or rights.
(c) No third party has any ownership right, title, interest, claim in
or lien on any of the Company's Proprietary Assets and the Company has taken,
and in the future the Company will use its best efforts to take, all steps
reasonably necessary to preserve its legal rights in, and the secrecy of, all
its Proprietary Assets, except those for which disclosure is required for
legitimate business or legal reasons.
(d) No Infringement. To the best of the Company's knowledge, the
---------------
Company has not violated or infringed, and is not currently violating or
infringing, any Proprietary Asset of any other person or entity. The Company has
not received any communications alleging that the Company (or any of its
employees or consultants) has violated or infringed or, by conducting its
business as proposed, would violate or infringe, any Proprietary Asset of any
other person or entity.
(e) No Breach by Employees. To the best of the Company's knowledge,
----------------------
at no time during the conception of or reduction of any of the Company's
Proprietary Assets to practice was any developer, inventor or other contributor
to such patents operating under any grants from any governmental entity or
agency or private source, performing research sponsored by any governmental
entity or agency or private source or subject to any employment agreement or
invention assignment or nondisclosure agreement or other obligation with any
third party that could adversely affect the Company's rights in such Proprietary
Assets.
3.10 Compliance with Law and Charter Documents. The Company is not in
-----------------------------------------
violation or default of any provisions of its Articles of Incorporation or
Bylaws, both as amended, or any instrument, judgment ,order, writ, decree or
material contract of the Company, to which the Company is a party or by which it
is bound and to the best of the Company's knowledge, except for any violations
that individually and in the aggregate would have no material adverse impact on
the Company's business, the Company is in compliance with all applicable
statutes, laws, regulations and executive orders of the United States of America
and all states, foreign countries or other governmental bodies and agencies
having jurisdiction over the Company's business or properties. The Company has
not received any notice of any violation of such statutes, laws, regulations or
orders which has not been remedied prior to the date hereof. The execution,
delivery and performance of this Agreement and the Investors' Rights Agreement
and the consummation of the transactions contemplated hereby or thereby will not
result in any such violation or default, or be in conflict with or constitute,
with or without the passage of time or the giving of notice or both, either a
default under the Company's Articles of Incorporation or Bylaws, or any
instrument, judgment ,order, writ, decree or material contract of the Company,
to which the Company is a party or by which it is bound, or, to the best of the
Company's knowledge, a violation of any statutes, laws, regulations or orders,
or an event which results in the creation of any lien, charge or encumbrance
upon any asset of the Company.
3.11 Registration Rights. Except as provided in the Investors' Rights
-------------------
Agreement, the Company has not granted or agreed to grant to any person or
entity any rights (including piggyback registration rights) to have any
securities of the Company registered with
6
<PAGE>
the United States Securities and Exchange Commission ("SEC") or any other
---
governmental authority.
3.12 Title to Property and Assets. The properties and assets the
----------------------------
Company purports to own are owned by the Company free and clear of all
mortgages, deeds of trust, liens, encumbrances and security interests except for
statutory liens for the payment of current taxes that are not yet delinquent and
liens, encumbrances and security interests which arise in the ordinary course of
business and which do not materially affect the properties and assets of the
Company. With respect to any property or assets it leases, the Company is in
material compliance with such leases, and, to the Company's actual knowledge,
without further investigation or any search of recorded filings in any
jurisdiction, the Company's direct interests, including, without limitation, all
expected uses and quiet enjoyment thereof, in such leased property or assets are
free of any third party claims or encumbrances, other than such claims and
encumbrances as may be placed thereon by the lessor or owner of such property or
asset, or such lessor's or owner's creditors, in their ordinary course of
business.
3.13 Financial Statements. Attached to this Agreement as Exhibit E is
-------------------- ---------
an audited balance sheet of the Company dated March 31, 1999, and an audited
income statement and statement of cash flows of the Company for its fiscal year
ended March 31, 1999, and an unaudited balance sheet of the Company dated March
31, 2000 (the "Balance Sheet Date") and an unaudited income statement of the
------------------
Company for the fiscal year ended March 31, 2000 (all such financial statements
being collectively referred to herein as the "Financial Statements"). Such
--------------------
Financial Statements (i) are in accordance with the books and records of the
Company; (ii) are true, correct and complete and present fairly the financial
condition of the Company at the date or dates thereon indicated and the results
of operations for the period or periods thereon specified; and (iii) have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, except that the unaudited financial statements omit notes
and are subject to normal year-end audit adjustments.
3.14 Certain Actions. Since the Balance Sheet Date, the Company has
---------------
not: (i) declared or paid any dividends, or authorized or made any distribution
upon or with respect to any class or series of its capital stock; (ii) incurred
any indebtedness for money borrowed or incurred any other liabilities
individually in excess of $50,000 or in excess of $100,000 in the aggregate;
(iii) made any loans or advances to any person, other than ordinary advances for
travel expenses; (iv) sold, exchanged or otherwise disposed of any material
assets or rights other than the sale of inventory in the ordinary course of its
business; or (v) entered into any material transactions with any of its
officers, directors or employees or any entity controlled by any of such
individuals.
3.15 Activities Since Balance Sheet Date. Since the Balance Sheet
-----------------------------------
Date, there has not been:
(a) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as presently
conducted and as presently proposed to be conducted);
7
<PAGE>
(b) any waiver by the Company of a valuable right or of a material
debt owed to it;
(c) any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject, except for changes or amendments which are expressly provided for or
disclosed in this Agreement;
(d) to the Company's knowledge, any other event or condition of any
character which would materially and adversely affect the assets, properties,
financial condition, operating results or business of the Company;
(e) any deferred compensation charge or tax withholding obligation
incurred on any shares of Common Stock issued to date;
(f) any resignation or termination of any executive officers or key
employees of the Company;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets, or any rights therein,
except in the ordinary course of business; or
(h) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company, except such satisfaction, discharge or
payment made in the ordinary course of business that is not material to the
assets, properties, financial condition, operating results or the business of
the Company.
3.16 ERISA Plans. The Company does not have any Employee Pension
-----------
Benefit Plan as defined in Section 3 of the Employee Retirement Income Security
Act of 1974, as amended.
3.17 Insurance. The Company has in full force and effect fire and casualty
---------
insurance policies, with extended coverage, sufficient in amount (subject to
reasonable deductibles) to allow it to replace any of its properties that might
be damaged or destroyed.
3.18 Tax Returns and Payments. The Company has timely filed all tax
------------------------
returns and reports required by law and has never been audited by any state or
federal taxing authority. All tax returns and reports of the Company are true
and correct in all material respects. The Company has paid all taxes and other
assessments due, except those, if any, currently being contested by it in good
faith which are listed in the Schedule of Exceptions.
The provisions for taxes in the Financial Statements are sufficient for the
payment of all accrued and unpaid federal, state, county and local taxes of the
Company, whether or not assessed or disputed as of the date of each such balance
sheet. There have been no examinations or audits of any tax returns or reports
by any applicable federal, state or local governmental agency. There are in
effect no waivers of applicable statutes of limitations with respect to taxes
for any year.
8
<PAGE>
3.19 Labor Agreements and Actions. The Company is not bound by or
----------------------------
subject to any contract, commitment or arrangement with any labor union, and to
the Company's best knowledge, no labor union has requested, sought or attempted
to represent any employees, representatives or agents of the Company. There is
no strike or other labor dispute involving the Company pending nor, to the
Company's best knowledge, threatened, nor is the Company aware of any labor
organization activity involving its employees.
3.20 Real Property Holding Corporation Status. Since its inception
----------------------------------------
the Company has not been a "United States real property holding corporation", as
defined in Section 897(c)(2) of the U.S. Internal Revenue Code of 1986, as
amended, and in Section 1.897-2(b) of the Treasury Regulations issued thereunder
(the "Regulations"), and the Company has filed with the Internal Revenue Service
-----------
all statements, if any, with its United States income tax returns which are
required under Section 1.897-2(h) of the Regulations.
3.21 Obligations of Management. Each officer of the Company is
-------------------------
currently devoting one hundred percent (100%) of his or her business time to the
conduct of the business of the Company. The Company is not aware of any officer
or key employee of the Company planning to work less than full time at the
Company in the future.
3.22 Full Disclosure. This Agreement, the Exhibits hereto, the
---------------
Investors' Rights Agreement, and all other documents delivered by the Company to
Investors or their attorneys or agents in connection herewith or therewith or
with the transactions contemplated hereby or thereby, neither contain any untrue
statement of a material fact nor, to the Company's knowledge, omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.
3.23 Qualified Small Business. The Company represents and warrants to
------------------------
the Investors that, to the best of its knowledge, the Purchased Shares will
qualify as "Qualified Small Business Stock" as defined in Section 1202(c) of the
Internal Revenue Code of 1986, as amended (the "Code") as of the date hereof.
----
The Company will use all reasonable efforts to comply with the reporting and
record keeping requirements of Section 1202 of the Code, any regulations
promulgated thereunder and any similar state laws and regulations. The Company
will use all reasonable efforts to extend the time periods for repurchases of
stock from employees which have left the Company if necessary to qualify under
Section 1202(c) of the Code so long as obtaining such an extension does not
limit or restrict the ability of the Company to repurchase such stock at the
original purchase price at a later time.
3.24 Agreements; Action.
------------------
(a) There are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors or
affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound which involve: (i) obligations of
or payments to the Company in excess of $100,000; (ii) the license of any
intellectual property to or from the Company; (iii) provisions restricting or
affecting the development, manufacture or distribution of the Company's products
9
<PAGE>
or services; or (iv) indemnification by the Company with respect to
infringements of intellectual property rights.
(c) The Company has not: (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or series
of its capital stock; (ii) incurred any indebtedness for money borrowed or
incurred any other liabilities individually in excess of $50,000 or in excess of
$100,000 in the aggregate; (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses; and (iv) sold, exchanged or
otherwise disposed of any of its assets or rights, other than in the ordinary
course of business.
(d) For purposes of this section, all indebtedness, liabilities,
agreements, understandings, instruments, contracts and proposed transactions
involving the same person or entity (including persons or entities the Company
has reason to believe are affiliated therewith) shall be aggregated for the
purpose of meeting the individual and aggregate minimum dollar amounts of this
section.
3.25 Related-Party Transactions. No employee, officer or director of the
--------------------------
Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the Company's knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company is affiliated or with which the Company has a business relationship,
or any firm or corporation that competes with the Company, except that
employees, officers or directors of the Company and members of their immediate
families may own stock in publicly traded companies that compete with the
Company. No member of the immediate family of any officer or director of the
Company is directly or indirectly interested in any material contract with the
Company.
3.26 Employment Agreements. No employee has any agreement or
---------------------
contract, written or verbal, regarding his or her employment. The Company is
not a party to or bound by any currently effective employment contract, deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation plan or agreement. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or other agreement relating to the
right of any such individual to be employed by, or to contract with, the Company
because of the nature of the business to be conducted by the Company; and to the
Company's knowledge, the continued employment by the Company of its present
employees, and the performance of the Company's contracts with its independent
contractors, will not result in any such violation. The Company has not
received any notice alleging that any such violation has occurred. No employee
of the Company has been granted the right to continued employment by the Company
or to any material compensation following termination of employment with the
Company. The Company is not aware that any officer or key employee intends to
terminate his employment with the Company, nor does the Company have a present
intention to terminate the employment of any of the foregoing. The employment
of each officer and employee of the Company is terminable at the will of the
Company.
10
<PAGE>
3.27 Section 83(b) Elections. To the Company's knowledge, all
-----------------------
elections and notices permitted by Section 83(b) of the Internal Revenue Code
have been timely filed by all employees who have purchased shares of the
Company's common stock under agreements that provide for the vesting of such
shares.
4. Representations, Warranties and Certain Agreements of Investors. Each
---------------------------------------------------------------
Investor hereby represents and warrants to, and agrees with, the Company,
severally and not jointly, that:
4.1 Authorization. This Agreement constitutes such Investor's valid
-------------
and legally binding obligation, enforceable in accordance with its terms except
as may be limited by (i) applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) the effect of rules of law governing the
availability of equitable remedies. Each Investor represents that such Investor
has full power and authority to enter into this Agreement and the Investors'
Rights Agreement.
4.2 Purchase for Own Account. The Purchased Shares to be purchased
------------------------
by such Investor hereunder will be acquired for investment for such Investor's
own account, not as a nominee or agent, and not with a view to the public resale
or distribution thereof within the meaning of the 1933 Act, and such Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same. If not an individual, such Investor also represents that
such Investor has not been formed for the specific purpose of acquiring
Purchased Shares.
4.3 Disclosure of Information. Such Investor believes it has received
-------------------------
or such investor has had full opportunity to access all the information it
considers necessary or appropriate to make an informed investment decision with
respect to the Purchased Shares to be purchased by such Investor under this
Agreement. Such Investor further has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Purchased Shares and to obtain additional information (to the
extent the Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify any information furnished to
such Investor or to which such Investor had access. The foregoing, however, does
not in any way limit or modify the representations and warranties made by the
Company in Section 3.
4.4 Investment Experience. Such Investor understands that the
---------------------
purchase of the Purchased Shares involves substantial risk. Such Investor: (i)
has experience as an investor in securities of companies in the development
stage and acknowledges that such Investor is able to fend for itself, can bear
the economic risk of such Investor's investment in the Purchased Shares and has
such knowledge and experience in financial or business matters that such
Investor is capable of evaluating the merits and risks of this investment in the
Purchased Shares and protecting its own interests in connection with this
investment and/or (ii) has a preexisting personal or business relationship with
the Company and certain of its officers, directors or controlling persons of a
nature and duration that enables such Investor to be aware of the character,
business acumen and financial circumstances of such persons.
11
<PAGE>
4.5 Accredited Investor Status. Unless otherwise expressly indicated
--------------------------
on Exhibit A to this Agreement, such Investor is an "accredited investor" within
---------
the meaning of Regulation D promulgated under the 1933 Act.
4.6 Restricted Securities. Such Investor understands that the
---------------------
Purchased Shares are characterized as "restricted securities" under the 1933 Act
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under the 1933 Act and applicable
regulations thereunder such securities may be resold without registration under
the 1933 Act only in certain limited circumstances. In this connection, such
Investor represents that such Investor is familiar with Rule 144 promulgated by
the SEC under the 1933 Act, as presently in effect, and understands the resale
limitations imposed thereby and by the 1933 Act. Such Investor understands that
the Company is under no obligation to register any of the securities sold
hereunder except as provided in the Investors' Rights Agreement. Such Investor
understands that no public market now exists for any of the Purchased Shares and
that it is uncertain whether a public market will ever exist for the Purchased
Shares or the Conversion Shares.
4.7 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, such Investor further agrees not to make
any disposition of all or any portion of the Purchased Shares or the Conversion
Shares unless and until:
(a) there is then in effect a registration statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition, and (ii) such Investor
shall have furnished the Company, at the expense of such Investor or its
transferee, with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such securities under the
1933 Act.
Notwithstanding the provisions of paragraphs (a) and (b) above, no such
registration statement or opinion of counsel shall be required: (i) for any
transfer of any Purchased Shares or Conversion Shares in compliance with SEC
Rule 144 or Rule 144A, (ii) for any transfer of Purchased Shares or Conversion
Shares by an Investor that is a partnership, a corporation, an affiliate or a
limited liability corporation ("LLC") to (A) a partner of such partnership,
---
shareholder of such corporation, affiliate of such Investor, or member of such
LLC, (B) a retired partner or member of such partnership or LLC who retires
after the date hereof, (C) the estate of any such partner, shareholder or
member, or (iii) for the transfer by gift, will or intestate succession by any
Investor to his or her spouse or lineal descendants or ancestors or any trust
for the primary benefit of any of the foregoing; provided that with respect to
--------
transactions pursuant to clauses (ii) and (iii) of this sentence, the transferee
agrees in writing to be subject to the terms of this Section 4 (other than
Section 4.5) to the same extent as if the transferee were an original Investor
hereunder.
12
<PAGE>
4.8 Legends. It is understood that the certificates evidencing the
-------
Purchased Shares and the Conversion Shares will bear the legends, subject to
Section 4.7 above, set forth below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 if the California Corporations Code or any other state
securities laws, including a legend substantially in the form of the following:
THE SHARES EVIDENCED BY THIS CERTIFICATE: (1) ARE
CONVERTIBLE INTO SHARES OF COMMON STOCK OF THE COMPANY AT THE
OPTION OF THE HOLDER AT ANY TIME PRIOR TO AUTOMATIC CONVERSION
THEREOF; AND (2) AUTOMATICALLY CONVERT INTO COMMON STOCK OF THE
COMPANY IN THE EVENT OF A PUBLIC OFFERING MEETING CERTAIN
REQUIREMENTS OR UPON APPROVAL OF A MAJORITY OF THE COMPANY'S
PREFERRED STOCK, ALL PURSUANT TO AND UPON THE TERMS AND
CONDITIONS SPECIFIED IN THE COMPANY'S ARTICLES OF INCORPORATION.
A COPY OF SUCH ARTICLES OF INCORPORATION MAY BE OBTAINED, WITHOUT
CHARGE, AT THE COMPANY'S PRINCIPAL OFFICE.
(c) If the Investor is a resident of the State of Georgia, a
legend substantially in the form of the following:
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON
PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE "GEORGIA SECURITIES
ACT OF 1973," AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN
EFFECTIVE REGISTRATION UNDER SUCH ACT.
The legend set forth in (a) above shall be removed by the Company from any
certificate evidencing Purchased Shares or Conversion Shares upon delivery to
the Company of an opinion
13
<PAGE>
by counsel, to the extent required by Section 4.7 above, reasonably satisfactory
to the Company, that a registration statement under the 1933 Act is at that time
in effect with respect to the legended security or that such security can be
freely transferred in a public sale without such a registration statement being
in effect and that such transfer will not jeopardize the exemption or exemptions
from registration pursuant to which the Company issued the Purchased Shares or
Conversion Shares.
5. Conditions to Investors' Obligations at Closing. The obligations of
-----------------------------------------------
each Investor under Section 2 of this Agreement are subject to the fulfillment
or waiver, on or before the Closing, of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
to such waiver, which consent may be given by written, oral or telephone
communication to the Company, its counsel or to special counsel to the
Investors:
5.1 Representations and Warranties True. Each of the representations
-----------------------------------
and warranties of the Company contained in Section 3 shall be true and correct
on and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
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 and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
5.3 Restated Articles Effective. The Restated Articles shall have
---------------------------
been duly adopted by the Company by all necessary corporate action of its Board
of Directors and shareholders, and shall have been duly filed with and accepted
by the Secretary of State of the State of California.
5.4 No Material Change. There shall have been no material adverse
------------------
change in the business, affairs, prospects, operations, properties, assets or
condition of the Company not previously disclosed to the Investors in writing.
5.5 Compliance Certificate. The Company shall have delivered to each
----------------------
Investor at the Closing a certificate signed on its behalf by its President,
Chief Executive Officer, or Chief Financial Officer certifying that the
conditions specified in Sections 5.1, 5.2, 5.3 and 5.4 have been fulfilled.
5.6 Securities Exemptions. The offer and sale of the Purchased Shares
---------------------
to the Investors pursuant to this Agreement shall be exempt from the
registration requirements of the 1933 Act, the qualification requirements of the
Law and the registration and/or qualification requirements of all other
applicable state securities laws.
5.7 Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to each
Investor and to the Investors' special counsel, and they shall each have
received all such counterpart originals and certified or other copies of such
documents as they may reasonably request. Such documents shall include (but not
be limited to) the following:
14
<PAGE>
(a) Certified Charter Documents. A copy of the Restated Articles
---------------------------
and the Bylaws of the Company (as amended through the date of the Closing),
certified by the Secretary of the Company as true and correct copies thereof as
of the Closing.
(b) Corporate Actions. A copy of the resolutions of the Board of
-----------------
Directors and, if required, the shareholders of the Company evidencing the
amendment to the Company's Articles of Incorporation providing for the
authorization of the Series F Stock, the approval of this Agreement and the
Investors' Rights Agreement, the issuance of the Purchased Shares and the other
matters contemplated hereby, and a copy of the Bylaws of the Company, certified
by the Secretary of the Company to be true, complete and correct.
5.8 Bylaws. The Bylaws of the Company shall be in the form previously
------
presented to special counsel to the Investors and shall provide that the
authorized number of members of the Board of Directors of the Company shall be a
variable number between five (5) and seven (7) persons and shall be set at five
(5) as of the Closing.
5.9 Board of Directors. The directors of the Company at the Closing
------------------
shall consist of Barry M. Ariko, Bruce Bourbon, B. J. Cassin, Neal Dempsey and
Kenneth Ross.
5.10 Opinion of Company Counsel. Each Investor shall have received an
--------------------------
opinion from Gray Cary Ware & Freidenrich LLP, counsel for the Company, dated as
of the date of the Closing, in the form attached hereto as Exhibit F.
---------
5.11 Investors' Rights Agreement. The Company, each Investor and a
---------------------------
sufficient number of other investors necessary to amend the Existing Rights
Agreement shall have executed and delivered the Fifth Restated Investors' Rights
Agreement in the form attached to this Agreement as Exhibit G (the "Investors'
--------- ----------
Rights Agreement").
- ----------------
5.12 Board Observation Rights. The Company shall have executed and
------------------------
delivered a letter to Charter Growth Capital II, L.P. and to Broadview Capital
Partners substantially in the form set forth in Exhibit H, pursuant to which a
---------
designee of each Investor shall have the right to attend all meetings of the
Board of Directors of the Company, in person or by telephone, in a non-voting
advisory capacity and the right to examine Company records.
5.13 Existing Refusal Rights. The Existing Refusal Rights (as defined
-----------------------
in Section 3.2) as they apply to the Purchased Shares shall have been waived to
the extent called for and described in Section 3.6 of the Investors' Rights
Agreement.
6. Conditions to the Company's Obligations at Closing. The obligations of
--------------------------------------------------
the Company to each Investor under this Agreement are subject to the fulfillment
by each such Investor or waiver by the Company on or before the Closing of each
of the following conditions:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of such Investor contained in Section 4 shall be true and correct on
the date of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
15
<PAGE>
6.2 Payment of Purchase Price. Each Investor shall have delivered to
-------------------------
the Company the purchase price specified for such Investor on Exhibit A in
accordance with the provisions of Section 2.
6.3 Restated Articles Effective. The Restated Articles shall have
---------------------------
been duly adopted by the Company by all necessary corporate action of its Board
of Directors and shareholders, and shall have been duly filed with and accepted
by the Secretary of State of the State of California.
6.4 Securities Exemptions. The offer and sale of the Purchased Shares
---------------------
to the Investors pursuant to this Agreement shall be exempt from the
registration requirements of the 1933 Act, the qualifications requirements of
the Law and the registration and/or qualification requirements of all other
applicable state securities laws.
6.5 Board of Directors. The directors of the Company at the Closing
------------------
shall consist of Barry M. Ariko, Bruce Bourbon, B. J. Cassin, Neal Dempsey and
Kenneth Ross.
6.6 Investors' Rights Agreement. The Company and each Investor shall
---------------------------
have executed and delivered the Investors' Rights Agreement.
6.7 Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Company and to the Company's legal counsel, and the Company shall have received
all such counterpart originals and certified or other copies of such documents
as it may reasonably request.
6.8 Existing Refusal Rights. The Existing Refusal Rights (as defined
-----------------------
in Section 3.2) as they apply to the Purchased Shares shall have been waived to
the extent called for and described in Section 3.6 of the Investors' Rights
Agreement.
6.9 Minimum Purchases. The Company shall have received not less than
-----------------
$22,000,001.85 from Investors, representing the issuance and sale, pursuant to
this Agreement, of not less than 3,410,853 shares of Series F Stock.
7. Post Closing Covenants of the Company.
-------------------------------------
7.1 Employee Invention Agreements. The Company shall require all
-----------------------------
future officers, directors, and employees of, and consultants to, the Company to
execute and deliver an Employee Invention Assignment and Confidentiality
Agreement in substantially the form of Exhibit D.
---------
7.2 Qualified Small Business Stock. The Company covenants that so
------------------------------
long as any of the Purchased Shares, or the Common Stock into which such shares
are converted, are held by an Investor (or a transferee in whose hands such
Purchased Shares or Common Stock are eligible to qualify as Qualified Small
Business Stock as defined in Section 1202(c) of the Internal Revenue Code of
1986, as amended), it will use all reasonable efforts (including complying with
any applicable filing or reporting requirements imposed by the Code on issuers
of Qualified Small Business Stock) to cause the Purchased Shares, or the Common
Stock into
16
<PAGE>
which they are converted, to qualify as Qualified Small Business Stock;
provided, however, that "reasonable efforts" as used in this Section 7.3 shall
not be construed to require the Company to operate its business in a manner
which would adversely affect its business, limit its future prospects or alter
the timing or resource allocation related to its planned operations or financing
activities.
7.3 Election of Independent Board Member. Of the two members of the
------------------------------------
Board of Directors that holders of Common Stock may elect, one shall (in
accordance with the Investors' Rights Agreement) be an independent director that
is nominated by the management of the Company and that is reasonably acceptable
to the directors elected by the holders of the Preferred Stock or to the
Investors (as such term is defined in the Investors' Rights Agreement).
8. Miscellaneous.
-------------
8.1 Survival of Warranties. The representations, warranties and
----------------------
covenants of the Company and the Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of any of the Investors, their counsel or
the Company, as the case may be.
8.2 Successors and Assigns. 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.
8.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the internal laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California, without reference to principles of conflict of laws or choice of
laws.
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 Headings. The headings and captions used in this Agreement are
--------
used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
8.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given: (i) upon personal delivery to the party to be notified; (ii)
when sent by confirmed facsimile; or (iii) upon deposit with the United States
Post Office, by registered or certified mail, postage prepaid or with a
commercial overnight carrier and addressed to the party to be notified at the
address indicated for such party on Exhibit A or, in the case of the Company, at
555 Twin Dolphin Drive, Suite 600, Redwood Shores, California 94065, or at such
other address as any party or the Company may designate by giving ten (10) days
advance written notice to all other parties.
17
<PAGE>
8.7 No Finder's Fees. Each party represents that it neither is nor
----------------
will be obligated for any finder's or broker's fee or commission in connection
with this transaction. The payment of any finder's or broker's fee or commission
arising in connection with this transaction shall be the sole and exclusive
obligation of the party who contracted for, or is otherwise responsible for
engaging, the services of such finder or broker. Each Investor agrees to
indemnify and to hold harmless the Company from any liability for any commission
or compensation in the nature of a finders' or broker's fee (and any asserted
liability) for which the Investor or any of its officers, partners, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless each Investor from any liability for any commission or compensation in
the nature of a finder's or broker's fee (and any asserted liability) for which
the Company or any of its officers, employees or representatives is responsible.
8.8 Costs, Expenses. The Company shall pay in connection with the
---------------
preparation, execution and delivery of this Agreement and the issuance of the
Purchased Shares at the Closing, Brobeck, Phleger & Harrison LLP a set fee of
$10,000 and reasonable expenses.
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 Company and the holders of Purchased Shares
and/or Conversion Shares representing at least a majority of the aggregate
number of shares of Common Stock into which the Purchased Shares then are
convertible and/or have been converted (excluding any of such shares that have
been sold to the public or pursuant to SEC Rule 144 or Rule 144A). Any amendment
or waiver effected in accordance with this Section shall be binding upon each
holder of any Purchased Shares and/or Conversion Shares at the time outstanding,
each future holder of such securities, and the Company; provided, however, that
-------- -------
no condition set forth in Section 5 may be waived with respect to any Investor
who does not consent thereto.
8.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
8.11 Waiver of Conflict of Interest. Each Investor and the Company are
-------------------------------
aware that Gray Cary Ware & Freidenrich LLP ("GCWF") and Brobeck, Phleger &
----
Harrison LLP ("BPH") may have previously performed and may continue to perform
---
certain legal services for certain of the parties to this Agreement and
agreements referred to herein. Each of GCWF and BPH also may have obtained
confidential information of any such party material to GCWF's representation of
the Company and BPH's representation of the Investors in connection with this
Agreement and the transactions hereunder. In addition, each of GCWF Investment
Partnership, an affiliate of GCWF, and BPH Investment Partnership, an affiliate
of BPH, may be investing as an Investor hereunder under the terms of this
Agreement. By signing this Agreement, each Investor and the Company hereby
waives any conflict of interest arising out of such representation or such
possession of confidential information and consents to such investment. Each
Investor and the Company further represents that each has had the opportunity to
be or has been represented by independent counsel in giving the waivers
contained in this Section 8.11.
18
<PAGE>
8.12 Entire Agreement. This Agreement, together with all exhibits and
----------------
schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the parties with respect to the subject matter hereof.
8.13 Further Assurances. From and after the date of this Agreement,
------------------
upon the request of any Investor or the Company, the Company and the Investors
shall execute and deliver such instruments, documents or other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
[THE REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE COMPANY:
- -----------
Extricity, Inc.,
a California corporation
By: ______________________________
Barry M. Ariko, President
<TABLE>
THE INVESTORS:
- -------------
<S> <C>
Charter Growth Capital II, L.P. Broadview Capital Partners Qualified
Purchaser Fund, L.P.
By: CGC Partners II
By: Broadview Capital Partners
Management LLC
By: ______________________________________ Its: General Partner
George H. Bischof, General Partner
By: ___________________________________________
Name: ___________________________________________
Title: Member
CGC Investors II QP, L.P. Broadview Capital Partners, L.P.
By: CGC Partners II
By: Broadview Capital Partners
Management LLC
Its: General Partner
By: _______________________________________
George H. Bischof, General Partner
By: ___________________________________________
Name: ___________________________________________
Title: Member
CGC Investors II A, L.P. Broadview Capital Partners Affiliates Fund, LLC
By: CGC Partners II By: Broadview Capital Partners
Management LLC
By: ________________________________________ Its: Manager
George H. Bischof, General Partner
By: ____________________________________________
Name: ____________________________________________
Title: Member
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Aspen Tech Broadview BCPSBS Fund, L.P.
By: Broadview Capital Partners
By: _________________________________________ Management LLC
Its: Manager
Title: Member, General Partner
----------------------
By:__________________________________________
Name:________________________________________
Title: Member
WingSpring
By: _________________________________________ By: ______________________________________________
Title: Member, General Partner __________________________________, individual
----------------------
Manugistics
By: _________________________________________
Title: Member, General Partner
----------------------
Robertson, Stephens
By: _________________________________________
Title: Member, General Partner
----------------------
GCWF Investment Partners II
By GCWF Investments LLC, Managing Partner
By: Gregory M. Gallo, President & CFO
______________________________________________
TCV IV, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management IV, L.L.C.,
Its: General Partner
By: __________________________________________
Name: Carla S. Newell
Title: Attorney in Fact
</TABLE>
<PAGE>
<TABLE>
<S> <C>
RRE Investors, L.P. RRE Investors Fund, L.P.
By: ______________________________________ By: __________________________________________
Title: Member, General Partner Title: Member, General Partner
Bay Partners SBIC, L.P. Telos Venture Partners, L.P.
By: Bay Management Company 1995, its General
Partner
By: ___________________________________________
By: ________________________________________ Bruce R. Bourbon, General Partner
_______________________, General Partner
Bay Partners LS Fund, L.P. Vector Capital, L.P.
By: ____________________________________ By: Vector Capital Partners, LLC
Name: __________________________________
Title: ______________________________________ By: ___________________________________________
Alexander R. Slusky, Managing Member
Piper Jaffray Technology Capital SBIC, L.P.
Donald. C Hichens
By: Piper Ventures Capital, Inc.,
- --------------------------------------------- its General Partner
By: _____________________________________________
Gary J. Blauer
Vice President
Timothy A. Woodward Brendan Joseph Cassin, Trustee of the Robert
Sean Cassin Trust U/D/T dated 2/20/97
______________________________________________
By: ________________________________________
B. J. Cassin, Trustee
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Brendan Joseph Cassin and Isabel B. Cassin, Saint Francis Growth Fund
Trustees of the Cassin Family Trust U/T/D dated
January 31, 1996
By: _________________________________________
By: ___________________________________________ Title: ______________________________________
B. J. Cassin, Trustee
Saint Mary's College of California Stanford University
By: __________________________________________ By: __________________________________________
Title: _______________________________________ Title: _______________________________________
Eagle Ventures II, LLC Crescendo II, L.P.
By: __________________________________________ By: ______________________, its General Partner
R. David Spreng, President
By: ________________________________________
R. David Spreng, President
Ronald P. Antipa Ray Bingham
_____________________________________________ _____________________________________________
James A. Chafoulias Joe Costello
_____________________________________________ _____________________________________________
Gerald C. Down Larry G. Gerdes
______________________________________________ _____________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Paul K. Joas
_____________________________________________
Donald L. Lucas, SUCC TTEE Donald L. Richard M. Lucas Cancer Foundation
Lucas Profit Sharing Trust DTD 1/1/84
By: _________________________________________
By: _______________________________________ Title: ______________________________________
Title:_____________________________________
Byron A. Gregerson Alberto Perez
___________________________________________ _____________________________________________
Noel Rahn RWI Group II, L.P.
- ------------------------------------------- By: _________________________________________
Donald A. Lucas, General Partner
F & W Investments 2000 Gregory V. Vaughan
By: _______________________________________ ---------------------------------------------
Name: _____________________________________
Title: ____________________________________
Bert L. Zaccaria Isaac Stein and Madelein Johnson Stein,
Trustees of the Stein 1995 Revocable Trust
____________________________________________
By: _________________________________________
Title:_______________________________________
</TABLE>
<PAGE>
Cambridge Technology Capital
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
<TABLE>
<S> <C>
Chancellor Private Capital Partners III, L.P. Citiventure 96 Partnership, L.P.
By: CPCP Associates, L.P., its General Partner By: INVESCO Private Capital, Inc., as
By: INVESCO Private Capital, Inc., its General Investment Advisor and Attorney-in-Fact
Partner
By: __________________________________________ By: __________________________________________
Name: ___________________________________ Name: ____________________________________
Title ___________________________________ Title: ___________________________________
Chancellor Private Capital Offshore Partners II, Chancellor Private Capital Offshore Partners
L.P. I, C V
By: CPCO Associates, L.P., its Investment By: Chancellor KME IV, L.P., its Investment
General Partner General Partner
By: INVESCO Private Capital, Inc., its General By: INVESCO Private Capital, Inc., its
Partner General Partner
By: __________________________________________ By: ____________________________________________
Name: ____________________________________ Name: ______________________________________
Title: ___________________________________ Title: _____________________________________
Anne Marie Jasse & Bruce Fram, Ken Goldman
Community Property
By: __________________________________________ _______________________________________________
Title: _______________________________________
</TABLE>
<PAGE>
Intel 64 Fund, LLC
By: Intel 64 Fund Operations, Inc.,
its Coordinating Member
By: ______________________________________
Arvind Sodhani
Vice President and Treasurer
<TABLE>
<S> <C>
SAP America, Inc. Motete Corporation
By: _________________________________________
By: ________________________________________ Title: ______________________________________
Name: ______________________________________
Title: _____________________________________
Sand Hill Financial Company Liberty Environmental Partners, L.P.
By: __________________________________________ By: _________________________________________
Title: _______________________________________ Name: __________________, General Partner
Aaron Ross Alison Ross
______________________________________________ _____________________________________________
Catherine Ross David Ross
______________________________________________ _____________________________________________
Jeffrey O. Henley & Judy Henley TTEEs, Jeffrey Arlene B. Tenenbaum and Joshua B. Tenenbaum
and Judy Henley Trust I dtd 10/23/89 as Trustees of the Jay M. Tenenbaum
Technology Trust
By: __________________________________________
Title: _______________________________________ By: __________________________________________
Title: _______________________________________
</TABLE>
<PAGE>
SERIES F PREFERRED STOCK PURCHASE AGREEMENT
LIST OF EXHIBITS
----------------
Exhibit A - Schedule of Investors
Exhibit B - Amended and Restated Articles of Incorporation
Exhibit C - Schedule of Exceptions
Exhibit D - Form of Invention Assignment and Confidentiality Agreement
Exhibit E - Financial Statements
Exhibit F - Form of Opinion of Company Counsel
Exhibit G - Fifth Restated Investors' Rights Agreement
Exhibit H - Board Observation Rights Letter
<PAGE>
Exhibit A
---------
SCHEDULE OF INVESTORS
<PAGE>
Exhibit B
---------
AMENDED AND RESTATED ARTICLES OF INCORPORATION
<PAGE>
Exhibit C
---------
SCHEDULE OF EXCEPTIONS
<PAGE>
Exhibit D
---------
FORM OF INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
<PAGE>
Exhibit E
---------
FINANCIAL STATEMENTS
<PAGE>
Exhibit F
---------
FORM OF OPINION OF COMPANY COUNSEL
<PAGE>
Exhibit G
---------
FIFTH RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
Exhibit H
---------
BOARD OBSERVATION RIGHTS LETTER
<PAGE>
EXHIBIT 4.3
FIFTH RESTATED INVESTORS' RIGHTS AGREEMENT
------------------------------------------
This Fifth Restated Investors' Rights Agreement (this "Agreement") is
---------
made and entered into as of May 3, 2000 by and among Extricity, Inc., a
California corporation (the "Company"), and the persons and entities listed on
-------
Exhibit A attached hereto (the "Investors") and the persons listed on Exhibit B
- --------- --------- ---------
attached hereto (the "Shareholders").
------------
RECITALS
--------
A. Certain of the Investors (the "Prior Investors") are holders of
---------------
outstanding shares of the Company's Series A Preferred Stock ("Series A Stock")
--------------
issued by the Company to such Prior Investors pursuant to a Series A Preferred
Stock Purchase Agreement by and among the Company and the Prior Investors dated
May 10, 1996 (the "Series A Agreement"), and/or holders of outstanding shares of
------------------
the Company's Series B Preferred Stock ("Series B Stock") issued by the Company
--------------
to such Prior Investors pursuant to a Series B Preferred Stock Purchase
Agreement by and among the Company and the Prior Investors dated June 17, 1997
(the "Series B Agreement"), and/or holders of outstanding shares of the
------------------
Company's Series C Preferred Stock ("Series C Stock") issued by the Company to
--------------
such Prior Investors pursuant to a Series C Preferred Stock Purchase Agreement
by and among the Company and the Prior Investors dated April 24, 1998 (the
"Series C Agreement"), and/or holders of outstanding shares of the Company's
------------------
Series D Preferred Stock ("Series D Stock") issued by the Company to such Prior
--------------
Investors pursuant to a Series D Preferred Stock Purchase Agreement by and among
the Company and the Prior Investors dated April 28, 1999 (the "Series D
--------
Agreement"), and/or holders of outstanding shares of the Company's Series E
- ---------
Preferred Stock ("Series E Stock") issued by the Company to such Prior Investors
--------------
pursuant to a Series E Preferred Stock Purchase Agreement by and among the
Company and the Prior Investors dated November 29, 1999 (the "Series E
--------
Agreement"), and have also been granted certain information and registration
- ---------
rights and rights of first refusal under the Fourth Restated Investors' Rights
Agreement by and among the Company and the Prior Investors dated November 29,
1999 (the "Prior Rights Agreement").
----------------------
B. Certain Investors (the "Series F Investors") have agreed to
------------------
purchase shares of the Company's Series F Preferred Stock ("Series F Stock")
--------------
pursuant to a certain Series F Preferred Stock Purchase Agreement by and among
the Company and such Series F Investors dated of even date herewith (the "Series
------
F Agreement"). The Series F Agreement provides that, as a condition to the
- -----------
Series F Investors' purchase of Series F Stock thereunder, the Company will
enter into this Agreement and the Series F Investors will be granted the rights
set forth herein. (The Series A Stock, Series B Stock, Series C Stock, Series D
Stock, Series E Stock and Series F Stock are collectively referred to as the
"Preferred Stock").
---------------
C. The Company and the undersigned parties hereto desire to enter
into this Agreement in order to amend, restate and replace the rights and
obligations of all parties to and under the Prior Rights Agreement with the
rights and obligations set forth in this Agreement and to extend such rights and
obligations to the Series F Investors. Section 6.2 of the Prior Rights
Agreement provides that the Prior Rights Agreement may be amended by the written
consent of the holders of a majority of the "Investors' Shares" (as defined in
Section 6.2 of the Prior Rights Agreement) and the undersigned parties to this
Agreement hold a majority of the Investors' Shares, as defined in the Prior
Rights Agreement.
1
<PAGE>
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. INFORMATION RIGHTS.
------------------
1.1 Financial Information. The Company covenants and agrees
---------------------
that, commencing on the date of this Agreement, the Company will:
(a) Annual Reports. Furnish to each Investor as soon as
--------------
practicable and in any event within ninety (90) days after the end of each
fiscal year of the Company, a consolidated Balance Sheet as of the end of such
fiscal year, a consolidated Statement of Income and a consolidated Statement of
Cash Flows of the Company and its subsidiaries for such year, setting forth in
each case in comparative form the figures from the Company's previous fiscal
year (if any), all prepared in accordance with generally accepted accounting
principles and practices and audited by nationally recognized independent
certified public accountants;
(b) Quarterly Reports, Monthly Reports, Annual Budget.
-------------------------------------------------
Furnish to each Investor, for so long as any Investor holds at least 150,000
shares (such number of shares being subject to proportional adjustment to
reflect combinations or subdivisions of such Preferred Stock or dividends
declared in shares of such stock) of Preferred Stock and/or the equivalent
number on an as-converted basis of shares of Common Stock of the Company
("Common Stock") issued upon the conversion of such shares of Preferred Stock
------------
("Conversion Stock"):
----------------
(1) as soon as practicable, and in any case within
forty-five (45) days of the end of each fiscal quarter of the Company (except
the last quarter of the Company's fiscal year), quarterly unaudited financial
statements, including an unaudited Balance Sheet, an unaudited Statement of
Income and an unaudited Statement of Cash Flows;
(2) as soon as practicable, and in any case within
thirty (30) days of the end of each calendar month (except the last month of the
Company's fiscal year), monthly unaudited financial statements, including an
unaudited Balance Sheet, an unaudited Statement of Income and an unaudited
Statement of Cash Flows; and
(3) as soon as practicable and in any event no later
than thirty (30) days after the close of each fiscal year of the Company, an
annual operating plan and budget, prepared on a monthly basis, for the next
immediate fiscal year. The Company shall also furnish to each such Investor,
within a reasonable time of its preparation, amendments to the annual budget, if
any.
1.2 Inspection Rights. The Company shall permit each Investor
-----------------
holding at least 250,000 shares (such number of shares being subject to
proportional adjustment to reflect combinations or subdivisions of such
Preferred Stock or dividends declared in shares of such stock) of Preferred
Stock and/or the equivalent number on an as-converted basis of shares of
Conversion Stock, or any combination thereof, at such Investor's expense, to
visit and inspect the Company's properties, to examine its books of account and
records and to discuss the Company's affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by such Investor.
2
<PAGE>
1.3 Confidentiality. Each Investor agrees, except to the extent such
---------------
information may be made publicly available by the Company, (i) to hold all
information received pursuant to this Section in confidence, (ii) not to use
such information for any purpose other than evaluating such Investor's
investment in the Company; and (iii) not to disclose any of such information to
any third party.
1.4 Termination of Certain Rights. The Company's obligations under
-----------------------------
Sections 1.1, 1.2 and 1.3 above will terminate upon the closing of the Company's
initial public offering of Common Stock pursuant to an effective registration
statement filed under the U.S. Securities Act of 1933, as amended (the
"Securities Act") in which the gross proceeds raised for the Company's account
--------------
(calculated before deduction of underwriters' discounts and omissions) exceeds
$15,000,000 and the public offering price per share of which equals or exceeds
$11.82 per share before deduction of underwriters' discounts and commissions
(such price per share of Common Stock to be appropriately adjusted to reflect
any stock dividends, stock splits or combinations, or other recapitalizations or
reorganizations).
1.5 Rule 144A Information. The Company agrees to provide each
---------------------
Investor, upon request, with such written information as may be required in
order to permit such Investor to resell any shares of the Preferred Stock or
Conversion Stock pursuant to Rule 144A promulgated under the Securities Act.
2. REGISTRATION RIGHTS.
-------------------
2.1 Definitions. For purposes of this Section 2:
-----------
(a) Registration. The terms "register," "registered," and
------------ -------- ----------
"registration" refer to a registration effected by preparing and filing a
------------
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
(b) Registrable Securities. The term "Registrable Securities"
---------------------- ----------------------
means: (1) all the shares of Common Stock of the Company issued or issuable
upon the conversion of any shares of Preferred Stock; (2) the shares of Common
Stock now held by the Shareholders and set forth in Exhibit B attached hereto
---------
(the "Shareholders' Shares"); and (3) any shares of Common Stock of the Company
--------------------
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, all such shares of Common Stock
described in clause (1) or (2) of this subsection (b); excluding in all cases,
---------
however, any Registrable Securities sold by a person in a transaction in which
rights under this Section 2 are not assigned in accordance with this Agreement
or any Registrable Securities sold to the public or sold pursuant to Rule 144
promulgated under the Securities Act; and provided, however, that
-------- -------
notwithstanding anything herein to the contrary, the Shareholders' Shares and
any shares of Common Stock described in clause (3) of this Section 2(b) that are
issued in respect of any Shareholders' Shares (which with the Shareholders'
Shares are collectively hereinafter referred to as the "Excluded Shares"), shall
---------------
not be Registrable Securities for purposes of Sections 2.2, 2.4 or 3 of this
Agreement.
(c) Registrable Securities Then Outstanding. The number of shares
---------------------------------------
of "Registrable Securities Then Outstanding" shall mean the number of shares of
---------------------------------------
Common Stock
3
<PAGE>
which are Registrable Securities and (1) are then issued and outstanding or (2)
are then issuable pursuant to the exercise or conversion of then outstanding and
then exercisable options, warrants or convertible securities; provided, however,
-------- -------
that Excluded Shares shall not be Registrable Securities Then Outstanding for
purposes of Sections 2.2 or 2.4 of this Agreement.
(d) Holder. For purposes of this Section 2 hereof, the term "Holder"
------ ------
means any person owning of record Registrable Securities that have not been sold
to the public or pursuant to Rule 144 promulgated under the Securities Act or to
any assignee of record of such Registrable Securities to whom rights under this
Section 2 have been duly assigned in accordance with this Agreement; provided,
--------
however, that for purposes of this Agreement, a record holder of shares of
- -------
Preferred Stock convertible into such Registrable Securities shall be deemed to
be the Holder of such Registrable Securities; provided further, that a holder of
-------- -------
Excluded Shares (as defined in Section 2.1(b) shall not be a Holder with respect
to such Excluded Shares for purposes of Sections 2.2, 2.4 or 3 of this
Agreement; and provided, further, that the Company shall in no event be
-------- -------
obligated to register shares of Preferred Stock, and that Holders of Registrable
Securities will not be required to convert their shares of Preferred Stock into
Common Stock in order to exercise the registration rights granted hereunder,
until immediately before the closing of the offering to which the registration
relates.
(e) Form S-3. The term "Form S-3" means such form under the
-------- --------
Securities Act as is in effect on the date hereof or any successor registration
form under the Securities Act subsequently adopted by the SEC which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(f) SEC. The term "SEC" or "Commission" means the U.S. Securities
--- --- ----------
and Exchange Commission.
2.2 Demand Registration.
-------------------
(a) Request by Holders. If the Company shall receive at any time
------------------
after the earlier to occur of (i) one (1) year after the effective date of the
Company's initial public offering of its securities pursuant to a registration
filed under the Securities Act, and (ii) December 31, 2000, a written request
from the Holders of at least forty percent (40%) of the Registrable Securities
Then Outstanding that the Company file a registration statement under the
Securities Act covering the registration of Registrable Securities pursuant to
this Section 2.2, then the Company shall, within ten (10) business days of the
receipt of such written request, give written notice of such request ("Request
-------
Notice") to all Holders, and effect, as soon as practicable, the registration
- ------
under the Securities Act of all Registrable Securities which Holders request to
be registered and included in such registration by written notice given by such
Holders to the Company within twenty (20) days after receipt of the Request
Notice, subject only to the limitations of this Section 2.2; provided that the
--------
Registrable Securities requested by all Holders to be registered pursuant to
such request must either (i) be at least twenty-five percent (25%) of all
Registrable Securities Then Outstanding or (ii) have an anticipated aggregate
public offering price (before any underwriting discounts and commissions) of not
less than $5,000,000.
(b) Underwriting. If the Holders initiating the registration request
------------
under this Section 2.2 ("Initiating Holders") intend to distribute the
------------------
Registrable Securities
4
<PAGE>
covered by their request by means of an underwriting, then they shall so advise
the Company as a part of their request made pursuant to this Section 2.2 and the
Company shall include such information in the written notice referred to in
subsection 2.2(a). In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the managing underwriter or underwriters selected for such underwriting by
the Company (which underwriter shall be reasonably acceptable to a majority in
interest of the Initiating Holders). Notwithstanding any other provision of this
Section 2.2, if the underwriter(s) advise(s) the Company in writing that
marketing factors require a limitation of the number of securities to be
underwritten then the Company shall so advise all Holders of Registrable
Securities which would otherwise be registered and underwritten pursuant hereto,
and the number of Registrable Securities that may be included in the
underwriting shall be reduced as required by the underwriter(s) and allocated
among the Holders of Registrable Securities requesting registration on a pro
rata basis according to the number of Registrable Securities Then Outstanding
held by each Holder requesting registration (including, but not limited to, the
Initiating Holders); provided, however, that the number of shares of
-------- -------
Registrable Securities held by Holders to be included in such underwriting and
registration shall not be reduced unless first, all securities held by
Shareholders are entirely excluded from the underwriting and registration, and
second, if the number of shares to be registered still exceed the limitation set
by the underwriter(s), all other securities of the Company are excluded from the
underwriting and registration. Any Registrable Securities excluded and withdrawn
from such underwriting shall be withdrawn from the registration.
(c) Maximum Number of Demand Registrations. The Company is obligated
--------------------------------------
to effect only two (2) such registrations pursuant to this Section 2.2.
(d) Deferral. Notwithstanding the foregoing, if the Company shall
--------
furnish to Holders requesting the filing of a registration statement pursuant to
this Section 2.2, a certificate signed by the President or Chief Executive
Officer of the Company stating that in the good faith judgment of the Board of
Directors of the Company it would be seriously detrimental to the Company and
its shareholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, then the Company
shall have the right to defer such filing for a period of not more than six (6)
months after receipt of the request of the Initiating Holders; provided,
--------
however, that the Company may not utilize this right more than once in any
- -------
twelve (12) month period.
(e) Expenses. All expenses incurred in connection with a
--------
registration pursuant to this Section 2.2, including without limitation all
registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders, which counsel may (if
desired by the selling Holders) be counsel for the Company, (but excluding
underwriters' discounts and commissions), shall be borne by the Company. Each
Holder participating in a registration pursuant to this Section 2.2 shall bear
such Holder's proportionate share (based on the number of shares sold by such
Holder divided by the total number of shares sold in such
5
<PAGE>
registration) of all discounts, commissions or other amounts payable to
underwriters or brokers in connection with such offering. Notwithstanding the
foregoing, the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to this Section 2.2 if the registration
request is subsequently withdrawn at the request of the Holders of a majority of
the Registrable Securities to be registered, unless the Holders of a majority of
the Registrable Securities Then Outstanding agree to forfeit their right to one
(1) demand registration pursuant to this Section 2.2 (in which case such right
shall be forfeited by all Holders of Registrable Securities); provided, further,
-------- -------
however, that if at the time of such Registrable Securities held by Holders to
- -------
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company not known to the Holders at the
time of their request for such registration and have withdrawn their request for
registration with reasonable promptness after learning of such material adverse
change, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to this Section 2.2.
2.3 Piggyback Registrations. The Company shall notify all Holders of
-----------------------
Registrable Securities in writing at least thirty (30) days prior to filing any
registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to any employee benefit
---------
plan or a corporate reorganization) and will afford each such Holder an
opportunity to include in such registration statement all or any part of the
Registrable Securities then held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by such Holder shall, within twenty (20) days after receipt of
the above-described notice from the Company, so notify the Company in writing,
and in such notice shall inform the Company of the number of Registrable
Securities such Holder wishes to include in such registration statement. If a
Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(a) Underwriting. If a registration statement under which the
------------
Company gives notice under this Section 2.3 is for an underwritten offering,
then the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder's Registrable Securities to be included in a
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriter(s) selected by the Company for such
underwriting. Notwithstanding any other provision of this Agreement, if the
managing underwriter determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration to the underwriting shall be allocated, first, to the and
second, to each of the Investors who are Holders requesting inclusion of their
Registrable Securities in such registration statement on a pro rata basis based
on the number of Registrable Securities each such Holder has requested to be
included in the
6
<PAGE>
registration; and third, to the Holders other than the Investors on a pro rata
-----
basis based on the total number of Registrable Securities each such Holder has
requested to be included in the registration; provided however, that the right
-------- -------
of the underwriters to exclude shares (including Registrable Securities) from
the registration and underwriting as described above shall be restricted so
that: (A) the number of Registrable Securities included in any such registration
is not reduced below thirty percent (30%) of the shares included in the
registration, except for (i) a registration relating to the Company's initial
public offering, from which all Registrable Securities may be excluded and (ii)
a piggyback on a registration initiated under Section 2.2, from which all
Registrable Securities held by Shareholders may be excluded; and (B) all shares
that are not Registrable Securities and are held by persons who are employees or
directors of the Company (or any subsidiary of the Company) shall first be
excluded from such registration and underwriting before any Registrable
Securities are so excluded.
(b) Expenses. All expenses incurred in connection with a
--------
registration pursuant to this Section 2.3 (excluding underwriters' and brokers'
discounts and commissions), including, without limitation all federal and "blue
sky" registration and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and reasonable fees and
disbursements of one counsel for the selling Holders (which, if desired by the
selling Holders, may be counsel to the Company) shall be borne by the Company.
2.4 Form S-3 Registration. In case the Company shall receive from any
---------------------
Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, then the Company will:
(a) Notice. Promptly give written notice of the proposed registration
------
and the Holder's or Holders' request therefor, and any related qualification or
compliance, to all other Holders of Registrable Securities; and
(b) Registration. As soon as practicable, effect such registration
------------
and all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within twenty (20) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
-------- -------
any such registration, qualification or compliance pursuant to this Section 2.4:
(1) if Form S-3 is not available for such offering by the
Holders;
(2) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $1,000,000;
7
<PAGE>
(3) if the Company shall furnish to the Holders a certificate
signed by the President or Chief Executive Officer of the Company stating that
in the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement no more
than once during any twelve month period for a period of not more than six (6)
months after receipt of the request of the Holder or Holders under this Section
2.4;
(4) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected one (1) registration on
Form S-3 for the Holders pursuant to this Section 2.4; or
(5) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(c) Expenses. Subject to the foregoing, the Company shall file a Form
--------
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered pursuant to this Section 2.4 as soon as
practicable after receipt of the request or requests of the Holders for such
registration. The Company shall pay all expenses incurred in connection with
each registration requested pursuant to this Section 2.4, (excluding
underwriters' or brokers' discounts and commissions), including without
limitation all filing, registration and qualification, printers' and accounting
fees and the reasonable fees and disbursements of counsel for the Company and
one counsel for the selling Holder or Holders (which, if desired by the selling
Holder or Holders, may be counsel for the Company).
(d) Not Demand Registration. Form S-3 registrations shall not be
-----------------------
deemed to be demand registrations as described in Section 2.2 above.
2.5 Obligations of the Company. Whenever required to effect the
--------------------------
registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to ninety (90) days.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of the Registrable Securities owned by them that
are included in such registration.
8
<PAGE>
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting registration of
Registrable Securities, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a "comfort"
letter dated as of such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering
and reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
(h) Use its best efforts to cause all such Registrable Securities
pursuant hereunder to be listed on any securities exchange or included for
trading on any interleader quotation system on which similar securities issued
by the Company are then listed.
(i) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
2.6 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to Sections 2.2, 2.3 or
2.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to timely effect
the registration of their Registrable Securities.
9
<PAGE>
2.7 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.8 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) By the Company. To the extent permitted by law, the Company
--------------
will indemnify and hold harmless each Holder, the partners, officers and
directors of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended, (the "1934 Act"), against any losses, claims, damages, or
--------
liabilities (joint or several) to which they may become subject under the
Securities Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"):
---------
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto;
(ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or
(iii) any violation or alleged violation by the Company of
the Securities Act, the 1934 Act, any federal or state securities law or any
rule or regulation promulgated under the Securities Act, the 1934 Act or any
federal or state securities law in connection with the offering covered by such
registration statement;
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided however, that the
-------- -------
indemnity agreement contained in this subsection 2.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by law, each selling
------------------
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder within the meaning of the Securities Act or the
1934 Act,
10
<PAGE>
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, underwriter or
other such Holder, partner or director, officer or controlling person of such
other Holder may become subject under the Securities Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or other
Holder, partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
-------- -------
in this subsection 2.8(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; and provided further, that the total amounts payable in indemnity by a
-------- -------
Holder under this Section 2.8(b) in respect of any Violation or Violations shall
not exceed the net proceeds received by such Holder in the registered offering
out of which such Violation or Violations arise.
(c) Notice. Promptly after receipt by an indemnified party under
------
this Section 2.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
-------- -------
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.8.
(d) Defect Eliminated in Final Prospectus. The foregoing indemnity
-------------------------------------
agreements of the Company and Holders are subject to the condition that, insofar
as they relate to any Violation made in a preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the SEC at the time the
registration statement in question becomes effective or the amended prospectus
filed with the SEC pursuant to SEC Rule 424(b) (the "Final Prospectus), such
----------------
indemnity agreement shall not inure to the benefit of any person if a copy of
the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
11
<PAGE>
(e) Contribution. In order to provide for just and equitable
------------
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to this
Section 2.8 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 2.8 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this Section
2.8; then, and in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such Holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by and sold under the
registration statement bears to the public offering price of all securities
offered by and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion; provided, however,
-------- -------
that, in any such case, (A) no Holder will be required to contribute any amount
in excess of the net proceeds received by such Holder from all Registrable
Securities offered and sold by such Holder pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
(f) Survival. The obligations of the Company and Holders under
--------
this Section 2.8 shall survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
2.9 "Market Stand-Off" Agreement. Each Holder hereby agrees that it
---------------------------
shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any
Registrable Securities or other shares of stock of the Company then owned by
such Holder (other than to donees or partners or affiliates of the Holder who
agree to be similarly bound) for up to one hundred eighty (180) days following
the effective date of a registration statement of the Company; provided,
--------
however, that:
- -------
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers securities to be sold on its
behalf to the public in an underwritten offering but not to Registrable
Securities sold pursuant to such registration statement;
(b) all executive officers and directors of the Company holding
capital stock of the Company and all holders of more than 1% of the outstanding
capital stock of the Company enter into similar agreements;
(c) such agreement shall not apply to any shares of stock other
than those that are privately acquired; and
(d) any waiver or termination of such agreement as to a portion
of the shares of stock shall be applied pro-rata to all Holders.
12
<PAGE>
In order to enforce the foregoing covenant, the Company shall have the
right to place restrictive legends on the certificates representing the shares
subject to this Section and to impose stop transfer instructions with respect to
the Registrable Securities and such other shares of stock of each Holder (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
2.10 Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the Commission which may at any time permit
the sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date of the first registration under the Securities Act
filed by the Company for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the 1934 Act (at any time after it has become subject to such
reporting requirements); and
(c) So long as any Holder owns any Registrable Securities, to
furnish to each such Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the 1934 Act (at any time after it has
become subject to the reporting requirements of the 1934 Act), a copy of the
most recent annual or quarterly report of the Company, and such other reports
and documents of the Company as a Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Holder to sell any
such securities without registration (at any time after the Company has become
subject to the reporting requirements of the 1934 Act).
2.11 Termination of the Company's Obligations. The Company shall have
----------------------------------------
no obligations pursuant to Sections 2.2 through 2.4 with respect to: (i) any
request or requests for registration made by any Holder on a date more than five
(5) years after the closing date of the Company's initial public offering; or
(ii) any Registrable Securities proposed to be sold by a Holder in a
registration pursuant to Section 2.2, 2.3 or 2.4 if, in the opinion of counsel
to the Company, all such Registrable Securities proposed to be sold by a Holder
may be sold in any and all three-month periods without registration under the
Securities Act pursuant to Rule 144 under the Securities Act.
2.12 Limitation on Subsequent Registration Rights. After the date of
--------------------------------------------
this Agreement, the Company shall not, without the prior written consent of the
Investors holding at least a majority of the Registrable Securities held by the
Investors, enter into any agreement with any holder or prospective holder of any
securities of the Company that would grant such holder registration rights on
par to or senior to those granted to the Investors hereunder.
13
<PAGE>
3. RIGHT OF FIRST REFUSAL.
----------------------
3.1 General. Each holder of shares of Common Stock issued or
-------
issuable upon the conversion of any shares of Preferred Stock and any party to
whom such holder's rights under this Section 3 or Section 4 have been duly
assigned in accordance with Section 6.1(b) (each such holder or assignee being
----
hereinafter referred to as a "Rights Holder") has the right of first refusal to
-------------
purchase such Rights Holder's Pro Rata Share (as defined below), of all (or any
part) of any "New Securities" (as defined in Section 3.2) that the Company may
from time to time issue after the date of this Agreement. A Rights Holder's
"Pro Rata Share" for purposes of this right of first refusal and the right of
- ---------------
co-sale provided for in Section 4 is the ratio of (a) the number of Registrable
Securities as to which such Rights Holder is the Holder (and/or is deemed to be
the Holder under Section 2.1(d)), to (b) a number of shares of Common Stock of
the Company equal to the sum of (i) the total number of shares of Common Stock
of the Company then outstanding plus (ii) the total number of shares of Common
Stock of the Company into which all then outstanding shares of Preferred Stock
of the Company are then convertible plus (iii) the number of shares of Common
Stock of the Company subject to then outstanding options or outstanding
warrants.
3.2 New Securities. "New Securities" shall mean any Common Stock or
-------------- --------------
Preferred Stock of the Company, whether now authorized or not, and rights,
options or warrants to purchase such Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible or
exchangeable into such Common Stock or Preferred Stock, whether with or without
consideration; provided, however, that the term "New Securities" does not
-------- ------- ---- ---
include:
- -------
(i) any shares of the Company's Common Stock (and/or
options or warrants therefor) issued to employees, officers, directors,
contractors, advisors or consultants of the Company pursuant to incentive
agreements or plans unanimously approved by the Board of Directors of the
Company;
(ii) any shares of Series A Stock, Series B Stock, Series C
Stock, Series D Stock, Series E Stock or Series F Stock issued under the Series
A Agreement, Series B Agreement, Series C Agreement, Series D Agreement, Series
E Agreement or Series F Agreement, respectively, as such agreements may be
amended.
(iii) any securities issuable upon conversion of or with
respect to any then outstanding shares of Preferred Stock of the Company or
Common Stock or other securities issuable upon conversion thereof;
(iv) any shares of the Company's Common Stock or Preferred
Stock issued in connection with any stock split or stock dividend;
(v) any securities offered by the Company to the public
pursuant to a registration statement filed under the Securities Act;
(vi) any shares of the Company's Common Stock or Preferred
Stock (and/or options or warrants therefor) issued or issuable in connection
with key customer relationships of the Company or to parties providing the
Company with (and in connection with
14
<PAGE>
such provision of) equipment leases, real property leases, loans, credit lines,
guaranties of indebtedness, cash price reductions or similar benefits with non-
financing purposes unanimously approved by the Board of Directors of the
Company;
(vii) any shares of the Company's Common Stock or Preferred
Stock (and/the options or warrants therefor) issued or issuable to (a)
Entrepreneurs Foundation pursuant to the Extricity Software, Inc. Warrant to
Purchase Common Stock, dated May 19, 1999, (b) Heidrick & Struggles pursuant to
the Warrant to Purchase 8,333 Shares of Common Stock of Extricity Software,
Inc., dated December 18, 1998, (c) Gray Cary Ware & Freidenrich pursuant to the
Extricity Software, Inc. Warrant to Purchase Common Stock, dated March 13, 2000,
(d) Intel Corporation ("Intel") pursuant to the Warrant to Purchase Series C
-----
Preferred Stock of CrossRoute Software, Inc., dated April 24, 1998, (e)
Solectron Corporation pursuant to the Warrant to Purchase Series C Preferred
Stock of Extricity Software, Inc., dated April 21, 1999, and (f) Amkor
Technology, Inc. pursuant to the Extricity Software, Inc. Warrant to Purchase
Series E Preferred Stock, dated March 29, 2000 (collectively, the "Warrants,"
individually, a "Warrant").
(viii) securities issued pursuant to the acquisition of another
corporation or entity by the Company by consolidation, merger, purchase of all
or substantially all of the assets, or other reorganization (including a stock-
for-stock acquisition) in which the Company acquires, in a single transaction or
series of related transactions, all or substantially all of the assets of such
other corporation or entity or fifty percent (50%) or more of the voting power
of such other corporation or entity or fifty percent (50%) or more of the equity
ownership of such other entity.
3.3 Procedures. In the event that the Company proposes to undertake
----------
an issuance of New Securities, it shall give to each Rights Holder written
notice of its intention to issue New Securities (the "Notice"), describing the
------
type of New Securities and the price and the general terms upon which the
Company proposes to issue such New Securities. Each Rights Holder shall have
ten (10) days from the date of receiving any such Notice to agree in writing to
purchase such Rights Holder's Pro Rata Share of such New Securities for the
price and upon the general terms specified in the Notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased (not to exceed such Rights Holder's Pro Rata Share). If any Rights
Holder fails to so agree in writing within such ten (10) day period to purchase
such Rights Holder's full Pro Rata Share of an offering of New Securities (a
"Nonpurchasing Holder"), then such Nonpurchasing Holder shall forfeit the right
- ---------------------
hereunder to purchase that part of his Pro Rata Share of such New Securities
that he did not so agree to purchase and the Company shall promptly give each
Rights Holder who has timely agreed to purchase his full Pro Rata Share of such
offering of New Securities (a "Purchasing Holder") written notice of the failure
-----------------
of any Nonpurchasing Holder to purchase such Nonpurchasing Rights Holder's full
Pro Rata Share of such offering of New Securities (the "Overallotment Notice").
--------------------
Each Purchasing Holder shall have a right of overallotment such that such
Purchasing Holder may agree to purchase a portion of the Nonpurchasing Holders'
unpurchased Pro Rata Shares of such offering on a pro rata basis according to
the relative Pro Rata Shares of the Purchasing Rights Holders, at any time
within five (5) days after receiving the Overallotment Notice.
15
<PAGE>
3.4 Failure to Exercise. In the event that the Rights Holders fail
-------------------
to exercise in full the right of first refusal within such ten (10) plus five
(5) day period, then the Company shall have 120 days thereafter to sell the New
Securities with respect to which the Rights Holders' rights of first refusal
hereunder were not exercised, at a price and upon general terms not materially
more favorable to the purchasers thereof than specified in the Company's Notice
to the Rights Holders. In the event that the Company has not issued and sold
the New Securities within such 120 day period, then the Company shall not
thereafter issue or sell any New Securities without again first offering such
New Securities to the Rights Holders pursuant to this Section 3.
3.5 Termination. This right of first refusal shall terminate (i)
-----------
immediately before the closing of the first underwritten sale of Common Stock of
the Company to the public pursuant to a registration statement filed with, and
declared effective by, the SEC under the Securities Act, covering the offer and
sale of Common Stock to the public at an offering price of at least $9.00 per
share (such offering price being subject to proportional adjustment to reflect
subdivisions, combinations, stock dividends and similar transactions affecting
the number of outstanding shares of Common Stock) for an aggregate gross public
offering price (calculated before deduction of underwriters' discounts and
commissions) of at least $25,000,000, or (ii) upon (a) the acquisition of all or
substantially all the assets of the Company or (b) an acquisition of the Company
by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) or more of the voting
power of the corporation or other entity surviving such transaction.
3.6 Waiver of Right of First Refusal. The undersigned Prior
--------------------------------
Investors understand and agree that while Section 3 of the Prior Rights
Agreement gives them (and other persons holding Series A Stock, Series B Stock,
Series C Stock, Series D Stock and Series E Stock) the right to purchase their
respective Pro Rata Shares (as such term is defined in the Prior Rights
Agreement) of the Series F Stock to be sold and issued by the Company, they will
instead be given the right to purchase the amounts of Series F Stock indicated
in Exhibit A hereto. To the extent that the Pro Rata Share (as such term is
---------
defined in the Prior Rights Agreement) of any Prior Investor (and any other
person holding Series A Stock, Series B Stock, Series C Stock, Series D Stock or
Series E Stock) exceeds the amount indicated in Exhibit A, the Prior Investors
---------
hereby waive all rights of first refusal under Section 3 of the Prior Rights
Agreement with respect to sale and issuance by the Company of the Series F Stock
(and any Common Stock issuable upon the conversion thereof). The Prior
Investors also hereby waive any notice period required under Section 3 of the
Prior Rights Agreement with respect to sale and issuance by the Company of the
Series F Stock (and any Common Stock issuable upon the conversion thereof).
4. RIGHT OF CO-SALE.
----------------
4.1 General. No Shareholder may sell, assign or transfer any of the
-------
Shareholders' Shares which have not been elected to be purchased by the Company
pursuant to a right of first refusal held by the Company until each Rights
Holder shall have been given the opportunity, exercisable within ten (10) days
from the date of receiving written notice from the Shareholder of the proposed
sale, assignment or transfer (such notice to include the price and
16
<PAGE>
general terms of such proposed sale, assignment or transfer), to sell to the
proposed transferee or transferees, upon the same terms and conditions offered
to or by the Shareholder, its Pro Rata Share of the shares proposed to be sold,
assigned or transferred. Any Rights Holder who fails to notify the Shareholder
within (10) days after receiving the written notice from the Shareholder that
this co-sale right is being exercised shall be deemed to have waived its rights
under this Section 4 with respect to such proposed sale, assignment or transfer.
Any sale, assignment or transfer made pursuant to this Section 4 shall be
consummated within ninety (90) days of the date of receiving the notice given
pursuant to this Section and shall be conditioned upon the agreement of the
proposed transferee or transferees that such proposed transferee or transferees
will purchase each electing Rights Holder's Pro Rata Share of the shares
proposed to be sold.
4.2 Termination. This right of co-sale shall terminate (i)
-----------
immediately before the closing of the first underwritten sale of Common Stock of
the Company to the public pursuant to a registration statement filed with, and
declared effective by, the SEC under the Securities Act, covering the offer and
sale of Common Stock to the public at an offering price of at least $9.00 per
share (such offering price being subject to proportional adjustment to reflect
subdivisions, combinations, stock dividends and similar transactions affecting
the number of outstanding shares of Common Stock) for an aggregate gross public
offering price (calculated before deduction of underwriters' discounts and
commissions) of at least $25,000,000, or (ii) upon (a) the acquisition of all or
substantially all the assets of the Company or (b) an acquisition of the Company
by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) or more of the voting
power of the corporation or other entity surviving such transaction.
5. PREFERRED RIGHT OF FIRST REFUSAL AND RIGHT OF CO-SALE.
-----------------------------------------------------
5.1 Right of First Refusal. (a) Each holder of shares of Common
----------------------
Stock issued or issuable upon the conversion of any shares of Series C Stock,
Series D Stock, Series E Stock and Series F Stock and any party to whom such
holder's rights under this Section 5 have been duly assigned in accordance with
Section 6.1(b) (each such holder or assignee being hereinafter referred to as a
----
"Special Rights Holder") has the right of first refusal to purchase such Special
---------------------
Rights Holder's Special Pro Rata Share (as defined below), of all (or any part)
of any "Special Preferred Sale" (as defined below) from time to time after the
date of this Agreement. A Special Rights Holder's "Special Pro Rata Share" for
----------------------
purposes of this right of first refusal and the right of co-sale provided for in
Section 5.2 is the ratio of (a) the number of Registrable Securities issued or
issuable upon conversion of Series C Stock, Series D Stock, Series E Stock or
Series F Stock as to which such Special Rights Holder is the Holder (and/or is
deemed to be the Holder under Section 2.1(d)), to (b) a number of shares of
Common Stock of the Company equal to the sum of (i) the total number of shares
of Common Stock of the Company then outstanding plus (ii) the total number of
shares of Common Stock of the Company into which all then outstanding shares of
Preferred Stock of the Company are then convertible plus (iii) the number of
shares of Common Stock of the Company subject to then outstanding options or
outstanding warrants. "Special Preferred Sale" for purposes of this right of
----------------------
first refusal and the right of co-sale provided for in Section 5.2 shall mean
the sale, assignment or transfer (other than to an affiliate, including without
limitation, a partner, shareholder or member, that agrees in writing to be
17
<PAGE>
subject to the terms of this Section 5.1 to the same extent as if such affiliate
were an original party hereunder) of any shares of any series of Preferred Stock
by any Holder of such Preferred Stock who is listed on Exhibit 5.1 hereto (such
-----------
Exhibit 5.1 representing the Holders of Preferred Stock who hold in the
- -----------
aggregate, together with their affiliates, five (5) percent or more of the total
outstanding Preferred Stock of the Company, and each such Holder referred to
hereinafter as a "Special Preferred Holder").
------------------------
(b) Procedures. In the event that any Special Preferred Holder
----------
proposes to undertake a Special Preferred Sale, it shall give to each Special
Rights Holder written notice of its intention to undertake a Special Preferred
Sale (the "Special Notice"), describing the series of Preferred Stock and the
--------------
price and the general terms upon which such Special Preferred Holder proposes to
undertake such Special Preferred Sale. Each Special Rights Holder shall have
ten (10) days from the date of receiving any such Special Notice to agree in
writing to purchase such Special Rights Holder's Special Pro Rata Share of such
Special Preferred Sale shares for the price and upon the general terms specified
in the Special Notice by giving written notice to the Special Preferred Holder
and stating therein the quantity of shares of such Special Preferred Sale to be
purchased (not to exceed such Special Rights Holder's Special Pro Rata Share).
If any Special Rights Holder fails to so agree in writing within such ten (10)
day period to purchase such Special Rights Holder's full Special Pro Rata Share
of a Special Preferred Sale, then such Special Rights Holder shall forfeit the
right hereunder to purchase that part of his Special Pro Rata Share of such
Special Preferred Sale that he did not so agree to purchase.
5.2 Right of Co-Sale. In the event that any Special Rights Holder
----------------
timely waives its right of first refusal set forth in Section 5.1 in its
entirety, such Special Rights Holder shall be given the opportunity, exercisable
within ten (10) days from the date of the Special Notice, without requiring
further notice to such Special Rights Holder, to sell to the proposed transferee
or transferees, upon the same terms and conditions offered to or by the Special
Preferred Holder, its Special Pro Rata Share of the Special Preferred Sale
shares proposed to be sold, assigned or transferred. Any Special Rights Holder
who fails to notify the Special Preferred Holder within (10) days after
receiving the Special Notice from the Special Preferred Holder that this co-sale
right is being exercised shall be deemed to have waived its rights under this
Section 5.2 with respect to such proposed sale, assignment or transfer. Any
sale, assignment or transfer made pursuant to this Section 5.2 shall be
consummated within ninety (90) days of the date of receiving the notice given
pursuant to this Section and shall be conditioned upon the agreement of the
proposed transferee or transferees that such proposed transferee or transferees
will purchase each electing Special Rights Holder's Special Pro Rata Share of
the shares proposed to be sold.
5.3 Failure to Exercise. In the event that the Special Rights
-------------------
Holders fail to exercise in full the right of first refusal and/or right of co-
sale within such ten (10) day period, then the Special Preferred Holder shall be
free thereafter to undertake the Special Preferred Sale with respect to the
shares which the Special Rights Holders' rights of first refusal and/or rights
of co-sale under this Section 5 were not exercised, at a price and upon general
terms not materially more favorable to the purchasers thereof than specified in
the Special Notice to the Special Rights Holders.
18
<PAGE>
5.4 Termination. The right of first refusal and the right of co-sale
-----------
set forth in this Section 5 shall not apply to and shall terminate (i)
immediately before the closing of the first underwritten sale of Common Stock of
the Company to the public pursuant to a registration statement filed with, and
declared effective by, the SEC under the Securities Act, covering the offer and
sale of Common Stock to the public at an offering price of at least $9.00 per
share (such offering price being subject to proportional adjustment to reflect
subdivisions, combinations, stock dividends and similar transactions affecting
the number of outstanding shares of Common Stock) for an aggregate gross public
offering price (calculated before deduction of underwriters' discounts and
commissions) of at least $25,000,000, or (ii) upon (a) the acquisition of all or
substantially all the assets of the Company or (b) an acquisition of the Company
by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) or more of the voting
power of the corporation or other entity surviving such transaction.
6. ASSIGNMENT AND AMENDMENT.
------------------------
6.1 Assignment. Notwithstanding anything herein to the contrary:
----------
(a) Information and Inspection Rights. The rights of an
---------------------------------
Investor under Section 1.1 or 1.2 hereof may be assigned only to a party who
acquires from an Investor (or an Investor's permitted assigns) at least that
number of shares of Preferred Stock and/or an equivalent number (on an as-
converted basis) of shares of Conversion Stock described in Section 1.1 or 1.2
hereof, respectively.
(b) Registration Rights; Refusal Rights; Co-Sale Rights. The
---------------------------------------------------
registration rights of a Holder under Section 2 hereof, the rights of first
refusal of a Rights Holder under Section 3 hereof, the rights of co-sale of a
Rights Holder under Section 4, and the rights of first refusal and rights of co-
sale of a Special Rights Holder under Section 5 hereof may be assigned only to
(i) a party who acquires at least 250,000 shares of Registrable Securities or
(ii) (A) a shareholder, affiliate, partner, member, or beneficiary of such
Holder or Rights Holder (or permitted assignee); (B) a spouse or children of a
shareholder, partner, affiliate, member, or beneficiary of a Holder or Rights
Holder (or permitted assignee); (C) a trust for the benefit of the persons set
forth in (A) or (B) or for the issue of the persons set forth in (A) or (B); and
(D) an entity (corporation, partnership, limited liability company or other
juridical entity) of which at least 75 percent in interest is owned or
controlled, directly or indirectly through other entities, by one or more of the
persons set forth in (A), (B), or (C); provided, however that no party may be
-------- -------
assigned any of the foregoing rights unless the Company is given written notice
by the assigning party at the time of such assignment stating the name and
address of the assignee and identifying the securities of the Company as to
which the rights in question are being assigned; and provided further that any
-------- -------
such assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the provisions of
this Section 6.
6.2 Amendment of Rights. Subject to Section 6.3, any provision of
-------------------
this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the
19
<PAGE>
Company and Investors (and/or any of their permitted successors or assigns)
holding shares of Preferred Stock and/or Conversion Stock representing and/or
convertible into a majority of all the Investors' Shares (as defined below);
provided, however, that the piggyback registration rights granted to the
- -------- -------
Shareholders under Section 2 of this Agreement may not be eliminated or
materially and adversely changed without the written consent of persons holding
a majority of the Shareholders' Shares; and provided, further, that the grant to
-------- -------
third parties of piggyback registration rights on a pari passu basis with the
piggyback registration rights of the Shareholders' Shares under Section 2.3
shall not be deemed to be a material and adverse change to the piggyback
registration rights of the Shareholders under this Agreement. As used herein,
the term "Investors' Shares" shall mean the shares of Common Stock then issuable
-----------------
upon conversion of all then outstanding shares of Preferred Stock plus all then
outstanding shares of Conversion Stock that were issued upon the conversion of
any shares of Preferred Stock. Any amendment or waiver effected in accordance
with this Section 6.2 shall be binding upon each Investor, each Holder, each
permitted successor or assignee of such Investor or Holder and the Company.
6.3 New Investors. Notwithstanding anything herein to the contrary,
-------------
if pursuant to Section 2.2 of the Series F Agreement, additional parties may
purchase shares of Series F Stock as "New Investors" thereunder, then each such
New Investor shall become a party to this Agreement as an "Investor" hereunder,
without the need for any consent, approval or signature of any Investor when
such New Investor has both: (i) purchased shares of Series F Stock under the
Series F Agreement and paid the Company all consideration payable for such
shares and (ii) executed one or more counterpart signature pages to this
Agreement as an "Investor", with the Company's consent.
7. VOTING.
------
7.1 Common Stock Directors. The Shareholders agree to vote their
----------------------
shares of Common Stock so that one of the two directors elected by the Common
Stock (the "Independent Director") is an individual not employed by or providing
--------------------
consulting services to the Company, and who is reasonably satisfactory (as
provided below) to the Preferred Directors (as defined below) or to the
Investors holding two-thirds of the outstanding shares of Series A Stock and
Series B Stock. The Shareholders shall notify the directors elected by holders
of Preferred Stock of the Company ("Preferred Directors") of the individual
-------------------
designated by the Shareholders as the Independent Director, who will be elected
if the Preferred Directors do not object to such designation within 10 days
after receipt of such notice. If the Preferred Directors object in writing,
then the Shareholders shall either propose a new Independent Director or shall
submit their proposal to a vote of the Investors. This procedure shall be
repeated until an Independent Director is selected. Replacement of the
Independent Director shall conform to this procedure and Article VI, Section 4.4
of the Company's Articles of Incorporation.
7.2 Series C/D/E/F Nominee. The Series C Investors, Series D
----------------------
Investors, Series E Investors and Series F Investors, voting together as a
single class, shall be entitled to elect one (1) director of the Company (the
"Series C/D/E/F Nominee"). Any replacement of the Series C/D/E/F Nominee shall
----------------------
conform to this Section 7.2 and Article VI, Section 4.4 of the Company's
Articles of Incorporation.
20
<PAGE>
8. GENERAL PROVISIONS.
------------------
8.1 Notices. Any notice, request or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given (i) when sent by confirmed facsimile, (ii) upon personal delivery or (iii)
if deposited in the U.S. mail by registered or certified mail, return receipt
requested, postage prepaid, or with a commercial overnight carrier as follows:
(a) if to an Investor, at such Investor's respective address as
set forth on Exhibit A hereto.
---------
(b) if to the Company, at 555 Twin Dolphin Drive, Suite 600,
Redwood Shores, California 94065.
(c) if to a Shareholder, at such Shareholder's address as set
forth on Exhibit B hereto.
---------
Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder. Notice shall conclusively be
deemed to have been given when sent by confirmed facsimile, when personally
delivered or when deposited in the mail in the manner set forth above.
8.2 Entire Agreement. This Agreement, together with all the Exhibits
----------------
hereto, constitutes and contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes the Prior
Rights Agreement and any and all prior negotiations, correspondence, agreements,
understandings, duties or obligations between the parties respecting the subject
matter hereof. This Agreement will amend and restate the Prior Rights Agreement
to read as set forth herein, when it has been duly executed by parties having
the right to so amend and restate the Prior Rights Agreement.
8.3 Governing Law. This Agreement shall be governed by and construed
-------------
exclusively in accordance with the internal laws of the State of California as
applied to agreements among California residents entered into and to be
performed entirely within California, excluding that body of law relating to
conflict of laws and choice of law.
8.4 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, then such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
8.5 Third Parties. Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
8.6 Successors And Assigns. Subject to the provisions of Section
----------------------
6.1, the provisions of this Agreement shall inure to the benefit of, and shall
be binding upon, the successors and permitted assigns of the parties hereto.
21
<PAGE>
8.7 Captions. The captions to sections of this Agreement have been
--------
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
8.8 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
8.9 Costs And Attorneys' Fees. In the event that any action, suit or
-------------------------
other proceeding is instituted concerning or arising out of this Agreement or
any transaction contemplated hereunder, the prevailing party shall recover all
of such party's costs and attorneys' fees incurred in each such action, suit or
other proceeding, including any and all appeals or petitions therefrom.
8.10 Adjustments for Stock Splits, Etc. Wherever in this Agreement
---------------------------------
there is a reference to a specific number of shares of Common Stock or Preferred
Stock of the Company of any class or series, then, upon the occurrence of any
subdivision, combination or stock dividend of such class or series of stock, the
specific number of shares so referenced in this Agreement shall automatically be
proportionally adjusted to reflect the affect on the outstanding shares of such
class or series of stock by such subdivision, combination or stock dividend.
8.11 Aggregation of Stock. All shares 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 Prior Rights Agreement Superseded. Pursuant to Section 6.2 of
---------------------------------
the Prior Rights Agreement, the undersigned parties who are parties to such
Prior Rights Agreement hereby amend and restate the Prior Rights Agreement to
read in its entirety as set forth in this Agreement, all with the intent and
effect that the Prior Rights Agreement shall hereby be entirely replaced and
superseded by this Agreement, which shall be binding on all Prior Investors
whether or not they sign this Agreement.
8.13 Confidentiality and Non-Disclosure.
----------------------------------
(a) Disclosure of Terms. The terms and conditions of Intel's
-------------------
participation in this Agreement, the Series C Agreement, the Series D Agreement,
the Series E Agreement, the Series F Agreement and the Warrant and the terms and
conditions of the participation of SAP AG, and its affiliates (collectively,
"SAP") in this Agreement, the Series C Agreement, the Series E Agreement, and
the Series F Agreement (collectively referred to hereinafter as the respective
"Financing Terms" of the applicable party) shall be considered confidential
information and shall not be disclosed by any party hereto to any third party
except in accordance with the provisions set forth below.
(b) Press Releases, Etc. Within sixty (60) days of the
-------------------
Closing, the Company may issue a press release in the form provided by Intel
disclosing that Intel has invested in the Company; provided that the release
does not disclose any of the Financing Terms and the final form of the press
release is approved in advance in writing by Intel. No other announcement
regarding Intel and/or SAP in a press release, conference, advertisement,
22
<PAGE>
announcement, professional or trade publication, mass marketing materials or
otherwise to the general public may be made without the prior written consent of
Intel or SAP, as the case may be.
(c) Permitted Disclosures. Notwithstanding the foregoing, (i)
---------------------
any party may disclose any of the Financing Terms to its current or bona fide
prospective investors, employees, investment bankers, lenders, accountants and
attorneys, in each case only where such persons or entities are under
appropriate nondisclosure obligations; (ii) any party may disclose (other than
in a press release or other public announcement described in subsection (b))
solely the fact that Intel and/or SAP is an investor in the Company to any third
parties without the requirement for the consent of any other party or
nondisclosure obligations; and (iii) Intel and/or SAP may disclose its
respective investment in the Company and the Financing Terms to third parties or
to the public at its sole discretion and, if it does so, the other parties
hereto shall have the right to disclose to third parties any such information
disclosed in a press release or other public announcement by Intel and/or SAP,
as the case may be.
(d) Legally Compelled Disclosure. In the event that the
----------------------------
Company is requested or becomes legally compelled (including without limitation,
pursuant to securities laws and regulations) to disclose Intel's and/or SAP's
participation in this Agreement, the Series C Agreement, the Series D Agreement,
the Series E Agreement, the Series F Agreement and/or the Warrant and/or any of
the Financing Terms hereof in contravention of the provisions of this Section
8.13, the Company shall provide Intel and/or SAP, as the case may be, with
prompt written notice of that fact so that Intel and/or SAP, as the case may be,
may seek (with the cooperation and reasonable efforts of the Company) a
protective order, confidential treatment or other appropriate remedy. In such
event, the Company shall furnish only that portion of the information which is
legally required and shall exercise reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded such information to the
extent reasonably requested by Intel and/ or SAP, as the case may be.
(e) Other Information. The provisions of this Section 8.13
-----------------
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by any of the parties hereto with
respect to the transactions contemplated hereby. Additional disclosures and
exchange of confidential information between the Company and Intel (including
without limitation, any exchanges of information with any Intel board observer)
shall be governed by the terms of the Corporate Non-Disclosure Agreement No.
115010, dated June 2, 1998, executed by the Company and Intel, and any
Confidential Information Transmittal Records provided in connection therewith.
(f) All notices required under this Section 8.13 shall be made
pursuant to Section 8.1 hereof.
(g) Notwithstanding anything herein to the contrary, this
Section 8.13 shall not be binding upon Intel 64 Fund, LLC.
[THE REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
THE COMPANY:
- -----------
Extricity, Inc.,
a California corporation
By: __________________________________
Barry M. Ariko, President
THE SHAREHOLDERS:
- ----------------
By: __________________________________
The Kenneth Ross Trust dated December 3, 1980
By: __________________________________
Kenneth Ross, Trustee of the Ross ACD
Irrevocable Trust
By: __________________________________
Kenneth Ross, Trustee of the Ross BMR
Irrevocable Trust dated August 13, 1997
By: __________________________________
Kenneth Ross, Trustee of the Ross EAR
Irrevocable Trust dated July 29, 1999
By: __________________________________
Gregory R. Olsen
By: __________________________________
Kimberly Weins
[SIGNATURE PAGE TO EXTRICITY, INC.
FIFTH RESTATED INVESTORS'RIGHTS AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
THE COMPANY:
- -----------
Extricity, Inc.,
a California corporation
By: _________________________
Barry M. Ariko, President
THE INVESTORS:
- -------------
Charter Growth Capital II, L.P. Broadview Capital Partners Qualified
Purchaser Fund, L.P.
By: CGC Partners II
By: Broadview Capital Partners
Management LLC
By: __________________________________ Its: General Partner
George H. Bischof, General Partner
By:______________________________
Name:____________________________
Title: Member
CGC Investors II QP, L.P. Broadview Capital Partners, L.P.
By: CGC Partners II
By: Broadview Capital Partners
Management LLC
Its: General Partner
By: __________________________________ By:______________________________
George H. Bischof, General Partner Name:____________________________
Title: Member
CGC Investors II A, L.P. Broadview Capital Partners
Affiliates Fund, LLC
By: CGC Partners II
By: Broadview Capital Partners
Management LLC
Its: Manager
By: __________________________________ By: _____________________________
George H. Bischof, General Partner Name:____________________________
Title: Member
[SIGNATURE PAGE TO EXTRICITY, INC.
FIFTH RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
AspenTech Broadview BCPSBS Fund, L.P.
By:_____________________________ By: Broadview Capital Partners
Title: Member, General Partner Management LLC
-----------------------
Its: Manager
By:______________________________
Name:____________________________
Title: Member
WingSpring
By:______________________________ By: ______________________________
Title: Member, General Partner ________________, individual
-----------------------
Manugistics
By:______________________________
Title: Member, General Partner
-----------------------
Robertson, Stephens
By:______________________________
Title: Member, General Partner
-----------------------
GCWF Investment Partners II
By GCWF Investments LLC, Managing Partner
By: Gregory M. Gallo, President & CFO
_________________________________
TCV IV, L.P.
a Delaware Limited Partnership
By: Technology Crossover
Management IV, L.L.C.,
Its: General Partner
By:______________________________
Name: Carla S. Newell
Title: Attorney in Fact
[SIGNATURE PAGE TO EXTRICITY, INC.
FIFTH RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
Bay Partners SBIC, L.P. RRE Investors Fund, L.P.
By: Bay Management Company 1995, its General By: __________________________
Partner Title: Member, General Partner
-----------------------
By: ________________________________________
___________________, General Partner
Piper Jaffray Technology Capital SBIC, L.P. Bay Partners LS Fund, L.P.
By: Piper Ventures Capital, Inc., By:___________________________
its General Partner Name:_________________________
Title:________________________
By: ________________________________________
Gary J. Blauer
Vice President
Vector Capital, L.P. Telos Venture Partners, L.P.
By: Vector Capital Partners, LLC By: __________________________
Bruce R. Bourbon, General
Partner
By: ________________________________________
Alexander B. Slusky, Managing Member
Donald. C Hichens RRE Investors Fund, L.P.
____________________________________________ By:___________________________
Title: Member, General Partner
-----------------------
Liberty Environmental
Partners, L.P.
By: __________________________
Name: __________________,
General Partner
[SIGNATURE PAGE TO EXTRICITY, INC.
FIFTH RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
Timothy A. Woodward
___________________________________
Brendan Joseph Cassin, Trustee of the Brendan Joseph Cassin and Isabel B.
Robert Sean Cassin Trust U/D/T dated Cassin, Trustees of the
2/20/97 Cassin Family Trust U/T/D
dated January 31, 1996
By: _________________________________ By: ________________________________
B. J. Cassin, Trustee B. J. Cassin, Trustee
Saint Francis Growth Fund Saint Mary's College of California
By:__________________________________ By: ________________________________
Title:_______________________________ Title: _____________________________
Stanford University Eagle Ventures II, LLC
By: _________________________________ By: ________________________________
Title: ______________________________ R. David Spreng, President
Crescendo II, L.P. Ronald P. Antipa
By: ________________, its General ___________________________________
Partner
By: _________________________________
R. David Spreng, President
Ray Bingham James A. Chafoulias
_____________________________________ ___________________________________
[SIGNATURE PAGE TO EXTRICITY, INC.
FIFTH RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
Joe Costello Gerald C. Down
_______________________________ __________________________________
Larry G. Gerdes Jeffrey O. Henley & Judy Henley TTEEs,
Jeffrey and Judy Henley Trust I dtd
10/23/89
By:___________________________________
Title:________________________________
_______________________________
Paul K. Joas Donald L. Lucas, SUCC TTEE Donald L.
Lucas Profit Sharing Trust DTD 1/1/84
By:___________________________________
Title:________________________________
Richard M. Lucas Cancer Foundation Motete Corporation
By:____________________________ By:___________________________________
Title:_________________________ Title:________________________________
Alberto Perez Noel Rahn
_______________________________ ______________________________________
Royal Wulff Investment Group RWI Group II, L.P.
By:____________________________ By:___________________________________
Donald A. Lucas, General Partner Donald A. Lucas, General Partner
[SIGNATURE PAGE TO EXTRICITY, INC.
FIFTH RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
Sand Hill Financial Company Gregory V. Vaughan
By:____________________________ ___________________________________
Title:_________________________
F & W Investments 1996 F & W Investments 1996 - II
By:____________________________ By:________________________________
Title:_________________________ Title:_____________________________
F & W Investments 1997 F & W Investments 2000
By:____________________________ By:________________________________
Title:_________________________ Title:_____________________________
WS Investments 96A WS Investments 97A
By:____________________________ By:________________________________
Title:_________________________ Title:_____________________________
WS Investments 98A
By:____________________________
Title:_________________________
Aaron Ross Alison Ross
_______________________________ ___________________________________
Catherine Ross David Ross
_______________________________ ___________________________________
[SIGNATURE PAGE TO EXTRICITY, INC.
FIFTH RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
Bert L. Zaccaria Arlene B. Tenenbaum and Joshua B.
Tenenbaum as Trustees of the Jay M.
_________________________________ Tenenbaum Technology Trust
By:_________________________________
Title:______________________________
Anne Marie Jasse & Bruce Fram, Byron A. Gregerson
Community Property
By:______________________________ ____________________________________
Title:___________________________
Isaac Stein and Madelein Johnson Stein, Ken Goldman
Trustees of the Stein 1995 Revocable Trust
By:______________________________ ____________________________________
Title:___________________________
[SIGNATURE PAGE TO EXTRICITY, INC.
FIFTH RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
<TABLE>
<S> <C>
Intel 64 Fund, LLC Intel Corporation
By: Intel 64 Fund Operations, Inc.,
its Coordinating Member By:_____________________________________________________________
Name:___________________________________________________________
Title:__________________________________________________________
By:_____________________________________________
Arvind Sodhani
Vice President and Treasurer
Chancellor Private Capital Partners III, L.P. Citiventure 96 Partnership, L.P.
By: CPCP Associates, L.P., its General Partner By: INVESCO Private Capital, Inc., as
By: INVESCO Private Capital, Inc., its General Partner Investment Advisor and Attorney-in-Fact
By:_________________________________________________ By:________________________________________________________________
Name:___________________________________________ Name:___________________________________________________________
Title:__________________________________________ Title:__________________________________________________________
Chancellor Private Capital Offshore Partners II, L.P. Chancellor Private Capital Offshore Partners I, C V
By: CPCO Associates, L.P., its Investment General Partner By: Chancellor KME IV, L.P., its Investment General Partner
By: INVESCO Private Capital, Inc., its General Partner By: INVESCO Private Capital, Inc., its General Partner
By:__________________________________________________ By:________________________________________________________________
Name:____________________________________________ Name:___________________________________________________________
Title:___________________________________________ Title:__________________________________________________________
Cambridge Technology Capital SAP America, Inc.
By:______________________________________________
Name:____________________________________________ By:_____________________________________________________________
Title:___________________________________________ Name:___________________________________________________________
Title:__________________________________________________________
</TABLE>
[SIGNATURE PAGE TO EXTRICITY, INC.
FIFTH RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
THE SHAREHOLDERS:
- ----------------
The Kenneth Ross Trust dated Kenneth Ross, Trustee of the Ross ACD
December 3, 1980 Irrevocable Trust
By:___________________________________ By:__________________________________
Kenneth Ross, Trustee Kenneth Ross, Trustee
Kenneth Ross, Trustee of the Ross BMR Kenneth Ross, Trustee of the Ross EAR
Irrevocable Trust dated August 13, 1997 Irrevocable Trust dated July 29, 1999
By:___________________________________ By:__________________________________
Kenneth Ross, Trustee Kenneth Ross, Trustee
Gregory R. Olsen Kimberly P. Weins
______________________________________ _____________________________________
[SIGNATURE PAGE TO EXTRICITY, INC.
FIFTH RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EXHIBIT A
[SUBJECT TO REVISION]
List of Investors
-----------------
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
---------- ----------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Charter Growth Capital II, L.P. 0 0 0 0 0 1,767,442
525 University Avenue
Suite 1500
Palo Alto, CA 94301
Tel: 650-325-6953
Fax: 650-325-8811
Email: [email protected]
--------------------------
CGC Investors II QP, L.P. 0 0 0 0 0 69,767
525 University Avenue
Suite 1500
Palo Alto, CA 94301
Tel: 650-325-6953
Fax: 650-325-8811
CGC Investors II A, L.P. 0 0 0 0 0 23,256
525 University Avenue
Suite 1500
Palo Alto, CA 94301
Tel: 650-325-6953
Fax: 650-325-8811
Broadview Capital Partners 0 0 0 0 0 1,290,520
Qualified Purchaser Fund, L.P.
950 Tower Lane, 18th Floor
Foster City, CA 94404
Tel: 650-356-6000
Fax: 650-356-6001
Email:
[email protected]
- ------------------------------
[email protected]
- ----------------------------
[email protected]
Broadview Capital Partners, L.P. 0 0 0 0 0 178,317
950 Tower Lane, 18th Floor
Foster City, CA 94404
Tel: 650-356-6000
Fax: 650-356-6001
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Broadview Capital Partners 0 0 0 0 0 71,705
Affiliates Fund, LLC
950 Tower Lane, 18th Floor
Foster City, CA 94404
Tel: 650-356-6000
Fax: 650-356-6001
Broadview BCPSBS Fund, L.P. 0 0 0 0 0 9,845
950 Tower Lane, 18th Floor
Foster City, CA 94404
Tel: 650-356-6000
Fax: 650-356-6001
AspenTech 0 0 0 0 0 310,077
____________________________________
____________________________________
____________________________________
Email: [email protected]
--------------------------
[email protected]
WingSpring, L.L.C. 0 0 0 0 0 155,039
2370 Watson Court, Suite 200
Palo Alto, CA 94303
Tel: 650-843-9800
Fax: 650-843-3660
Attn: Timothy F. Tasch
Email: [email protected]
-------------------
Manugistics 0 0 0 0 0 155,039
____________________________________
____________________________________
____________________________________
Email: [email protected]
----------------------------
GCWF Investment Partners II 0 0 0 0 0 7,752
400 Hamilton Avenue
Palo Alto, CA 94301-1825
Tel: 650-833-2000
Fax: 650-327-3699
Attn: Peggy Hone
Email: [email protected]
------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
TCV IV, L.P. 0 0 0 0 0 1,079,884
Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attn: Carla S. Newell
Tel: 650-614-8210
Fax: 650-614-8222
Email: [email protected]
----------------
[email protected]
---------------
with a copy to:
Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attn: Robert C. Bensky
Tel: 973-467-5320
Fax: 973-467-5323
RRE Investors, L.P. 0 0 402,826 87,301 62,571 0
126 East 56/th/ Street
New York, NY 10022
Attn: Andrew L. Zalasin
Tel: 212-418-5100
Fax: 212-355-0330
E-mail: [email protected]
RRE Investors Fund, L.P. 0 0 221,774 48,063 34,448
P. O. Box 31106 SMB
West Bay Road, Grand Cayman
Cayman Islands, B.W.I.
Fax: 345-949-3877
Bay Partners SBIC, L.P. 800,000 327,273 131,791 87,812 161,355 264,900
10600 No. DeAnza Blvd.
Suite 100
Cupertino, CA 95014-2031
Attn: Neil Dempsey
Tel: 408-725-2444
Fax: 408-446-4502
E-mail: [email protected]
-------------------
[email protected]
--------------------
Bay Partners LS Fund, L.P. 0 0 0 0 1,018,330 0
10600 No. DeAnza Blvd., Suite 100
Cupertino, CA 95014-2031
Attn: Neil Dempsey
Tel: 408-725-2444
Fax: 408-446-4502
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
---------- ------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Telos Venture Partners, L.P. 800,000 327,273 131,791 87,812 161,355 195,258
2350 Mission College Blvd.,
Suite 1070
Santa Clara, CA 95054
Attn: Bruce Bourbon
Tel: 408-982-5800
Fax: 408-982-5880
E-mail: [email protected]
-------------------
[email protected]
-------------------
Vector Capital, L.P. 250,000 72,727 37,730 25,140 46,194 55,900
c/o Vector Capital Partners, LLC -
General Partner
Attn: Alex Slusky
456 Montgomery Street
San Francisco, CA 94104
Tel: 415-293-5000
Fax: 415-293-5100
E-mail: [email protected]
-----------------------
Piper Jaffray Technology Capital 0 500,000 58,456 38,949 19,756 0
SBIC, L.P.
Attn: Marco Demiros
2500 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Tel: 650-233-2294
Fax: 650-561-9127
E-mail: [email protected]
----------------
[email protected] (Asst.)
---------------
Liberty Environmental Partners, L.P. 0 54,545 6,377 4,249 0 0
220 Montgomery Street, Penthouse 10
San Francisco, CA 94014
Attn: Donald C. Hichens
Tel: 415-834-1600
Fax: 415-834-1603
Email:
[email protected]
- ---------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
---------- ------------ ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Donald C. Hichens 0 0 0 0 4,344 9,448
2 Britton Avenue
Belvedere, CA 94942
Tel: 415-834-1600
Fax: 415-834-1603
Email:
[email protected]
- ---------------------------------
Timothy A. Woodward 0 0 0 0 3,462 0
937 Lake Street
San Francisco, CA 94118
Tel: 415-974-1668
Fax: 415-974-0608
E-mail: [email protected]
----------------------
Brendan Joseph Cassin Trustee of 25,000 8,635 3,932 2,620 4,814 5,826
the Robert Sean Cassin Trust U/D/T
dated 2/20/97
3000 Sand Hill Road, Suite 3-210
Menlo Park, CA 94025
Tel: 650-854-7990
Fax: 650-854-4547
E-mail: [email protected]
----------------------
[email protected]
----------------------
(Bobbi Dolan, Asst.)
Brendan Joseph Cassin and Isabel B. 250,000 86,353 39,323 26,201 101,833 61,932
Cassin, Trustees of the Cassin
Family Trust U/T/D dated January
31, 1996
3000 Sand Hill Road, Suite 3-210
Menlo Park, CA 94025
Tel: 650-854-7990
Fax: 650-854-4547
Saint Francis Growth Fund 25,000 8,635 3,932 2,620 4,814 5,826
c/o Saint Francis High School
Attn: James S. Bowler
1885 Miramonte Avenue
Mountain View, CA 94040
Tel: 650-968-1213
Fax: 650-968-3241
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
---------- ----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Saint Mary's College of California 25,000 8,635 3,932 2,620 4,814 5,826
1928 St. Mary's Road, Moraga,
CA 94556
P.O. Box 3554, Moraga, CA 94575
Attn: Kristine Chase
Tel: 925-631-4000
E-mail: [email protected]
----------------------
(Sharon Neward, Asst.)
Stanford University 25,000 8,635 3,932 2,620 4,814 5,826
2770 Sand Hill Road
Menlo Park, CA 94025
Attn: Carol Gilmer
Tel: 650-926-0200
Fax: 650-854-9267
E-mail: [email protected]
--------------------
Eagle Ventures II, LLC 0 9,087 1,062 1,162 1,355 0
c/o Crescendo Ventures
Attn: R. David Spreng
800 LaSalle Avenue, Suite 2250
Minneapolis, MN 55402
Tel: 612-607-2800
Fax: 612-607-2801
E-mail: [email protected]
------------------------------
Crescendo II, L.P. 0 245,458 28,697 84,148 101,833 55,972
c/o Crescendo Ventures
Attn: R. David Spreng
800 LaSalle Avenue, Suite 2250
Minneapolis, MN 55402
Tel: 612-607-2800
Fax: 612-607-2801
Ronald P. Antipa 10,000 3,454 1,573 1,048 1,926 2,330
c/o BT Alex. Brown Incorporated
101 California Street, 46th Floor
San Francisco, CA 94111
Tel: 415-544-2896
Fax: 415-732-3060
E-mail: [email protected]
--------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of
Shares of No. of Shares Shares of Shares of Shares of No. of Shares
Series A of Series B Series C Series D Series E of Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ray Bingham 15,000 5,181 2,359 1,572 2,889 3,496
c/o Cadence Design Systems, Inc.
2655 Seely, Building 5
San Jose, CA 95134
Tel: 408-943-1234
Fax: 408-435-9585
E-mail: [email protected]
-------------------
James A. Chafoulias 0 7,271 2,019 1,345 1,274 1,542
155 Irving Avenue North
Minneapolis, MN 55405
Tel: 612-374-2280
Fax: 612-374-5982
Joe Costello 30,000 10,362 4,719 3,144 5,777 6,991
Think3
2880 Lakeside Drive, Suite 250
Santa Clara, CA 95054
Tel: 408-987-2200
Fax: 408-727-0235
E-mail: [email protected]
------------------------
Gerald C. Down 10,000 3,454 1,573 1,048 2,926 2,399
2882 Sand Hill Road, #200
Menlo Park, CA 94025
Tel: 650-853-6142
Fax: 650-853-6183
E-mail: [email protected]
------------------------
Larry G. Gerdes 10,000 3,454 1,573 1,048 1,926 2,330
3353 Peachtree Road, Suite 1030
Atlanta, GA 30326
Tel: 404-240-8585
Fax: 404-240-8586
E-mail: [email protected]
----------------------
Jeffrey O. Henley & Judy Henley 15,000 5,181 2,359 1,572 0 6,235
TTEEs, Jeffrey and Judy Henley
Trust I dtd 10/23/89 51 Monte Vista
Atherton, CA 94027 Tel: 650-506-5678
Email: uu:[email protected]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of
Shares of No. of Shares Shares of Shares of Shares of No. of Shares
Series A of Series B Series C Series D Series E of Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul K. Joas 20,000 15,999 4,209 2,804 5,153 6,235
c/o Dain Bosworth Inc.
60 South 6th Street, 11th Floor
Minneapolis, MN 55402
Tel: 612-371-7998
Fax: 612-371-2722
E-mail: [email protected]
----------------------
[email protected]
- ------------------------
Donald L. Lucas, SUCC TTEE Donald 50,000 17,271 7,865 5,240 9,629 11,652
L. Lucas Profit Sharing
Trust DTD 1/1/84
3000 Sand Hill Road/Bldg. 3, Suite 210
Menlo Park, CA 94025
Tel: 650-854-4223
Fax: 650-854-4547
E-mail: [email protected] or
---------------
[email protected]
----------------
(associates)
Richard M. Lucas Cancer Foundation 65,000 22,452 10,224 6,812 12,518 15,148
Attn: Donald L. Lucas
3000 Sand Hill Road/Bldg. 3,
Suite 210
Menlo Park, CA 94025
Tel: 650-854-4223
Fax: 650-854-4547
Motete Corporation 25,000 8,635 3,932 2,620 0 5,497
P. O. Box 8052
Panama City 7, Panama
Attn: Gabriel de la Guardia
Tel: 011-507-270-1164
Fax: 011-507-226-5758
Email: [email protected]
----------------
Alberto Perez 25,000 8,635 3,932 2,620 0 5,497
El Arreo, S.A.
Next to Intel
La Ribera de Belen
Heredia, Costa Rica [use DHL service]
Tel: 011-506-239-0618
Fax: 011-506-239-0402
E-mail: [email protected]
----------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of
Shares of No. of Shares Shares of Shares of Shares of No. of Shares
Series A of Series B Series C Series D Series E of Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Noel Rahn 50,000 10,000 5,846 3,895 10,255 10,240
c/o Rahn Group
3355 U.S. Bank Place
601 - Second Avenue South/
Suite 3355
Minneapolis, MN 55402
Tel: 612-343-7000
Fax: 612-343-7001
E-mail: [email protected]
--------------
(associate)
Royal Wulff Investment Group 60,000 0 0 0 0 0
720 University Avenue, Suite 103
Palo Alto, CA 94301
Tel: 650-833-4980
Fax: 650-833-4983
RWI Group II, L.P. 0 38,907 11,564 42,301 18,302 22,148
720 University Avenue, Suite 103
Palo Alto, CA 94301
Tel: 650-833-4980
Fax: 650-833-4983
E-mail: [email protected]
-------------------
[email protected]
-------------------
Sand Hill Financial Company 250,000 86,353 39,323 26,201 0 54,968
3000 Sand Hill Road, Suite 3-210
Menlo Park, CA 94025
Tel: 415-854-4223
Fax: 415-854-4547
E-mail: [email protected]
----------------
Gregory V. Vaughan 15,000 5,181 2,359 1,572 2,889 0
Morgan Stanley & Co.
555 California St.
San Francisco, CA 94104
Tel: 415-576-2152
Fax: 415-576-2361
E-mail: [email protected]
------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of
Shares of No. of Shares Shares of Shares of Shares of No. of Shares
Series A of Series B Series C Series D Series E of Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
---------- ------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
F & W Investments 1996 30,000 0 0 0 0 0
Two Palo Alto Square
Palo Alto, CA 94306
Attn: Joel D. Kellman (out of
office for 2 wks)
Laird Simons
Tel: 650-494-0600
Fax: 650-494-1417
E-mail: [email protected]
-------------------
F & W Investments 1996 - II 0 10,362 0 0 0 0
Two Palo Alto Square
Palo Alto, CA 94306
Attn: Joel D. Kellman
Tel: 650-494-0600
Fax: 650-494-1417
F & W Investments 1997 0 0 4,719 0 0 0
Two Palo Alto Square
Palo Alto, CA 94306
Attn: Joel D. Kellman
Tel: 650-494-0600
Fax: 650-494-1417
F & W Investments 2000 0 0 0 0 5,401 0
Two Palo Alto Square
Palo Alto, CA 94306
Attn: Joel D. Kellman
Tel: 650-494-0600
Fax: 650-494-1417
F & W Investments 2000 II 0 0 0 0 0 6,535
Two Palo Alto Square
Palo Alto, CA 94306
Attn: Joel D. Kellman
Tel: 650-494-0600
Fax: 650-494-1417
WS Investments 96A 15,000 0 0 0 0 0
Attn: James Terranova
650 Page Mill Road
Palo Alto, CA 94304-1050
Tel: 650-493-9300
Fax: 650-493-6811
E-mail: [email protected]
--------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
----------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
WS Investments 97A 0 3,786 0 0 0 0
650 Page Mill Road
Palo Alto, CA 94304-1050
Tel: 650-493-9300
Fax: 650-493-6811
WS Investments 98A 0 0 2,196 0 0 0
650 Page Mill Road
Palo Alto, CA 94304-1050
Tel: 650-493-9300
Fax: 650-493-6811
Anne Marie Jasse & Bruce Fram 0 9,091 1,063 0 0 1,389
645 Upland Road
Redwood City, CA 94062
Attn: Bruce Fram
Tel: 650-298-7002
Fax: 650-556-1731
E-mail: [email protected]
------------------
Byron A. Gregerson 10,000 3,454 1,573 1,048 1,000 2,267
908 Chituras
Modesto, CA 95355
Tel: 209-523-3300
Fax: 209-523-3399
E-mail: [email protected]
----------------------
Isaac Stein and Madeline Johnson 10,000 3,454 1,573 1,048 5,092 2,547
Stein, Trustees of the Stein 1995
Revocable Trust
c/o Waverly Associates
525 University Avenue, Suite 700
Palo Alto, CA 94301
Tel: 650-324-1245
E-mail: [email protected]
---------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
----------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Arlene B. Tenenbaum and Joshua B. 50,000 0 0 0 0 6,839
Tenenbaum as Trustees of the Jay M.
Tenenbaum Technology Trust
c/o Arlene B. Tenenbaum and Joshua
B. Tenenbaum, Trustees
25 El Hambra Court
Portola Valley, CA 94025
Tel: 650-493-8608
E-mail: [email protected]
--------------------
[email protected]
Bert L. Zaccaria 0 18,182 2,126 1,416 2,603 3,149
3000 Sand Hill Road, Suite 3-210
Menlo Park, CA 94025
Tel: 650-854-1203
Fax: 650-854-2019
E-mail: [email protected]
-----------------
Aaron Ross 5,000 1,819 797 0 0 0
76 Ridgeview Drive
Atherton. CA 94027
Tel: 650-854-1700
Fax: 650-854-8579
E-mail: [email protected]
--------------------------
Alison Ross 75,000 13,637 10,363 0 0 13,361
76 Ridgeview Drive
Atherton, CA 94027
Tel: 650-854-1700
Fax: 650-854-8579
E-mail: [email protected]
-----------------------
Catherine Ross 5,000 1,819 797 0 0 1,028
76 Ridgeview Drive
Atherton, CA 94027
Tel: 650-854-1700
Fax: 650-854-8579
E-mail: [email protected]
--------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
----------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
David Ross 5,000 1,819 797 0 0 1,028
76 Ridgeview Drive
Atherton, CA 94027
Tel: 650-854-1700
Fax: 650-854-8579
E-mail: [email protected]
--------------------
Cambridge Technology Capital 0 0 98,039 6,838 101,833 21,309
11512 El Camino Real, Suite 215
San Diego, CA 92130-2046
Attn: Barry Rosenbaum
Tel: 619-259-7869
E-mail: [email protected]
--------------
[email protected]
---------------
Intel Corporation 0 0 294,118 0 0 0
2200 Mission College Boulevard
Santa Clara, CA 95052
Attn: Portfolio Manager RN6-46
Tel: 408-765-5636
Fax: 408-765-6038
E-mail: [email protected]
----------------------------
[email protected]
Copy to: Intel Corporation
2200 Mission College Boulevard
Santa Clara, CA 95052
Attn: General Counsel
Fax: 408-765-1859
Intel 64 Fund, LLC 0 0 0 253,807 0 252,437
2200 Mission College Boulevard
Santa Clara, CA 95052
Attn: Portfolio Manager RN6-37
Fax: 408-765-6038
Email: [email protected]
----------------------
[email protected]
Copy to: Intel Corporation
2200 Mission College Boulevard
Santa Clara, CA 95052
Attn: General Counsel
Fax: 408-765-1859
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
SAP America, Inc. 0 0 196,078 0 0 0
3999 Westchester Pike
Newtown Square, PA 19073
Attn: General Counsel
E-mail: [email protected]
----------------------
[email protected]
620,155
SAP - AG
_______________________________
_______________________________
_______________________________
_______________________________
Ken Goldman 0 0 0 12,690 0 1,736
@home Network
425 Broadway
Redwood City, CA 94063
Tel: 650-569-5000
E-mail: [email protected]
-----------------
Chancellor Private Capital Partners 0 0 22,538 42,978 14,727 109,389
III, L.P.
c/o Invesco Private Capital, Inc.
1166 Avenue of the Americas
New York, N.Y. 10036
Attn: Jean Ouyang
E-mail: [email protected]
-----------------------
Citiventure 96 Partnership, L.P. 0 0 96,627 184,264 63,138 468,992
c/o Invesco Private Capital, Inc.
1166 Avenue of the Americas
New York, N.Y. 10036
Attn: Mark Radonvanovich or
Alessandro Piol
Chancellor Private Capital Offshore 0 0 37,089 70,728 24,235 180,018
Partners II, L.P.
c/o Invesco Private Capital, Inc.
1166 Avenue of the Americas
New York, N.Y. 10036
Attn: Mark Radonvanovich or
Alessandro Piol
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
----------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Chancellor Private Capital Offshore 0 0 3,460 6,599 2,261 16,795
Partners I, C V
c/o Invesco Private Capital, Inc.
1166 Avenue of the Americas
New York, N.Y. 10036
Attn: Mark Radonvanovich or
Alessandro Piol
Jeff Becker 0 0 0 0 0 1,085
21 Boulderwood Drive
Livingston, NJ 07039
Tel: 973-535-8899
Fax: 973-535-6337
Email: [email protected]
--------------------
Anna Brady 0 0 0 0 0 620
1851 Pine Street
San Francisco, CA 94104
Tel: 415-346-3954
Fax: 415-676-2633
Email: [email protected]
--------------------
Thomas S. Champion 0 0 0 0 0 465
1884 Greenwich Street, Apt. 702
San Francisco, CA 94128
Tel: 415-929-2547
Email: [email protected]
----------------------
Mark Edwards 0 0 0 0 0 930
101 Buckingham Avenue
San Dimas, CA 91773
Tel: 909-599-4066
Email: [email protected]
----------------------
Maureen Dorney 0 0 0 0 0 775
870 Los Robles Avenue
Palo Alto, CA 94306
Tel: 650-833-2177
Fax: 650-327-3699
Email: [email protected]
--------------------
Atesa Farshian 0 0 0 0 0 620
1206 Canterbury Road
Hillsborough, CA 94010
Tel: 415-676-2557
Fax: 415-693-3448
Email: [email protected]
------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Paul Friday 0 0 0 0 0 930
1020 Lexington Avenue
4th Floor
New York, NY 10021
Tel: 212-407-0467
Fax: 212-407-0486
Email: [email protected]
--------------------
Gregory M. Gallo 0 0 0 0 0 775
572 Ringwood Avenue
Menlo Park, CA 94025
Tel: 650-833-2020
Fax: 650-617-5667
Email: [email protected]
-------------------
Ashley Marks 0 0 0 0 0 465
1430 Clay Street
San Francisco, CA 94109
Tel: 415-885-1101
Email: [email protected]
---------------------
Lisa McClure 0 0 0 0 0 930
c/o Robertson Stephens
One International Place
Boston, MA 02110
Tel: 617-526-7425
Fax: 617-526-7488
Email: [email protected]
---------------------
Sara Michel 0 0 0 0 0 307
522 East 85th, 2E
New York, NY 10028
Tel: 212-628-1276 and
212-407-0460
Fax: 212-610-6125
Email: [email protected]
---------------------
Phuonglien Nguyen 0 0 0 0 0 465
c/o Robertson Stephens
One International Place
30th Floor
Boston, MA 02110
Tel: 617-526-7424
Fax: 617-526-7410
Email: [email protected]
--------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Darren Oberst 0 0 0 0 0 2,325
2030 Vallejo Street, #7E
San Francisco, CA 94123
Tel: 415-673-3177
Fax: 415-248-4042
Email: [email protected]
----------------------
Narendra B. Patel 0 0 0 0 0 775
400 Baltic Circle, #418
Redwood Shores, CA 94065
Tel: 650-833-2143
Fax: 650-327-3699
Email: [email protected]
-------------------
Nimesh Patel 0 0 0 0 0 465
861 Sutter Street, #304
San Francisco, CA 94109
Tel: 415-248-4706
Fax: 415-248-4700
Email: [email protected]
---------------------
Greg Rickman 0 0 0 0 0 620
555 California Street
Suite 2600
San Francisco, CA 94104
Tel: 415-248-4348
Fax: 415-693-3393
Email: [email protected]
-------------------------
James Schumacher 0 0 0 0 0 465
400 Hamilton Avenue
Palo Alto, CA 94301-1825
Tel: 650-833-2197
Fax: 650-327-3699
Email: [email protected]
-------------------------
Joe C. Sorenson 0 0 0 0 0 775
1775 Holly Avenue
Menlo Park, CA 94025
Tel: 650-833-2282
Fax: 650-327-3699
Email: [email protected]
-----------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Shares of Shares of Shares of Shares of Shares of Shares of
Series A Series B Series C Series D Series E Series F
Stock Held Stock Held Stock Held Stock Held Stock Held Stock Held
----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Peter Tran 0 0 0 0 0 930
36849 Port Sailwood Drive
Newark, CA 94560
Tel: 415-248-4377
Fax: 415-248-4042
William Stephen Westermann, Jr. 0 0 0 0 0 1,085
668 Greenwich Street, #343
New York, NY 10014
Tel: 415-676-2837
Fax: 415-693-3520
Email: [email protected]
-------------------------
Totals 3,055,000 1,976,469 1,954,937 1,187,575 2,031,846
</TABLE>
<PAGE>
EXHIBIT B
List of Shareholders
--------------------
<TABLE>
<CAPTION>
Number of Shares
Name and Address of Common Stock Held
- ---------------- ---------------------
<S> <C>
The Kenneth Ross Trust dated December 3, 1980 1,870,000
76 Ridgeview
Atherton, CA 94027
Tel: (650) 364-4530
Fax: (650) 364-4562
Email: [email protected]
----------------
Kenneth Ross, Trustee of the
Ross ACD Irrevocable Trust 300,000
76 Ridgeview
Atherton, CA 94027
Tel: (650) 364-4530
Fax: (650) 364-4562
Email: [email protected]
----------------
Kenneth Ross, Trustee of the
Ross BMR Irrevocable Trust dated August 13, 1997 100,000
76 Ridgeview
Atherton, CA 94027
Tel: (650) 364-4530
Fax: (650) 364-4562
Email: [email protected]
----------------
Kenneth Ross, Trustee of the
Ross EAR Irrevocable Trust dated July 29, 1999 100,000
76 Ridgeview
Atherton, CA 94027
Tel: (650) 364-4530
Fax: (650) 364-4562
Email: [email protected]
----------------
Gregory R. Olsen 600,000
2124 Gordon Avenue
Menlo Park, CA 94025
Tel: (650) 364-4530
Fax: (650) 364-4562
Email: [email protected]
----------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Name and Address of Common Stock Held
- ---------------- ---------------------
<S> <C>
Kimberly Weins 150,000
2 Mosswood Way
Atherton, CA 94027
Tel: (650) 364-4530
Fax: (650) 364-4562
Email: [email protected]
--------------------
</TABLE>
<PAGE>
EXHIBIT 5.1
SPECIAL PREFERRED HOLDERS
(Holders of 5% or more of outstanding Preferred Stock)
----------------------------------------------------
[SUBJECT TO REVISION]
Charter Growth Capital II, L.P.
Broadview Capital Partners
RRE Investors, L.P.
RRE Investors Fund, L.P.
Bay Partners SBIC, L.P.
Bay Partners LS Fund, L.P.
Telos Venture Partners, L.P.
Piper Jaffray Technology Capital SBIC, L.P.
Brendan Joseph Cassin Trustee of the Robert Sean Cassin Trust U/D/T dated
2/20/97
Brendan Joseph Cassin and Isabel B. Cassin, Trustees of the Cassin Family Trust
U/T/D dated January 31, 1996
Chancellor Private Capital Partners III, L.P.
Citiventure 96 Partnership, L.P.
Chancellor Private Capital Offshore Partners II, L.P.
Chancellor Private Capital Offshore Partners I, C V
<PAGE>
Exhibit 10.1
INDEMNITY AGREEMENT
This Indemnity Agreement, dated as of __________, 2000, is made by and
between Extricity Software, Inc., a Delaware corporation (the "Company"), and
(the "Indemnitee").
RECITALS
--------
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors, officers or agents of corporations
unless they are protected by comprehensive liability insurance or
indemnification, due to increased exposure to litigation costs and risks
resulting from their service to such corporations, and due to the fact that the
exposure frequently bears no reasonable relationship to the compensation of such
directors, officers and other agents.
B. The statutes and judicial decisions regarding the duties of
directors and officers are often difficult to apply, ambiguous, or conflicting,
and therefore fail to provide such directors, officers and agents with adequate,
reliable knowledge of legal risks to which they are exposed or information
regarding the proper course of action to take.
C. Plaintiffs often seek damages in such large amounts and the costs
of litigation may be so enormous (whether or not the case is meritorious), that
the defense and/or settlement of such litigation is often beyond the personal
resources of directors, officers and other agents.
D. The Company believes that it is unfair for its directors,
officers and agents and the directors, officers and agents of its subsidiaries
to assume the risk of huge judgments and other expenses which may occur in cases
in which the director, officer or agent received no personal profit and in cases
where the director, officer or agent was not culpable.
E. The Company recognizes that the issues in controversy in
litigation against a director, officer or agent of a corporation such as the
Company or its subsidiaries are often related to the knowledge, motives and
intent of such director, officer or agent, that he is usually the only witness
with knowledge of the essential facts and exculpating circumstances regarding
such matters, and that the long period of time which usually elapses before the
trial or other disposition of such litigation often extends beyond the time that
the director, officer or agent can reasonably recall such matters; and may
extend beyond the normal time for retirement for such director, officer or agent
with the result that he, after retirement or in the event of his death, his
spouse, heirs, executors or administrators, may be faced with limited ability
and undue hardship in maintaining an adequate defense, which may discourage such
a director, officer or agent from serving in that position.
F. Based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and attract
talented and experienced individuals to serve as directors, officers and agents
of the Company and its subsidiaries and to encourage such individuals to take
the business risks necessary for the success of the Company and its
subsidiaries, it is necessary for the Company to contractually indemnify its
directors,
1
<PAGE>
officers and agents and the directors, officers and agents of its subsidiaries,
and to assume for itself maximum liability for expenses and damages in
connection with claims against such directors, officers and agents in connection
with their service to the Company and its subsidiaries, and has further
concluded that the failure to provide such contractual indemnification could
result in great harm to the Company and its subsidiaries and the Company's
stockholders.
G. Section 145 of the General Corporation Law of Delaware, under
which the Company is organized ("Section 145"), empowers the Company to
indemnify its directors, officers, employees and agents by agreement and to
indemnify persons who serve, at the request of the Company, as the directors,
officers, employees or agents of other corporations or enterprises, and
expressly provides that the indemnification provided by Section 145 is not
exclusive.
H. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director, officer or agent of the Company and/or one or
more subsidiaries of the Company free from undue concern for claims for damages
arising out of or related to such services to the Company and/or one or more
subsidiaries of the Company.
I. Indemnitee is willing to serve, or to continue to serve, the
Company and/or one or more subsidiaries of the Company, provided that he is
furnished the indemnity provided for herein.
AGREEMENT
---------
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions.
-----------
(a) Agent. For the purposes of this Agreement, "agent" of the
-----
Company means any person who is or was a director, officer, employee or other
agent of the Company or a subsidiary of the Company; or is or was serving at the
request of, for the convenience of, or to represent the interests of the Company
or a subsidiary of the Company as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise; or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of the Company or a
subsidiary of the Company, or was a director, officer, employee or agent of
another enterprise at the request of, for the convenience of, or to represent
the interests of such predecessor corporation.
(b) Expenses. For purposes of this Agreement, "expenses" include
--------
all out of pocket expenses, costs of any type or nature whatsoever (including,
without limitation, all attorneys' fees and related disbursements), actually and
reasonably incurred by the Indemnitee in connection with either the
investigation, defense or appeal of a proceeding or establishing or enforcing a
right to indemnification under this Agreement or Section 145 or otherwise;
provided,
2
<PAGE>
however, that "expenses" shall not include any judgments, fines, ERISA excise
taxes or penalties, or amounts paid in settlement of a proceeding.
(c) Proceeding. For the purposes of this Agreement, "proceeding"
----------
means any threatened, pending, or completed action, suit or other proceeding,
whether civil, criminal, administrative, or investigative.
(d) Subsidiary. For purposes of this Agreement, "subsidiary"
----------
means any corporation of which more than 50% of the outstanding voting
securities is owned directly or indirectly by the Company, by the Company and
one or more other subsidiaries, or by one or more other subsidiaries.
2. Agreement to Serve. The Indemnitee agrees to serve and/or
------------------
continue to serve as agent of the Company, at its will (or under separate
agreement, if such agreement exists), in the capacity Indemnitee currently
serves as an agent of the Company, so long as he is duly appointed or elected
and qualified in accordance with the applicable provisions of the Bylaws of the
Company or any subsidiary of the Company or until such time as he tenders his
resignation in writing; provided, however, that nothing contained in this
Agreement is intended to create any right to continued employment by Indemnitee.
3. Liability Insurance.
-------------------
(a) Maintenance of D&O Insurance. The Company hereby covenants
----------------------------
and agrees that, so long as the Indemnitee shall continue to serve as an agent
of the Company and thereafter so long as the Indemnitee shall be subject to any
possible proceeding by reason of the fact that the Indemnitee was an agent of
the Company, the Company, subject to Section 3(c), shall promptly obtain and
maintain in full force and effect directors' and officers' liability insurance
("D&O Insurance") in reasonable amounts from established and reputable insurers.
(b) Rights and Benefits. In all policies of D&O Insurance, the
-------------------
Indemnitee shall be named as an insured in such a manner as to provide the
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if the Indemnitee is a director; or of the
Company's officers, if the Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if the Indemnitee is not a director
or officer but is a key employee.
(c) Limitation on Required Maintenance of D&O Insurance.
---------------------------------------------------
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain D&O Insurance if the Company determines in good faith that such
insurance is not reasonably available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or the Indemnitee is covered by similar insurance maintained by a
subsidiary of the Company.
4. Mandatory Indemnification. Subject to Section 9 below, the
-------------------------
Company shall indemnify the Indemnitee as follows:
3
<PAGE>
(a) Successful Defense. To the extent the Indemnitee has been
------------------
successful on the merits or otherwise in defense of any proceeding (including,
without limitation, an action by or in the right of the Company) to which the
Indemnitee was a party by reason of the fact that he is or was an Agent of the
Company at any time, against all expenses of any type whatsoever actually and
reasonably incurred by him in connection with the investigation, defense or
appeal of such proceeding.
(b) Third Party Actions. If the Indemnitee is a person who was or is
-------------------
a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, the Company shall indemnify the Indemnitee against any and
all expenses and liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding, provided the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and its stockholders, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
(c) Derivative Actions. If the Indemnitee is a person who was or is
------------------
a party or is threatened to be made a party to any proceeding by or in the right
of the Company by reason of the fact that he is or was an agent of the Company,
or by reason of anything done or not done by him in any such capacity, the
Company shall indemnify the Indemnitee against all expenses actually and
reasonably incurred by him in connection with the investigation, defense,
settlement, or appeal of such proceeding, provided the Indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and its stockholders; except that no indemnification
under this subsection 4(c) shall be made in respect to any claim, issue or
matter as to which such person shall have been finally adjudged to be liable to
the Company by a court of competent jurisdiction unless and only to the extent
that the court in which such proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such amounts which the court shall deem proper.
(d) Actions where Indemnitee is Deceased. If the Indemnitee is a
------------------------------------
person who was or is a party or is threatened to be made a party to any
proceeding by reason of the fact that he is or was an agent of the Company, or
by reason of anything done or not done by him in any such capacity, and if prior
to, during the pendency of after completion of such proceeding Indemnitee
becomes deceased, the Company shall indemnify the Indemnitee's heirs, executors
and administrators against any and all expenses and liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
and penalties, and amounts paid in settlement) actually and reasonably incurred
to the extent Indemnitee would have been entitled to indemnification pursuant to
Sections 4(a), 4(b), or 4(c) above were Indemnitee still alive.
(e) Notwithstanding the foregoing, the Company shall not be obligated
to indemnify the Indemnitee for expenses or liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes and
penalties, and amounts paid in settlement)
4
<PAGE>
for which payment is actually made to Indemnitee under a valid and collectible
insurance policy of D&O Insurance, or under a valid and enforceable indemnity
clause, by-law or agreement.
5. Partial Indemnification. If the Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding, but not entitled, however, to indemnification for all of
the total amount hereof, the Company shall nevertheless indemnify the Indemnitee
for such total amount except as to the portion hereof to which the Indemnitee is
not entitled.
6. Mandatory Advancement of Expenses. Subject to Section 8(a)
---------------------------------
below the Company shall advance all expenses incurred by the Indemnitee in
connection with the investigation, defense, settlement or appeal of any
proceeding to which the Indemnitee is a party or is threatened to be made a
party by reason of the fact that the Indemnitee is or was an agent of the
Company. Indemnitee hereby undertakes to repay such amounts advanced only if,
and to the extent that, it shall be determined ultimately that the Indemnitee is
not entitled to be indemnified by the Company as authorized hereby. The advances
to be made hereunder shall be paid by the Company to the Indemnitee within
twenty (20) days following delivery of a written request therefor by the
Indemnitee to the Company.
7. Notice and Other Indemnification Procedures.
-------------------------------------------
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.
(b) If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 7(a) hereof, the Company has
D&O Insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(c) In the event the Company shall be obligated to pay the
expenses of any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee, upon the delivery to the Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of such
counsel by the Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to the Indemnitee under this Agreement for any fees
of counsel subsequently incurred by the Indemnitee with respect to the same
proceeding, provided that (i) the Indemnitee shall have the right to employ his
counsel in any such proceeding at the Indemnitee's expense; and (ii) if (A) the
employment of counsel by the Indemnitee has been previously authorized by the
Company, (B) the Indemnitee shall have reasonably concluded that there may be a
conflict of
5
<PAGE>
interest between the Company and the Indemnitee in the conduct of any such
defense; or (C) the Company shall not, in fact, have employed counsel to assume
the defense of such proceeding, the fees and expenses of Indemnitee's counsel
shall be at the expense of the Company.
8. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance
------------------------------
expenses to the Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by the Indemnitee and not by way of defense, unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board, (iii) such indemnification is provided by the Company,
in its sole discretion, pursuant to the powers vested in the Company under the
General Corporation Law of Delaware or (iv) the proceeding is brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under Section 145.
(b) Lack of Good Faith. To indemnify the Indemnitee for any
------------------
expenses incurred by the Indemnitee with respect to any proceeding instituted by
the Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(c) Unauthorized Settlements. To indemnify the Indemnitee
------------------------
under this Agreement for any amounts paid in settlement of a proceeding unless
the Company consents to such settlement, which consent shall not be unreasonably
withheld.
9. Non-exclusivity. The provisions for indemnification and
---------------
advancement of expenses set forth in this Agreement shall not be deemed
exclusive of any other rights which the Indemnitee may have under any provision
of law, the Company's Certificate of Incorporation or Bylaws, the vote of the
Company's stockholders or disinterested directors, other agreements, or
otherwise, both as to action in his official capacity and to action in another
capacity while occupying his position as an agent of the Company, and the
Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as an agent of the Company and shall inure to the benefit of the heirs,
executors and administrators of the Indemnitee.
10. Enforcement. Any right to indemnification or advances granted by
-----------
this Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee
in any court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim is
made within ninety (90) days of request therefor. Indemnitee, in such
enforcement action, if successful in whole or in part, shall be entitled to be
paid also the expense of prosecuting his claim. It shall be a defense to any
action for which a claim for indemnification is made under this Agreement (other
than an action brought to enforce a claim for expenses pursuant to Section 6
hereof, provided that the required undertaking has been tendered to the Company)
that Indemnitee is not entitled to indemnification because of the limitations
set forth in Sections 4 and 8 hereof. Neither the failure of the Company
(including its Board of Directors or its stockholders) to have made a
determination prior to the commencement
6
<PAGE>
of such enforcement action that indemnification of Indemnitee is proper in the
circumstances, nor an actual determination by the Company (including its Board
of Directors or its stockholders) that such indemnification is improper, shall
be a defense to the action or create a presumption that Indemnitee is not
entitled to indemnification under this Agreement or otherwise.
11. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
12. Survival of Rights.
------------------
(a) All agreements and obligations of the Company contained
herein shall continue during the period Indemnitee is an agent of the Company
and shall continue thereafter so long as Indemnitee shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal, arbitrational, administrative or investigative, by
reason of the fact that Indemnitee was serving in the capacity referred to
herein.
(b) The Company shall require any successor to the Company
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place.
13. Interpretation of Agreement. It is understood that the parties
---------------------------
hereto intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent permitted by law
including those circumstances in which indemnification would otherwise be
discretionary.
14. Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
(i) the validity, legality and enforceability of the remaining provisions of the
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 13 hereof.
15. Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
7
<PAGE>
16. Notice. All notices, requests, demands and other communications
------
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee or (ii) if mailed by
certified or registered mail with postage prepaid, on the third business day
after the mailing date. Addresses for notice to either party are as shown on
the signature page of this Agreement, or as subsequently modified by written
notice.
17. Governing Law. This Agreement shall be governed exclusively by
-------------
and construed according to the laws of the State of Delaware as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.
18. Consent to Jurisdiction. The Company and the Indemnitee each
-----------------------
hereby consent to the jurisdiction of the courts of the State of Delaware with
respect to any action or proceeding which arises out of or relates to this
Agreement.
8
<PAGE>
EXHIBIT 10.4
[LETTERHEAD OF EXTRICITY SOFTWARE]
January 26, 2000
Mr. Barry Ariko
14740 Farwell Avenue
Saratoga, CA 95070
Dear Barry:
On behalf of Extricity Software, Inc. ("Extricity" or the" Company"), I am
pleased to offer you the position of President and Chief Executive Officer,
reporting to the Board of Directors (the "Board"). In addition to your role of
CEO, you'll also be elected to serve as a Director. Your annual salary will be
$200,000 and you will receive the Company's standard employee benefit package
(or your COBRA election, at your option).
You will also be eligible for an annual bonus in an amount equal to one half of
your salary upon achievement of specific milestones. This bonus will be paid
quarterly. The milestones will be proposed by you to be Board in January of each
year (or within 45 days of your start date in the first year), and will be
negotiated and approved by the Board.
As part of this offer, Extricity is offering you an incentive stock option to
purchase 1,922,932 shares of the Company's Common Stock at an exercise price
equal to the then current fair market value of the Company's Common Stock at
the date of grant (the "Option Grant"). The Option Grant will be subject to the
Board approval and will be effective on the date of such approval. In the event
additional financing becomes necessary, you will be given dilution protection
for this Initial Option Grant (the number of fully diluted shares outstanding as
of the date of this offer is approximately 27,470,471). The Option Grant's
vesting date will commence on your start of employment and is contingent on your
continued employment. After the first six months of employment, 1/3 of the
Option Grant will vest and thereafter, 1/42 of the remaining Option Grant will
vest each month. The Option Grant, which is immediately exercisable, will be
subject to a Repurchase Agreement that lapses according to the Option Grant's
vesting schedule. Furthermore, Extricity will offer you the option of paying for
any exercise of the Option Grant pursuant to the terms of a full-recourse note
which will be offered at the lowest legal interest rate, with principal and
interest payable within one year of an IPO or liquidation event.
Should Extricity undergo a change of control, fifty percent of your unvested
Option Grant will be accelerated. In addition, in the event of a change of
control, should your employment end as a result of termination other than "for
cause," or as a result of "constructive termination," any of the remaining
unvested portion of the Option Grant will be accelerated. In addition, you would
<PAGE>
Mr. Barry Ariko
January 25, 2000
Page 2
also receive a lump sum severance equal to one year of your targeted earnings
(base salary plus incentive compensation).
Should your job otherwise be terminated involuntarily for any reason other than
"for cause," (including death) your salary, benefits, and stock option vesting
will continue for twelve months beyond the date of termination.
This offer of employment is contingent upon execution and return of this offer
letter by Thursday, January 27, 2000. You will also be asked to sign an Employee
Invention Agreement and Confidentiality Agreement as part of your employment.
This document is enclosed for your review.
Further your employment with Extricity is "at will" and may be terminated by
either the employee or employer at any time, for any reason. Nothing in this
offer is to be construed as a contract of employment for any specific length of
time. Except for the Non-Disclosure Agreement and the Proprietary Information
Agreement and any rights in employee benefits generally offered to employees of
Extricity, this offer represents the entire agreement related to your employment
with Extricity and supersedes all prior or contemporaneous oral or written
communications or representations.
Barry, we are pleased to welcome you to Extricity Software. Please signify your
acceptance of our offer by signing below and returning this letter to me.
Sincerely,
EXTRICITY SOFTWARE
/s/ B.J. CASSIN
B.J. Cassin
Chairman of the Board
Acknowledged receipt and accepted offer:
/s/ BARRY ARIKO
- ------------------------------
Barry Ariko
1/28/00
- -----------------------------
Date
Projected Start Date: 2/21/00
-------
<PAGE>
April 28, 2000
Mr. Barry M. Ariko
14740 Farwell Avenue
Saratoga, CA 95070
Dear Barry:
This letter shall serve as an amendment to the January 26, 2000 Offer
Letter from Extricity Software, Inc. (the "Company") to you (the "Offer
Letter"). This letter clarifies the understanding between the Company and you
regarding the anti-dilution protection provided to you in the Offer Letter.
As set forth in the Offer Letter, you were granted incentive stock options
to purchase 1,922,932 shares of the Company's Common Stock at an exercise price
equal to the fair market value of the Company's Common Stock on the date of
grant. The options granted represented exactly seven percent (7%) of the
outstanding equity securities of the Company as of the date of grant, based on
the number of shares outstanding on a fully diluted basis.
As you know, the Company is in the process of closing a new round of
financing by selling shares of the Company's Series F Preferred Stock.
Consistent with the Offer Letter, the Company will grant you additional stock
options such that your equity interest in the Company following the financing
will be equal to seven percent (7%) of the outstanding equity securities of the
Company immediately following the financing, on a fully diluted basis. The
exercise price of the additional options granted shall be equal to the fair
market value of the Company's Common Stock on the date of grant. Your anti-
dilution protection will terminate upon the closing of the Series F financing,
and will not apply to any subsequent issuances of equity securities.
Except as set forth herein, the terms of the Offer Letter shall remain in
full force and effect.
EXTRICITY, INC. ACKNOWLEDGED AND AGREED TO:
BARRY M. ARIKO
By: /s/ B.J. Cassin /s/ Barry M. Ariko
---------------------------------- --------------------------------
Its: Director
---------------------------------
1
<PAGE>
[LETTERHEAD OF EXTRICITY SOFTWARE]
EXHIBIT 10.5
February 18, 1999
Mr. Steve Albertolle
776 Garland Dr.
Palo Alto, CA 94303
Re: Employment With Extricity Software, Inc.
----------------------------------------
Dear Steve:
Extricity Software, Inc. (the "Company") is pleased to offer you a
-------
position as Vice President Finance and CFO in the Company, on the terms set
forth in this letter agreement, effective as of your actual start date, which is
anticipated to be around March 15, 1999, upon your acceptance by execution of a
counterpart copy of this letter where indicated below.
1. Reporting; Duties and Responsibilities; Employment At Will; Employee
--------------------------------------------------------------------
Invention Assignment and Confidentiality Agreement. Today, in this position,
- --------------------------------------------------
you will report to the President/CEO of the Company. Your specific duties and
responsibilities will be determined by him or her. This offer is for a full time
position. Your employment with the Company is on an "at will" basis, and either
you or the Company may terminate your employment with the Company at any time,
for any reason.
2. Salary; Bonus; Benefits and Vacation. Your initial base salary will
------------------------------------
be $135,000 per year, subject to adjustment in good faith by the Company,
payable in accordance with the Company's customary payroll practice as in effect
from time to time. You also will be eligible to earn an annual bonus/incentive
payment. The targeted value of your initial annual Bonus for our fiscal year
beginning April l, 1999 will be $35,000.00. In subsequent fiscal years, the
targeted annual bonus will be determined annually, subject to adjustment in good
faith by the Company. The actual amount of the bonus will be determined by the
Company's President/CEO and the board of directors, based upon a written
compensation plan to be jointly developed and agreed to by each of us. The bonus
will be determined and paid based upon the terms of the compensation plan with
the final payment being no later than 30 days after the end of the fiscal year.
You also will receive the Company's standard employee benefits package, and will
be subject to the Company's vacation policy, as such package and policy are in
effect from time to time.
3. Stock Option. Effective at the Company's Board of Directors meeting
------------
next after the date of this letter, the President/CEO of the Company will
recommend that the Board grant you an incentive stock option, effective upon the
date of such Board of Directors meeting, to
<PAGE>
purchase up to 150,000 shares of the Company Common Stock. The grant of such
option shall be subject to Board approval. The vesting of such option will begin
on the date of your commencement of employment with the Company and the exercise
price for this option will be the then-current fair market value of the Company
Common Stock at the date of grant. The option will vest according to the
Company's standard four-year vesting schedule, which calls for an initial
vesting of 25% of the total (i.e., 37,500 shares) after the first year of
------
continuous service to the Company, and thereafter an additional 2.09% of the
shares per month, at the close of each month during which you remain employed
with the Company, over the remainder of the vesting term. Unvested shares will
be repurchasable at the original purchase price per share on termination of
employment.
3a. Merger or Acquisition. If the Company is acquired in a merger or
---------------------
acquisition where the Company's shareholders own less than a majority of the
outstanding stock of the surviving corporation after the closing of the
transaction, then half of (50%) any unvested shares or options held by you at
closing will vest as of the consummation of that transaction.
4. Confidential Information. As an employee of the Company, you will
------------------------
have access to certain Company confidential information and you may, during the
course of your employment, develop certain information or inventions which will
be the property of the Company. To protect the interest of the Company, you
will need to sign the Company's standard "Employee Inventions and
Confidentiality Agreement" as a condition of your employment. We wish to impress
upon you that we do not wish you to bring with you any confidential or
proprietary material of any former employer or to violate any other obligation
to your former employers.
5. At-Will Employment. While we look forward to a long and profitable
------------------
relationship, should you decide to accept our offer, you will be an at-will
employee of the Company, which means the employment relationship can be
terminated by either of us for any reason at any time. Any statements or
representations to the contrary (and, indeed, any statements contradicting any
provision in this letter) should be regarded by you as ineffective. Further,
your participation in any stock option or benefit program is not to be regarded
as assuring you of continuing employment for any particular period of time.
6. Authorization to Work. Because of Federal regulations adopted in the
---------------------
Immigration Reform and Control Act of 1986, you will need to present
documentation demonstrating that you have authorization to work in the United
States. If you have any questions about this requirement, which applies to U.S.
citizens and non-U.S. citizens alike, please contact our human resources
department.
7. Term of Offer. This offer will remain open until February 28, 1999.
-------------
If you decide to accept our offer, and I hope that you will, please sign the
enclosed copy of this letter in the space indicated and return it to me.
Please FAX it to my home FAX at 854-8579. Upon your signature below, this will
- ----------------------------------------
become our binding agreement with respect to the subject matter of this letter,
superseding in their entirety all other or prior agreements by you with the
Company as to the specific subjects of this letter, will be binding upon and
inure to the benefit of our respective
<PAGE>
successors and assigns, and your heirs, administrators and executors, will be
governed by California law, and may only be amended in a writing signed by you
and the Company.
We are excited to have you join us and look forward to working with
you.
Sincerely,
/s/ Kenneth Ross
Kenneth Ross
President & CEO
Acknowledged, Accepted and Agreed
/s/ Steve Albertolle
- ---------------------------
Steve Albertolle Date
<PAGE>
EXHIBIT 10.6
[LETTERHEAD OF CROSS ROUTE SOFTWARE]
April 17, 1998
David J. Cope
100 Hilow Court
Los Gatos, CA 95032
Re: Employment With CrossRoute Software, Inc.
-----------------------------------------
Dear David:
CrossRoute Software, Inc. (the "Company") is pleased to offer you a
-------
position as Vice President of Marketing in the Company, on the terms set forth
in this letter agreement, effective as of your actual start date, which is
anticipated to be approximately May 4, 1998, upon your acceptance by execution
of a counterpart copy of this letter where indicated below.
1. Reporting; Duties and Responsibilities; Employment At Will; Employee
--------------------------------------------------------------------
Invention Assignment and Confidentiality Agreement. In this position, you will
- --------------------------------------------------
report to the President of the Company. Your specific duties and
responsibilities will be determined by him or her. This offer is for a full time
position, located at the offices of the Company, except as travel to other
locations may be necessary to fulfill your responsibilities. Your employment
with the Company is on an "at will" basis, and either you or the Company may
terminate your employment with the Company at any time, for any reason.
2. Salary; Bonus; Benefits and Vacation. Your initial base salary will
------------------------------------
be $165,000 per year, subject to adjustment in good faith by the Company,
payable in accordance with the Company's customary payroll practice as in effect
from time to time. You also will be eligible to earn an annual bonus. The
targeted value of your initial annual Bonus will be $40,000 and will be pro-
rated based upon your start date and March 31, the fiscal year-end of the
Company. Thereafter, the targeted annual bonus will be determined annually,
subject to adjustment in good faith by the Company. The actual amount of the
bonus will be determined by the Company's President/CEO and other executives
based upon your individual performance as well as the Company's overall
performance as compared to its business plan. The bonus will be determined and
paid approximately one month after the end of the Company's fiscal year. You
also will
<PAGE>
receive the Company's standard employee benefits package, and will be subject to
the Company's vacation policy, as such package and policy are in effect from
time to time.
3. Stock Option. Effective at the Company's Board of Directors meeting
------------
next after the date of this letter, the President/CEO of the Company will
recommend that the Board grant you an incentive stock option, effective upon the
date of such Board of Directors meeting, to purchase up to 200,000 shares of the
Company Common Stock. The grant of such option shall be subject to Board
approval. The vesting of such option will begin on the date of your commencement
of employment with the Company and the exercise price for this option will be
the then-current fair market value of the Company Common Stock at the date of
grant. The option will vest according to the Company's standard four-year
vesting schedule, which calls for an initial vesting of 25% of the total (i.e.,
-----
50,000 shares) after the first year of continuous service to the Company, and
thereafter an additional 2.09% of the shares per month, at the close of each
month during which you remain employed with the Company, over the remainder of
the vesting term. Unvested shares will be repurchasable at the original purchase
price per share on termination of employment.
3a. Merger or Acquisition. If the Company is acquired in a merger or
---------------------
acquisition where the Company's shareholders own less than a majority of the
outstanding stock of the surviving corporation. Then, after the closing of the
transaction, fifty percent (50%) of the unvested balance of your stock options
will be vested upon the completion of the merger or acquisition. Further, you
will receive an extra year of vesting in any unvested shares or options if you
are terminated as a result of that transaction or if you terminate your
employment as a result of receiving a significant reduction in salary or
responsibility, or a change in the position to which you report, all within one
year of the closing of such a transaction.
4. Confidential Information. As an employee of the Company, you will
------------------------
have access to certain Company confidential information and you may, during the
course of your employment, develop certain information or inventions which will
be the property of the Company. To protect the interest of the Company, you will
need to sign the Company's standard "Employee Inventions and Confidentiality
Agreement" as a condition of your employment. We wish to impress upon you that
we do not wish you to bring with you any confidential or proprietary material of
any former employer or to violate any other obligation to your former employers.
5. At-Will Employment. While we look forward to a long and profitable
------------------
relationship, should you decide to accept our offer, you will be an at-will
employee of the Company, which means the employment relationship can be
terminated by either of us for any reason at any time. Any statements or
representations to the contrary (and, indeed, any statements contradicting any
provision in this letter) should be regarded by you as ineffective.
<PAGE>
Further, your participation in any stock option or benefit program is not to be
regarded as assuring you of continuing employment for any particular period of
time.
6. Authorization to Work. Because of Federal regulations adopted in the
---------------------
Immigration Reform and Control Act of 1986, you will need to present
documentation demonstrating that you have authorization to work in the United
States. If you have any questions about this requirement, which applies to U.S.
citizens and non-U.S. citizens alike, please contact our human resources
department.
7. Term of Offer. This offer will remain open until April 21, 1998.
-------------
If you decide to accept our offer, and I hope that you will, please sign the
enclosed copy of this letter in the space indicated and return it to me. Upon
your signature below, this will become our binding agreement with respect to the
subject matter of this letter, superseding in their entirety all other or prior
agreements by you with the Company as to the specific subjects of this letter,
will be binding upon and inure to the benefit of our respective successors and
assigns, and your heirs, administrators and executors, will be governed by
California law, and may only be amended in a writing signed by you and the
Company.
We are excited to have you join us and look forward to working with you.
Sincerely,
/s/ Kenneth Ross
Kenneth Ross
President & CEO
Acknowledged, Accepted and Agreed
/s/ David J. Cope 4-20-98
- ----------------------------
David J. Cope Date
<PAGE>
EXHIBIT 10.7
CrossRoute Software, Inc.
555 Twin Dolphin Dr., Suite 190
Redwood Shores, CA 94065
August 15, 1996
Ms. Laura E. Ferrell
13818 La Paloma Rd.
Los Altos Hills, CA 94022
Dear Laura:
CrossRoute Software, Inc. (the "Company") is pleased to offer you a
-------
position as Vice President of Engineering in the Company, on the terms set forth
in this letter agreement, effective as of your actual start date, which is
anticipated to be during the first half of September, 1996 upon your acceptance
by execution of a counterpart copy of this letter where indicated below.
1. Reporting; Duties and Responsibilities; Employment At Will; Employee
--------------------------------------------------------------------
Invention Assignment and Confidentiality Agreement. In this position, you will
- --------------------------------------------------
report to the President/CEO of the Company, and your specific duties and
responsibilities will be determined by him. This offer is for a full time
position, located at the offices of the Company, except as travel to other
locations may be necessary to fulfill your responsibilities. Your employment
with the Company is on an "at will" basis, and either you or the Company may
terminate your employment with the Company at any time, for any reason.
2. Salary; Bonus; Benefits and Vacation. Your initial base salary will
------------------------------------
be $125,000.00 per year, subject to adjustment in good faith by the Company in
accordance with the Company's customary payroll practice as in effect from time
to time. You will also receive a special, one time "signing bonus" of $7,500 to
be paid thirty days after you commence full time employment with the Company.
Additionally, you will be eligible to earn an annual bonus. The targeted value
of your initial Bonus will be $25,000 on an annual basis and will be pro-rated
based upon your start date and March 31, the fiscal year-end of the Company.
Thereafter, the targeted bonus will determined annually, subject to adjustment
in good faith by the Company. The actual amount of the bonus will be determined
by the Company's President/CEO and the board of directors based upon your
individual performance as well as the Company's overall performance as compared
to its business plan. The bonus will be determined and paid approximately one
month after the end of the Company's fiscal year. You also will receive the
Company's standard employee benefits package, and will be subject to the
Company's vacation policy, as such package and policy are in effect from time to
time.
<PAGE>
2a. Advance Against Bonus. Each pay period, in addition to the payment
---------------------
of your base salary, you will be paid all additional $500.00 ($1,000 per month)
as part of your paycheck. These payments will be treated as a non-refundable
advance against your bonus payment at the end of the fiscal year.
3. Stock Option. Effective at the Company's Board of Directors meeting
------------
next after the date of this letter, the President/CEO of the Company will
recommend that the Board adopt a Stock Option Plan and grant you an incentive
stock option, effective upon the later of receipt of a permit from the
California Department of Corporations or the date of your commencement of
employment to purchase up to 150,000 shares of the Company's Common Stock. The
exercise price for this option will be the then-current fair market value of the
Company Common Stock at the date of grant. The option will vest according to the
Company's standard four-year exercise schedule, which calls for an initial
vesting of 25% of the total (i.e., 37,500 shares) after the first year of
-----
continuous service to the Company, and thereafter an additional 2.09% of the
shares per month, at the close of each month during which you remain employed
with the Company, over the remainder of the exercise term. Unvested Shares will
be repurchasable at the original purchase price per share on termination of
employment.
The sale of the shares which are the subject of this letter has not been
qualified with the Commissioner of Corporations of the State of California, and
the issuance of shares or the payment or receipt of any part of the
consideration for the shares prior to such qualification is unlawful, unless the
offer and sale are exempt from the qualification provisions. The rights of all
parties to this letter are expressly conditioned upon such qualification being
obtained or an exemption being available.}
4. Confidential Information. As an employee of the Company, you will
------------------------
have access to certain Company confidential information and you may, during the
course of your employment, develop certain information or inventions which will
be the property of the Company. To protect the interest of the Company, you will
need to sign the Company's standard "Employee Inventions and Confidentiality
Agreement" as a condition of your employment. We wish to impress upon you that
we do not wish you to bring with you any confidential or proprietary material of
any former employer or to violate any other obligation to your former employers.
5. At-Will Employment. While we look forward to a long and profitable
------------------
relationship, should you decide to accept our offer, you will be an at-will
employee of the Company, which means the employment relationship can be
terminated by either of us for any reason at any time. Any statements or
representations to the contrary (and, indeed, any statements contradicting any
provision in this letter) should be regarded by you as ineffective. Further,
your participation in any stock option or benefit program is not to be regarded
as assuring you of continuing employment for any particular period of time.
6. Authorization to Work. Because of Federal regulations adopted in the
---------------------
Immigration Reform and Control Act of 1986, you will need to present
documentation demonstrating that you have authorization to work in the United
States. If you have any
<PAGE>
questions about this requirement, which applies to U.S. citizens and non-U.S.
citizens alike, please contact our human resources department.
7. Term of Offer. This offer will remain open until August 30, 1996.
-------------
If you decide to accept our offer, and I hope that you will, please sign the
enclosed copy of this letter in the space indicated and return it to me. Upon
your signature below, this will become our binding agreement with respect to the
subject matter of this letter, superseding in their entirety all other or prior
agreements by you with the Company as to the specific subjects of this letter,
will be binding upon and inure to the benefit of our respective successors and
assigns, and your heirs, administrators and executors, will be governed by
California law, and may only be amended in a writing signed by you and the
Company.
We are excited to have you join us and look forward to working with you.
Sincerely,
/s/ Kenneth Ross
Kenneth Ross
President & CEO
Acknowledged, Accepted and Agreed
/s/ Laura Ferrell 8/30/96
- ----------------------------
Laura Ferrell Date
<PAGE>
Addendum 1
Offer letter with Extricity Software
October 7, 1996
Laura Ferrell
Merger or Acquisition. If the Company is acquired in a merger or acquisition
- ---------------------
where the Company's shareholders own less than a majority of the outstanding
stock of the surviving corporation after the closing of the transaction, then
half of (50%) any invested shares or options held by you at closing will vest as
of the consummation of that transaction.
/s/ Kenneth Ross
/s/ Laura Ferrell
<PAGE>
EXHIBIT 10.8
[LETTERHEAD OF
CROSS
ROUTE
SOFTWARE]
December 12, 1996 Revised
-------
Richard T. Fitchen
824 King Street
Santa Cruz, CA 95060
Dear Richard:
CrossRoute Software, Inc. (the "Company") is pleased to offer you a
-------
position as Vice President of Client Services in the Company, on the terms set
forth in this letter agreement, effective as of your actual start date, which is
anticipated to be sometime in January 1997, upon your acceptance by execution of
a counterpart copy of this letter where indicated below.
1. Reporting; Duties and Responsibilities: Employment At Will; Employee
--------------------------------------------------------------------
Invention Assignment and Confidentiality Agreement. In this position you will
- --------------------------------------------------
report to the President/CEO of the Company, and your specific duties and
responsibilities will be determined by him. This offer is for a full time
position, located at the offices of the Company, except as travel to other
locations may be necessary to fulfill your responsibilities. Your employment
with the Company is on an "at will" basis, and either you or the Company may
terminate your employment with the Company at any time, for any reason.
2. Salary; Bonus; Benefits and Vacation. Your initial base salary will
------------------------------------
be $115,000.00 per year, subject to adjustment in good faith by the Company in
accordance with the Company's customary payroll practice as in effect from time
to time. You will also receive a special, one time "signing bonus" of $7,500 to
be paid thirty days after you commence full time employment with the Company.
Additionally, you will be eligible to earn an annual bonus. The targeted value
of your initial Bonus will be $23,000 on an annual basis and will be pro-rated
based upon your start date and March 31, the fiscal year-end of the Company.
Thereafter, the targeted bonus will determined annually, subject to adjustment
in good faith by the Company. The actual amount of the bonus will be determined
by the Company's President/CEO and the board of directors based upon your
individual performance as well as the Company's overall performance as compared
to its business plan. The bonus will be determined and paid approximately one
month after the end of the Company's fiscal year. You also will receive the
Company's standard employee benefits package, and will be subject to the
Company's vacation policy, as such package and policy are in effect from time to
time.
<PAGE>
2a. Advance Against Bonus. Each pay period, in addition to the payment
---------------------
of your base salary, you will be paid an additional 208.33 ($416.66 per month)
as part of your paycheck. These payments will be treated as a non-refundable
advance against your bonus payment at the end of the fiscal year.
3. Stock Option. Effective at the Company's Board of Directors meeting
------------
next after your start date, the President/CEO of the Company will recommend that
the Board adopt a Stock Option Plan and grant you an incentive stock option,
effective upon the later of receipt of a permit from the California Department
of Corporations or the date of your commencement of employment, to purchase up
to 120,000 shares of the Company's Common Stock. The exercise price for this
option will be the then-current fair market value of the Company Common Stock at
the date of grant. The option will vest according to the Company's standard
four-year exercise schedule, which calls for an initial vesting of 25% of the
total (i.e., 30,000 shares) after the first year of continuous service to the
-----
Company, and thereafter an additional 2.083% of the shares per month, at the
close of each month during which you remain employed with the Company, over the
remainder of the exercise term. Unvested Shares will be repurchasable at the
original purchase price per share on termination of employment.
The sale of the shares which are the subject of this letter has not been
qualified with the Commissioner of Corporations of the State of California, and
the issuance of shares or the payment or receipt of any part of the
consideration for the shares prior to such qualification is unlawful, unless the
offer and sale are exempt from the qualification provisions. The rights of all
parties to this letter are expressly conditioned upon such qualification being
obtained or an exemption being available.}
4. Confidential Information. As an employee of the Company, you will
------------------------
have access to certain Company confidential information and you may, during the
course of your employment, develop certain information or inventions which will
be the property of the Company. To protect the interest of the Company, you
will need to sign the Company's standard "Employee Inventions and
Confidentiality Agreement" as a condition of your employment. We wish to impress
upon you that we do not wish you to bring with you any confidential or
proprietary material of any former employer or to violate any other obligation
to your former employers.
5. At-Will Employment. While we look forward to a long and profitable
------------------
relationship, should you decide to accept our offer, you will be an at-will
employee of the Company, which means the employment relationship can be
terminated by either of us for any reason at any time. Any statements or
representations to the contrary (and, indeed, any statements contradicting any
provision in this letter) should be regarded by you as ineffective. Further,
your participation in any stock option or benefit program is not to be regarded
as assuring you of continuing employment for any particular period of time.
<PAGE>
6. Authorization to Work. Because of Federal regulations adopted in
---------------------
the Immigration Reform and Control Act of 1986, you will need to present
documentation demonstrating that you have authorization to work in the United
States. If you have any questions about this requirement, which applies to
U.S. citizens and non-U.S. citizens alike, please contact our human resources
department.
7. Term of Offer. This offer will remain open until May 6, 1996. If
-------------
you decide to accept our offer, and I hope that you will, please sign the
enclosed copy of this letter in the space indicated and return it to me. Upon
your signature below, this will become our binding agreement with respect to the
subject matter of this letter, superseding in their entirety all other or prior
agreements by you with the Company as to the specific subjects of this letter,
will be binding upon and inure to the benefit of our respective successors and
assigns, and your heirs, administrators and executors, will be governed by
California law, and may only be amended in a writing signed by you and the
Company.
We are excited to have you join us and look forward to working with you.
Sincerely,
/s/ Kenneth Ross
Kenneth Ross
President & CEO
Acknowledged, Accepted and Agreed
/s/ Richard T. Fitchen 12/20/96
- ---------------------- --------
Richard T. Fitchen Date
<PAGE>
Addendum 1
Offer letter with Extricity Software
January 20, 1997
Richard Fitchen
Merger or Acquisition. If the Company is acquired in a merger or acquisition
- ---------------------
where the Company's shareholders own less than a majority of the outstanding
stock of the surviving corporation after the closing of the transaction, then
half of (50%) any unvested shares or options held by you at closing will vest as
of the consummation of that transaction.
/s/ Kenneth Ross
/s/ Richard Fitchen
<PAGE>
EXHIBIT 10.9
[LETTERHEAD OF EXTRICITY (TM) SOFTWARE]
February 17, 1999
Mr. James R. Lochry
1800 Brookside Dr.
Roswell, GA 30076
Re: Employment With Extricity Software, Inc.
----------------------------------------
Dear Jim:
Extricity Software, Inc. (the "Company") is pleased to offer you a
-------
position as Vice President, World Wide Sales in the Company, on the terms set
forth in this letter agreement, effective as of your actual start date, which is
anticipated to be around March 1, 1999, upon your acceptance by execution of a
counterpart copy of this letter where indicated below.
1. Reporting; Duties and Responsibilities; Employment At Will; Employee
--------------------------------------------------------------------
Invention Assignment and Confidentiality Agreement. Today, in this position,
- --------------------------------------------------
you will report to the President/CEO of the Company. Your specific duties and
responsibilities will be determined by him or her. This offer is for a full time
position. Your employment with the Company is on an "at will" basis, and either
you or the Company may terminate your employment with the Company at any time,
for any reason.
2. Salary; Bonus; Benefits and Vacation. Your initial base salary will
------------------------------------
be $175,000 per year, subject to adjustment in good faith by the Company,
payable in accordance with the Company's customary payroll practice as in effect
from time to time. You also will be eligible to earn an annual bonus/incentive
payment. The targeted value of your initial annual Bonus for our fiscal year
beginning April l, 1999 will be $150,000.00. In subsequent fiscal years, the
targeted annual bonus will be determined annually, subject to adjustment in good
faith by the Company. The actual amount of the bonus will be determined by the
Company's President/CEO and the board of directors, based upon a written
compensation plan to be jointly developed and agreed to by each of us. The bonus
will be determined and paid based upon the terms of the compensation plan with
the final payment being no later than 30 days after the end of the fiscal year.
You also will receive the Company's standard employee benefits package, and will
be subject to the Company's vacation policy, as such package and policy are in
effect from time to time.
3. Stock Option. Effective at the Company's Board of Directors meeting
------------
next after the date of this letter, the President/CEO of the Company will
recommend that the Board grant
<PAGE>
you an incentive stock option, effective upon the date of such Board of
Directors meeting, to purchase up to 200,000 shares of the Company Common Stock.
The grant of such option shall be subject to Board approval. The vesting of such
option will begin on the date of your commencement of employment with the
Company (on or before March 1, 1999) and the exercise price for this option will
be the then-current fair market value of the Company Common Stock at the date of
grant. The option will vest according to the Company's standard four-year
vesting schedule, which calls for an initial vesting of 25% of the total (i.e.,
------
50,000 shares) after the first year of continuous service to the Company, and
thereafter an additional 2.09% of the shares per month, at the close of each
month during which you remain employed with the Company, over the remainder of
the vesting term. Unvested shares will be repurchasable at the original purchase
price per share on termination of employment.
3a. Merger or Acquisition. If the Company is acquired in a merger or
---------------------
acquisition where the Company's shareholders own less than a majority of the
outstanding stock of the surviving corporation after the closing of the
transaction, then half of (50%) may unvested shares or options held by you at
closing will vest as of the consummation of that transaction.
3b. Additional Stock Option. At the conclusion of the Company's
-----------------------
fiscal year ending March 31, 2000, and conditional upon your continued
employment with the company, we will grant you an additional stock option of up
to 25,000 shares. The actual number of shares granted will be based upon
achieving substantially the revenue plan of the Company and will be computed
using a formula to be mutually agreed upon by you and I.
4. Confidential Information. As an employee of the Company, you will
------------------------
have access to certain Company confidential information and yon may, during the
course of your employment, develop certain information or inventions which will
be the property of the Company. To protect the interest of the Company, you
will need to sign the Company's standard "Employee Inventions and
Confidentiality Agreement" as a condition of your employment. We wish to impress
upon you that we do not wish you to bring with you any confidential or
proprietary material of any former employer or to violate any other obligation
to your former employers.
5. At-Will Employment. While we look forward to a long and profitable
------------------
relationship, should you decide to accept our offer, you will be an at-will
employee of the Company, which means the employment relationship can be
terminated by either of us for any reason at any time. Any statements or
representations to the contrary (and, indeed, any statements contradicting any
provision in this letter) should be regarded by you as ineffective. Further,
your participation in any stock option or benefit program is not to be regarded
as assuring you of continuing employment for any particular period of time.
6. Authorization to Work. Because of Federal regulations adopted in the
---------------------
Immigration Reform and Control Act of 1986, you will need to present
documentation demonstrating that you have authorization to work in the United
States. If you have any questions about this requirement, which applies to U.S.
citizens and non-U.S. citizens alike, please contact our human resources
department.
<PAGE>
7. Term of Offer. This offer will remain open until February 28, 1999.
-------------
If you decide to accept our offer, and I hope that you will, please sign the
enclosed copy of this letter in the space indicated and return it to me. Upon
your signature below, this will become our binding agreement with respect to the
subject matter of this letter, superseding in their entirety all other or prior
agreements by you with the Company as to the specific subjects of this letter,
will be binding upon and inure to the benefit of our respective successors and
assigns, and your heirs, administrators and executors, will be governed by
California law, and may only be amended in a writing signed by you and the
Company.
As we discussed, this offer is conditional upon you beginning work
(becoming an "official" employee) no later than March 1, 1999. We understand
your need to take personal time off during March, and our arrangement during the
month of March would involve you spending some time (perhaps 1 week's worth)
working with us to develop our annual plan, our hiring goals and getting set up
administratively (phone, Fax, e-mail). The balance of the time you take off
during March would be counted as unpaid, personal time off. You would begin full
time work on or before April 1, 1999.
We are excited to have you join us and look forward to working with you.
Sincerely,
/s/ Kenneth Ross
Kenneth Ross
President & CEO
Acknowledged, Accepted and Agreed
/s/ Jim Lochry 2/21/99
- -------------- -------
Jim Lochry Date
<PAGE>
EXHIBIT 10.10
AUGMENTUM SOFTWARE, INC.
April 30, 1996
Mr. Greg Olsen
2124 Gordon Ave.
Menlo Park, CA 94025
Re: Employment With Augmentum Software, Inc.
----------------------------------------
Dear Greg:
Augmentum Software, Inc. (the "Company") is pleased to offer you a
-------
position as Vice President, Chief Technical Officer of the Company, on the terms
set forth in this letter agreement, effective as of a date to be mutually
determined, but in no case later than June 13, 1996 upon your acceptance by
execution of a counterpart copy of this letter where indicated below.
1. Reporting; Duties and Responsibilities; Employment At Will; Employee
-------------------------------------------------------------------
Invention Assignment and Confidentiality Agreement. In this position you will
- --------------------------------------------------
report to the President and Chief Executive Officer of the Company. Your
specific duties and responsibilities will be determined by the President/CEO of
the Company. This offer is for a full time position, located at the offices of
the Company, except as travel to other locations may be necessary to fulfill
your responsibilities. Your employment with the Company is on an "at will"
basis, and either you or the Company may terminate your employment with the
Company at any time, for any reason.
2. Salary; Bonus; Benefits and Vacation. Your initial base salary will
------------------------------------
be $92,000.00 per year, subject to adjustment in good faith by the Company's
Board of Directors, payable in accordance with the Company's customary payroll
practice as in effect from time to time. You also will be eligible to earn an
annual bonus, the exact amount of which will be determined in good faith by the
Company's Board of Directors, based on the achievement of objectives which you
and the Company will mutually determine in good faith. The targeted value of
your initial Bonus will be $15,000 on an annual basis and will be pro-rated
based upon your start date and March 31, the fiscal year-end of the Company.
Thereafter, the targeted bonus will determined annually, subject to adjustment
in good faith by the Company's Board of Directors. The actual amount of the
bonus will be determined by the Company's board of directors based upon your
individual performance as well as the Company's overall performance as compared
to its business plan. The bonus will be determined and paid approximately one
month after the end of the Company's fiscal year. You also will receive the
Company's standard employee benefits package, and will be subject to the
Company's vacation policy, as such package and policy are in
<PAGE>
effect from time to time. During the interim period until we establish a benefit
program, the Company will reimburse you for your expenses in maintaining your
COBRA insurance from your previous employer.
3. Stock Purchase. In connection with your offer of employment, you
--------------
have purchased 300,000 shares of the Company's common stock. The purchase price
was the then-current fair market value of the Company's Common Stock as of the
date of the Company's incorporation, April 8, 1996. The stock you purchased will
be subject to repurchase by the Company at your cost should you cease your
employment with the Company for any reason or no reason. The right of the
Company to repurchase your stock will expire according to the same terms as the
Company's stock option vesting schedule, i.e. 25% of the right to repurchase
(75,000 shares) will expire on April 8, 1997 and the remainder will expire
evenly (2.083% per month) over the next three years so long as you remain
employed by the Company.
The sale of the shares which are the subject of this letter has not been
qualified with the Commissioner of Corporations of the State of California, and
the issuance of shares or the payment or receipt of any part of the
consideration for the shares prior to such qualification is unlawful, unless the
offer and sale are exempt from the qualification provisions. The rights of all
parties to this letter are expressly conditioned upon such qualification being
obtained or an exemption being available.}
4. Loan. - On or about the date on which you start substantially full
----
time employment at the Company, the Company will grant you a loan in the amount
of $50,000. The term of the loan will be five years, the interest rate will be
the lowest allowed by law, and if allowed by law, the interest will accrue and
be payable with the repayment of the loan. The payment of the loan will
accelerate and be due within three months should you leave the employment of the
Company for any reason.
5. Confidential Information. As an employee of the Company, you will
------------------------
have access to certain Company confidential information and yon may, during the
course of your employment, develop certain information or inventions which will
be the property of the Company. To protect the interest of the Company, you will
need to sign the Company's standard "Employee Inventions and Confidentiality
Agreement" as a condition of your employment. We wish to impress upon you that
we do not wish you to bring with you any confidential or proprietary material of
any former employer or to violate any other obligation to your former employers.
6. At-Will Employment. While we look forward to a long and profitable
------------------
relationship, should you decide to accept our offer, you will be an at-will
employee of the Company, which means the employment relationship can be
terminated by either of us for any reason at any time. Any statements or
representations to the contrary (and, indeed, any statements contradicting any
provision in this letter) should be regarded by you as ineffective. Further,
your participation in any stock option or benefit program is not to be regarded
as assuring you of continuing employment for any particular period of time.
<PAGE>
7. Authorization to Work. Because of Federal regulations adopted in
---------------------
the Immigration Reform and Control Act of 1986, you will need to present
documentation demonstrating that you have authorization to work in the United
States. If you have any questions about this requirement, which applies to U.S.
citizens and non-U.S. citizens alike, please contact our human resources
department.
8. Term of Offer. This offer will remain open until May 6, 1996. If
-------------
you decide to accept our offer, and I hope that you will, please sign the
enclosed copy of this letter in the space indicated and return it to me. Upon
your signature below, this will become our binding agreement with respect to the
subject matter of this letter, superseding in their entirety all other or prior
agreements by you with the Company as to the specific subjects of this letter,
will be binding upon and inure to the benefit of our respective successors and
assigns, and your heirs, administrators and executors, will be governed by
California law, and may only be amended in a writing signed by you and the
Company.
We are excited to have you join us and look forward to working with
you.
Sincerely,
/s/ Kenneth Ross
Kenneth Ross
President
Acknowledged, Accepted and Agreed
/s/ Greg Olsen 5-1-96
- -------------------------
Greg Olsen date
<PAGE>
Addendum 1
Offer Letter with Augmentum Software
April 30, 1996
Greg Olsen
Vesting on Acquisition - If the Company is acquired pursuant to a statutory
- -----------------------
merger or statutory consolidation of the Company with or into another
corporation or corporations, whereby the shareholders of the Company own less
than a majority of the surviving corporation or in the event of a sale of all or
substantially all of the Company's assets (an "Acquisition"), then any of your
Company shares that have not yet vested, whether then owned by you or
purchasable under any option then held by you, will become fully vested
immediately prior to the consummation of such Acquisition.
/s/ Kenneth Ross
/s/ Greg Olsen
<PAGE>
EXHIBIT 10.11
555 TWIN DOLPHIN PLAZA
CROSSROUTE SOFTWARE, INCORPORATED
a California corporation
<PAGE>
BASIC LEASE INFORMATION
OFFICE LEASE
Lease Date: March 28, 1997
Landlord: SPIEKER PROPERTIES, L.P.
a California limited partnership
Address of Landlord: 555 Twin Dolphin Drive
Suite #110
Redwood City, California 94065
Tenant: CROSSROUTE SOFTWARE, INCORPORATED
a California corporation
Address of Tenant: 555 Twin Dolphin Drive
Suite #190
Redwood City, California 94065
Contact: Mr. Ken Ross Telephone: (415) 596-1300
Premises: Approximately 5,255 rentable square feet on
the first floor of the building located at 555
Twin Dolphin Drive, Redwood City, California,
94065, as shown in the attached Exhibit "B"
Scheduled Term Commencement Date: June 1, 1997
Scheduled Length of Term: Sixty (60) Months
Scheduled Term Expiration Date: May 31, 2002
Rent: See Addendum #1, Rent, attached
hereto and made a part hereof.
Security Deposit: $17,079
Tenant's Proportionate Share: 2.65%
Permitted Use: General Office
Occupancy Density: 3.3/1,000 sqft
The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Each reference in this Lease to any of the Basic Lease Information
shall mean the respective information above set forth and shall be construed to
incorporate all of the terms provided under the particular Lease paragraph
pertaining to such information. In the event of any conflict between the Basic
Lease Information and the Lease, the latter shall control.
LANDLORD: TENANT:
SPIEKER PROPERTIES, L.P. CROSSROUTE SOFTWARE, INCORPORATED
- ------------------------ ---------------------------------
a California limited partnership a California corporation
By: Spieker Properties, Inc.
a Maryland corporation
Its: General Partner
By /s/ Peter H. Schnugg By /s/ Kenneth Ross
-------------------------- -----------------------------
Peter H. Schnugg Kenneth Ross
Its Senior Vice President Its President
------------------------- -----------------------------
Date: Date:
4-7-97 3/31/97
------------------------- -----------------------------
<PAGE>
LEASE
TABLE OF CONTENTS
<TABLE>
<S> <C>
Basic Lease Information
1. Premises 3
2. Occupancy 3
3. Term and Possession 3
4. Rent 3
5. Restrictions On Use 4
6. Compliance With Laws 4
7. Alterations 4
8. Repairs 4
9. Liens 5
10. Assignment and Subletting 5
11. Insurance and Indemnification 6
12. Waiver of Subrogation 7
13. Services and Utilities 7
14. Estoppel Certificate 8
15. Security Deposit 8
16. Substitution 8
17. Holding Over 8
18. Subordination 8
19. Rules and Regulations 9
20. Re-entry by Landlord 9
21. Default by Tenant 9
22. Damage by Fire, Etc. 11
23. Eminent Domain 11
24. Sale by Landlord and Tenant's Remedies 12
25. Right of Landlord To Perform 12
26. Surrender of Premises 12
27. Waiver 12
28. Notices 13
29. Rental Adjustments 13
30. Taxes Payable by Tenant 15
31. Successors and Assigns 15
32. Attorneys' Fees 15
33. Light and Air 15
34. Public Transportation Information 15
35. Miscellaneous 16
36. Lease Effective Date 16
Signatures 16
Addendum #1 - 3 17
Exhibit A Rules and Regulations
Exhibit B Outline of Premises, Suite #180
Exhibit D Form of Tenant Certificate
</TABLE>
<PAGE>
LEASE
-----
THIS LEASE is made this of this 28th day of March, 1997 , between Spieker
---- ------ -- ------
Properties, L.P. a California limited partnership (hereinafter called
- -------------------------------------------------
"Landlord") and CrossRoute Software Incorporated, a California corporation
----------------------------------------------------------
hereinafter "Tenant").
PREMISES
1. Landlord leases to Tenant and Tenant leases from Landlord those premises
(hereinafter called "Premises") outlined in red on Exhibit B attached
hereto and made a part hereof, specified in the Basic Lease Information
attached hereto. The Premises may be all or part of the building (the
"Building") or of the project (the "Project") which may consist of more
than one building.
OCCUPANCY
2. Tenant shall use the Premises for the Permitted Use and for no other use or
purpose without the prior written consent of Landlord. No increase in
occupant density of the Leased Premises shall be made which shall add to
the burden of such use of the Building as determined by Landlord without
the prior written consent of Landlord.
TERM AND POSSESSION
3. (a) The parties project that the term shall commence on the Scheduled
Term Commencement Date and, except as otherwise provided herein or in
any exhibit or addendum hereto, shall continue in full force until the
Term Expiration Date. If the Premises are not delivered by Landlord by
the Scheduled Term Commencement Date for any reason, Landlord shall
not be liable to Tenant for any loss or damage resulting from such
delay. The Term Commencement Date shall be the first day of the
calendar month next following the earlier of (i) the day when the
Premises are substantially complete, or (ii) the date on which Tenant
takes possession of, or commences the operation of its business in
some or all of the Premises. If substantial completion occurs prior to
the Scheduled Term Commencement Date, Tenant shall take occupancy.
Landlord shall provide Tenant as much notice as circumstances allow of
the date when Landlord expects to achieve substantial completion,
based upon the progress of work. Should the Term Commencement Date be
a date other than the Scheduled Term Commencement Date, either
Landlord or Tenant, at the request of the other shall execute a
declaration specifying the Term Commencement Date and the rent
commencement date which shall be binding upon the parties as to the
matters therein stated. Tenant's obligation to pay Rent and its other
obligations for payment under this Lease shall commence upon the
earlier of (i) the day when the Premises are substantially complete,
or (ii) the date on which Tenant takes possession of, or commences the
operation of its business in some or all of the Premises.
(c) The Premises shall be substantially complete and possession shall be
delivered when (i) installation of Building Standard Work (which shall
not include installation of telephone and other communication
facilities or equipment, finish work and decoration to be performed by
Tenant) has occurred, (ii) Tenant has direct access from the street to
the elevator lobby on the floor where the Premises are located (iii)
Landlord is in a position to furnish Building services to the
Premises, and (iv) Landlord's architect shall certify substantial
completion with respect to the premises, whether or not substantial
completion of the Building itself shall have occurred. Substantial
completion shall be deemed to have occurred notwithstanding a
requirement to complete "punchlist" or similar corrective work.
RENT
4. Tenant shall pay to Landlord throughout the Term Rent as specified in the
Basic Lease Information, payable in equal monthly installments in advance
on the first day of each calendar month during every year of the Term in
lawful money of the United States, without deduction or offset whatsoever,
to Landlord at the address specified in the Basic Lease Information or to
such other firm or to such other place as Landlord may from time to time
designate in writing by notice given as herein provided. Rent for the first
month of the Term shall be paid by Tenant upon execution of this Lease. If
the obligation for payment of Rent commences on other than the first day of
a month as provided in paragraph 3(a), then Rent provided for such partial
month shall be prorated and the prorated installment shall be paid on the
first day of the calendar month next succeeding the Term Commencement Date.
If the Term terminates on other than the last day of a calendar month, then
the Rent provided for such partial month shall be prorated and the prorated
installment shall be paid on the first day of the calendar month next
preceding the date of termination.
3
<PAGE>
RESTRICTIONS ON USE
5. Tenant shall not do or permit anything to be done in or about the Premises
which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Building or injure or annoy them, nor use or
allow the Premises to be used for any improper, immoral, unlawful or
objectionable purposes, nor shall Tenant cause or maintain or permit any
nuisance in, on or about the Premises. Tenant shall not commit or suffer
the commission of any waste in, on or about the Premises.
COMPLIANCE WITH LAWS
6. Tenant shall not use the Premises or permit anything to be done in or about
the Premises which will in any way conflict with any law, statute,
ordinance or governmental rule or regulation now in force or which may
hereafter be enacted or promulgated. Tenant shall not do or permit anything
to be done on or about the Premises or bring or keep anything therein which
will in any way increase the rate of any insurance upon the Building or any
of its contents or cause a cancellation or said insurance or otherwise
affect said insurance in any manner, and Tenant shall at its sole cost and
expense promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force and with the requirements of any board of fire
underwriters or other similar body now or hereafter constituted relating to
or affecting the condition, use or occupancy of the Premises, excluding
structural changes not related to or affected by alterations or
improvements made by or for Tenant or Tenant's acts. The judgement of any
court of competent jurisdiction or the admission of Tenant in any actions
against Tenant, whether Landlord be a party thereto or not, that Tenant has
so violated any such law, statute, ordinance, rule, regulation or
requirement, shall be conclusive of such violation as between Landlord and
Tenant.
ALTERATIONS
7. Tenant shall not make or suffer to be made any alterations, additions or
improvements in, on or to the Premises or any part thereof without the
prior written consent of Landlord; and any such alterations, additions or
improvements in, on or to said Premises, except for Tenant's movable
furniture and equipment, shall immediately become Landlord's property and,
at the end of the Term, shall remain on the Premises without compensation
to Tenant. In the event Landlord consents to the making of any such
alteration, addition or improvement by Tenant, the same shall be made by
Tenant, at Tenant's sole cost and expense, in accordance with plans and
specifications approved by Landlord, and any contractor or person selected
by Tenant to make the same must first be approved in writing by Landlord.
Notwithstanding the foregoing, Tenant shall be permitted to make non-
structural alterations or additions, the costs of which do not exceed
$1,000 per work of improvement, without Landlord's written approval.
Notwithstanding the foregoing, Landlord, shall agree to allow Tenant to
contract with outside licensed contractors for installation of additional
approved tenant work for Tenant's account, subject to review and approval
of all work and contractors by Landlord. Landlord shall have the right to
collect from Tenant a supervision fee equal to 15% of the total direct
costs associated with Tenant's improvements to the Premises, per the terms
of Paragraph 7. Upon the expiration or sooner termination of the Term,
Tenant shall upon demand by Landlord, at Tenant's sole cost and expense,
with all due diligence remove all those alterations, additions or
improvements made by or for the account of Tenant, designated by Landlord
to be removed and Tenant shall with all due diligence, at its sole cost and
expense, repair and restore the Premises to their original condition. At
Landlord's election and notwithstanding the foregoing, however, Tenant
shall pay to Landlord the cost of removing any such alterations, additions
or improvements and restoring the Premises to their original condition such
cost to include a reasonable charge for Landlord's overhead and profit as
provided above, and such amount may be deducted from the Security Deposit
or any other sums or amounts held by Landlord under this Lease.
REPAIRS
8. By taking possession of the Premises, Tenant accepts the Premises as being
in the condition in which Landlord is obligated to deliver them and
otherwise in good order, condition and repair. At all times during the Term
Tenant shall, at Tenant's sole cost and expense, keep the Premises and
every part thereof in good order, condition and repair, excepting damage
thereto by fire, earthquake, act of God or other elements. Tenant waives
all right it may have under Section 1942 of the Civil Code of the State of
California and any similar law, statues or ordinance now or hereafter in
effect (to the full extent that such waiver may lawfully be given)
authorizing or purporting to authorize Tenant to make repairs to or for the
account of Landlord. Tenant shall upon the expiration or sooner termination
of the Term hereof, unless Landlord demands otherwise pursuant to paragraph
7 hereof, surrender to Landlord the Premises and all repairs, changes,
alterations, additions and improvements thereto in the same condition as
when received or when first installed, damage by fire, earthquake, act of
God or the elements excepted, Landlord has no obligation to alter, remodel,
improve, repair, decorate or paint the Premises or any part thereof, except
as specified in the Office Lease Improvement Agreement and no
representations respecting the condition of the Premises or the Building
have been made by Landlord to Tenant, except as specifically set forth
therein or in the Office Lease Improvement Agreement.
4
<PAGE>
LIENS
9. Tenant shall keep the Premises free from liens arising out of or related to
work performed, materials or supplies furnished or obligations incurred by
Tenant or in connection with work made, suffered or done by Tenant in
Premises or Building. In the event that Tenant shall not, within ten (10)
days following the imposition of any such lien, cause the same to be
released of record by payment or posting of a proper bond, Landlord shall
have, in addition to all other remedies provided herein and by law, the
right, but no obligation, to cause the same to be released by such means as
it shall deem proper, including payment of the claim giving rise to such
lien. Landlord shall have the right at all times to post and keep posted on
the Premises any notices permitted or required by law, or which Landlord
shall deem proper, for the protection of Landlord, the Premises, the
Building and any other party having an interest therein, from mechanics'
and materialmen's liens, and Tenant shall give Landlord not less than ten
(10) business days prior written notice of the commencement of any work in
the Building or Premises which could lawfully give rise to a claim for
mechanics' or materialmen's liens.
ASSIGNMENT AND SUBLETTING
10. Tenant shall not sell, assign, encumber or otherwise transfer this Lease or
any interest therein (by operation of law or otherwise), sublet the
Premises or any part thereof or suffer any other person to occupy or use
the Premises or any portion thereof, nor shall Tenant permit any lien to be
placed on Tenant's interest under this Lease by operation of law except in
accordance with the provisions of this paragraph 10. For purposes hereof,
sales, transfers or assignments of (i) a controlling interest in the stock
of Tenant, if Tenant is a corporation, or of (ii) the general partnership
interests sufficient to control management decisions if Tenant is a
partnership or of (iii) the majority or controlling underlying beneficial
interest, if Tenant is any other form of business entity, shall constitute
an assignment subject to the terms of this paragraph 10.
(a) In the event that Tenant should desire to sublet the Premises or any
part thereof, Tenant shall provide Landlord with written notice of
such desire at least ninety (90) days in advance of the date on which
Tenant desires to make such sublease. Landlord shall then have a
period of thirty (30) days following receipt of such notice within
which to notify Tenant in writing that Landlord elects either (i) to
terminate this Lease as to the space so affected as of the date so
specified by Tenant, in which event Tenant shall be relieved of all
further obligations hereunder as to such space from and after that
date, or (ii) to permit Tenant to sublet such space, subject, however,
to the prior written approval of the proposed Sublessee by Landlord
which said consent shall not be unreasonably withheld. If Landlord
should fail to notify Tenant in writing of its election within said
thirty (30) day period, Landlord shall be deemed to have waived option
(i) above, but written approval of the proposed Sublessee shall still
be required. Refusal by Landlord to approve a proposed Sublessee shall
not constitute a termination of this Lease. In exercising its right of
consent to a Sublessee it shall be reasonable for Landlord to withhold
consent to any Sublessee who (aa) does not agree to assume the
obligations of the Lease with respect to the space to be so sublet,
(bb) does not agree to utilize the space so sublet for the Permitted
Use, (cc) is of unsound financial condition as determined by Landlord,
or (dd) will, in Landlord's opinion increase the occupant density in
the Leased Premises. If Tenant proposes to sublease less than all of
the Premises, election by Landlord of termination of this Lease with
respect to space to be so sublet shall leave this Lease in full force
and effect with respect to the remainder of the space, the Rent and
Tenant's Proportionate Share of Operating Expenses and taxes shall be
adjusted on a pro rata basis to reflect the reduction in Net Rentable
Area of the Premises as retained by Tenant. This Lease as so amended
shall continue thereafter in full force and effect and references
herein to the Premises shall mean that portion thereof as to which the
Lease has not been terminated.
(b) Tenant shall not enter into any other transaction subject to this
paragraph 10 without Landlord's prior written consent which said
consent shall not be unreasonably withheld. It shall be reasonable for
Landlord to withhold consent to any proposed transaction described in
this paragraph 10 on any of the grounds specified in paragraph 10 (a)
with respect to sublessee's or any other reasonable grounds.
(c) Any rent or other consideration realized by Tenant under any such
sublease or assignment to which Landlord has consented hereunder, in
excess of the Rent payable hereunder, after amortization or the
reasonable cost of the improvements over the remainder of the Term for
which Tenant has paid and reasonable subletting and assignment costs,
shall be divided and paid ninety percent (90%) to Landlord and ten
percent (10%) to Tenant.
(d) Any subletting hereunder by Tenant shall not result in Tenant being
released or discharged from any liability under this lease. Any
purported assignment, subletting or other transaction to which
paragraph 10 applies, which occurs contrary to the provisions hereof,
shall be void. Landlord's consent to any assignment, subletting or
other transaction to which this paragraph 10 applies shall not release
Tenant from any of Tenant's obligations hereunder or constitute a
consent with respect to any subsequent transaction to which this
paragraph applies.
5
<PAGE>
INSURANCE AND INDEMNIFICATION
11. (a) Landlord shall not be liable to Tenant and Tenant hereby waives all
claims against Landlord for any injury or damage to any person or
property in or about the Premises by or from any cause whatsoever
(other than Landlord's gross negligence or willful misconduct) and,
without limiting the generality of the foregoing, whether caused by
water leakage of any character from the roof, walls, basement or other
portion of the Premises or the Building, or caused by gas, fire, oil
or electricity in, on or about the Premises or the Building.
(b) Tenant shall hold Landlord harmless from and defend Landlord against
any and all claims or liability for any injury or damage to any person
or properly whatsoever; (i) occurring in, on, or about the Premises or
any part thereof, or (ii) occurring in, on or about any facilities
(including, without prejudice to the generality of the term
"facilities", elevators, stairways, lobbies, health clubs, passageways
or hallways), the use of which Tenant may have in conjunction with
other tenants of the Building, when such injury or damage shall be
caused in part or in whole by the act, neglect, fault of or omission
of any duty with respect to the same by Tenant, its agents, servants,
employees or invitees. Tenant shall further indemnify and save
Landlord harmless against and from any and all claims by or on behalf
of any person, firm or corporation arising from the conduct or
management of any work or thing whatsoever done by Tenant in or about
or from transactions of Tenant concerning the Premises, and will
further indemnify and save Landlord harmless against and from any and
all claims arising from any breach or default on the part of Tenant in
the performance of any covenant or agreement on the part of Tenant to
be performed pursuant to the terms of this Lease or arising from any
act or negligence of Tenant, or any of its agents, contractors,
servants, employees or licensees, and from and against all costs,
counsel fees, expenses and liabilities incurred in connection with any
such claim or action or proceeding brought thereon. In case any action
or proceeding is brought against Landlord by reason of any claims or
liability within the limits of the foregoing indemnity, Tenant shall
defend such action or proceeding at Tenant's sole expense by counsel
reasonably satisfactory to Landlord.
(c) Landlord shall hold Tenant harmless from and defend Tenant against any
and all claims or liability for any injury or damage to any person or
property occurring in or about any facilities (including, without
prejudice to the generality of the term "facilities", elevators,
stairways, passageways or hallways), the use of which Tenant may have
in conjunction with other tenants of the building, when such injury or
damage shall be caused in whole or in part by the act, neglect, fault
of or omission of any duty with respect to the same by Landlord, its
agents, servants, employees or invitees. Landlord shall further
indemnify and save Tenant harmless against and from any and all claims
by or on behalf of any person, firm or corporation arising from the
conduct or management of any work or thing whatsoever done by Landlord
in or about, or from transactions of Landlord concerning, the Premises
where such work is not being done for the account of Tenant; and
Landlord will further indemnify and save Tenant harmless against and
from any and all claims arising from any breach or default on the part
of Landlord in the performance of any covenant or agreement on the
part of Landlord to be performed pursuant to the terms of this Lease
or arising from any act or negligence of Landlord, or any of its
agents, contractors, servants, employees or licensees, and from and
against all costs, counsel fees, expenses and liabilities incurred in
connection with any such claims or action or proceeding brought
thereon. In case any action or proceeding is brought against Tenant by
reason of any claims or liability within the limits of the foregoing
indemnity, Landlord shall defend such action or proceeding at
Landlord's sole expense by counsel reasonably satisfactory to Tenant.
(d) The provisions of paragraph 11 (b) and 11 (c) shall survive the
expiration or termination of this Lease with respect to any claims or
liability occurring prior to such expiration or termination.
(e) Tenant shall purchase at its own expense and keep in force during the
Term of this Lease a policy or policies of workers' compensation and
comprehensive liability insurance, including personal injury and
property damage, in the amount of Five Hundred Thousand Dollars
($500,000.00) for property damage and Two Million Dollars
($2,000,000.00) per occurrence for personal injuries or deaths of
persons occurring in or about the Premises. The foregoing limits shall
be increased in proportion to increases during the Term in the United
States Department of Labor, Bureau of Labor Statistics, Cost of Living
Index, All Urban consumers (1967=100) for the region in which the
Leased Premises are located. Said policies shall: (i) name Landlord
and any party holding an interest to which this Lease may be
subordinated under paragraph 18 hereof, as additional insureds, and
insure Landlord's contingent liability under this Lease; (ii) be
issued by an insurance company acceptable to Landlord and licensed to
do business in the State of California; and (iii) provide that said
insurance shall not be cancelled unless ten (10) days prior written
notice shall have been given to Landlord. Said policy or policies or
certificates thereof shall be delivered to Landlord by Tenant upon
commencement of the term of this Lease and upon each renewal of said
insurance.
6
<PAGE>
WAIVER OF SUBROGATION
12. To the extent permitted by law and without affecting the coverage provided
by insurance required to be maintained hereunder Landlord and Tenant each
waive any right to recover against the other (i) damages for injury, to or
death of persons, (ii) damages to property (iii) damage to the Premises or
any part thereof, (ix,) damage to the Braiding or any part thereof, or (v)
claims arising by reason of the foregoing, but only to the extent that any
of the foregoing damages and/or claims referred to above are covered (and
only to the extent of such coverage) by insurance actually carried by either
Landlord or Tenant. This provision is intended to waive fully, and for the
benefit of each party, any rights and/or claims which might give rise to a
right of subrogation on any insurance carrier. The coverage obtained by each
party pursuant to this Lease shall include, but without limitation, a waiver
of subrogation by the carrier which conforms to the provisions of this
paragraph.
SERVICES AND UTILITIES
13. (a) Landlord shall maintain the public and common areas of the Building,
including lobbies, stairs, elevators, corridors and restrooms, the
windows in the Building, the mechanical, plumbing and electrical
equipment serving the Building, and the structure itself, in
reasonably good order and condition except for damage occasioned by
the act of Tenant, which damage shall be repaired by Landlord at
Tenant's expense.
(b) Provided Tenant shall not be in default hereunder, and subject to the
provisions elsewhere herein contained and to the rules and regulations
of the Building, Landlord shall furnish to the Premises during
ordinary business hours of generally recognized business days to be
determined by Landlord (but exclusive, in any event, of Saturdays,
Sundays and legal holidays), water and electricity suitable for the
Permitted Uses of the Premises, heat and air conditioning required in
Landlord's judgement for the comfortable use and occupation of the
Premises for the Permitted Uses, janitorial services during the times
and in the manner that such services are, in Landlord's judgement,
customarily furnished in comparable buildings in the immediate market
area, and elevator service which shall mean service either by
nonattended automatic elevators or elevators with attendants, or both,
at the option of Landlord. Landlord shall have no obligation to
provide additional or after-hours heating or air-conditioning, but if
Landlord elects to provide such services at Tenant's request, Tenant
shall pay to Landlord a reasonable charge for such services as
determined by Landlord. Tenant agrees to keep and cause to be kept
closed all window coverings when necessary because of the sun's
position, and 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
heating, ventilating and air-conditioning systems. Wherever heat-
generating machines, excess lighting or equipment are used in the
Premises which affect the temperature otherwise maintained by the air
conditioning system, Landlord reserves the right to install
supplementary air-conditioning units in the Premises, and the cost
thereof, including the cost of installation and the cost of operating
and maintenance thereof, shall be paid by Tenant to Landlord upon
demand by Landlord.
(c) Tenant shall not without written consent of Landlord use any apparatus
or device in the Premises, including without limitation, electronic
data processing machines, punch card machines and machines using
excess lighting or using current in excess of that which is determined
by Landlord as reasonable and normal for the Permitted Use or which
will in any way increase the amount of electricity or water usually
furnished or supplied for the Permitted uses of the Premises; not
connect with electric current, except through existing electrical
outlets in the Premises or water pipes, any apparatus or device for
the purposes of using electrical current or water. If Tenant shall
require water or electrical current or any other resource in excess of
that usually furnished or supplied for the Permitted Use of the
Premises, Tenant shall first procure the consent of Landlord which
Landlord may refuse, to the use thereof, and Landlord may cause a
special meter to be installed in the Premises so as to measure the
amount of water, electrical current or other resource consumed for any
such other use. Tenant shall pay directly to Landlord as an addition
to and separate from payment of Basic Operating Costs the cost of all
such energy, utility service and meters (and of installation,
maintenance and repair thereof). Landlord may add to the metered
charge a recovery of additional expense incurred in keeping account of
the water, electrical current or other resource so consumed. Landlord
shall not be liable for any damages directly or indirectly resulting
from, nor shall the Rent herein reserved be abated by reason of (i)
the installation, use or interruption of use of any equipment in
connection with the furnishing of any of the foregoing utilities and
services, (ii) failure to furnish or delay in furnishing any such
utilities or services when such failure or delay is caused by acts of
God or the elements, labor disturbances of any character, any other
accidents or other conditions beyond the reasonable control of
Landlord, or by making of repairs or improvements to the Premises or
to the Building, or (iii) the limitation, curtailment, rationing or
restriction on use of water, electricity, gas or any other form of
energy or any other service or utility whatsoever serving the Premises
or the Building. Landlord shall be entitled to cooperate voluntarily
and in a reasonable manner with the efforts of national, state or
local government agencies or utility suppliers in reducing energy or
other resource consumption. The obligation to make services available
hereunder shall be subject to the limitations of any such voluntary,
reasonable program.
(d) Any sums payable under this paragraph 13 shall constitute Additional
Rent hereunder.
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ESTOPPEL CERTIFICATE
14. Within ten (10) days following any written request which Landlord may make
from time to time, Tenant shall execute and deliver to Landlord a
certificate substantially in the form attached hereto as Exhibit D and made
a part hereof indicating thereon any exceptions thereto which may exist at
/hat time. Failure by Tenant to execute and deliver such certificate shall
constitute an acceptance of the Premises and acknowledgment by Tenant that
the statements included in Exhibit D are true and correct without
exception. Landlord and Tenant intend that any statement delivered pursuant
to this paragraph may be relied upon by any mortgagee, beneficiary,
purchaser or prospective purchaser of the Building or any interest therein.
Landlord shall have the right to substitute for the attached Exhibit D a
certificate in form required by Landlord's mortgagee or provider of
financing.
SECURITY DEPOSIT
15. Concurrently with execution hereof, Tenant has paid to Landlord the
Security Deposit in the amount stated on the Basic Lease Information Sheet
as security for the full and faithful performance of Tenant's obligations
under this Lease. Upon expiration of the Term or earlier termination
hereof, the Security Deposit shall be returned to Tenant, reduced by such
amounts as may be required by Landlord to remedy defaults on the part of
Tenant in the payment of Rent, to repair damages to the Premises caused by
Tenant and to clean the Premises. Landlord shall hold the Security Deposit
for the foregoing purposes in accordance with the provisions of all
applicable law.
SUBSTITUTION
16. At any time after execution of this Lease, Landlord may substitute for the
Premises other premises in the Building (the "New Premises") upon not less
than ninety (90) days prior written notice, in which event the new Premises
shall be deemed to be the Premises for all purposes hereunder; provided,
however, that:
(a) The Net Rentable Area in the Premises is less than five thousand
(5,000) square feet;
(b) The New Premises shall be similar in area and in appropriateness for
Tenant's purposes;
(c) Any such substitution is effected for the purpose of accommodating a
tenant who will occupy all or a substantial portion of the Net
Rentable Area of the floor on which the Premises are located; and
(d) If Tenant is occupying the Premises at the time of such substitution,
Landlord shall pay the expense of moving Tenant, its property and
equipment to the New Premises and shall, at its sole cost, improve the
New Premises with improvements substantially similar to those Landlord
has committed to provide or has provided in the Premises.
HOLDING OVER
17. If Tenant shall retain possession of the Premises or any part thereof
without Landlord's consent following the expiration of the Term or sooner
termination of this Lease for any reason, then Tenant shall pay to Landlord
for each day of such retention triple the amount of the daily rental for
the last period prior to the date of such expiration or termination. Tenant
shall also indemnify and hold Landlord harmless from any loss or liability
resulting from delay by Tenant in surrendering the Premises, including,
without limitation, any claims made by any succeeding Tenant founded on
such delay. Alternatively, if Landlord gives notice to Tenant of Landlord's
election thereof, such holding over shall constitute renewal of this Lease
for a period from month to month, or for one year, whichever shall be
specified in such notice. Acceptance of Rent by Landlord following
expiration or termination shall not constitute a renewal of this Lease, and
nothing contained in this paragraph shall waive Landlord's right to reentry
or any other right. Unless Landlord exercises the option hereby given to
it, Tenant shall be only a Tenant at sufferance, whether or not Landlord
accepts any Rent from Tenant while Tenant is holding over without
Landlord's written consent.
SUBORDINATION
18. Without the necessity of any additional document being executed by Tenant
for the purpose of effecting a subordination, this Lease shall be subject
and subordinate at all times to: (a) all ground leases or underlying leases
which may now exist or hereafter be executed affecting the Building or the
land upon which the Building is situated or both, and (b) the lien of any
mortgage or deed of trust which may now exist or hereafter be executed in
any amount for which said Building, land, ground leases or underlying
leases, or Landlord's interest or estate in any of said items, is specified
as security. Notwithstanding the foregoing, Landlord shall have the right
to subordinate or cause to be subordinated any such ground leases or
underlying leases or any such liens to this Lease. In the event that any
ground leases or underlying lease terminates for any reason or any mortgage
or deed of trust is foreclosed or a conveyance in lieu of foreclosure is
made for any reason, Tenant shall, notwithstanding any subordination,
attorn to and become the Tenant of the successor in interest to Landlord at
the option of such
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successor in interest. Tenant shall execute and deliver, upon demand by
Landlord and in the form requested by Landlord, any additional documents
evidencing the priority or subordination of this Lease with respect to any
such ground leases or underlying leases or the lien of any such mortgage or
deed of trust. Tenant hereby irrevocably appoints Landlord as attorney-in-
fact for Tenant to execute, deliver and record any such documents in the
name and on behalf of Tenant At the request of Landlord, Tenant shall
provide to Landlord its current financial statement or other information
disclosing financial worth which Landlord shall use solely for purposes of
this lease and in connection with the ownership, management and disposition
of the property subject hereto.
RULES AND REGULATIONS
19. Tenant shall faithfully observe and comply with the rules and regulations
printed on or annexed to this Lease and all reasonable modifications
thereof and additions thereto from time to time put into effect by
Landlord. Landlord shall not be responsible to Tenant for the non-
compliance by any other Tenant or occupant of the Building with any of the
rules and regulations.
RE-ENTRY BY LANDLORD
20. Landlord reserves and shall at all times have the right to re-enter the
Premises to inspect the same, to provide any services to be provided by
Landlord to Tenant hereunder, to show the Premises to prospective
purchasers, mortgagees or tenants, to post notices of nonresponsibility and
to alter, improve or repair the Premises and any portion of the Building,
Without abatement of Rent, and may for that purpose erect, use and maintain
scaffolding, pipes, conduits and other necessary structures in and through
the Premises where reasonably required by the character of the work to be
performed; provided that entrance to the Premises shall not be blocked
thereby, and further provided that the business of Tenant shall not be
interfered with unreasonably. Tenant waives any claim for damages for any
injury or inconveniences to or interference with Tenant's business, any
loss of occupancy or quiet enjoyment of the Premises, and any other loss
occasioned thereby. Landlord shall at all times have and retain a key with
which to unlock all of the doors in, upon and about the Premises, excluding
Tenant's vaults and safes or special security areas (designated in
advance), and Landlord shall have the right to use any and all means which
Landlord may deem necessary or proper to open said doors in an emergency,
in order to obtain entry to any portion of the Premises, and any entry to
the Premises or portions thereof obtained by Landlord by any of said means,
or otherwise, shall not be construed to be a forcible or unlawful entry
into, or a detainer of, the Premises, or any eviction, actual or
constructive, of Tenant from the premises or any portions thereof. Landlord
shall also have the right at any time, without the same constituting an
actual or constructive eviction and without incurring any liability to
Tenant therefore, to change the arrangement and/or location of entrances or
passageway, doors and doorways, and corridors, elevators, stairs, toilets
or other public parts of the Building, and to change the name, number or
designation by which the Building is commonly known.
DEFAULT BY TENANT
21. (a) Events of Default:
The occurrence of any of the following shall constitute an event of
default on the part of Tenant:
(1) Abandonment. Vacation or Abandonment of the Premises for a
continuous period in excess of five (5) business days. Tenant
waives any right to notice Tenant may have under Section 1951.3
of the Civil Code of the State of California, the terms of this
subsection (a) being deemed such notice to Tenant as required by
said Section 1951.3;
(2) Nonpayment of Rent. Failure to pay any installment of Rent due
and payable hereunder (or failure to pay any other amount
required to be paid hereunder, all such obligations to be
construed as the equivalent of obligations for payment of Rent)
upon the date when said payment is due, such failure continuing
without cure by payment of the delinquent Rent and late charge
for a period of five (5) business days after written notice and
demand; provided, however, that except as expressly otherwise
provided herein, Landlord shall not be required to provide such
notice more than twice during the Term, the third such non-
payment constituting default for all purposes hereof without
requirement of notice. For purposes of subparagraph 21(e), such
failure shall constitute a default without requirement of notice.
The due dates for payment of installments of rent provided for
herein shall be absolute and the existence of a cure period or
notice period shall not be deemed to extend said date for
purposes of determining Tenant's compliance with its obligations
hereunder.
(3) Other Obligations. Failure to perform any obligations, agreement
or covenant under this Lease other than those matters specified
in subparagraphs (1) and (2) of this subparagraph (a), such
failure continuing for fifteen (15) business days after written
notice of such failure (or such longer period as Landlord
determines to be necessary to remedy such default, provided that
Tenant shall continuously and diligently pursue such remedy at
all times until such default is cured);
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(4) General Assignment. A general assignment by Tenant for the
Benefit of creditors;
(5) Bankruptcy. The filing of any voluntary petition in bankruptcy by
Tenant, or the filing of an involuntary petition by Tenant's
creditors, which involuntary petition remains undischarged for a
period of thirty (30) days. In the event that under applicable
law the trustee in bankruptcy or Tenant has the right, to affirm
this Lease and continue to perform the obligations of Tenant
hereunder, such trustee or Tenant shall, in such time period as
may be permitted by the bankruptcy court having jurisdiction,
cure all defaults of Tenant hereunder outstanding as of the day
of the affirmance of this Lease and provide to Landlord such
adequate assurances as may be necessary to ensure Landlord of the
continued performance of Tenant's obligations under this Lease:
(6) Receivership. The employment of a receiver to take possession of
substantially all of Tenant's assets or the Premises, if such
receivership remains undissolved for a period of ten (10)
business days after creation thereof;
(7) Attachment. The attachment, execution or other judicial seizure
of all or substantially all of Tenant's assets or the Premises,
if such attachment or other seizure remains undismissed or
undischarged for a period of ten (10) business days after the
levy thereof;
(8) Insolvency. The admission by Tenant in writing of its inability
to pay its debts as they become due, the filing by Tenant of a
petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under
any present or future statute, law or regulation, the filing by
Tenant of an answer admitting or failing timely to contest a
material allegation of a petition filed against Tenant in any
such proceeding or, if within thirty (30) days after the
commencement of any proceeding against Tenant seeking any
reorganization or arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceeding shall not have
been dismissed.
(b) Remedies Upon Default.
(1) Rent. All failures to pay any monetary obligation to be paid by
Tenant under this Lease shall be construed as obligations for
payment of Rent.
(2) Termination. In the event of the occurrence of any event of
default, Landlord shall have the right, with or without notice or
demand, immediately to terminate this Lease, and at any time
thereafter recover possession of the Premises or any part thereof
and expel and remove therefrom Tenant and any other person
occupying the same, by any lawful means, and again repossess and
enjoy the Premises without prejudice to any of the remedies that
Landlord may have under this Lease, or at law or equity by reason
of Tenant's default or of such termination.
(3) Continuation After Default. Even though Tenant has breached this
Lease and/or abandoned the Premises, this Lease shall continue in
effect for so long as Landlord does not terminate Tenant's right
to possession under paragraph 21 (b) (2) hereof, and Landlord may
enforce all its right and remedies under this Lease, including
rout without limitation) the right to recover Rent as it becomes
due; and Landlord, without terminating this Lease, may exercise
all of the rights and remedies of a Landlord under Section 1951.4
of the Civil Code of the State of California or any successor
code section. Acts of maintenance, preservation or efforts to
lease the premises or the appointment of receiver upon
application of Landlord to protect Landlord's interests under
this Lease shall not constitute an election to terminate Tenant's
right to possession.
(c) Damages Upon Termination.
Should Landlord terminate this Lease pursuant to the provisions
of paragraph 21(b)(2) hereof, Landlord shall have all the rights
and remedies of a landlord provided by Section 1951.2 of the
Civil Code of the State of California, or successor code section.
Upon such termination, in addition to any other rights and
remedies to which Landlord may be entitled under applicable law,
Landlord shall be entitled to recover from Tenant: (i) the worth
at the time of award of the unpaid Rent and other amounts which
had been earned at the time of termination; (ii) the worth at the
time of award of the amount by which the unpaid Rent which would
have been earned after termination until the time of award
exceeds the amount of such Rent loss that the Tenant proves could
have been reasonably avoided; (iii) the worth at the time of
award of the amount by which the unpaid Rent for the balance of
the Term after the time of award exceeds the amount of such Rent
loss that the Tenant proves could be reasonably avoided; and (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. The "worth at the
time of award" of the amounts referred to in (i) and (ii) shall
be computed with interest at the lesser of eighteen percent (18%)
per annum or the maximum rate allowed by law. The "worth at the
time of award" of the amount referred to in (iii) shall be
computed by reference to competent appraisal evidence or the
formula prescribed by and using the lowest discount rate
permitted under applicable law.
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(d) Computation of Rent For Purposes of Default.
For purposes of computing unpaid Rent which would have accrued and
become payable under this Lease pursuant to the provisions of
paragraph 2 l(c), unpaid Rent shall consist of the sum of:
(1) the total Basic Rent for the balance of the Term then remaining
(with the amount of Basic Rent to be determined by reference to
fair rental value being the subject of proof by competent
evidence), plus
(2) a computation of the excess of Gross Rent (the term "Gross Rent"
meaning the sum of (i) rental adjustments payable pursuant to
paragraph 29 and (ii) Basic Rent) over Basic Rent for the balance
of the Term then remaining ("Excess Gross Rental"), the assumed
excess Gross Rental for the calendar year of the default and each
future calendar year in the Term to be equal to the Excess Gross
Rental for the calendar year prior to the year in which default
occurs compounded at a per annum rate equal to the mean average
rate of inflation for the preceding five (5) calendar years as
determined by the United States Department of Labor, Bureau of
Labor Statistics Consumer Price Index (All Urban Consumers) for
the Metropolitan Area or Region of which San Francisco,
California is a part.
(e) Late Charge. In addition to its other remedies, Landlord shall have
the right without notice or demand to add to the amount of any payment
required to be made by Tenant hereunder, and which is not paid on or
before the date the sum is due, an amount equal to five percent (5%)
of the delinquency for each month or portion thereof that the
delinquency remains outstanding to compensate Landlord for the loss of
the use of the amount not paid and the administrative costs caused by
the delinquency, the parties agreeing that Landlord's damage by virtue
of such delinquencies would be difficult to compute and the amount
stated herein represents a reasonable estimate thereof.
(f) Remedies Cumulative. All rights, privileges and elections or remedies
of the parties are cumulative and not alternative to the extent
permitted by law and except as otherwise provided herein.
DAMAGE BY FIRE, ETC.
22. If the Premises or the Building are damaged by fire or other casualty,
Landlord shall forthwith repair the same, provided such repairs can be made
within one hundred eighty (180) days from the date of such damage under the
laws and regulations of the federal, state and local governmental
authorities having jurisdiction thereof. In such event, this Lease shall
remain in full force and effect except that Tenant shall be entitled to a
proportionate reduction of Rent while such repairs to be made hereunder by
Landlord are being made. Said proportionate reduction shall be based upon
the extent to which the making of such repairs to be made hereunder by
Landlord shall interfere with the business carried on by Tenant in the
Premises. Within twenty (20) days from the date of such damage, Landlord
shall notify Tenant whether or not such repairs can be made within one
hundred eighty (180) days from the date of such damage and Landlord's
determination thereof shall be binding on Tenant. If such repairs cannot be
made within one hundred eighty (180) days from the date of such damage,
Landlord shall have the option within thirty (30) days of the date of such
damage either to: (a) Notify Tenant of Landlord's intention to repair such
damage and diligently prosecute such repairs, in which event this Lease
shall continue in full force and effect and the Rent shall be reduced as
provided herein, or Co) notify Tenant of Landlord's election to terminate
this Lease as of a date specified in such notice, which date shall be not
less than thirty (30) nor more than sixty (60) days after notice is given.
In the event such notice to terminate is given by Landlord, this Lease
shall terminate on the date specified in such notice. In case of
termination by either event, the Rent shall be reduced by a proportionate
amount based upon the extent to which said damage interfered with the
business carried on by Tenant in the Premises, and Tenant shall pay such
reduced Rent up to the date of termination. Landlord agrees to refund to
Tenant any Rent previously paid for any period of time subsequent to such
date of termination. The repairs to be made hereunder by Landlord shall not
include, and Landlord shall not be required to repair, any damage by fire
or other cause to the property of Tenant or any repairs or replacements of
any paneling, decorations, railings, floor coverings or any alterations,
additions, fixtures or improvements installed on the premises by or at the
expense of Tenant. The provisions of Section 1942, subdivision 2, and
Section 1933, subdivision 4, of the Civil Code of California are superseded
by the foregoing.
EMINENT DOMAIN
23. If any part of the Premises shall be taken or appropriated under the power
of eminent domain or conveyed in lieu thereof, either party shall have the
right to terminate this Lease at its option. If any part of the Building
shall be taken or appropriated under power of eminent domain or conveyed in
lieu thereof, Landlord may terminate this Lease at its option. In either of
such events, Landlord shall receive subject to the rights of Landlord's
first mortgage (and Tenant shall assign to Landlord upon demand from
Landlord) any income, rent, award or any interest therein which may be paid
in connection with the exercise of such power of eminent domain, and Tenant
shall have no claim against Landlord for any part of the sums paid by
virtue 6f such proceedings, whether or not attributable to the value of the
unexpired Term. If a part of the Premises shall be so taken or appropriated
or conveyed and neither party hereto shall elect to terminate this Lease
and the Premises have been damaged as a consequence of such partial taking
or appropriation or conveyance, Landlord shall restore the Premises
continuing
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under this Lease at Landlord's cost and expense; provided, however, that
Landlord shall not be required to repair or restore any injury or damage to
the property of Tenant or to make any repairs or restoration of any
alterations, additions, fixtures or improvements installed on the Premises
by or at the expense of Tenant. Thereafter the Rent for the remainder of
the Term shall be proportionately reduced, such reduction to be based upon
the extent to which the partial taking or appropriation or conveyance shall
interfere with the business carried on by Tenant in the. Premises.
Notwithstanding anything to the contrary contained in this paragraph, if
the temporary use or occupancy of any part of the Premises shall be taken
or appropriated under power of eminent domain during the Term. this Lease
shall be and remain unaffected by such taking or appropriation and Tenant
shall continue to pay, in full, all Rent payable hereunder by Tenant during
the Term; in the event of any such temporary appropriation or taking,
Tenant shall be entitled to receive that portion of any award which
represents compensation for the use of or occupancy of the Premises during
the Term, and Landlord shall be entitled to receive that portion of any
award which represents the cost of restoration of the Premises and the use
and occupancy of the Premises after the end of the Term.
SALE BY LANDLORD AND TENANT'S REMEDIES
24. In the event of a sale or conveyance by Landlord of the Building, the same
shall operate to release Landlord from any future liability upon any of the
covenants or conditions, express or implied, herein contained in favor of
Tenant, and in such event Tenant agrees to look solely to the
responsibility of the successor in interest of Landlord in and to this
Lease. This Lease shall not be affected by any such sale and Tenant agrees
to attorn to the purchaser or assignee. Tenant shall look solely to
Landlord's interest in the Building for recovery of any judgment from
Landlord. Landlord, or if Landlord is a partnership, its partners whether
general or limited, or if Landlord is a corporation, its directors,
officers or shareholders, shall never be personally liable for any such
judgment.
RIGHT OF LANDLORD TO PERFORM
25. All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of Rent. If Tenant shall fail to pay any
sum of money, other than Rent, required to be paid by it hereunder or shall
fail to perform any other act on its part to be performed hereunder, and
such failure shall continue for ten (10) days after notice thereof by
Landlord, Landlord may, but shall not be obligated to do so, and without
waiving or releasing Tenant from any obligations of the Tenant, make any
such payment or perform any such act on the Tenant's part to be made or
performed. All sums so paid by Landlord and all necessary incidental costs
together with interest thereon at the rate of eighteen percent (18%) per
annum or the maximum rate permitted by law, whichever is less per annum
from the date of such payment by the Landlord shall be payable as
Additional Rent to Landlord on demand, and Tenant covenants to pay such
sums, and Landlord shall have, in addition to any other right or remedy of
Landlord, the same right and remedies in the event of the nonpayment
thereof by Tenant as in the case of default by Tenant in the payment of the
Rent.
SURRENDER OF PREMISES
26. (a) Tenant shall, at least ninety (90) days before the last day of the
Term, give to Landlord a written notice of intention to surrender the
Premises on that day, but nothing contained herein shall be construed
as an extension of the Term or as consent of Landlord to any holding
over by Tenant.
(b) At the end of the term or any renewal thereof or other sooner
termination of this Lease, Tenant shall peaceably deliver up to
Landlord possession of the Premises, together with all improvements,
fixtures or additions thereto by whomsoever made, in the same
condition as received, or first installed, wear and tear and damage by
fire, earthquake, act of God or the elements alone excepted. Tenant
may, upon the termination of this Lease, remove all movable furniture
and equipment belonging to Tenant, at Tenant's sole cost, title to
which shall be in Tenant until such termination, repairing any damage
caused by such removal. Property not so removed shall be deemed
abandoned by the Tenant, and title to the same shall thereupon pass to
Landlord.
(c) The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger and shall, at the option
of Landlord, terminate all or any existing subleases or subtenancies
or may, at the option of Landlord, operate as an assignment to it of
any or all such subleases or subtenancies.
WAIVER
27. If either Landlord or Tenant waives the performance of any term, covenant
or condition contained in this Lease, such waiver shall not be deemed to be
a waiver of any subsequent breach of the same or any other term, covenant
or condition contained herein. The acceptance of Rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant
or condition of this Lease, regardless of Landlord's knowledge of such
preceding breach at the time Landlord accepted such Rent. Failure by
Landlord to enforce any of the terms, covenants or conditions of this Lease
for any length of time shall not be deemed to waive or to decrease the
right of Landlord to insist thereafter upon strict performance by Tenant.
Waiver by Landlord of any term, covenant or condition contained in this
Lease may only be made by a written document signed by Landlord.
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NOTICES
28. All notices and demands which may or are required to be given by either
party to the other hereunder shall be in writing. All notices and demands
by Landlord to Tenant shall be sent by United States certified or
registered mail, or Federal Express or singular overnight carrier, postage
or freight prepaid, addressed to Tenant at the Premises, or to such other
place as Tenant may from time to time designate in a notice to Landlord.
All notices and demands by Tenant to Landlord shall be sent by United
States certified or registered mail, or Federal Express of similar
overnight carrier, postage or freight prepaid, addressed to Landlord at the
address specified in the Basic Lease Information, or to such other firm or
to such other place as Landlord may from time to time designate in a notice
to Tenant.
RENTAL ADJUSTMENT
29. In addition to Basic Rent provided to be paid hereunder, Tenant shall pay
as Rent Tenant's Proportionate Share of Basic Operating Cost in the manner
set forth below.
(a) Definition: For purposes hereof, the terms used in this Paragraph 29
shall have the following meanings:
(1) "Basic Operating Cost" shall mean all expenses and costs of
every kind and nature which Landlord shall pay or become
obligated to pay because of or in connection with the ownership
and operation of the Building and supporting facilities of the
Building, and such additional facilities now and in subsequent
years as may be determined by Landlord to be necessary to the
Building, including, but not limited to the following:
(i) Wages, salaries and related expenses and benefits of all on-
site and off-site employees engaged directly in the operation,
management, maintenance, engineering and security of the
Building, and the costs of an office in the Building; provided,
however, that Basic Operating Cost shall not include leasing
commissions paid to any real estate broker, salesperson or
agent.
(ii) Supplies, materials and rental of equipment used in the
operation, management and maintenance of the Building.
(iii) Utilities, including water and power, heating, lighting, air
conditioning and ventilating of the Building.
(iv) All maintenance, janitorial and service agreements for the
Building and the equipment therein, including, without
limitation, alarm services, window cleaning and elevator
maintenance.
(v) A management cost recovery determined by Landlord equal to
three percent (3%) of Gross Rent derived from the Building.
(vi) Legal expenses and the cost of audits by certified public
accountants; provided, however, that legal expenses chargeable
as Basic Operating Cost shall not include the cost of
negotiating leases, collecting rents, evicting tenants nor
shall it include costs incurred in legal proceedings with or
against any tenant or to enforce the provisions of any lease.
(vii) All insurance premiums and costs, including but not limited to,
the premiums and cost of fire, casualty and liability coverage
and rental abatement and earthquake insurance (if Landlord
elects to provide such coverage) applicable to the Building and
Landlord's personal property used in connection therewith.
(viii) Repairs, replacements and general maintenance (excluding
repairs and general maintenance paid by proceeds of insurance
or by Tenant or other third parties, and alterations
attributable solely to tenants of the Building other than
Tenant).
(ix) All maintenance costs relating to public and service areas of
the Building, including (but without limitation) sidewalks,
landscaping, service areas, mechanical rooms and Building
exteriors.
(x) All taxes, service payments in lieu of taxes, annual or
periodic license or use fees, fees, real estate taxes,
impositions or charges imposed upon or levied in connection
with use of the Building to raise funds for public transit,
housing or other environmental, sociological or fiscal effects
of the Building or land use, assessments whether general or
special, ordinary and extraordinary, unforeseen as well as
foreseen, of any kind which are assessed, levied, charged,
confirmed or imposed by any public authority upon the Building,
the land upon which it is located, Building operations or Rent
payable under this Lease (or any portion or component thereof),
excepting only inheritance or estate taxes imposed upon or
assessed against the interest of any person in the Building or
any part thereof or interest therein, and taxes computed upon
the basis of the net income of the owners of the Building or
any part thereof or interest therein.
13
<PAGE>
(xi) Amortization (together with reasonable financing charges) of
capital improvement made to the Building subsequent to the Term
Commencement Date which will improve the operating efficiency of
the building or which may be required to comply with laws,
ordinances, rules or regulations promulgated, adopted or enforced
after completion of the initial construction of the Building and
improvements of the Premises pursuant to the Office Lease
Improvement Agreement.
Notwithstanding anything to the contrary herein contained, Basic
Operating Cost shall not include (aa) the initial construction cost of
the Building; (bb) depreciation on the initial construction of the
Building; (cc) the cost of providing Tenant Improvements to Tenant or
any other tenant; (dd) debt service (including, but without
limitation, interest, principal and any impound payment) required to
be made on any mortgage or deed of trust recorded with respect to the
Building and/or the real property on which the Building is located
other than debt service and financing charges imposed pursuant to
paragraph 29(a)(1)(xi) above; and (ee) the cost of special services,
goods or materials provided to any tenant. In the event that the
Building is not fully occupied during any fiscal year of the Term as
determined by Landlord, an adjustment shall be made in computing the
Basic Operating Cost for such year so that Basic Operating Cost shall
be computed as though the Building had been one hundred percent (100%)
occupied; provided, however, that in no event shall Landlord be
entitled to collect in excess of one hundred percent (100%) of the
total Basic Operating Cost from all of the tenants in the Building
including Tenant. All costs and expenses shall be determined in
accordance with generally accepted accounting principles which shall
be consistently applied (with accruals appropriate to Landlord's
business). Basic Operating Cost shall not include specific costs
incurred for the account of, separately billed to and paid by specific
tenants.
(2) "Estimated Basic Operating Cost" for any particular year shall
mean Landlord's estimate of the Basic Operating Cost for such
fiscal year made prior to commencement of such fiscal year as
hereinafter provided. Landlord shall have the right from time to
time to revise its fiscal year and interim accounting periods so
long as the periods as so revised are reconciled with prior
periods in accordance with generally accepted accounting
principles applied in a consistent manner.
(3) "Basic Operating Cost Adjustment" shall mean the difference
between Basic Operating Cost and Estimated Basic Operating Cost
for any fiscal year determined as hereinafter provided.
(b) Payment of Estimated Basic Operating Cost.
During the last month of each fiscal year during the Term, or as soon
thereafter as practicable, Landlord shall give Tenant written notice
of the Estimated Basic Operating Cost for the ensuing fiscal year. The
Estimated Basic Operating Cost for the fiscal year in which the
Scheduled Term Commencement Date falls is set forth in the Basic Lease
Information sheet. Tenant shall pay Tenant's Proportionate Share of
the Estimated Basic Operating Costs with installments of Basic Rent
required to be paid pursuant to paragraph 3 above for the fiscal year
to which the estimate applies in monthly installments on the first day
of each calendar month during such year, in advance. Such payment
shall be construed to be Rent for all purposes hereof. If at any time
during the course of a fiscal year, Landlord determines that Basic
Operating Cost will apparently vary from the then Estimated Basic
Operating Cost by more than five percent (5%), Landlord may, by
written notice to Tenant, revise the Estimated Basic Operating Cost
for the balance of such fiscal year and Tenant shall pay Tenant's
Proportionate Share of the Estimated Basic Operating Cost as so
revised for the balance of the then current fiscal year on the first
day of each calendar month thereafter, such revised installment
amounts to be Rent for all purposes hereof.
(c) Computation of Basic Operating Cost Adjustment.
Within one hundred twenty (120) days after the end of each fiscal year
as determined by Landlord or as soon thereafter as practicable,
Landlord shall deliver to Tenant a statement of Basic Operating Cost
for the fiscal year just ended, accompanied by a computation of Basic
Operating Cost Adjustment. If such statement shows that Tenant's
payment based upon Estimated Basic Operating Cost is less than
Tenant's Proportionate Share of Basic Operating Cost, then Tenant
shall pay the difference within twenty (20) days after receipt of such
statement, such payment to constitute additional Rent hereunder. If
such statement shows that Tenant's payments of Estimated Basic
Operating Cost exceed Tenant's Proportionate Share of Basic Operating
Costs, then (provided that Tenant is not in default under this Lease),
Tenant shall receive a credit for the amount of such payment against
Tenant's obligation for payment of Tenant's Proportionate Share of
Estimated Basic Operating Cost next becoming due hereunder. If this
Lease has been terminated or the Term hereof has expired prior to the
date of such statement, then the Basic Operating Cost Adjustment shall
be paid by the appropriate party within twenty (20) days after the
date of delivery of the statement.
(d) Net Lease.
This shall be a net lease and Base Rent shall be paid to Landlord
absolutely net of all costs and expenses. The provisions for payment
of Basic Operating Cost by means of periodic payments of Tenant's
Proportionate Share of Estimated Basic Operating Cost and the Basic
Operating Cost Adjustment are intended to pass on to Tenant and
reimburse Landlord for all cost and expenses of the nature described
in paragraph 29(a)(1) above incurred in connection with ownership and
operation of the Building and such
14
<PAGE>
additional facilities now and in subsequent years as may be determined
by Landlord to be necessary to the Building.
(e) Tenant Audit.
Tenant shall have the right, at Tenant's expense and upon not less
than forty-eight (48) hours prior written notice to Landlord to review
at reasonable times Landlord's books and records for any fiscal year a
portion of which falls within the Term for purposes of verifying
Landlord's calculations of Basic Operating Cost and Basic Operating
Cost Adjustments. In the event that Tenant shall dispute the amount
set forth in any statement provided by Landlord under paragraph 29(c)
above, Tenant shall have the right not later than twenty (20) days
following the receipt of such statement, and upon condition that
Tenant shall first deposit with Landlord the full amount in dispute,
to cause Landlord's books and records with respect to such fiscal year
to be audited by certified public accountants selected by Tenant
subject to Landlord's reasonable right of approval. The Basic
Operating Cost Adjustment shall be appropriately adjusted on the basis
of such audit. If such audit discloses a liability for a refund or
credit by Landlord to Tenant in excess of ten percent (10%) of
Tenant's Proportionate Share of the Basic Operating Cost Adjustment
previously reported, the cost of such audit shall be borne by
Landlord. Otherwise the cost of such audit shall be paid by Tenant. If
Tenant shall not request an audit in accordance with the provisions of
this paragraph 29(e) within twenty (20) days of receipt of Landlord's
statement provided pursuant to paragraph 29(d), such statement shall
be final and binding for all purposes hereof.
TAXES PAYABLE BY TENANT
30. (a) Tenant shall pay before delinquency any and all taxes levied or
assessed and which become payable by Landlord (or Tenant) during the
Term of this Lease, whether or not now customary or within the
contemplation of the parties hereto, which are based upon, measured by
or otherwise calculated with respect to: (a) the value of Tenant's
equipment, furniture, fixtures or other personal property located in
the Premises; (b) the value of any leasehold improvements,
alterations, or additions made in or to the Premises, regardless of
whether title to such improvements, alterations or additions shall be
in Tenant or Landlord; or (c) this transaction or any document to
which Tenant is a party creating or transferring an interest or an
estate in the Premises.
(b) In the event that it shall not be lawful for Tenant so to reimburse
Landlord, the Rent shall be revised to net Landlord the same net rent
after imposition of any such tax upon Landlord as would have been
payable to Landlord prior to the imposition of any such tax. All taxes
payable to Tenant under this paragraph 30 shall be additional rental.
SUCCESSORS AND ASSIGNS
31. Subject to the provisions of paragraph 10 hereof, the terms, covenants and
conditions contained herein shall be binding upon and inure to the benefit
of the heirs, successors, executors, administrators and assigns of the
parties hereto.
ATTORNEYS' FEES
32. In the event that any action or proceeding is brought to enforce any term,
covenant or condition of this Lease on the part of Landlord or Tenant, the
prevailing party in such litigation shall be entitled to reasonable
attorneys' fees to be fixed by the court in such action or proceeding.
LIGHT AND AIR
33. No diminution of light, air or view by any structure which may hereafter be
erected (whether or not by Landlord) shall entitle Tenant to any reduction
of Rent, result in any liability of Landlord to Tenant, or in any other way
affect this Lease or Tenant's obligations hereunder.
PUBLIC TRANSPORTATION INFORMATION
34. Tenant shall establish and maintain during the Term hereof a program to
encourage maximum use of public transportation by personnel of Tenant
employed on the Premises, including without limitation the distribution to
such employees of written materials explaining the convenience and
availability of public transportation facilities adjacent or proximate to
the Building, staggering working hours of employees, and encouraging use of
such facilities, all at Tenant's sole reasonable cost and expense.
15
<PAGE>
MISCELLANEOUS
35. (a) The term "Premises" shall be deemed to include (except where such
meaning would be clearly repugnant to the context) the office space
demised and improvements now or at any time hereinafter comprising or
built in the space hereby demised
(b) The paragraph headings hereto are for convenience of reference and
shall in no way define, increase, limit or describe the scope or
intent of any provision of this Lease.
(c) The term "Landlord" in these presents shall include the Landlord, its
successors and assigns. In any case where this lease is signed by more
than one person, the obligations hereunder shall be joint and several.
(d) The term "Tenant" or any pronoun used in place thereof shall indicate
and include the masculine or feminine, the singular or plural number,
individuals, firms or corporations, and their and each of their
respective successors, executors, administrators and permitted
assigns, according to the context hereof.
(e) Time is of the essence of this Lease and all of its provisions.
(f) This Lease shall in all respects be governed by the laws of the State
of California.
(g) This Lease, together with its exhibits, contains all the agreements of
the parties hereto and supersedes any previous negotiations.
(h) There have been no representations made by the Landlord or
understandings made between the parties other than those set forth in
this Lease and its exhibits.
(i) This Lease may not be modified except by a written instrument by the
parties hereto.
(j) If for any reason whatsoever any of the provisions hereof shall be
unenforceable or ineffective, all of the other provisions shall be and
remain in full force and effect.
(k) See Addenda #1 - #3 attached hereto and made a part hereof. If the
term of the printed form and the terms of the Addendas are in
conflict, the terms of the Addendas will prevail.
LEASE EFFECTIVE DATE
36. Submission of this instrument for examination or signature by Tenant does
not constitute a reservation or option for lease, and it is not effective
as a lease or otherwise until execution and delivery by both Landlord and
Tenant.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and
year first above written.
"LANDLORD"
SPIEKER PROPERTIES, L.P.
a California limited partnership
By: Spieker Properties, Inc.
a Maryland corporation
By: /s/ Peter Schnugg
-------------------------------
Peter Schnugg
Its: Senior Vice President
------------------------------
Date: 4-7-97
-----------------------------
"TENANT"
CROSSROUTE SOFTWARE, INCORPORATED
a California corporation
By: /s/ Kenneth Ross
-------------------------------
Kenneth Ross
Its: President
-----------------------------
Date:
-----------------------------
16
<PAGE>
LEASE DATE: March 28, 1997
LANDLORD: SPIEKER PROPERTIES,
L.P. a California limited partnership
TENANT: CROSSROUTE SOFTWARE, INCORPORATED
a California corporation
ADDENDUM #1 RENT
----------------
Rent for the Premises shall be as follows:
Months 1 - 12
-------------
6/1/97 - 5/31/98
Base Rent $13,243.00
Basic Operating Costs
(1997 Est.) 3,836.00
----------
$17,079.00 per month
Months 13 - 24
--------------
6/1/98 - 5/31/99
Base Rent $13,768.00
Basic Operating Costs
(1997 Est.) 3,836.00
----------
$17,604.00 per month
Months 25 - 36
--------------
6/1/99 - 5/31/00
Base Rent $14,294.00
Basic Operating Costs
(1997 Est.) 3,836.00
----------
$18,130.00 per month
Months 37 - 48
--------------
6/1/00 - 5/31/01
Base Rent $14,819.00
Basic Operating Costs
(1997 Est.) 3,836.00
----------
$18,655.00 per month
Months 49 - 60
--------------
6/1/01 - 5/31/02
Base Rent $15,345.00
Basic Operating Costs
(1997 Est.) 3,836.00
----------
$19,181.00 per month
Rental rate includes a $.73 (1997 estimate) per square foot per month
allowance for real estate taxes, assessments, insurance, normal routine
maintenance, management, five (5) days per week janitorial service, and
normal operating hours utilities. Should the actual expenses be more or
less than this allowance, the difference shall be credited to Tenant, or
owed by Tenant, as the case may be.
17
<PAGE>
ADDENDUM #2 TENANT IMPROVEMENTS
-------------------------------
Landlord, at its sole cost, shall provide the following tenant
improvements:
- Shampoo carpets throughout office area
- Touch-up paint as necessary throughout office area
ADDENDUM #3 LETTER OF CREDIT
----------------------------
Upon execution hereof., Tenant shall provide Landlord with a Letter of
Credit from a United States bank acceptable to Landlord, and naming
Landlord as beneficiary in an amount equal to $51,236.00 (fifty one
thousand two hundred thirty six dollars) and in the form and substance
satisfactory to Landlord. This Letter of Credit shall be held throughout
the entire length of the lease term. Said Letter of Credit shall serve as
security for the faithful performance and observance by Tenant of the
terms, provisions and conditions of this Lease, including without
limitation, the surrender of possession of the Premises to Landlord as
herein provided. The Letter of Credit shall be payable at sight when
accompanied by Landlord's signed statement that Tenant has failed to pay
any rent or other amount due under the Lease and evidence of notice from
Landlord to Tenant per the terms of this Lease.
"Landlord"
Spieker Properties, L. P.
a California limited partnership
By: Spieker Properties, Inc.
------------------------
a Maryland corporation
By: /s/ Peter Schnugg
------------------------
Peter H. Schnugg
Its: Senior Vice President
------------------------
Date: 4-7-97
------------------------
"TENANT"
Crossroute Software, Incorporated
a California corporation
By: /s/ Kenneth Ross
------------------------
Kenneth Ross
Its: President
------------------------
Date: 3/31/97
------------------------
18
<PAGE>
Rules and Regulations
1. No sign, placard, picture, advertisement, name or notice shall be
installed or displayed on any part of the outside or inside of the Building
without the prior written consent of Landlord. Landlord shall have the right to
remove, at Tenant's expense and without notice, any sign installed or displayed
in violation of this rule. All approved signs or lettering on doors, windows and
walls shall be printed, painted, affixed or inscribed at the expense of Tenant
by a person chosen by Landlord, using materials or Landlord's choice and in a
style and format approved by Landlord.
2. Tenant must use Landlord's blinds in all exterior and atrium window
offices. No awning shall be permitted on any part of the Premises. Tenant shall
not place anything against or near glass partitions or doors or windows which
may appear unsightly from outside the Premises.
3. Tenant shall not obstruct sidewalks, halls, passages, exits, entrances,
elevators, escalators or stairways of the Building. The halls, passages, exits,
entrances, shopping malls, elevators, escalators and stairways are not for the
general public, and Landlord shall in all cases retain the right to control and
prevent access thereto of all persons whose presence in the judgement of
Landlord would be prejudicial to the safety, character, reputation and interests
of the Building and its tenants; provided that nothing herein contained shall be
construed to prevent such access to persons with whom any tenant normally deals
in the ordinary course of its business, unless such persons are engaged in
illegal activities. No tenant and no employee or invitee of any tenant shall go
upon the roof of the Building.
4. The directory of the Building will be provided exclusively for the
display of the name and location of Tenants only, and Landlord reserves the
right to execute any other names therefrom.
5. All cleaning and janitorial services for the Building and the Premises
shall be provided exclusively through Landlord, and except with the written
consent of Landlord, no person or persons other than those approved by Landlord
shall be employed by Tenant or permitted to enter the Building for the purpose
of cleaning the same. Tenant shall not cause any unnecessary labor by
carelessness or indifference to the good order and cleanliness of the Premises.
Landlord shall not in any way be responsible to any Tenant for any loss of
property on the Premises, however occurring, or for any damage to any Tenant's
property by the janitor or any other employee or any other person.
6. Landlord will furnish Tenant, free of charge, with two keys to each
door lock in the Premises. Landlord may make a reasonable charge for any
additional keys. Tenant shall not make or have made additional keys, and Tenant
shall not alter any lock or install a new additional lock or bolt on any door of
its Premises. Tenant, upon the termination of its tenancy, shall deliver to
Landlord the keys of all doors which have been furnished to Tenant, and in the
event of loss of any keys so furnished, shall pay Landlord therefor.
7. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instructions in
their installation.
8. Any freight elevator shall be available for use by all tenants in the
Building, subject to such reasonable scheduling as Landlord in its discretion
shall deem appropriate, No equipment, materials, furniture, packages, supplies,
merchandise or other property will be received in the Building or carried in the
elevators except between such hours and in such elevators as may be designated
by Landlord.
9. Tenant moves and deliveries of large quantities of furniture,
equipment or supplies must be accomplished after 5:30 pm on weekdays or anytime
on weekends and must be coordinated with Landlord.
10. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry and
which is allowed by law. Landlord shall have the right to prescribe the weight,
size and position of all equipment, materials, furniture or other property
brought into the Building. Heavy objects, if such objects are considered
necessary by Tenant, as determined by Landlord, shall stand on such platforms as
determined by Landlord to be necessary to properly distribute the weight.
Business machines and mechanical equipment belonging to Tenant, which cause
noise or vibration that may be transmitted to the structure of the Building or
to any space therein to such a degree as to be objectionable to Landlord or to
any tenants in the Building, shall be placed and maintained by Tenant, at
Tenant's expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration. The persons employed to move such equipment in or
out of the Building must be acceptable to Landlord. Landlord will not be
responsible for loss of, or damage to, any such equipment or other property from
any cause, and all damage done to the Building by maintaining or moving such
equipment or other property shall be repaired at the expense of Tenant.
11. Tenant shall not use or keep in the Premises any kerosene, gasoline
or inflammable or combustible fluid or materials other than those limited
quantities necessary for the operation or maintenance of office equipment.
Tenant shall not use or permit to be used in the Premises any foul or noxious
gas or substance, or permit or allow the Premises to be occupied or used in a
manner offensive or objectionable to Landlord or other occupants of the Building
by reason of noise, odors or vibrations, nor shall Tenant bring into or keep in
or about the Premises any birds or animals.
12. Tenant shall not use any method of heating or air-conditioning other
than that supplied by Landlord.
Exhibit "A"
Page -1-
<PAGE>
13. Tenant shall not waste electricity, water or air-conditioning and
agrees to cooperate fully with Landlord to assure the most effective operation
of the Building's heating and air-conditioning and to comply with any
governmental energy-saving rules, laws and regulations of which Tenant has
actual notice, and shall refrain from attempting to adjust controls other than
room thermostats for Tenant's use. Tenant shall keep corridor doors closed, and
shall close window coverings at the end of each business day. Heat and air-
conditioning shall be provided during ordinary business hours of generally
recognized business days but not less than the hours of 8:00 am to 6:00 pm on
Monday through Friday (excluding in any event Saturdays, Sundays and legal
holidays it being understood that legal holidays shall mean and refer to those
holidays of which Landlord provides Tenant with reasonable prior written notice
which shall in any event include those holidays on which the New York Stock
Exchange is closed).
14 Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building.
15. Landlord reserves the right to exclude from the building between the
hours of 6:00 pm and 7:00 am the following day, or such other hours as may be
established from time to time by Landlord, and on Saturdays, Sundays and legal
holidays, any person unless that person is known to the person or employee in
charge of the Building and has a pass or is properly identified. Tenant shall be
responsible for all persons for whom it requests passes and shall be liable to
Landlord for all acts of all such persons. Landlord shall not be liable for
damages for any error with regard to the admission to or exclusion from the
Building of any person. Landlord reserves the right to prevent access to the
Building in case of invasion, mob, riot, public excitement or other commotion by
closing the doors or by other appropriate action.
16. Tenant shall close and lock the doors of its Premises and entirely
shut off all water faucets or other water apparatus, and electricity, gas or air
outlets before Tenant and employees leave the Premises. Tenant shall be
responsible for any damage or injuries sustained by other tenants or occupants
of the Building or by Landlord for noncompliance with this rule.
17. Tenant shall not obtain for use on the Premises ice, drinking water,
food beverage, towel or other similar services or accept barbering or
bootblacking services upon the Premises, except at such hours and under such
regulations as may be fixed by Landlord.
18. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be 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 employees or
invitees, shall have caused it.
19. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise to the
general public in or on the Premises. Tenant shall not make any room-to-room
solicitation of business from other tenants in the Building. Tenant shall not
use the Premises for any business or activity other than that specifically
provided for in Tenant's Lease.
20. Tenant shall not install any radio or television antenna, loudspeaker
or other device on the roof or exterior walls of the Building. Tenant shall, not
interfere with radio or television broadcasting or reception from or in the
Building or elsewhere.
21. Tenant shall not mark, drive nails, screw or drill into the
partitions, woodwork or plaster or in any way deface the Premises or any part
thereof, except to install normal wall hangings. Landlord reserves the right to
direct electricians as to where and how telephone and telegraph wires are to be
introduced to the Premises, Tenant shall not cut or bore holes for wires. Tenant
shall not affix any floor covering to the floor of the Premises in any manner
except as approved by Landlord. Tenant shall repair any damage resulting from
noncompliance with this rule.
22. Tenant shall not install, maintain or operate upon the Premises
any vending machine without the written consent of Landlord.
23. Canvassing, soliciting and distribution of handbills or any other
written material, and peddling in the Building are prohibited, and each tenant
shall cooperate to prevent same.
24. Landlord reserves the right to exclude or expel from the Building any
person who, in Landlord's judgement, is intoxicated or under the influence of
liquor or drugs or who is in violation of any of the Rules and Regulations of
the Building.
25. Tenant shall store all its trash and garbage within its Premises.
Tenant shall not place in any trash box or receptacle any material which cannot
be disposed of in the ordinary and customary manner of trash and garbage
disposal. All garbage and refuse disposal shall be made in accordance with
directions issued from time to time by Landlord.
26. The Premises shall not be used for the storage of merchandise held
for sale to the general public, or for lodging or for manufacturing or any kind,
nor shall the Premises be used for any improper, immoral or objectionable
purpose. No cooking shall be done or permitted by any tenant on the Premises,
except that used by Tenant of Underwriters' Laboratory-approved equipment for
brewing coffee, tea, hot chocolate and similar beverages shall be permitted, and
the use of a microwave shall be permitted, providing that such equipment and use
is in accordance with all applicable federal, state, county and city laws,
codes, ordinance, rules and regulations.
27. Tenant shall not use in any space or in the public halls of the
Building any hand trucks except those equipped with rubber tires and side guards
or such other material-handling equipment as Landlord may approve. Tenant shall
not bring any other vehicles of any kind into the Building.
28. Without the written consent of Landlord, Tenant shall not use the
name of the Building in connection with or in promoting or advertising the
business of Tenant except as Tenant's address.
Exhibit "A"
Page -2-
<PAGE>
29. Tenant shall comply with all safety, fire protection and
evacuation procedures and regulations established by Landlord or any
governmental agency.
30. Tenant assumes any and all responsibility for protecting its
Premises from theft, robbery and pilferage, which includes keeping doors locked
and other means of entry to the Premises closed.
31 The requirements of Tenants will be attended to only upon appropriate
application to the off ice of the Building by an authorized individual.
Employees of Landlord shall not perform any work or do anything outside of their
regular duties unless under special instructions from Landlord. and no employee
of Landlord will admit any person (Tenant or otherwise) to any office without
specific instructions from Landlord.
32. Landlord may waive any one or more of these Rules and Regulations for
the benefit of Tenant or any other tenant, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of Tenant or any
other Tenant, or prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the tenants of the Building.
33. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of premises in the Building.
34. Landlord reserves the right to make such other and reasonable Rules
and Regulation as, in its judgement, may from time to time be needed for safety
and security, for care and cleanliness of the Building and for the preservation
of good order therein. Tenant agrees to abide by all such Rules and Regulations
hereinabove stated and any additional rules and regulations which are adopted.
35. Tenant shall be responsible for the observance of all the
foregoing rules by Tenant's employees, agents, clients, customers, invitees and
guests.
36. Tenant shall not occupy or permit any portion of Demised Premises to
be occupied as an office that is not generally consistent with the character and
nature of all other tenancies in the Building, or is (a) for an employment
agency, a public stenographer or typist, a labor union office, a physician's or
dentist's office, a dance or music studio, a school, a beauty salon or barber
shop, the business of photographic, multilith or multigraph reproductions or
offset printing (not precluding using any part of Demised Premises for
photographic, multilith or multigraph reproductions solely in connection with
Tenant's own business and/or activities), a restaurant or bar, an establishment
for the sale of confectionery or soda or beverages or sandwiches or ice cream or
baked goods, an establishment for the preparation of dispensing or consumption
of food or beverages (of any kind) in any manner whatsoever, or as a news or
cigar stand, or as a radio or television or recording studio, theater or
exhibition-hall, for manufacturing for the storage of merchandise or for the
sale of merchandise, goods or property of any kind at auction, or for lodging,
sleeping or for any immoral purpose, or for any business which would tend to
generate a large amount of foot traffic in or about the Building or the land
upon which it is located, or any of the areas used in the operation of the
Building, including but not limited to any use (i) for a banking, trust company,
depository, guarantee, or safe deposit business, (ii) as a savings bank, or as a
savings and loan association, or as a loan company, (iii) for the sale of
travelers checks, money orders, drafts, foreign exchange or letters of credit or
for the receipt of money for transmission, (iv) as a stock broker's or dealer's
office or for the underwriting of securities, (v) a government office or foreign
embassy or consulate, or (vi) tourist or travel bureau, or (b) a use which
conflicts with any so-called "exclusive" then in favor of, or is for any use the
same as that stated in any percentage lease to another tenant of the Building or
the Site, or (c) a use which would be prohibited by any other portion of this
Lease (including, but not limited to any Rules and Regulations then in effect)
or in violation of law. Tenant shall not engage or pay any employees on Demised
Premises, except those actually working for Tenant on Demised Premises nor shall
Tenant advertise for laborers giving an address at Demised Premises.
37. If Demised Premise is or becomes infested with vermin as a result of
the use or any misuse or neglect of Demised Premises by Tenant, its agents,
servants, employees, contractors, visitors or licensees, Tenant shall forthwith
at Tenant's expense cause the same 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.
38. Tenant, Tenant's agents, servants, employees, contractors, licensees
or visitors shall not park any vehicles in any driveways, service entrances, or
areas posted "No Parking".
39. Tenant shall install and maintain, at Tenant's sole cost and expense,
an adequate visibly marked (at all times properly operational) fire extinguisher
next to any duplicating or photocopying machine or similar heat producing
equipment, which may or may not contain combustible material, in Demised
Premises.
40. Smoking will not be permitted in the Building.
41. Landlord reserves the right to assess a $100 penalty to the Tenant
whose employee(s) after repeated warnings continue to abuse parking privileges.
Landlord also has the right to tow any vehicle(s) in violation at the vehicle
owner's expense.
42. Tenant shall not use lobbies or other common areas of the Building
for promotion, such as parties, displays or advertisements.
43. Tenants may reserve the Tenant Conference Room through the Building
Manager on a first come, first served basis. Tenants shall comply with all
check-in and cleanup of the conference room or Landlord reserves the right to
assess a reasonable fee for maid service.
Exhibit "A"
Page -3-
<PAGE>
Outline of Premises, Suite 180
Approximately 5,255 rsf
(Map)
Exhibit "B"
Page -1-
<PAGE>
Form of Tenant Certificate
CrossRoute Software: Incorporated
- ---------------------------------
555 Twin Dolphin Drive, Suite 190
- ---------------------------------
Redwood City, California 94065
- ------------------------------
RE: Premises located at 555 Twin Dolphin Drive, Suite 180
Redwood City, California 94065
Gentlemen:
The undersigned, as Tenant under that certain lease (the "Lease") dated March
-----
28, 1997,
- ---------
made with Spieker Properties, L.P. as
------------------------
Landlord (the "Landlord"), does hereby certify:
1. That the copy of the Lease attached hereto as Exhibit A is a true and
complete copy of the Lease, and that there are no amendments, modifications
or extensions of or to the Lease and the Lease is now in full force and
effect.
2. That its leased premises at the above location have been completed in
accordance with the terms of the Lease, that it has accepted possession of
said premises, and that it now occupies the same.
3. That it began paying rent on ________________, 19__, and that, save only as
may be required by the terms of the Lease, no rental has been paid in
advance, nor has the undersigned deposited any sums with the Landlord as
security.
4. That there exists no defenses or offsets to enforcement of the Lease by the
Landlord and, so far as is known to the undersigned, the Landlord is not, as
of the date hereof, in default in the performance of the Lease, nor has the
Landlord committed any breach thereof, nor has any event occurred which, with
the passage of time or the giving of notice, or both, would constitute a
default or breach by the Landlord.
The undersigned acknowledges that you are relying on the above representation
of the undersigned in (advancing funds to purchase the existing first
mortgage loan covering the building in which the leased premises are located)
(in purchasing the building in which the leased premises are located) and
does hereby warrant and affirm to and for your benefit, and that of your
successors and assigns, that each of the foregoing representations is true,
correct and complete as of the date hereof.
Dated:_________________________
By_____________________________
Kenneth Ross
Its_______________________
Exhibit "D"
Page -1-
<PAGE>
LEASE AMENDMENT #1
------------------
ORIGINAL LEASE DATE March 28, 1997
LEASE AMENDMENT DATE: October 6, 1997
LANDLORD: Spieker Properties, L.P.
a California Limited Partnership
TENANT: CrossRoute Software, Incorporated
a California Corporation
Landlord and Tenant, by executing this Lease Amendment as provided do hereby
amend the Original Lease referred to above as follows:
1. TERM
----
The term of the Lease shall be extended so that the Scheduled Term
Expiration Date, as defined per the Basic Lease Information within the
Original Lease Agreement, shall be October 31, 2002.
2. PREMISES
--------
The Premises of the Lease as defined per the Basic Lease Information shall
be amended such that effective November 1, 1997, approximately 17,198
square feet of rentable space on the sixth floor of 555 Twin Dolphin Drive,
known as Suite #600, shall be incorporated into the Original Lease
Agreement, and approximately 5,255 square feet of rentable space on the
first floor of 555 Twin Dolphin Drive, known as Suite #180, shall be
reduced from the Original Lease Agreement. Total square footage shall
increase from 5,255 to 17,198 rentable square feet.
3. RENTAL RATE
-----------
Months 1 - 12
(11/01/97 - 10/31/98) Base Rent $47,982.42
Op. Exp. (est '97) $12.210.58
----------
Total Rent $60,193.00 per month
Months 13 - 24
11/01/98 - 10/31/99 Base Rent $49,702.22
Op. Exp. (est '97) $12,210.58
----------
Total Rent $61,912.80 per month
Months 25 - 36
11/01/99 - 10/31/2000 Base Rent $51,422.02
Op. Exp. (est '97) $12.210.58
----------
Total Rent $63,632.60 per month
Months 37 - 48
11/01/2000 - 10/31/2001 Base Rent $53,141.82
Op. Exp. (est '97) $12.210.58
----------
Total Rent $65,352.40 per month
Months 49 - 60
11/01/2001 - 10/31/2002 Base Rent $54,861.62
Op. Exp. (est '97) $12,210.58
----------
Total Rent $67,072.20 per month
4. PROPORTIONATE SHARE
-------------------
Tenant's Share, as defined per the Basic Lease Information within the
Original Lease Agreement shall increase effective November 1, 1997 from
2.65% to 8.66%.
<PAGE>
CrossRoute Software, Incorporation
Lease Amendment #1
Page Two
5. SECURITY DEPOSIT
----------------
The of the Security Deposit, as defined in the Basic Lease Information of
the Lease Agreement, shall increase from $17,079.00 to $60,193.00.
6. LETTER OF CREDIT
----------------
The amount of the Letter of Credit, as defined in Addendum #3 of the
Original Lease Agreement, shall increase from $51,236.00 to $180,579.00.
7. TENANT IMPROVEMENTS
-------------------
Landlord, at its sole cost, shall provide the following tenant
improvements:
. New building standard carpet throughout entire office
. New paint throughout entire office
8. All other terms and conditions of the original Lease Agreement shall apply
to this Lease Amendment #1. Agreed to this 7th day of October, 1997.
LANDLORD:
Spieker Properties, L. P.
a California Limited Partnership
By: Spieker Properties, Inc.
-----------------------------------
a Maryland corporation
Its: General Partner
By: /s/ Peter H. Schnugg
-----------------------------------
Peter H. Schnugg
Its: Senior Vice President
----------------------------------
Date: 10-16-97
---------------------------------
TENANT:
Crossroute Software, Incorporated
a California corporation
By: /s/ Kenneth Ross
------------------------------------
Kenneth Ross
Its: President
----------------------------------
Date: 10/7/97
---------------------------------
<PAGE>
EXPANSION AGREEMENT
-------------------
AMENDMENT NUMBER 2 TO THAT LEASE DATED MARCH 28,1997 AND AS AMENDED BY LEASE
AMENDMENT #I DATED OCTOBER 6, 1997 BETWEEN SPIEKER PROPERTIES, L.P., AS
LANDLORD, AND CROSSROUTE SOFTWARE, INCORPORATED, AS TENANT, FOR PREMISES LOCATED
AT 555 TWIN DOLPHIN DRIVE, REDWOOD CITY, CALIFORNIA.
Effective September 1, 1999, the above-described Lease will be amended as
follows to provide for Tenant's expansion premises:
1. Expansion Premises. Approximately 3,610 square feet of rentable area
------------------
located on the third floor of the building known as 555 Twin Dolphin Drive.
The Premises as expanded herein are approximately as shown outlined in red
on the attached floor plan (Exhibit A, Suite 350 and Exhibit A-1, Suite
600).
2. Premises. The Premises of the Lease as defined per the Basic Lease
--------
Information shall be amended such that effective September 1, 1999, the
square footage shall increase from 17,198 rentable square feet to 20,808
rentable square feet.
3. Rent. Base Rent for the Premises shall be as follows:
----
9/1/99 - 10/31/99: Sixty One Thousand Sixty Eight and 11/100ths dollars
($61,068.11) per month plus Tenant's Proportionate
Share of Basic Operating Cost per Paragraph 29 of the
Lease. Tenant's Proportionate Share of Basic Operating
Cost through December 1999 is estimated to be
$17,719.11 per month. Tenant's Proportionate Share of
Basic Operating Cost is estimated a year in advance
and collected on a monthly basis. Any adjustments
necessary (up or down) will be made at the end of the
operating year.
11/1/99 - 10/31/00: Sixty Two Thousand Seven Hundred Eighty Seven and
91/100ths dollars ($62,787.91) per month plus Tenant's
Proportionate Share of Basic Operating Cost per
Paragraph 29 of the Lease. Tenant's Proportionate
Share of Basic Operating Cost through December 1999 is
estimated to be $17,719.11 per month. Tenant's
Proportionate Share of Basic Operating Cost is
estimated a year in advance and collected on a monthly
basis. Any adjustments necessary (up or down) will be
made at the end of the operating year.
11/1/00 - 10/31/01: Sixty Four Thousand Nine Hundred Five and 52/100ths
dollars ($64,905.52) per month plus Tenant's
Proportionate Share of Basic Operating Cost per
Paragraph 29 of the Lease
11/1/01 - 10/31/02 Sixty Seven Thousand Thirty Seven and 05/100ths
dollars ($67,037.05) per month plus Tenant's
Proportionate Share of Basic Operating Cost per
Paragraph 29 of the Lease.
5. Security Deposit. The Security Deposit, as set forth in the Basic Lease
----------------
Information of the Lease shall be increased from $60,193.00 to $75,000.00.
The increase ($14,807.00) to the Security Deposit shall be due and payable
upon execution of this Expansion Agreement
<PAGE>
6. Tenant's Proportionate Share. Tenant's Proportionate Share per the Basic
----------------------------
Lease Information of the Lease shall increase effective September 1, 1999
from 8.66% to 10.49%
7. Tenant Improvements. Tenant agrees to accept the Premises as so expanded in
-------------------
"as is" condition except for the improvements as described on the attached
Exhibit B.
All other terms and conditions of the Lease shall remain in full force and
effect and shall apply to the expansion premises as well as to the original
premises.
Dated: 6-22-99
-------
IN WITNESS WHEREOF, the parties hereto have executed this Expansion Agreement
the day and year first above written.
Landlord: SPIEKER PROPERTIES, L.P.
By: Spieker Properties, Inc.
/s/ Nancy B. Gille
------------------
By: Nancy B. Gille
--------------
Its: Vice President
--------------
Dated: 6/24/99
-------
Tenant: EXTRICITY SOFTWARE, INCORPORATED
By: /s/ [ILLEGIBLE]^^
-------------------
Its: VP Finance and CFO
------------------
Dated: 6-22-99
-------
<PAGE>
EXHIBIT A
THIRD FLOOR
[GRAPH]
<PAGE>
EXHIBIT A-1
SIXTH FLOOR
[GRAPH]
<PAGE>
EXHIBIT B
---------
to Expansion Agreement
Landlord, at Landlord's sole cost and expense, shall perform or cause to be
performed the following improvements to the Premises:
1. Re-paint all interior walls; color selection by Tenant
2. Steam clean carpeted area and clean/buff tiled area.
<PAGE>
555 Twin Dolphin Drive
Suite 110
Redwood City, CA 94065
(415) 591-1717
Fax (415) 591-9502
[SPIEKER
LEASE COMMENCEMENT (START-UP) LETTER PROPERTIES LOGO]
October 7, 1999
Karin Duff
Extricity Software. Inc.
555 Twin Dolphin Drive, Suite 600
Redwood City, Ca 94065
Re: Lease for Premises at 555 Twin Dolphin Drive, Redwood City, California
(the "Lease,")
Dear Karin:
Per Paragraph 3 of the Lease dated March 28, 1997, this letter Will serve to
define the term of the Expansion Agreement dated June 22, 1999, as beginning
September 13, 1999, and ending on October 31, 2002.
Per paragraph 5 of the Expansion Agreement, please remit $14,807.00 for the
increase of the security deposit.
Please amend the Letter of Credit No SB20011412, dated November 5, 1997 to
reflect the name Extricity Software, Inc..
Please indicate your acceptance of this by signing where indicated below and
returning all three (3) copies of this letter to our office. We will return a
fully executed copy to you for your files.
Your full obligations is now due and payable, broken down as follows:
Increase in Security Deposit 14,807.00
Base Rent, Ste. 350-September 13-30 6,819.53
Est. Operating Expenses, Ste 350- September 13-30 1,844.47
Base Rent, Ste. 650-September 49,702.22
Est. Operating Expenses, Ste 650- September 14,645.00
Base Rent, Sts. 350&650-October 61,068.11
Estimated Operating Expenses Sts. 350&650-October 17,719.l1
------------
total: 166,605.44
Received: (144,574.00)
Total Outstanding: $ 22,031.44
============
<PAGE>
October 7, 1999
Karin Duff
Extricity Software, Inc.
Page 2
As a reminder, you will not be invoiced for rent. Please notify your accounting
department that rent is due and payable on or before the first of each month.
Please reference your Lease Id # (EXTRSOF01) on all checks sent to Spieker
Properties. All checks should be made payable to Spieker Properties and mailed
------------------
to the following address:
Spieker Properties
P.O. Box 45587
Department 11511
San Francisco, California 94145-0587
Please make a note that as of November 1, 1999, a rent increase will take place
per your Lease and your monthly rental obligation will total $80,507.02
($62,787.91 base rent, $17,719.11 for operating expenses).
Please furnish this office with current evidence of the insurance coverage
required to be maintained by Tenant pursuant to Paragraph 11.E of the Lease,
and, naming Spieker Properties, L.P., as an additional insured.
It is truly a pleasure having Extricity Software, Inc. as a Tenant at the
Project and we wish you every success at your new location.
Should you have any questions or require any additional information, please feel
free to call me at (650) 591-1717.
Sincerely,
/s/ Anne Risberg
Anne Risberg
Project Manager
AGREED AND ACCEPTED:
Spieker Properties, L.P., Extricity Software, Inc.
a California limited partnership
By: Spieker Properties, Inc.,
a Maryland corporation
its general partner
By: /s/ [ILLEGIBLE]^^
----------------------------
Its: ____________________________
By: /s/ [ILLEGIBLE]^^
---------------------------
Its: 10/18/99
--------------------------
Approved as to Legal Fee
Signed: [ILLEGIBLE]^^
------------------
Date: 10-11-99
--------------------
<PAGE>
AMENDMENT #3
------------
EXPANSION AGREEMENT
-------------------
AMENDMENT NUMBER 3 TO THAT LEASE DATED MARCH 28,1997 AND AS AMENDED BY LEASE
AMENDMENT #1 DATED OCTOBER 6, 1997 AND AMENDMENT NUMBER 2 EFFECTIVE SEPTEMBER 1,
1999 BETWEEN SPIEKER PROPERTIES, L.P., AS LANDLORD, AND EXTRICITY SOFTWARE,
INC., FORMERLY CROSSROUTE SOFTWARE, INCORPORATED, AS TENANT, FOR PREMISES
LOCATED AT 555 TWIN DOLPHIN DRIVE, REDWOOD CITY, CALIFORNIA.
Effective January 1, 2000, the above-described Lease will be amended as follows
to provide for Tenant's second expansion premises (the "Second Expansion
Premises"):
1. Date of Agreement. The date of this Amendment Number 3 shall be December
-----------------
28, 1999.
2. Second Expansion Premises. Approximately 5,255 square feet of rentable area
-------------------------
located on the first floor of the building known as 555 Twin Dolphin Drive
as shown outlined in red on the attached floor plan (Exhibit A - Suite
180).
3. Premises. The Premises of the Lease as defined per the Basic Lease
--------
Information shall be amended such that effective January 1, 2000, the
square footage shall increase from 20,808 rentable square feet to 26,063
rentable square feet. The Premises as expanded herein are approximately as
shown outlined in red on the attached floor plan (Exhibit A - Suite 180
(Second Expansion Premises), Exhibit A-l, Suite 350 ("Expansion Premises")
and Exhibit A-2, Suite 600 ("Original Premises") collectively, the
Premises.
4. Term for Second Expansion Premises. The Term for the Second Expansion
----------------------------------
Premises shall be sixty (60) months commencing January 1, 2000.
5. Rent. Rent for the Second Expansion Premises shall be as follows:
----
1/1/2000-12/31/2000: Nineteen Thousand Four Hundred Sixty Six and
00/100ths dollars ($19,466.00) per month plus
Basic Operating Cost per Paragraph 29 of the
Lease. Operating expenses through December 2000
are estimated to be $4,707.00 per month. Direct
operating expenses are estimated a year in advance
and collected on a monthly basis. Any adjustments
necessary (up or down) will be made at the end of
the operating year.
1/1/2001-12/31/2001: Twenty Thousand One Hundred Forty Seven and
00/100ths dollars ($20,147.00) per month per month
plus Basic Operating Cost per Paragraph 29 of the
Lease.
<PAGE>
1/1/2002-12/31/2002: Twenty Thousand Eight Hundred Fifty Two and
00/100ths dollars ($20,852.00) per month per month
plus Basic Operating Cost per Paragraph 29 of the
Lease.
1/1/2003-12/31/2003: Twenty One Thousand Eight Hundred Fifty Two and
00/100ths dollars ($21,582.00) per month per month
plus Basic Operating Cost per Paragraph 29 of the
Lease.
1/1/2004-12/31/2004: Twenty Two Thousand Three Hundred Thirty Seven and
00/100ths dollars ($22,337.00) per month per month
plus Basic Operating Cost per Paragraph 29 of the
Lease.
Rent for the Expansion Premises and the Original
Premises shall remain as enumerated in Amendment
Number 2 and shall not in any way be amended,
modified or altered by this Amendment Number 3.
6. Security Deposit. Three hundred thousand and 00/100 dollars
---------------- ($300,000.00) in the form of a letter of credit
pursuant to the below-itemized terms.
A. (i) Delivery of Letter of Credit. In addition to the existing Security
Deposit currently held by Landlord, Tenant shall, on execution of this
Amendment Number 3, deliver to Landlord and cause to be in effect
during the Lease Term for the Second Expansion Premises an
unconditional, irrevocable letter of credit ("LOC") in the amount
specified above. The LOC shall be in a form acceptable to Landlord and
shall be issued by an LOC bank selected by Tenant and acceptable to
Landlord. An LOC bank is a bank that accepts deposits, maintains
accounts, has a local office that will negotiate a letter of credit,
and the deposits of which are insured by the Federal Deposit Insurance
Corporation. Tenant shall pay all expenses, points, or fees incurred
by Tenant in obtaining the LOC. The LOC shall not be mortgaged,
assigned or encumbered in any manner whatsoever by Tenant without the
prior written consent of Landlord. Tenant acknowledges that Landlord
has the right to transfer or mortgage its interest in the Project, the
Building 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 LOC and/or the LOC Security Deposit (as defined below)
to the transferee or mortgagee, and in the event of such transfer,
Tenant shall look solely to such transferee or mortgagee for the
return of the LOC and/or the LOC Security Deposit.
(ii) Replacement of Letter of Credit. Tenant may, from time to time,
replace any existing LOC with a new LOC if the new LOC (a) becomes
effective at least thirty (30) days before expiration of the LOC that
it replaces; (b) is in the required LOC amount; (c) is issued by an
LOC bank acceptable to Landlord; and (d) otherwise complies with the
requirements of this Paragraph 6 A.
(iii) Landlord's Right to Draw on Letter of Credit. Landlord shall
hold the LOC as security for the performance of Tenant's obligations
under the Lease. If, after notice and failure to cure within any
applicable period provided in this Lease, Tenant defaults on any
provision of the Lease, Landlord may, without prejudice to any other
remedy it has, draw on that portion of the LOC necessary to (a) pay
Rent or other sum in default; (b) pay or reimburse Landlord for any
amount that Landlord may spend or become obligated
<PAGE>
to spend in exercising Landlord's rights under Paragraph 25 (Right of
Landlord to Perform); and/or (c) compensate Landlord for any expense,
loss, or damage that Landlord may suffer because of Tenant's default.
If Tenant fails to renew or replace the LOC at least thirty (30) days
before its expiration, Landlord may, without prejudice to any other
remedy it has, draw on the entire amount of the LOC.
B. LOC Security Deposit. Any amount of the LOC that is drawn on by
Landlord but not applied by Landlord shall be held by Landlord as a
security deposit (the "LOC Security Deposit") in accordance with
Paragraph 15 of the Lease.
C. Restoration of Letter of Credit and LOC Security Deposit. If Landlord
draws on any portion of the LOC and/or applies all or any portion of
such draw, Tenant shall, within five (5) business days after demand by
Landlord, either (a) deposit cash with Landlord in an amount that,
when added to the amount remaining under the LOC and the amount of any
LOC Security Deposit, shall equal the LOC Amount then required under
this Amendment Number 3; or (b) reinstate the LOC to the full LOC
Amount.
7. Tenant's Proportionate Share. Tenant's Proportionate Share per the Basic
----------------------------
Lease Information of the Lease shall increase effective January 1, 2000
from 10.49% to 13.14%. Upon the expiration or earlier termination of the
Term for the Original Premises and the Expansion Premises, Tenant's
proportionate share shall be reduced to 2.65%
8. Tenant Improvements. Tenant agrees to accept the Second Expansion Premises
-------------------
as so expanded in "as is" condition.
All other terms and conditions of the Lease shall remain in full force and
effect and shall apply to the Second Expansion Premises as well as to the
Expansion Premises and the Original Premises. IN WITNESS WHEREOF, the parties
hereto have executed this Amendment Number 3 as of the Date of Agreement above
written.
Landlord: SPIEKER PROPERTIES, L.P.
By: Spieker Properties, Inc.
/s/ Nancy B. Gille
----------------------
By: Nancy B. Gille
Its: Vice President
Dated: 2/8/00
----------
Tenant: EXTRICITY SOFTWARE, INC.
By: /s/ Stephan Albertolle
-----------------------
Printed: Stephan Albertolle
------------------
Its: CFO
----------------------
Dated:_____________________
<PAGE>
Exhibit 10.12
LOAN AGREEMENT
This Loan Agreement is entered into as of October 6, 1997 (this "Loan
Agreement") between CrossRoute Software, Inc., a California corporation (herein
called "Borrower"), and Imperial Bank (herein called "Bank").
1. The Commitment. Subject to all the terms and conditions of this Loan
Agreement and prior to the termination of its commitment as hereinafter
provided, Bank hereby agrees to make loans (each a "loan" or collectively,
"loans") to Borrower in such amounts as Borrower shall request pursuant to this
Section 1C at any time from the date hereof through October 5, 1998 (the
"Availability End Date"), in an aggregate principal amount not to exceed
$750,000.00 (the "Commitment"). If at any time or for any reason, the
outstanding principal amount of the Loan Account (as hereinafter defined) is
greater than the Commitment, Borrower shall immediately pay to Bank, in cash,
the amount of such excess. Any commitment of Bank, pursuant to the terms of this
Loan Agreement, to make Loans shall expire on the Availability End Date, subject
to Bank's right to renew said commitment in its sole and absolute discretion at
Borrower's request. Any such renewal of said commitment shall not be binding
upon Bank unless it is in writing and signed by an officer of Bank. Loans which
are repaid by Borrower may not be reborrowed. Borrower promises to pay to Bank
the outstanding unpaid principal balance (and all accrued unpaid interest
thereon) of the Loan Account on October 5, 2001 ("Maturity Date").
A. Loans. The amount of each Loan made by Bank-to Borrower hereunder
shall be debited to the loan ledger account of Borrower maintained by Bank for
the Commitment (herein called the "Loan Account") and Bank shall credit the Loan
Account with all loan repayments in respect thereof made by Borrower. When
Borrower desires to obtain a Loan, Borrower shall notify Bank (which notice
shall be signed by an officer of Borrower and shall be irrevocable) in
accordance with Section 2 hereof, to be received no later than 3:00 p.m. Pacific
time one (1) Banking Day before the day on which the Loan is to be made. When
Borrower desires to obtain a Loan to purchase equipment, software or furniture
(herein called an "Equipment Advance"), the notice shall be signed by an officer
of Borrower and include a copy of the invoice for the equipment to be financed.
Loans for equipment will be limited to one hundred percent (100%) of the invoice
amount for such equipment approved from time to time by Bank and purchased by
Borrower subsequent to April 1, 1997, less any taxes, shipping and freight
charges or discounts, warranty charges, installation expenses and similar soft
costs. Loans for software and furniture will be limited to: (a) one hundred
percent of the invoice amount for such software and furniture approved from time
to time by Bank, less any taxes, shipping and freight charges or discounts,
warranty charges, installation expenses and similar soft costs and (b)
$200,000.00.
(1) SVB Advance. Subject to the availability of the Commitment and
in reliance on the representations and warranties of Borrower set forth herein,
in order to repay all existing loans and related indebtedness ("SVB Loans") owed
by Borrower to Silicon Valley Bank ("SVB"), Bank hereby agrees to make loans to
Borrower in an aggregate principal amount not to exceed $250,000.00 (the "SVB
Advance"); provided, however, that the outstanding amounts under the SVB Advance
shall be deemed to constitute Loans for the purpose of calculating the
availability under the Commitment. If at any time or for any reason, the
outstanding amount of the SVB Advance is greater than $250,000.00, Borrower
shall pay immediately to Bank, in cash, the amount of such excess.
(2) Limitations on Advance of any Loan. Notwithstanding any of the
foregoing provisions contained in this Section 1, prior to any advance of a
Loan, except for the initial advance of a Loan to repay the SVB Loans, Bank
shall have received satisfactory evidence of the release of all existing liens
against the Collateral to ensure Bank's first priority lien in the Collateral.
B. Principal Repayment and Interest Payments on SVB Advance. Borrower
further promises to pay to Bank, on or before the tenth day of the month
immediately following the date of the SVB Advance and on or before the tenth
(10th) day of each month thereafter through October 5, 1999, (a) the outstanding
principal balance of the SVB Advance in twenty-four (24) equal monthly
installments plus (b) interest on the average daily unpaid balance of the of the
SVB Advance accruing from and after the date of the SVB Advance, during the
immediately preceding month at a rate of interest and computed in accordance
with Section 1.C. hereof.
1.
<PAGE>
C. Interest Payments Prior to Maturity Date. Borrower further
promises to pay to Bank from the date of the initial Equipment Advance through
October 5, 1998, on or before the tenth (10th) day of each month, interest on
the average daily unpaid balance of the Equipment Advance during the immediately
preceding month at a rate of interest equal to one percent (1%) per annum in
excess of the Prime Rate, which shall vary concurrently with any change in the
Prime Rate. Interest shall be computed at the above rate on the basis of the
actual number of days during which the principal balance of the Loan Account is
outstanding divided by 360, which shall for interest computation purposes be
considered one (1) year.
D. Principal Repayment and Interest Payments Following Availability
End Date. Borrower further promises to pay to Bank, on or before October 5, 1998
and on or before the tenth (10th) day of each month thereafter through the
Maturity Date, (a) the outstanding principal balance of the Equipment Advance on
the Availability End Date in thirty-six (36) equal monthly installments plus (b)
interest on the average daily unpaid balance of the Loan Account accruing from
and after October 5, 1998, during the immediately preceding month at the rate of
interest and computed in accordance with Section 1.C. hereof.
2. Loan Requests. Requests for Loans hereunder shall be in writing duly
executed by Borrower in a form satisfactory to Bank and shall contain a
certification setting forth the matters referred to in Section 1, which shall
disclose that Borrower is entitled to the amount and type of Loan being
requested. Bank is hereby authorized to charge Borrower's deposit account with
Bank for all sums due Bank under this Loan Agreement.
3. Delivery of Payments. Payment to Bank of all amounts due hereunder
shall be made at its Santa Clara Valley Regional office, or at such other place
as may be designated in writing by Bank from time to time. If any payment date
fall on a day that is not a day that Bank is open for the transaction of
business ("Banking Day"), the payment due date shall be extended to the next
Banking Day.
4. Late Charge. If any interest payment, principal payment or principal
balance payment required hereunder is not received by Bank on or before ten (10)
days from the date in which such payment becomes due, Borrower shall pay to
Bank, a late charge equal to the lesser of (a) five percent (5.0%) of the amount
of such unpaid payment, in addition to said unpaid payment or (b) the maximum
amount permitted to be charged by applicable law, until remitted to Bank;
provided; however, nothing contained in this Section 4, shall be construed as
any obligation on the part of Bank to accept payment of any past due payment or
less than the total unpaid principal balance of the applicable Loan Account
following the Maturity Date. All payments shall be applied first to any late
charges due hereunder, next to accrued interest then payable and the remainder,
if any, to reduce any unpaid principal due under the applicable Loan Account.
5. Default Interest. From and after the Maturity Date, or such earlier
date as all sums owing under any Loan Account becomes due and payable by
acceleration or otherwise, or upon the occurrence of an Event of Default, at the
option of Bank all sums owing under the applicable Loan Account shall bear
interest until paid in full at a rate equal to the lesser of (a) five percent
(5.0%) per annum in excess of the then applicable interest rate provided for in
Section 1.C. hereof or (b) the maximum amount permitted to be charged by
applicable law, until all obligations hereunder are repaid in full or the Event
of Default is waived or cured to the satisfaction of Bank, as applicable.
6. Definitions. As used in this Loan Agreement and unless otherwise
defined herein, all initially capitalized terms shall have the meanings set
forth on Exhibit A attached hereto and incorporated herein by this reference.
7. Representations and Warranties. Borrower represents and warrants to
Bank: (a) That Borrower is a corporation, duly organized and existing in the
State of its incorporation and the execution, delivery and performance of each
of the Loan Documents are within Borrower's corporate powers, have been duly
authorized and are not in conflict with law or the terms of any charter, by-law
or other incorporation papers, or of any indenture, agreement or undertaking to
which Borrower is a party or by which Borrower is bound or affected; (b)
Borrower is, and at the time the Collateral becomes subject to Bank's security
interest will be, the true and lawful owner of and has, and at the time the
Collateral becomes subject to Bank's security interest will have, good and clear
title to the Collateral, subject only to Bank's rights therein and to Permitted
Liens; (c) Each Account is, and at the time the Account comes into existence
will be, a true and correct statement of a bona fide indebtedness incurred by
the debtor named therein in the amount of the Account for either
2.
<PAGE>
merchandise sold or delivered (or being held subject to Borrower's delivery
instructions) to, or services rendered, performed and accepted by, the account
debtor; (d) That there are and will be no defenses, counterclaims, or setoffs
which may be asserted against the Accounts from time to time, except as
permitted in the definition thereof; (e) Any and all financial information,
including information relating to the Collateral, submitted by Borrower to Bank,
whether previously or in the future, is and will be true and correct; (f) There
is no litigation or other proceeding pending or threatened against or affecting
Borrower, and Borrower is not in default with respect to any order, writ,
injunction, decree or demand of any court or other governmental or regulatory
authority; (g) (i) The consolidated balance sheets of Borrower dated as of
August 31, 1997, and the related consolidated profit and loss statements for the
fiscal year then ended, copies of which have heretofore been delivered to Bank
by Borrower, and all other statements and data submitted in writing by Borrower
to Bank in connection with Borrower's request for credit are true and correct,
and said balance sheet and profit and loss statement accurately present the
financial condition of Borrower as of the date thereof and the results of the
operations of Borrower for the period covered thereby, and have been prepared in
accordance with GAAP, (ii) since such date, there have been no material adverse
changes in the financial condition of Borrower, and (iii) Borrower has no
knowledge of any liabilities, contingent or otherwise, which are not reflected
in said balance sheet, and Borrower has not entered into any special commitments
or substantial contracts which are not reflected in said balance sheet, other
than in the ordinary and normal course of its business, which may have a
Material Adverse Effect upon its financial condition, operations or business as
now conducted; (h) Borrower has no liability for any delinquent local, state
or federal taxes, and, if Borrower has contracted with any government agency, it
has no liability for renegotiation of profits; and (i) Borrower, as of the date
hereof, possesses all necessary trademarks, trade names, copyrights, patents,
patent rights, and licenses to conduct its business as now operated, without any
known conflict with valid trademarks, trade names, copyrights, patents, patent
rights and license rights of others.
8. Negative Covenants. Borrower agrees that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or the
commitment of Bank hereunder is in effect, neither Borrower, nor any of its
subsidiaries ("Subsidiaries") will, without the prior written consent, which
will not unreasonably be withheld, of Bank:
A. Make any substantial change in the character of its business as
now conducted;
B. Create, incur, assume or permit to exist any Indebtedness other
than loans from Bank except obligations now existing as shown in the financial
statements referenced in Section 7.(g)(i), excluding those being refinanced by
Bank, Subordinated Debt and Permitted Indebtedness;
C. Create, incur, assume or permit to exist any mortgage, pledge,
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
Permitted Liens and liens in favor of Bank;
D. Sell, dispose of or grant a security interest in any of the
Collateral other than to Bank (other than the disposing of such Collateral in
the ordinary and normal course of its business as now conducted or other assets
which are obsolete or otherwise considered surplus), or execute any financing
statements covering the Collateral in favor of any secured party or Person other
than Bank;
E. Sell, transfer, assign, mortgage, pledge, license, lease, grant a
security interest in, or otherwise encumber any of its Intellectual Property,
other than licenses or leases conducted in the ordinary and normal course of its
business;
F. Make any loans or advances to any Person or other entity other
than in the ordinary and normal course of its business as now conducted
(provided that such loans or advances are not made to any Person or entity which
is controlled by or under common control with Borrower).
G. Purchase or otherwise acquire for an amount greater than Five
Hundred Thousand Dollars ($500,000), all or substantially all of the assets or
business of any Person or other entity; or liquidate, dissolve, merge or
consolidate, or commence any proceedings therefore; or, except in the ordinary
and normal course of its business as now conducted, sell (including, without
limitation, the selling of any property or other asset accompanied by the
leasing back of
3.
<PAGE>
the same) any assets including any fixed assets, any property, or other assets
necessary for the continuance of its business as now conducted; and
H. Declare or pay any dividend or make any other distribution on any
of its capital stock now outstanding or hereafter issued or purchase, redeem or
retire any of such stock other than in dividends or distributions payable in
Borrower's or any such Subsidiary's capital stock, except for the repurchase of
Borrower's capital stock from officers, directors, employees or consultants of
Borrower upon termination of their employment with or rendering of service to
Borrower.
9. Affirmative Covenants. Borrower affirmatively covenants that so long
as any loans, obligations or liabilities remain outstanding or unpaid to Bank or
the commitment of Bank hereunder is in effect, it will:
A. Furnish Bank from time to time such financial statements and
information as Bank may reasonably request and inform Bank immediately upon the
occurrence of a material adverse change therein;
B. Permit representatives of Bank to conduct an audit of Borrower's
books and records relating to the Collateral and make extracts therefrom, with
results satisfactory to Bank, provided that Bank shall use its best efforts to
not interfere with the conduct of Borrower's business, and to the extent
possible to arrange for verification of the Accounts directly with the account
debtors obligated thereon or otherwise, all under reasonable procedures
acceptable to Bank and at Borrower's sole expense;
C. Promptly notify Bank of any attachment or other legal process
levied against any of the Collateral and any information received by Borrower
relative to the Collateral, including the Accounts, the account debtors or other
Persons obligated in connection therewith, which may in any way affect the value
of the Collateral or the rights and remedies of Bank in respect thereto;
D. Reimburse Bank upon demand for any and all legal costs, including
reasonable attorneys' fees, and other expense incurred in collecting any sums
payable by Borrower under any Loan Account or any other obligation secured
hereby enforcing any term or provision of this Loan Agreement or otherwise or in
the checking, handling and collection of the Collateral and the preparation and
enforcement of any agreement relating thereto;
E. Notify Bank of each location and of each office of Borrower at
which records of Borrower relating to the Accounts are kept;
F. Provide, maintain and deliver to Bank policies insuring the
Collateral against loss or damage by such risks and in such amounts, forms and
companies as Bank may require (to the extent customarily maintained by
businesses similar to Borrower) and with loss payable to Bank, and, in the event
Bank takes possession of the Collateral, the insurance policy or policies and
any unearned or returned premium thereon shall at the option of Bank become the
sole property of Bank, such policies and the proceeds of any other insurance
coveting or in any way relating to the Collateral, whether now in existence or
hereafter obtained, being hereby assigned to Bank;
G. In the event the unpaid balance of any Loan Account shall exceed
the maximum amount of outstanding loans to which Borrower is entitled under
Section 1 hereof, as applicable, Borrower shall immediately pay to Bank for
credit to such Loan Account the amount of such excess;
H. Maintain and preserve all rights, franchises and other authority
adequate and necessary for the conduct of its business and maintain and preserve
its existence in the State of its incorporation and any other state(s) in which
Borrower conducts its business, except with respect to such other state(s), as
the failure to do so would not have a Material Adverse Effect;
I. Maintain public liability, property damage and workers
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained
4.
<PAGE>
by similar businesses. Borrower shall provide evidence of property insurance in
amounts and types acceptable to Bank, and certificates naming Bank as a loss
payee;
J. Pay and discharge, before the same becomes delinquent and
penalties accrue thereon, all taxes, assessments and governmental charges upon
or against it or any of its properties, and any of its other liabilities at any
time existing, except to the extent and so long as: (1) the same are being
contested in good faith and by appropriate proceedings in such manner as not to
cause any Material Adverse Effect or the loss of any right of redemption from
any sale thereunder; and (2) it shall have set aside on its books reserves
(segregated to the extent required by GAAP);
K. Maintain a standard and modern system of accounting in accordance
with GAAP on a basis consistently maintained; permit Bank's representatives to
have access to, and to examine its properties, books and records at all
reasonable times; provided that Bank shall use its best efforts to not interfere
with the conduct of Borrower's business;
L. Maintain its properties, equipment and facilities in good order
and repair;
M. Maintain its primary banking accounts with Bank or Imperial
Securities Corporation; and
N. Prior to allowing any of Borrower's raw materials, work in
process, furnished goods inventory and property, plant and equipment to be
transported to or be held at any contract manufacturer, warehouse or other
location (other than with bona fide distributors and retail accounts), Borrower
shall provide notice to Bank and Borrower shall have complied with such filing
and notice requirements as shall, in Bank's opinion, assure Borrower's and
Bank's priority in such property over creditors of such contract manufacturer,
warehouseman or operator of such other location, including, without limitation,
making filings under California Commercial Code (S)2326, providing notice under
California Commercial Code (S)9114 and making filings and publications as
required under California Civil Code (S)3440.1 and (S)3440.5 All such filings,
notices and publications shall be in form and substance satisfactory to Bank.
10. Financial Covenants and Information. All financial covenants and
financial information referenced herein shall be interpreted and prepared in
accordance with GAAP as used in the United States of America applied on a basis
consistent with previous years. Compliance with the financial covenants shall be
calculated and monitored on a monthly basis, except as shall be expressly stated
to the contrary. Borrower affirmatively covenants that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or any
commitment is outstanding hereunder, it will, on a consolidated basis:
A. At all times, maintain a Minimum Tangible Net Worth (meaning all
assets, excluding any value for goodwill, trademarks, patents, copyrights,
organization expense and other similar intangible items, less all liabilities
(excluding deferred revenue), plus Subordinated Debt) of not less than
$1,000,000.00,
B. At all times maintain a Minimum Quick Ratio (meaning all cash plus
Accounts divided by current liabilities (excluding deferred revenue)) of not
less than 1.25:1.00;
C. As soon as it is available, but not later than twenty-five (25)
days after and as of the end of each month, deliver to Bank internally-prepared
financial statement consisting of a balance sheet and profit and loss statement,
in form satisfactory to Bank, and a Compliance Certificate in the form of
Exhibit B attached hereto and incorporated herein by this reference, certified
by an officer of Borrower;
D. As soon as it is available, but not later than one hundred twenty
(120) days after the end of Borrower's fiscal year, deliver to Bank unqualified
copies of Borrower's consolidated financial statements together with changes in
financial position audited by an independent certified public accountant
selected by Borrower but acceptable to Bank;]
E. Upon the reasonable request of Bank, deliver to Bank current
budgets, sales projections, operating plans and other financial exhibits and
information in form and substance satisfactory to Bank; and
5.
<PAGE>
F. Upon any officer becoming aware, deliver immediately to Bank
written notice of any pending or threatened litigation claiming, or reasonably
likely to result in, damages against Borrower in an amount in excess of
$50,000.00.
11. Loan Fee. In addition to any other amounts due, or to become due,
concurrent with the execution hereof, in connection with the Equipment Advance,
Borrower shall deliver to Bank a loan fee in the amount of One Thousand Two
Hundred and Fifty Dollars ($1,250.00).
12. Default and Remedies. The occurrence of any one or more of the
following shall constitute an "Event of Default": (a) Default be made in the
payment of any obligation by Borrower under any Loan Document; (b) Except for
any failure to pay as described in clause (a) above, breach be made in any
warranty, statement, promise, term or condition, contained herein or in any
other Loan Document and the same shall not have been cured to the satisfaction
of Bank within fifteen (15) days after Borrower shall have become aware thereof,
whether by written notice from Bank, or otherwise, (except that no cure period
shall exist for breaches in respect of Borrower's obligations under Section 8,
Subsections 9.A., 9.B., 9.C., 9.F., 9.G., 9.H. and 9.I., Subsections 10.A.,
10.B., 10.C., and 10.D. of this Loan Agreement, and Sections 1 and 2 of the
General Security Agreement); (c) Any statement, warranty or representation made
by Borrower at any time proves false; (d) Borrower defaults in the repayment of
any principal of or the payment of any interest on any indebtedness exceeding in
the aggregate principal amount $10,000.00 or breaches or violates any term or
provision of any promissory note, loan agreement, mortgage, indenture or other
evidence of such indebtedness pursuant to which amounts outstanding in the
aggregate exceed $10,000.00 if the effect of such breach is to permit the
acceleration of such indebtedness, whether or not waived by the note holder or
obligee, and such failure shall not have been cured to Bank's satisfaction
within fifteen (15) calendar days after Borrower shall become aware thereof,
whether by written notice from Bank or otherwise, or there has in fact been an
acceleration of such indebtedness; (e) Borrower becomes insolvent or makes an
assignment for the benefit of creditors; (f) Any proceeding be commenced by
Borrower under any bankruptcy, reorganization, arrangement, readjustment of debt
or moratorium law or statute or, any such a proceeding is commenced against
Borrower and is not dismissed or stayed within ten (10) days (provided that no
Loans will be made prior to the dismissal of such proceeding); (g) Any money
judgment, writ of attachment, garnishment, execution or other legal process be
entered against Borrower or issued against any material property of Borrower
which is not fully covered by insurance (subject to reasonable deductibles) and
remains unvacated, unbonded, unstayed or unpaid or undischarged for more than
fifteen (15) days (whether or not consecutive) or in any event later than five
(5) days prior to the date of any proposed sale thereunder, or if any assessment
for taxes against Borrower other than against any of its real property, is made
by the Federal or State government or any department thereof; or (h) Any change
in Borrower's financial condition or operations which has a Material Adverse
Effect. on the occurrence and during the continuance of an Event of Default,
Bank may, at its option and without demand first made and without notice to
Borrower, do any one or more of the following: (i) Terminate its obligation to
make loans to Borrower as provided in Section 1 hereof; (ii) Declare all sums
secured hereby immediately due and payable; (iii) Immediately take possession of
the Collateral wherever it may be found, using all legally permissible means to
do so, or require Borrower to assemble the Collateral and make it available to
Bank at a place designated by Bank which is reasonably convenient to Borrower
and Bank, and Borrower waives all claims for damages due to or arising from or
connected with any such taking; (iv) Proceed in the foreclosure of Bank's
security interest and sale of the Collateral in any manner permitted by law, or
provided for herein; (v) Sell, lease or otherwise dispose of the Collateral at
public or private sale, with or without having the Collateral at the place of
sale, and upon terms and in such manner as Bank may determine, and Bank may
purchase same at any such sale; (vi) Retain the Collateral in full satisfaction
of the obligations secured thereby to the extent permitted under the Uniform
Commercial Code; or (vii) Exercise any remedies of a secured party under the
Uniform Commercial Code. Prior to any such disposition, Bank may, at its option,
cause any of the Collateral to be repaired or reconditioned in such manner and
to such extent as Bank may deem advisable, and any sums expended therefor by
Bank shall be repaid by Borrower and secured hereby. Bank shall have the right
to enforce one or more remedies hereunder successively or concurrently, and any
such action shall not stop or prevent Bank from pursuing any further remedy
which it may have hereunder or by law. If a sufficient sum is not realized from
any such disposition of the Collateral to pay all obligations secured by this
Loan Agreement, Borrower hereby promises and agrees to pay Bank any deficiency.
13. Records Retention. Borrower authorizes Bank to destroy all invoices,
delivery receipts, reports and other types of documents and records submitted to
Bank in connection with the transactions contemplated herein at any time
subsequent to four (4) months from the time such items are delivered to Bank.
6.
<PAGE>
14. Attorneys' Fees. Borrower agrees to reimburse Bank up to $2,000.00 for
its reasonable attorneys' fees and expenses incurred in connection with the
negotiation, preparation, execution and delivery of the Loan Documents.
15. Governing Law; Judicial Reference.
A. Governing Law. This Agreement shall be deemed to have been made in
the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
B. Judicial Reference.
(1) Other than (a) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (b) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Loan Agreement or the other Loan Documents, which controversy,
dispute or claim-is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to this Loan
Agreement gives written notice to all other parties that a controversy, dispute
or claim exists), will be settled by a reference proceeding in California in
accordance with the provisions of Section 638 et seq. of the California Code of
Civil Procedure, or their successor section ("CCP"), which shall constitute the
exclusive remedy for the settlement of any controversy, dispute or claim
concerning this Loan Agreement, including whether such controversy, dispute or
claim is subject to the reference proceeding and except as set forth above, the
parties waive their rights to initiate any legal proceedings against each other
in any court or jurisdiction other than the Superior Court in the County where
the real property, if any, is located or Santa Clara County, if none (the
"Court"). The referee shall be a retired Judge of the Court selected by mutual
agreement of the parties, and if they cannot so agree within forty-five (45)
days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his/her representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP (S) 170.6. The referee shall (x) be requested to set the matter
for hearing within sixty (60) days after the date of selection of the referee
and (y) try any and all issues of law or fact and report a statement of decision
upon them, if possible, within ninety (90) days of the Claim Date. Any decision
rendered by the referee will be final, binding and conclusive and judgement
shall be entered pursuant to CCP (S) 644 in any court in the State of California
having jurisdiction. Any party may apply for a reference proceeding at any time
after thirty (30) days following notice to any other party of the nature of the
controversy, dispute or claim, by filing a petition for a hearing and/or trial.
All discovery permitted by this Loan Agreement shall be completed no later than
fifteen (15) days before the first hearing date established by the referee. The
referee may extend such period in the event of a party's refusal to provide
requested discovery for any reason whatsoever, including, without limitation,
legal objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days written
notice, and request for production or inspection of documents shall be responded
to Within ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties Shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of the
referee as provided herein, the Superior Court is empowered to issue temporary
and/or provisional remedies, as appropriate.
(2) Except as expressly set forth in this Loan Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with respect to the
course of the reference proceeding. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter except that when any party so requests, a court reporter will be used
at any hearing conducted before the referee. The party making such a request
shall have the obligation to arrange for and pay for the court reporter. The
costs of the court reporter at the trial shall be borne equally by the parties.
7.
<PAGE>
(3) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(4) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, (S) 1280 through (S) 1294.2 of the CCP as
amended from time to time. The limitations with respect to discovery as set
forth hereinabove shall apply to any such arbitration proceeding.
16. Miscellaneous Provisions.
A. Nothing herein shall in any way limit the effect of the conditions
set forth in any other security or other agreement executed by Borrower; but
each and every condition hereof shall be in addition thereto.
B. No failure or delay on the part of Bank, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
C. All rights and remedies existing under this Loan Agreement or any
other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
D. All headings and captions in this Loan Agreement and any related
documents are for convenience only and shall not have any substantive effect.
E. This Loan Agreement may be executed in any number of counterparts,
each of which when so delivered shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument. Each such
agreement shall become effective upon the execution of a counterpart hereof or
thereof by each of the parties hereto and telephonic notification that such
executed counterparts has been received by Borrower and Bank.
BANK: BORROWER:
IMPERIAL BANK CrossRoute Software, Inc.
a California corporation
By: /s/ Sunita R. Patel By: /s/ Ken Ross
------------------- ------------
Sunita R. Patel Kenneth Ross
Assistant Vice President President and Chief Executive Officer
LIST OF EXHIBITS AND SCHEDULES
- ------------------------------
Exhibit A: Definitions
SCHEDULE 1 TO EXHIBIT A: List of Specific Permitted Indebtedness
SCHEDULE 2 TO EXHIBIT A: List of Specific Permitted Liens
8.
<PAGE>
Exhibit A
DEFINITIONS
"Accounts" means any right to payment for goods sold or leased, or to be
sold or to be leased, or for services rendered or to be rendered no matter how
evidenced, including accounts receivable, contract rights, chattel paper,
instruments, purchase orders, notes, drafts, acceptances, general intangibles
and other forms of obligations and receivables.
"Capital Lease" means, as to any Person, any lease of any Property by such
Person as lessee that is, or should be in accordance with Financing Accounting
Standards Board Statement No. 13, classified and accounted for as a "capital
lease" on the balance sheet of such Person prepared in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.
"Collateral" means any and all personal property of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest hereunder (including, without
limitation, the Accounts), or pursuant to the terms of the General Security
Agreement, the Intellectual Property Security Agreement or otherwise.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), co-made or discounted or sold with recourse by that Person,
or in respect of which that Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation for which that Person is in
effect liable through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, capital stock purchases, capital contributions or
otherwise), or to maintain the solvency of the obligor of such obligation, or to
make payment for any products, materials or supplies or for any transportation,
services or lease regardless of the non-delivery or non-furnishing thereof, in
any such case if the purpose or intent of such agreement is to provide assurance
that such obligation will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof. The amount of
any Contingent Obligation of any Person shall be deemed to be an amount equal to
the maximum amount of such Person's liability with respect to the stated or
determinable amount of the primary obligation for which such Contingent
Obligation is incurred or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder).
"Event of Default" has the meaning set forth in Section 12.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by the significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"General Security Agreement" means that certain General Security Agreement
(Tangible and Intangible Personal Property) dated of even date herewith, made by
Borrower in favor of Bank.
"Indebtedness" means, as to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money, including, without limitation,
all of such indebtedness outstanding under this Loan Agreement and any of the
other Loan Documents, (b) all Capital Lease Obligations of such Person, (c) to
the extent of the outstanding indebtedness thereunder, other than in the
ordinary and normal course of business as it is now conducted, any obligation of
such Person representing an extension of credit to such Person, whether or not
for borrowed money, (d) any obligation of such Person
Exhibit A
Page 1 of 5
<PAGE>
for the deferred purchase price of Property or services (other than (i) trade or
other accounts payable in the ordinary course of business in accordance with
customary industry terms and (ii) deferred franchise fees). (e) all Contingent
Obligations, (f) any obligation of such Person of the nature described in
clauses (a), (b), (c), (d) or (e) above, that is secured by a Lien on assets of
such Person and which is non-recourse to the credit of such Person, but Only to
the extent of the fair market value of the assets so subject to the Lien, (g)
obligations of such Person arising under acceptance facilities or under
facilities for the discount of accounts receivable of such Person, (h) any
obligation of such Person to reimburse the issuer of any letter of credit issued
for the account of such Person upon which a draw has been made, and (i) any
lease having the effect of indebtedness, whether or not the same shall be
treated as such on the balance sheet of Borrower under GAAP.
"Lien" means any mortgage, pledge, security interest, lien or other charge
or encumbrance, including the lien or retained security title of a conditional
vendor, upon or with respect to any property or assets.
"Loan Documents" means this Loan Agreement, the General Security Agreement
and that certain Agreement to Provide Insurance (Real or Personal Property)
dated of even date herewith, each as executed by Borrower in favor of Bank,
together with all other documents entered into or delivered pursuant to any of
the foregoing, in each case as originally executed or as the same may from time
to time be modified, amended, supplemented or restated.
"Loans" means individually and collectively, the Equipment Advance and the
SVB Advance advanced pursuant to Section 1.
"Material Adverse Effect" means any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse effect upon
the validity or enforceability of any material provision of any Loan Document,
(b) is or could reasonably be expected to be material and adverse to the
condition (financial or otherwise) or business operations of Borrower, (c)
materially impairs or could reasonably be expected to materially impair the
ability of Borrower, to perform its material Obligations, (d) materially impairs
or could reasonably be expected to materially impair the value or priority of
Bank's security interest in any Collateral or (e) materially impairs or could
reasonably be expected to materially impair the ability of Bank to enforce any
of its legal remedies pursuant to the Loan Documents.
"Maturity Date" has the meaning set forth in Section 1.
"Permitted Indebtedness" means the following:
(1) indebtedness of Borrower or Indebtedness and Contingent
Obligations of its Subsidiaries in favor of Bank arising under this Loan
Agreement and the other Loan Documents;
(2) the existing Indebtedness and Contingent Obligations disclosed on
Schedule 1 attached hereto and incorporated herein by this reference;
provided that the principal amount thereof is not increased and the terms
thereof are not modified to impose more burdensome terms upon Borrower or
any of its Subsidiaries;
(3) the Subordinated Debt;
(4) extensions, renewals or refinancings of Indebtedness permitted
under this Loan Agreement, other than clause (3) immediately above;
(5) accrued dividends on the preferred stock of Borrower;
(6) interest rate and currency hedging agreements;
(7) guaranties of any Subsidiary's suppliers in connection with the
purchase of supplies in the ordinary course of business;
(8) guaranties of lease obligations incurred in the ordinary course of
business and to the extent otherwise permitted hereunder;
Exhibit A
Page 2 of 5
<PAGE>
(9) Contingent Obligations constituting Permitted Liens; and
(10) the indebtedness referred to in clause (3)(a) of the definition
of Permitted Liens.
"Permitted Liens" means the following:
(1) liens and security interests existing as of this date and
disclosed in Schedule 2 attached hereto and incorporated herein by this
reference;
(2) liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by appropriate
proceedings;
(3) liens and security interests (a) upon or in any equipment
acquired or held by Borrower to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment and in an amount not greater than the purchase price thereof or
(b) existing on such equipment at the time of its acquisition, provided that the
lien and security interest is confined solely to the properly so acquired and
improvements thereon, and the proceeds of such equipment;
(4) liens consisting of leases or subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower's business not.
interfering in any material respect with the business of Borrower and any
interest or title of a lessor or licensor under any lease or license, as
applicable;
(5) liens securing claims or demands, of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons or entities imposed
without action of such parties, provided that the payment thereof is not yet
required;
(6) liens incurred or deposits made in the ordinary course of
Borrower's business in connection with worker's compensation, unemployment
insurance, social security and other like laws;
(7) liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(8) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
affecting real property not interfering in any material respect with the
ordinary conduct of Borrower's business;
(9) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(10) liens that are not prior to Bank's security interest which
constitute rights of set-off of a customary nature;
(11) any interest or title of a lessor in equipment subject to any
Capitalized Lease otherwise permitted hereunder; and
(12) any liens arising from the filing of any financing statements
relating to true leases otherwise permitted hereunder.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.
Exhibit A
Page 3 of 5
<PAGE>
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
Exhibit A
Page 4 of 5
<PAGE>
Schedule 1 to Exhibit A
SPECIFIC PERMITTED INDEBTEDNESS
Schedule 1 to Exhibit A
Page 1 of 1
<PAGE>
Schedule 2 to Exhibit A
SPECIFIC PERMITTED LIENS
Schedule 2 to Exhibit A
Page 1 of 1
<PAGE>
Exhibit B
COMPLIANCE CERTIFICATE
The consolidated financial statements dated as of _______________ of CrossRoute
Software, Inc. a California corporation ("Borrower") attached hereto and
submitted to Imperial Bank ("Bank") pursuant to that certain Loan Agreement
dated as of October 6, 1997, entered into between Borrower and Bank (the "Loan
Agreement"), are in compliance with all financial covenants (unless otherwise
noted below) as specified in Section 10 therein, as follows:
Covenant: Actual:
A. Minimum Tangible Net Worth of:
----------------------------- ----------------
$1,000,000.00
B. Minimum Quick Ratio:
------------------- -----------------
1.25:1.00
Exceptions: (if none, so state):
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The undersigned authorized officer of Borrower hereby certifies that Borrower is
in complete compliance with the terms and conditions of the Loan Agreement for
the period ending _________, ___, and as of the date of this Compliance
Certificate the representations and warranties stated therein are true, accurate
and complete as of the date hereof (except as to those representations and
warranties which specifically reference a particular date and except as noted
above).
The undersigned further certifies that s/he knows of no pending conditions which
may cause an Event of Default (as defined in the Loan Agreement) to exist in the
next thirty (30) days. The required support documents for this certification are
attached and prepared in accordance with GAAP consistently applied.
Date: October 6, 1977 CrossRoute Software, Inc.,
a California corporation
By:
--------------------------------
Bruce Hausmann
Controller
Exhibit B
Page 1 of 2
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT is entered into as of September 8,
1998 (this "Restated Loan Agreement") between CROSSROUTE SOFTWARE, INC., a
California corporation (herein called "Borrower"), and IMPERIAL BANK (herein
called "Bank"). This Restated Loan Agreement amends, restates and supersedes in
its entirety the Original Loan Agreement (as hereinafter defined).
RECITALS
A. Borrower and Bank entered into that certain Loan Agreement dated as of
October 6, 1997 (the "Original Loan Agreement"), pursuant to which Bank agreed
to extend and make loans available to Borrower under the Facility-A Commitment
(as hereinafter defined).
B. Borrower and Bank desire to amend and restate the Loan Agreement in its
entirety to, among other things, modify certain financial covenants and
reporting requirements under the Facility-A Commitment and to extend and make
available to Borrower additional advances of credit, all as more fully set forth
herein.
C. Bank has agreed to make and maintain the credit facilities described in
this Restated Loan Agreement, but only upon the terms and subject to the
conditions hereinafter set forth and in reliance on the representations and
warranties set forth herein.
AGREEMENT
NOW, THEREFORE, in Consideration of the foregoing recitals and the mutual
covenants hereinafter set forth, and intending to be legally bound, Borrower and
Bank hereby agree as follows:
1. Commitments.
A. Facility-A Commitment. Subject to all the terms and conditions of
this Restated Loan Agreement and prior to the termination of its commitment as
hereinafter provided, Bank hereby agrees to make loans (each a "Facility-A
Loan") to Borrower in such amounts as Borrower shall request pursuant to this
Section 1.A. at any time from the date hereof through October 5, 1998 (the
"Facility-A Availability End Date"), in an aggregate principal amount not to
exceed $750,000.00 (the "Facility-A Commitment"). If at any time or for any
reason, the outstanding principal amount of the Facility-A Loan Account (as
hereinafter defined) is greater than the Facility-A Commitment, Borrower shall
immediately pay to Bank, in cash, the amount of such excess. Any commitment of
Bank, pursuant to the terms of this Restated Loan Agreement, to make Facility-A
Loans shall expire on the Facility-A Availability End Date, subject to Bank's
right to renew said commitment in its sole and absolute discretion at Borrower's
request. Any such renewal of said commitment shall not be binding upon Bank
unless it is in writing and signed by an officer of Bank. Facility-A Loans that
are repaid by Borrower may not be reborrowed. Borrower promises to pay to Bank
the outstanding unpaid principal balance (and all accrued unpaid interest
thereon) of the Facility-A Loan Account on or before October 5, 2001 ("Facility-
A Maturity Date").
(1) Facility-A Loans. Facility-A Loans may only be used to
purchase or reimburse the cost of acquiring equipment purchased by Borrower
after April 1, 1997 or (b) purchase or reimburse the cost of acquiring software
or furniture purchased by Borrower. The amount of each Facility-A Loan made by
Bank to Borrower hereunder shall be debited to the loan ledger account of
Borrower maintained by Bank for the Facility-A Commitment (herein called the
"Facility-A Loan Account") and Bank shall credit the Facility-A Loan Account
with all loan repayments in respect thereof made by Borrower. When Borrower
desires to obtain a Facility-A Loan, Borrower shall notify Bank (which notice
shall be signed by an officer of Borrower and shall be
1.
<PAGE>
irrevocable) in accordance with Section 2 hereof, to be received no later than
3:00 p.m. Pacific time one (1) Banking Day before the day on which the Loan is
to be made. When Borrower desires to obtain a Facility-A Loan to purchase
equipment, software or furniture, the notice shall be signed by an officer of
Borrower and include a copy of the invoice for the equipment, software or
furniture to be financed. Facility-A Loans for equipment will be limited to one
hundred percent (100%) of the invoice amount for such equipment approved from
time to time by Bank, less any taxes, shipping and freight charges or discounts,
warranty charges, installation expenses and similar soft costs. Facility-A Loans
for software and furniture will be limited to: (a) one hundred percent of the
invoice amount for such software and furniture approved from time to time by
Bank, less any taxes, shipping and freight charges or discounts, warranty
charges, installation expenses and similar soft costs and (b) the maximum
aggregate total amount of $200,000.00.
(a) SVB Advance. Subject to the availability of the
Facility-A Commitment and in reliance on the representations and warranties of
Borrower set forth herein, in order to repay all existing loans and related
indebtedness ("SVB Loans") owed by Borrower to Silicon Valley Bank ("SVB"), Bank
hereby agrees to make one Facility-A Loan to Borrower in an aggregate principal
amount not to exceed $250,000.00 (the "SVB Advance"); provided, however, that
the outstanding amount under the SVB Advance shall be deemed to constitute a
Facility-A Loan for the purpose of calculating the availability under the
Facility-A Commitment.
(b) Limitations on Advance of any Facility-A Loan.
Notwithstanding any of the foregoing provisions contained in this Section 1.A.
prior to any advance of a Facility-A Loan, except for the initial advance of a
Facility-A Loan to repay the SVB Loans, Bank shall have received satisfactory
evidence of the release of all existing liens against the Collateral to ensure
Bank's first priority lien in the Collateral.
(2) Interest Payments Prior to Facility-A Maturity Date.
Borrower further promises to pay to Bank from the date of the initial advance of
a Facility-A Loan (including the SVB Advance) through the Facility-A Maturity
Date, on or before the tenth (10th) day of each month, interest on the average
daily unpaid balance of the Facility-A Loan Account during the immediately
preceding month at a rate of interest equal to one percent (1%) per annum in
excess of the rate of interest which Bank has announced as its prime lending
rate (the "Prime Rate"), which shall vary concurrently with any change in the
Prime Rate. Interest shall be computed at the above rate on the basis of the
actual number of days during which the principal balance of the Facility-A Loan
Account is outstanding divided by 360, which shall for interest computation
purposes be considered one (1) year.
(3) Principal Repayment and Interest Payments on SVB Advance.
Borrower further promises to pay to Bank, on or before the tenth (10th day of
the month immediately following the date of the SVB Advance and on or before the
tenth (10th) day of each month thereafter through October 5, 1999, (a) the
outstanding principal balance of the SVB Advance in twenty-four (24) equal
monthly installments plus (b) interest on the average daily unpaid balance of
the SVB Advance accruing during the immediately preceding month at a rate of
interest and computed in accordance with Section 1.A.(2) hereof.
(4) Principal Repayment and Interest Payments Following
Availability End Date. Borrower further promises to pay to Bank, on or before
the tenth (10th) day of the month immediately following the Facility-A
Availability End Date and on or before the tenth (10th) day of each month
thereafter through the Facility-A Maturity Date, (a) the outstanding principal
balance of the Facility-A Loan Account (excluding the SVB Advance) on the
Facility-A Availability End Date in thirty-six (36) equal monthly installments
plus (b) interest on the average daily unpaid balance of the Facility-A Loan
Account (excluding the SVB Advance) accruing during the immediately preceding
month at the rate of interest and computed in accordance with Section 1.A.(2)
hereof.
B. Facility-B Commitment. Subject to all the terms and conditions of
this Restated Loan Agreement and prior to the termination of its commitment as
hereinafter provided, Bank hereby agrees to make
2.
<PAGE>
loans (each a "Facility-B Loan") to Borrower, from time to time and in such
amounts as Borrower shall request pursuant to this Section 1.B., up to an
aggregate principal amount outstanding under the Facility-B Loan Account (as
hereinafter defined) not to exceed the least off (a) seventy-five percent
(75.0%) of Eligible Accounts (as the same may be adjusted from time to time as
provided for under Section 9.B. hereof, the "Borrowing Base") or (h) $750,000.00
(the "Facility-B Commitment"). If at any time or for any reason, the outstanding
principal amount of the Facility-B Loan Account is greater than the least of:
(x) the Borrowing Base or (y) the Facility-B Commitment, Borrower shall
immediately pay to Bank, in cash, the amount of such excess. Any commitment of
Bank, pursuant to the terms of this Restated Loan Agreement, to make Facility-B
Loans shall expire on the Facility-B Maturity Date (as hereinafter defined),
subject to Bank's right to renew said commitment in its sole and absolute
discretion at Borrower's request. Any such renewal of said commitment shall not
be binding upon Bank unless it is in writing and signed by an officer of Bank.
Provided that no Event of Default (as hereinafter defined) has occurred and is
continuing, all or any portion of the Facility-B Loans advanced by Bank that are
repaid by Borrower shall be available for reborrowing in accordance with the
terms hereof. Borrower promises to pay to Bank the entire outstanding unpaid
principal balance (and all accrued unpaid interest thereon) of the Facility-B
Loan Account on or before September 7, 1999 ("Facility-B Maturity Date").
(1) Facility-B Loans. Facility-B Loans may only be used to
support Borrower's working capital, needs. The amount of each Facility-B Loan
made by Bank to Borrower hereunder shall be debited to the loan ledger account
of Borrower maintained by Bank for the Facility-B Commitment (herein called the
"Facility-B Loan Account") and Bank shall credit the Facility-B Loan Account
with all loan repayments in respect thereof made by Borrower. When Borrower
desires to obtain a Facility-B Loan, Borrower shall notify Bank (which notice
shall be signed by an officer of Borrower and shall be irrevocable) in
accordance with Section 2 hereof, to be received no later than 3:00 p.m. Pacific
time one (1) Banking Day (as hereinafter defined) before the day on which the
Facility-B Loan is to be made.
(a) Letter of Credit Usage and Sublimit. Subject to the
availability of the Facility-B Commitment and in reliance on the representations
and warranties of Borrower set forth herein, at any time and from time to time
from the date hereof through the Banking Day immediately prior to the Facility-B
Maturity Date, Bank shall issue for the account of Borrower such standby and
commercial letters of credit ("Letters of Credit") as Borrower may request,
which request shall be made by delivering to Bank a duly executed letter of
credit application on Bank's standard form; provided, however, that the
outstanding and undrawn amounts under all such Letters of Credit (i) shall not
at any time exceed $200,000.00 and (ii) shall be deemed to constitute Facility-B
Loans for the purpose of calculating availability under the Facility-B
Commitment. Unless Borrower shall have deposited with Bank cash collateral in an
amount sufficient to cover all undrawn amounts under each such Letter of Credit
and Bank shall have agreed in writing, no Letter of Credit shall have an
expiration date that is later than the Facility-B Maturity Date. All Letters of
Credit shall be in form and substance acceptable to Bank in its sole discretion
and shall be subject to the terms and conditions of Bank's form application and
letter of credit agreement. Borrower will pay any standard issuance and other
fees that Bank notifies Borrower will be charged for issuing and processing
Letters of Credit for Borrower.
(2) Interest Payments on Facility-B Loans. Borrower further
promises to pay to Bank from the date of the advance of the initial Facility-B
Loan through the Facility-B Maturity Date, on or before the tenth (10th) day of
each month, interest on the average daily unpaid balance of the Facility-B Loan
Account during the immediately preceding month at a rate of interest equal to
one-half of one percent (0.50%) per annum in excess of Prime Rate, which shall
vary concurrently with any change in the Prime Rate. Interest shall be computed
at the above rate on the basis of the actual number of days during which the
principal balance of the Facility-B Loan Account is outstanding divided by 360,
which shall for interest computation purposes be considered one (1) year.
(3) Limitation on Advance of any Facility-B Loan.
Notwithstanding any of the provisions contained in this Section 1.B. hereof,
prior to any advance of a Facility-B Loan, a representative of
3.
<PAGE>
Bank shall have conducted an audit of Borrower's books and records relating to
the Collateral and made extracts therefrom, and arranged for verification of the
Accounts, directly with the account debtors or otherwise, all with results
satisfactory to Bank, the cost of such audit of which shall be at Borrower's
sole expense. Based on Bank's review of such audit, and prior to the advance of
a Facility-B Loan in accordance with the terms of this Section 1.B.(3), Bank may
adjust the Borrowing Base percentage, in its sole and reasonable discretion, as
provided for under Section 9.B. hereof.
C. Facility-C Commitment. Subject to all the terms and conditions of
this Restated Loan Agreement and prior to the termination of its commitment as
hereinafter provided, Bank hereby agrees to make loans (each a "Facility-C
Loan") to Borrower in such amounts as Borrower shall request pursuant to this
Section 1.C. at any time from the date hereof through September 7, 1999 (the
"Facility-C Availability End Date"), in an aggregate principal amount not to
exceed $750,000.00 (the "Facility-C Commitment"). If at any time or for any
reason, the outstanding principal amount of the Facility-C Loan Account (as
hereinafter defined) is greater than the Facility-C Commitment, Borrower shall
immediately pay to Bank, in cash, the amount of such excess. Any commitment of
Bank, pursuant to the terms of this Restated Loan Agreement, to make Facility-C
Loans shall expire on the Facility-C Availability End Date, subject to Bank's
right to renew said commitment in its sole and absolute discretion at Borrower's
request. Any such renewal of said commitment shall not be bidding upon Bank
unless it is in writing and signed by an officer of Bank. Facility-C Loans that
are repaid by Borrower may not be reborrowed. Borrower promises to pay to Bank
the outstanding unpaid principal balance (and all accrued unpaid interest
thereon) of the Facility-C Loan Account on or before September 7, 2002
("Facility-C Maturity Date").
(1) Facility-C Loans. Facility-C Loans may only be used to
purchase or reimburse the cost of acquiring equipment and software purchased by
Borrower after January 1, 1998. The amount of each Facility-C Loan made by Bank
to Borrower hereunder shall be debited to the loan ledger account of Borrower
maintained by Bank for the Facility-C Commitment (herein called the "Facility-C
Loan Account") and Bank shall credit the Facility-C Loan Account with all loan
repayments in respect thereof made by Borrower. When Borrower desires to obtain
a Facility-C Loan, Borrower shall notify Bank (which notice shall be signed by
an officer of Borrower and shall be irrevocable) in accordance with Section 2
hereof, to be received no later than 3:00 p.m. Pacific time one (1) Banking Day
before the day on which the Facility-C Loan is to be made. The notice shall be
signed by an officer of Borrower and include a copy of the invoice for the
equipment or software to be financed. Equipment Loans for equipment will be
limited to one hundred percent 100.00%) of the invoice amount for such
equipment, approved from time to time by Bank, less any taxes, shipping and
freight charges or discounts, warranty charges, installation expenses and other
similar soft costs. Facility-C Loans for software will be limited to: (a) one
hundred percent (100.00%) of the invoice amount for such software, approved from
time to time by Bank, less any taxes, shipping and freight charges or discounts,
warranty charges, installation expenses and other similar soft costs and (b) the
maximum aggregate total amount of $350,000.00.
(2) Interest Payments Prior to Facility-C Maturity Date.
Borrower further promises to pay to Bank from the date of the advance of the
initial Facility-C Loan through the Facility-C Maturity Date, on or before the
tenth (10') day of each month, interest on the average daily unpaid balance of
the Facility-C Loan Account during the immediately preceding month at a rate of
interest equal to three quarters of one percent (0.75%) per annum in excess of
the Prime Rate, which shall vary concurrently with any change in the Prime Rate.
Interest shall be computed at the above rate on the basis of the actual number
of days during which the principal balance of the Facility-C Loan Account is
outstanding divided by 360, which shall for interest computation purposes be
considered one (1) year.
(3) Principal Payments Following Facility-C Availability End
Date. Borrower further promises to pay to Bank, on or before the tenth (10th)
day of the month immediately following the Facility-C Availability End Date and
on or before the tenth (10th) day of each month thereafter through the Facility-
C Maturity Date, (a) the outstanding principal balance of the Facility-C Loan
Account on the Facility-C Availability End Date in thirty-six (36) equal monthly
installments plus (b) interest on the average daily unpaid
4.
<PAGE>
balance of the Facility-C Loan Account accruing during the immediately preceding
month at the rate of interest and computed in accordance with Section 1.C.(2)
hereof.
2. Loan Requests. Requests for Loans hereunder shall be in writing duly
executed by Borrower in a form satisfactory to Bank and shall contain a
certification setting forth the matters referred to in Section 1, which shall
disclose that Borrower is entitled to the amount and type of Loan being
requested. Bank is hereby authorized to charge Borrower's deposit account with
Bank for all sums due Bank under this Restated Loan Agreement.
3. Delivery of Payments. Payment to Bank of all amounts due hereunder
shall be made at its Santa Clara Valley Regional office, or at such other place
as may be designated in writing by Bank from time to time. If any payment date
fall on a day that is not a day that Bank is open for the transaction of
business ("Banking Day"), the payment due date shall be extended to the next
Banking Day.
4. Late Charge. If any interest payment, principal payment or principal
balance payment required hereunder is not received by Bank on or before ten (10)
days from the date in which such payment becomes due, Borrower shall pay to
Bank, a late charge equal to the lesser of (a) five percent (5.0%) of the amount
of such unpaid payment, in addition to said unpaid payment or (b) the maximum
amount permitted to be charged by applicable law, until remitted to Bank;
provided; however, nothing contained in this Section 4, shall be construed as
any obligation on the part of Bank to accept payment of any past due payment or
less than the total unpaid principal balance of the applicable Loan Account
following the Facility-A Maturity Date, the Facility-B Maturity Date and/or the
Facility-C Maturity Date, as applicable. All payments shall be applied first to
any late charges due hereunder, next to accrued interest then payable and the
remainder, if any, to reduce any unpaid principal due under the applicable Loan
Account.
5. Default Interest. From and after the Facility-A Maturity Date, the
Facility-B Maturity Date and/or the Facility-C Maturity Date, as applicable, or
such earlier date as all sums owing under any Loan Account becomes due and
payable by acceleration or otherwise, or upon the occurrence of an Event of
Default, at the option of Bank all sums owing under the applicable Loan Account
shall bear interest until paid in full at a rate equal to the lesser of (a) five
percent (5.0%) per annum in excess of the then applicable interest rate provided
for in Sections 1.A.(2), 1.B.(2) and 1.C.(2) hereof or (b) the maximum amount
permitted to be charged by applicable law, until all obligations hereunder are
repaid in full or the Event of Default is waived or cured to the satisfaction of
Bank, as applicable.
6. Definitions. As used in this Restated Loan Agreement and unless
otherwise defined herein, all initially capitalized terms shall have the
meanings set forth on Exhibit A attached hereto and incorporated herein by this
reference.
7. Representations and Warranties. Borrower represents and warrants to
Bank: (a) That Borrower is a corporation, duly organized and existing in the
State of its incorporation and the execution, delivery and performance of each
of the Loan Documents are within Borrower's corporate powers, have been duly
authorized and are not in conflict with law or the terms of any charter, by-law
or other incorporation papers, or of any indenture, agreement or undertaking to
which Borrower is a party or by which Borrower is bound or affected; (b)
Borrower is, and at the time the Collateral becomes subject to Bank's security
interest will be, the true and lawful owner of and has, and at the time the
Collateral becomes subject to Bank's security interest will have, good and clear
title to the Collateral, subject only to Bank's rights therein and to Permitted
Liens; (c) Each Account is, and at the time the Account comes into existence
will be, a true and correct statement of a bona fide indebtedness incurred by
the debtor named therein in the amount of the Account for either merchandise
sold Or delivered (or being held subject to Borrower's delivery instructions)
to, or services rendered, performed and accepted by, the account debtor; (d)
That there are and will be no defenses, counterclaims, or setoffs which may be
asserted against the Accounts from time to time represented by Borrower to be
Eligible Accounts, except as permitted in the
5.
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definition thereof; (e) Any and all financial information, including information
relating to the Collateral, submitted by Borrower to Bank, whether previously or
in the future, is and will be true and correct; (f) There is no litigation or
other proceeding pending or threatened against or affecting Borrower, and
Borrower is not in default with respect to any order, writ, injunction, decree
or demand of any court or other governmental or regulatory authority; (g) (i)
The consolidated balance sheets of Borrower dated as of May 31, 1998, and the
related consolidated profit and loss statements for the fiscal year then ended,
copies of which have heretofore been delivered to Bank by Borrower, and all
other statements and data submitted in writing by Borrower to Bank in connection
with Borrower's request for credit are true and correct, and said balance sheet
and profit and loss statement accurately present the financial condition of
Borrower as of the date thereof and the results of the operations of Borrower
for the period covered thereby, and have been prepared in accordance with GAAP,
(ii) since such date, there have been no material adverse changes in the
financial condition of Borrower, and (iii) Borrower has no knowledge of any
liabilities, contingent or otherwise, which are not reflected in said balance
sheet, and Borrower has not entered into any special commitments or substantial
contracts which are not reflected in said balance sheet, other than in the
ordinary and normal course of its business, which may have a Material Adverse
Effect upon its financial condition, operations or business as now conducted;
(h) Borrower has no liability for any delinquent local, state or federal taxes,
and, if Borrower has contracted with any government agency, it has no liability
for renegotiation of profits; and (i) Borrower, as of the date hereof, possesses
all necessary Trademarks, trade names, Copyrights, Patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with valid Trademarks, trade names, Copyrights, Patents, patent rights and
license rights of others; and 0) Borrower and its Subsidiaries (as hereinafter
defined) have reviewed the areas within their operations and business which
could be adversely affected by, and have developed or are developing a program
to address on a timely basis, the Year 2000 Problem and have made related
appropriate inquiry of material suppliers and vendors, and based on such review
and program, the Year 2000 Problem will not have a Material Adverse Effect upon
its financial condition, operations or business as now conducted.
8. Negative Covenants. Borrower agrees that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or the
commitment of Bank hereunder is in effect, neither Borrower, nor any of its
subsidiaries ("Subsidiaries") will, without the prior written consent of Bank,
which consent shall not be unreasonably withheld:
A. Make any substantial change in the character of its business as
now conducted;
B. Create, incur, assume or permit to exist any Indebtedness other
than loans from Bank except obligations now existing as shown in the financial
statements referenced in Section 7.(g)(i), excluding those being refinanced by
Bank, Subordinated Debt and Permitted Indebtedness;
C. Create, incur, assume or permit to exist any mortgage, pledge,
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
Permitted Liens and liens in favor of Bank;
D. Sell, dispose of or grant a security interest in any of the
Collateral other than to Bank (other than the disposing of such Collateral in
the ordinary and normal course of its business as now conducted or other assets
which are obsolete or otherwise considered surplus), or execute any financing
statements covering the Collateral in favor of any secured party or Person other
than Bank;
E. Sell, transfer, assign, mortgage, pledge, license, lease, grant a
security interest in, or otherwise encumber any of its Intellectual Property,
other than licenses or leases of its intellectually property granted in the
ordinary and normal course of its business;
6.
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F. Make any loans or advances to any Person or other entity other
than in the ordinary and normal course of its business as now conducted
(provided that such loans or advances are not made to any Person or entity that
is controlled by or under common control with Borrower). Notwithstanding the
foregoing provision, Borrower shall be permitted to accept full recourse
promissory notes from its employees in payment for its capital stock purchased
by such employees;
G. (1) Purchase or otherwise acquire all or substantially all of the
assets or business of any Person or other entity; or (2) liquidate, dissolve,
merge or consolidate, or commence any proceedings therefore; or (3) except in
the ordinary and normal course of its business as now conducted, sell
(including, without limitation, the selling of any property or other asset
accompanied by the leasing back of the same) any assets including any fixed
assets, any property, or other assets necessary for the continuance of its
business as now conducted. Notwithstanding the foregoing, upon the consent of
Bank, which consent shall not be unreasonably withheld, Borrower may proceed
with any acquisition of up to $500,000.00, (a) so long as no Event of Default
has occurred and is continuing or would exist after giving effect to such
transaction; (b) Borrower is the surviving corporation and (c) prior to
consummating such transaction, Borrower executes and delivers to Bank all such
additional agreements, documents and instruments as Bank may require in order to
affirm, effectuate or further assure its continuing, first priority lien in the
Collateral after giving effect to such transaction; and
H. Declare or pay any dividend or make any other distribution on any
of its capital stock now outstanding or hereafter issued or purchase, redeem or
retire any of such stock other than in dividends or distributions payable in
Borrower's or any such Subsidiary's capital stock, except for the repurchase of
Borrower's capital stock from officers, directors, employees or consultants of
Borrower upon termination of their employment with or rendering of service to
Borrower.
9. Affirmative Covenants. Borrower affirmatively covenants that so long
as any loans, obligations or liabilities remain outstanding or unpaid to Bank or
the commitment of Bank hereunder is in effect, it will:
A. Furnish Bank from time to time such financial statements and
information as Bank may reasonably request and inform Bank immediately upon the
occurrence of a material adverse change therein;
B. Notwithstanding the provisions contained in Section l.A.(3)
hereof, permit representatives of Bank to conduct an audit of Borrower's books
and records relating to the Collateral and make extracts therefrom, with results
satisfactory to Bank, provided that Bank shall use its best efforts to not
interfere with the conduct of Borrower's business, and to the extent possible to
arrange for verification of the Accounts directly with the account debtors
obligated thereon or otherwise, all under reasonable procedures acceptable to
Bank and at Borrower's sole expense; provided further that, prior to an Event of
Default, Borrower shall not be responsible for the expense of more than one (1)
such audit, in any fiscal year the cost of such audit of which shall not exceed
$1,500.00. Borrower hereby acknowledges and agrees that upon completion of any
such audit, including any such audit conducted in accordance with the provisions
of Section 1.A.(3) hereof, Bank shall have the right to adjust the Borrowing
Base percentage, in its sole and reasonable discretion, based on its review of
the results of such Collateral audit;
C. Promptly notify Bank of any attachment or other legal process
levied against any of the Collateral and any information received by Borrower
relative to the Collateral, including the Accounts, the account debtors or other
Persons obligated in connection therewith, which may in any way affect the value
of the Collateral or the rights and remedies of Bank in respect thereto;
D. Notwithstanding the provisions of Section 14 hereof, reimburse
Bank upon demand for any and all legal costs, including reasonable attorneys'
fees, and other expenses incurred in (1) collecting any sums payable by Borrower
under any Loan Account or any other obligation secured hereby, (2) enforcing any
7.
<PAGE>
term or provision of this Restated Loan Agreement or otherwise or (3) the
checking, handling and collection of the Collateral and the preparation and
enforcement of any agreement relating thereto in connection with the occurrence
and continuance of an Event of Default;
E. Notify Bank of each location and of each office of Borrower at
which records of Borrower relating to the Accounts are kept;
F. Provide, maintain and deliver to Bank policies insuring the
Collateral against loss or damage by such risks and in such amounts, forms and
companies as Bank may require (to the extent customarily maintained by
businesses similar to Borrower) and with loss payable to Bank, and, in the event
Bank takes possession of the Collateral, the insurance policy or policies and
any unearned or returned premium thereon shall at the option of Bank become the
sole property of Bank, such policies and the proceeds of any other insurance
covering or in any way relating to the Collateral, whether now in existence or
hereafter obtained, being hereby assigned to Bank;
G. In the event the unpaid balance of any Loan Account shall exceed
the maximum amount of outstanding loans to which Borrower is entitled under
Section 1 hereof, as applicable, Borrower shall immediately pay to Bank for
credit to such Loan Account the amount of such excess;
H. Maintain and preserve all rights, franchises and other authority
adequate and necessary for the conduct of its business and maintain and preserve
its existence in the state of its incorporation and any other state(s) in which
Borrower conducts its business, except with respect to such other state(s), as
the failure to do so would not have a Material Adverse Effect;
I. Maintain public liability, property damage and workers
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses. Borrower shall provide evidence of property
insurance in amounts and types acceptable to Bank, and certificates naming Bank
as a loss payee;
J. Pay and discharge, before the same becomes delinquent and
penalties accrue thereon, all taxes, assessments and governmental charges upon
or against it or any of its properties, and any of its other liabilities at any
time existing, except to the extent and so long as: (1) the same are being
contested in good faith and by appropriate proceedings in such manner as not to
cause any Material Adverse Effect or the loss of any right of redemption from
any sale thereunder; and (2) it shall have set aside on its books reserves
(segregated to the extent required by GAAP);
K. Maintain a standard and modem system of accounting in accordance
with GAAP on a basis consistently maintained; permit Bank's representatives to
have access to, and to examine its properties, books and records at all
reasonable times; provided that Bank shall use its best efforts to not interfere
with the conduct of Borrower's business;
L. Maintain its properties, equipment and facilities in good order
and repair;
M. Maintain its primary banking and operating accounts with Bank or
Imperial Securities Corporation;
N. Prior to allowing any of Borrower's raw materials, work in
process, finished goods inventory and property, plant and equipment to be
transported to or be held at any contract manufacturer, warehouse or other
location (other than with bona fide distributors and retail accounts), Borrower
shall provide notice to Bank and Borrower shall have complied with such filing
and notice requirements as shall, in Bank's opinion, assure Borrower's and
Bank's priority in such property over creditors of such contract manufacturer,
8.
<PAGE>
warehouseman or operator of such other location, including, without limitation,
making filings under California Commercial Code (S)2326, providing notice under
California Commercial Code (S)9114 and making filings and publications as
required under California Civil Code (S)3440.1 and (S)3440.5 All such filings,
notices and publications shall be in form and substance satisfactory to Bank;
and
O. Borrower shall perform all acts reasonably necessary to ensure
that Borrower and any business in which Borrower holds a substantial interest
becomes Year 2000 Compliant in a timely manner. Such acts shall include, without
limitation, performing a comprehensive review and assessment of all of
Borrower's systems and adopting a detailed plan, with an itemized budget, for
the remediation, monitoring and testing of such systems. If requested by Bank,
Borrower shall immediately deliver a statement to Bank summarizing the Year 2000
exposure, program or progress of Borrower and its Subsidiaries or other evidence
of Borrower's compliance with the terms of this Section, certified by an officer
of Borrower.
10. Financial Covenants and Information. All financial covenants and
financial information referenced herein shall be interpreted and prepared in
accordance with GAAP as used in the United States of America applied on a basis
consistent with previous years. Compliance with the financial covenants shall be
calculated and monitored on a monthly basis, except as shall be expressly stated
to the Contrary. Borrower affirmatively covenants that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or any
commitment is outstanding hereunder, it will, on a consolidated basis:
A. At all times, maintain a Minimum Tangible Net Worth of not less
than $3,000,000.00. As used herein, "Tangible Net Worth" shall mean all assets,
excluding any value for goodwill, Trademarks, Patents, Copyrights, organization
expense and other similar intangible items, less all liabilities (excluding
deferred revenue), plus Subordinated Debt;
B. At all times maintain a Minimum Term Liquidity Coverage Ratio of
not less than 1.50:1.00. As used herein "Term Liquidity Coverage Ratio" means
the sum of all unrestricted cash and cash equivalents plus the net availability
under the Facility-B Commitment divided by the total outstanding term
indebtedness owing by Borrower to Bank;
C. At all times maintain a Maximum Net Loss in any single month not
in excess of $1,000,000.00;
D. As soon as it is available, but not later than thirty (30) days
after and as of the end of each month, deliver to Bank an internally-prepared
financial statement consisting of a balance sheet and profit and loss statement,
in form satisfactory to Bank, and a Compliance Certificate in the form of
Exhibit B attached hereto and incorporated herein by this reference, certified
by an officer of Borrower;
E. As soon as it is available, but not later than one hundred twenty
(120) days after the end of Borrower's fiscal year, deliver to Bank unqualified
copies of Borrower's consolidated financial statements together with changes in
financial position audited by an independent certified public accountant
selected by Borrower but acceptable to Bank;
F. So long as any amounts remain outstanding and unpaid under the
Facility-B Loan Account, as soon as it is available, but not later than twenty
(20) days after and as of the end of each month, deliver to Bank, in such form
and detail as Bank may require, statements showing aging of the Accounts and
Borrower's accounts payable, together with a Borrowing Base Certificate in the
form of Exhibit C attached hereto and incorporated herein by this reference,
certified by an officer of Borrower. Notwithstanding the foregoing, as a
condition to any request for a Facility-B Loan, Borrower shall have delivered to
Bank said aging statements as well as a Borrowing Base Certificate covering the
most recent month then ended prior to the date of Borrower's request for an
advance for a Facility-B Loan;
9.
<PAGE>
G. Upon the reasonable request of Bank, deliver to Bank current
budgets, sales projections, operating plans and other financial exhibits and
information in form and substance satisfactory to Bank; and
H. Upon any officer becoming aware, deliver immediately to Bank
written notice of any pending or threatened litigation claiming, or reasonably
likely to result in, damages against Borrower in an amount in excess of
$50,000.00.
11. Loan Fee. Borrower has paid, and Bank hereby acknowledges receipt of
(a) in respect of the Facility-B Commitment, a loan fee in the amount of Two
Thousand Five Hundred Dollars ($2,500.00) and (b) in respect of the Facility-C
Commitment,a loan fee in the amount of Two Thousand Five Hundred Dollars
($2,500.00).
12. Default and Remedies. The occurrence of any one or more of the
following shall constitute an "Event of Default": (a) Default be made in the
payment of any obligation by Borrower under any Loan Document; (b) Except for
any failure to pay as described in clause (a) above, breach be made in any
warranty, statement, promise, term or condition, contained herein or in any
other Loan Document and the same shall not have been cured to the satisfaction
of Bank within fifteen (15) days after Borrower shall have become aware thereof,
whether by written notice from Bank, or otherwise, (except that no cure period
shall exist for breaches in respect of Borrower's obligations under Section 8,
Subsections 9.A., 9.B., 9.C., 9.F., 9.G., 9.H., 9:I and 9.0., Subsections 10.A.,
10.B., 10.C., 10.D., 10.E. and 10.F. of this Restated Loan Agreement, and
Sections 1 and 2 of the Restated Security Agreement); (c) Any statement,
warranty or representation made by Borrower at any time proves false; (d)
Borrower defaults in the repayment of any principal of or the payment of any
interest on any indebtedness exceeding in the aggregate principal amount
$10,000.00 or breaches or violates any term or provision of any promissory note,
loan agreement, mortgage, indenture or other evidence of such indebtedness
pursuant to which amounts outstanding in the aggregate exceed $10,000.00 if the
effect of such breach is to permit the acceleration of such indebtedness,
whether or not waived by the note holder or obligee, and such failure shall not
have been cured to Bank's satisfaction within fifteen (15) calendar days after
Borrower shall become aware thereof, whether by written notice from Bank or
otherwise, or there has in fact been an acceleration of such indebtedness; (e)
Borrower becomes insolvent or makes an assignment for the benefit of creditors;
(0 Any proceeding be commenced by Borrower under any bankruptcy, reorganization,
arrangement, readjustment of debt or moratorium law or statute or, any such a
proceeding is commenced against Borrower and is not dismissed or stayed within
ten (10) days (provided that no Loans will be made prior to the dismissal of
such proceeding); (g) Any money judgment, writ of attachment, garnishment,
execution or other legal process be entered against Borrower or issued against
any material property of Borrower which is not fully covered by insurance
(subject to reasonable deductibles) and remains unvacated, unbonded, unstayed or
unpaid or undischarged for more than fifteen (15) days (whether or not
consecutive) or in any event later than five (5) days prior to the date of any
proposed sale thereunder, or if any assessment for taxes against Borrower other
than against any of its real property, is made by the Federal or State
government or any department thereof; or (h) Any change in Borrower's financial
condition or operations which has a Material Adverse Effect. Upon the occurrence
and during the continuance of an Event of Default, Bank may, at its option and
without demand first made and without notice to Borrower, do any one or more of
the following: (i) Terminate its obligation to make loans to Borrower as
provided in Section 1 hereof; (ii) Declare all sums secured hereby immediately
due and payable; (iii) Immediately take possession of the Collateral wherever it
may be found, using all legally permissible means to do so, or require Borrower
to assemble the Collateral and make it available to Bank at a place designated
by Bank which is reasonably convenient to Borrower and Bank, and Borrower waives
all claims for damages due to or arising from or connected with any such taking;
(iv) Proceed in the foreclosure of Bank's security interest and sale of the
Collateral in any manner permitted by law, or provided for herein; (v) Sell,
lease or otherwise dispose of the Collateral at public or private sale, with or
without having the Collateral at the place of sale, and upon terms and in such
manner as Bank may determine, and Bank may purchase same at any such sale; (vi)
Retain the Collateral in full satisfaction of the obligations secured thereby to
the extent permitted under the Uniform Commercial Code; or (vii) Exercise any
remedies of a secured party under the Uniform Commercial Code. Prior to any such
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disposition, Bank may, at its option, cause any of the Collateral to be repaired
or reconditioned in such manner and to such extent as Bank may deem advisable,
and any sums expended therefor by Bank shall be repaid by Borrower and secured
hereby. Bank shall have the right to enforce one or more remedies hereunder
successively or concurrently, and any such action shall not estop or prevent
Bank from pursuing any further remedy that it may have hereunder or by law. If a
sufficient sum is not realized from any such disposition of the Collateral to
pay all obligations secured by this Restated Loan Agreement, Borrower hereby
promises and agrees to pay Bank any deficiency.
13. Records Retention. Borrower authorizes Bank to destroy all invoices,
delivery receipts, reports and other types of documents and records submitted to
Bank in connection with the transactions contemplated herein at any time
subsequent to four (4) months from the time such items are delivered to Bank.
14. Attorneys' Fees. Borrower agrees to reimburse Bank up to $3,500.00 for
its reasonable attorneys' fees and expenses incurred in connection with the
negotiation, preparation, execution and delivery of the Loan Documents.
15. Governing Law; Judicial Reference.
A. Governing Law. This Agreement shall be deemed to have been made
in the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
B. Judicial Reference.
(1) Other than (a) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (b) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Restated Loan Agreement or the other Loan Documents, which
controversy, dispute or claim is not settled in writing within thirty (30) days
after the "Claim Date" (defined as the date on which a party subject to this
Restated Loan Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in California in accordance with the provisions of Section 638 et seq. of the
California Code of Civil Procedure, or their successor section ("CCP"), which
shall constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Restated Loan Agreement, including whether such
controversy, dispute or claim is subject to the reference proceeding and except
as set forth above, the parties waive their rights to initiate any legal
proceedings against each other in any court or jurisdiction other than the
Superior Court in the County where the real property, if any, is located or
Santa Clara County, if none (the "Court"). The referee shall be a retired Judge
of the Court selected by mutual agreement of the parties, and if they cannot so
agree within forty-five (45) days after the Claim Date, the referee shall be
promptly selected by the Presiding Judge of the Court (or his/her
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP (S) 170.6. The
referee shall (x) be requested to set the matter for hearing within sixty (60)
days after the date of selection of the referee and (y) try any and all issues
of law or fact and report a statement of decision upon them, if possible, within
ninety (90) days of the Claim Date. Any decision rendered by the referee will be
final, binding and conclusive and judgement shall be entered pursuant to CCP (S)
644 in any court in the State of California having jurisdiction. Any party may
apply for a reference proceeding at any time after thirty (30) days following
notice to any other party of the nature of the controversy, dispute or claim, by
filing a petition for a hearing and/or trial. All discovery permitted by this
Restated Loan Agreement shall be completed no later than fifteen (15) days
before the first hearing date established by the referee. The
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referee may extend such period in the event of a party's refusal to provide
requested discovery for any reason whatsoever, including, without limitation,
legal objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days written
notice, and request for production or inspection of documents shall be responded
to within ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of the
referee as provided herein, the Superior Court is empowered to issue temporary
and/or provisional remedies, as appropriate.
(2) Except as expressly set forth in this Restated Loan
Agreement, the referee shall determine the manner in which the reference
proceeding is conducted including the time and place of all hearings, the order
of presentation of evidence, and all other questions that arise with respect to
the course of the reference proceeding. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter except that when any party So requests, a court reporter will be used
at any hearing conducted before the referee. The party making such a request
shall have the obligation to arrange for and pay for the court reporter. The
costs of the court reporter at the trial shall be borne equally by the parties.
(3) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding that shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(4) In the event that the enabling legislation which provides
for appointment of a referee is repealed (and no successor statute is enacted),
any dispute between the parties that would otherwise be determined by the
reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the Court,
in accordance with the California Arbitration Act, (S) 1280 through (S) 1294.2
of the CCP as amended from time to time. The limitations with respect to
discovery as set forth hereinabove shall apply to any such arbitration
proceeding.
16. Miscellaneous Provisions.
A. Nothing herein shall in any way limit the effect of the
conditions set forth in any other security or other agreement executed by
Borrower, but each and every condition hereof shall be in addition thereto.
B. No failure or delay on the part of Bank, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
C. All rights and remedies existing under this Restated Loan
Agreement or any other Loan Document are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
D. All headings and captions in this Restated Loan Agreement and any
related documents are for convenience only and shall not have any substantive
effect.
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E. This Restated Loan Agreement is not intended to be, and shall not
be construed to create, a novation or accord and satisfaction, and, except as
otherwise provided herein, the Original Loan Agreement is amended and restated
in full by the terms of this Restated Loan Agreement and all obligations
outstanding under the Original Loan Agreement are governed by the terms of this
Restated Loan Agreement.
F. This Restated Loan Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. Each
such agreement shall become effective upon the execution of a counterpart hereof
or thereof by each of the parties hereto and telephonic notification that such
executed counterparts has been received by Borrower and Bank.
Bank: Borrower:
Imperial Bank CrossRoute Software, Inc.,
a California corporation
By:___________________________ By: /s/ Bruce Hausmann
---------------------------------
Sunita R. Patel Bruce Hausmann
Assistant Vice President Vice President, Finance
LIST OF EXHIBITS AND SCHEDULES
- ------------------------------
EXHIBIT A: Definitions
SCHEDULE 1 TO EXHIBIT A: List of Specific Permitted Indebtedness
SCHEDULE 2 TO EXHIBIT A: List of Specific Permitted Liens
EXHIBIT B: Compliance Certificate
EXHIBIT C: Borrowing Base Certificate
13.
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Exhibit A
DEFINITIONS
"Accounts" means any right to payment for goods sold or leased, or to be
sold or to be leased, or for services rendered or to be rendered no matter how
evidenced, including accounts receivable, contract rights, chattel paper,
instruments, purchase orders, notes, drafts, acceptances, general intangibles
and other forms of obligations and receivables.
"Approved Account" means the Account of any account debtor which is a
"Fortune 500" company and approved by Bank in its sole and reasonable
discretion.
"Capital Lease" means, as to any Person, any lease of any Property by such
Person as lessee that is, or should be in accordance with Financing Accounting
Standards Board Statement No. 13, classified and accounted for as a "capital
lease" on the balance sheet of such Person prepared in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.
"Collateral" means any and all personal property of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest hereunder (including, without
limitation, the Accounts), Or pursuant to the terms of the Restated Security
Agreement, the IP Security Agreement or otherwise.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), co-made or discounted or sold with recourse by that Person,
or in respect of which that Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation for which that Person is in
effect liable through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, capital stock purchases, capital contributions or
otherwise), or to maintain the solvency of the obligor of such obligation, or to
make payment for any products, materials or supplies or for any transportation,
services or lease regardless of the non-delivery or non-furnishing thereof, in
any such case if the purpose or intent of such agreement is to provide assurance
that such obligation will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof. The amount of
any Contingent Obligation of any Person shall be deemed to be an amount equal to
the maximum amount of such Person's liability with respect to the stated or
determinable amount of the primary obligation for which such Contingent
Obligation is incurred or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder).
"Eligible Accounts" means such of Borrower's Accounts as Bank in its sole
reasonable discretion shall determine are eligible from time to time; provided,
however, that in no event shall Eligible Accounts include the following:
(1) all Accounts under which payment is not received within ninety
(90) days from the applicable invoice date;
Exhibit A
Page 1 of 6
<PAGE>
(2) all Accounts against which the account debtor or any other Person
obligated to make payment thereon asserts any defense, offset, counterclaim
or other right to avoid or reduce the liability represented by the
Accounts;
(3) any Accounts if the account debtor or any other Person liable in
connection therewith is insolvent, subject to bankruptcy or receivership
proceedings or has made an assignment for the benefit of creditors or whose
credit standing is unacceptable to Bank and Bank has so notified Borrower;
(4) Accounts with respect to which the account debtor is an officer,
director, shareholder, employee or Subsidiary;
(5) Accounts due from an account debtor if more than fifty percent
(50%) of the aggregate amount of Accounts of such account debtor have at
that time remained unpaid for more than ninety (90) days from the
applicable invoice date;
(6) Accounts with respect to international transactions unless either
(a) such Accounts are insured or covered by a letter of credit in a manner
and form acceptable to the Bank or (b) Bank shall have otherwise permitted
in writing in its sole and absolute direction;
(7) salesperson's accounts for promotional purposes;
(8) the amount by which the aggregate of all Accounts of an account
debtor exceeds twenty-five percent (25.0%) of the total accounts receivable
balance ("Concentration Limit"); provided, however, the Concentration Limit
for an Approved Account shall be thirty percent (30.0%);
(9) Accounts where the account debtor is a seller to borrower, to the
extent that a potential offset exists; and
(10) Accounts where the account debtor is a federal governmental
entity, federal agency or instrumentality thereof.
"Event of Default" has the meaning set forth in Section 12.
"Facility-A Maturity Date" has the meaning set forth in Section 1.A.
"Facility-B Maturity Date" has the meaning set forth in Section 1.B.
"Facility-C Maturity Date" has the meaning set forth in Section 1.C.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by the significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Indebtedness" means, as to any Person, without duplication, (a)all
indebtedness of such Person for borrowed money, including, without limitation,
all of such indebtedness outstanding under this Restated Loan Agreement and any
of the other Loan Documents, (b) all Capital Lease Obligations of such Person,
(c) to the extent of the outstanding indebtedness thereunder, other than in the
ordinary and normal course of business as it is now conducted, any obligation of
such Person representing an extension of credit to such Person, whether or not
Exhibit A
Page 2 of 6
<PAGE>
for borrowed money, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than (i) trade or other accounts payable in
the ordinary course of business in accordance with customary industry terms and
(ii) deferred franchise fees), (e) all Contingent Obligations, (f) any
obligation of such Person of the nature described in clauses (a), (b), (c), (d)
or (e) above, that is secured by a Lien on assets of such Person and which is
non-recourse to the credit of such Person, but only to the extent of the fair
market value of the assets so subject to the Lien, (g) obligations of such
Person arising under acceptance facilities or under facilities for the discount
of accounts receivable of such Person, (h) any obligation of such Person to
reimburse the issuer of any letter of credit issued for the account of such
Person upon which a draw has been made, and (i) any lease having the effect of
indebtedness, whether or not the same shall be treated as such on the balance
sheet of Borrower under GAAP.
"IP Security Agreement" means that certain Collateral Assignment, Patent
Mortgage and Security Agreement dated of even date herewith, made by Borrower
in favor of Bank.
"Intellectual Property" means
(1) Any and all copyright, rights, copyright applications, copyright
registrations and like protection in each work or authorship and derivative
work thereof, whether published or unpublished and whether or not the same
also constitutes a trade secret, now or hereafter existing, created,
acquired or held (collectively, the "Copyrights");
(2) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now Or hereafter
existing, created, acquired or held;
(3) Any and all design rights which may be available to Borrower now
or hereafter existing, created, acquired or held;
(4) Any patents, patent applications and like protections, including,
without limitation, improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same, including,
without limitation, the patents and patent applications (collectively, the
"Patents");
(5) Any trademark and servicemark rights, whether registered or not,
applications, to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks (collectively, the "Trademarks");
(6) Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the right, but not
the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(7) Any licenses or other rights to use any of the Copyrights,
Patents or Trademarks and all license fees and royalties arising from such
use to the extent permitted by such license or rights;
(8) Any amendments, extensions, renewals and extensions of any of the
Copyrights, Patents or Trademarks; and
(9) Any proceeds and products of the foregoing, including, without
limitation, all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Lien" means any mortgage, pledge, security interest, lien or other charge
or encumbrance, including the lien or retained security title of a conditional
vendor, upon or with respect to any property or assets.
Exhibit A
Page 3 of 6
<PAGE>
"Loan Account or Loan Accounts" means individually and collectively, the
Facility-A Loan Account, the Facility-B Loan Account and the Facility-C Loan
Account.
"Loan Documents" means this Restated Loan Agreement, the Restated Security
Agreement, the IP Security Agreement and that certain Agreement to Provide
Insurance (`Real or Personal Property) dated of even date herewith, each as
executed by Borrower in favor of Bank, together with all other documents entered
into or delivered pursuant to any of the foregoing, in each case as originally
executed or as the same may from time to time be modified, amended, supplemented
or restated.
"Loans" means individually and collectively, the Facility-A Loans, the
Facility-B Loans and the Facility-C Loans advanced pursuant to Section 1.
"Material Adverse Effect" means any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse effect upon
the validity Or enforceability of any material provision of any Loan Document,
(b) is or could reasonably be expected to be material and adverse to the
condition (financial or otherwise) or business operations of Borrower, (c)
materially impairs or could reasonably be expected to materially impair the
ability of Borrower, to perform its material Obligations, (d) materially impairs
or could reasonably be expected to materially impair the value or priority of
Bank's security interest in any Collateral or (e) materially impairs or could
reasonably be expected to materially impair the ability of Bank to enforce any
of; its legal remedies pursuant to the Loan Documents.
"Permitted Indebtedness" means the following:
(1) indebtedness of Borrower or Indebtedness and Contingent
Obligations of its Subsidiaries in favor of Bank arising under this
Restated Loan Agreement and the other Loan Documents;
(2) the existing Indebtedness and Contingent Obligations disclosed on
Schedule 1 attached hereto and incorporated herein by this reference;
provided that the principal amount thereof is not increased and the terms
thereof are not modified to impose more burdensome terms upon Borrower or
any of its Subsidiaries;
(3) the Subordinated Debt;
(4) extensions, renewals or refinancings of Indebtedness permitted
under this Restated Loan Agreement, other than clause (3) immediately
above;
(5) accrued dividends on the preferred stock of Borrower;
(6) interest rate and currency hedging agreements;
(7) guaranties of any Subsidiary's suppliers in connection with the
purchase of supplies in the ordinary course of business;
(8) guaranties of lease obligations incurred in the ordinary course
of business and to the extent otherwise permitted hereunder;
(9) Contingent Obligations constituting Permitted Liens; and
(10) the indebtedness referred to in clause (3)(a) of the definition
of Permitted Liens.
Exhibit A
Page 4 of 6
<PAGE>
"Permitted Liens" means the following:
(1) liens and security interests existing as of this date and
disclosed in Schedule 2 attached hereto and incorporated herein by this
reference;
(2) liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by
appropriate proceedings;
(3) liens and security interests (a) upon or in any equipment
acquired or held by Borrower to secure the purchase price of such equipment
or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment and in an amount not greater than the
purchase price thereof or (b) existing on such equipment at the time of its
acquisition, provided that the lien and security interest is confined
solely to the property so acquired and improvements thereon, and the
proceeds of such equipment;
(4) liens consisting of leases or Subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower's business
not interfering in any material respect with the business of Borrower and
any interest or title of a lessor or licensor under any lease or license,
as applicable;
(5) liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons or entities
imposed without action of such parties, provided that the payment thereof
is not yet required;
(6) liens incurred or deposits made in the ordinary course of
Borrower's business in connection with worker's compensation, unemployment
insurance, social security and other like laws;
(7) liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(8) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances affecting real property not interfering in any material
respect with the ordinary conduct of Borrower's business;
(9) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(10) liens that are not prior to Bank's security interest which
constitute rights of set-off of a customary nature;
(11) any interest or title of a lessor in equipment subject to any
Capitalized Lease otherwise permitted hereunder, and
(12) any liens arising from the filing of any financing statements
relating to true leases otherwise permitted hereunder.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.
Exhibit A
Page 5 of 6
<PAGE>
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"Restated Security Agreement" means that certain Amended and Restated
General Security Agreement dated of even date herewith, made by Borrower in
favor of Bank.
"Subordinated Debt" means indebtedness of Borrower, the repayment of
principal of which is fully subordinated in time and right of payment to the
Loans, and has been approved in Bank's sole and absolute discretion and in
writing.
"Year 2000 Compliant" means, in regard to Borrower or any Person, that all
software, hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of Borrower or such
Person, will properly perform date sensitive functions before, during and after
the year 2000.
"Year 2000 Problem" means the risk that any computer applications used by
Borrower and its Subsidiaries may be unable to recognize and properly perform
date-sensitive functions involving certain dates prior to and any date on or
after December 31, 1999.
Exhibit A
Page 6 of 6
<PAGE>
Schedule 1 to Exhibit A
SPECIFIC PERMITTED INDEBTEDNESS
List or indicate "None".
Schedule 1 to Exhibit A
Page 1 of 1
<PAGE>
Schedule 2 to Exhibit A
SPECIFIC PERMITTED LIENS
List or indicate "None"
Schedule 2 to Exhibit A
Page 1 of 1
<PAGE>
Exhibit B
COMPLIANCE CERTIFICATE
The consolidated financial statements dated as of __________________ of
CROSSROUTE SOFTWARE, INC., a California corporation ("Borrower") attached hereto
and submitted to IMPERIAL BANK ("Bank") pursuant to that certain Amended and
Restated Loan Agreement dated as of September 8, 1998, entered into between
Borrower and Bank (the "Restated Loan Agreement"), are in compliance with all
financial covenants (unless otherwise noted below) as specified in Section 10
therein, as follows:
- --------------------------------------------------------------------------------
COVENANT: ACTUAL:
- --------------------------------------------------------------------------------
A. Minimum Tangible Net Worth of:
-----------------------------
$3,000,000.00
- --------------------------------------------------------------------------------
B. Minimum Term Liquidity Coverage Ratio:
-------------------------------------
1.50:1.00
- --------------------------------------------------------------------------------
C. Maximum Net Loss:
----------------
$1,000,000.00
- --------------------------------------------------------------------------------
Exceptions: (if none, so state):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
The undersigned authorized officer of Borrower hereby certifies that Borrower is
in complete compliance with the terms and conditions of the Restated Loan
Agreement for the period ending ________________, ______, and as of the date of
this Compliance Certificate the representations and warranties stated therein
are true, accurate and complete as of the date hereof (except as to those
representations and warranties which specifically reference a particular date
and except as noted above).
The undersigned further certifies that s/he knows of no pending conditions which
may cause an Event of Default (as defined in the Restated Loan Agreement) to
exist in the next thirty (30) days. The required support documents for this
certification are attached and prepared in accordance with GAAP consistently
applied.
Date:________________ CROSSROUTE SOFTWARE, INC.,
a California corporation
By:_____________________________________
Name:___________________________________
Title:__________________________________
Exhibit B
Page 1 of 1
<PAGE>
Exhibit C
BORROWING BASE CERTIFICATE
(To be provided and attached by Bank)
Exhibit C
<PAGE>
[LETTERHEAD OF IMPERIAL BANK APPEARS HERE]
November 18, 1998
Extricity Software, Inc.
555 Twin Dolphin Drive, Suite 600
Redwood Shores, CA 94065
Attention: Bruce Hausmann
Ken Ross
Re: Imperial Bank Loan No. 00720000111
Gentlemen:
With reference to the Loan Agreement dated October 6, 1997 and the Amended
and Restated Loan Agreement dated September 8, 1998 between Imperial Bank
("Bank") and Extricity Software, Inc. ("Borrower") in connection with the
above-referenced loan ("Loan"), and as amended from time to time, the Bank
and Borrower hereby modify the following numbered terms and conditions of
the Amended and Restated Loan Agreement (hereinafter referred to as the
"Loan Agreement"):
1. Section C of Paragraph 10 of the Loan Agreement is deleted in its
entirety and is replaced with the following:
C. Borrower to maintain a Maximum Net Loss in any single month not
in excess of $1,500,000 beginning with the month ending October
31, 1998 through the month ending June 30, 1999, thereafter
maintain a Maximum Net Loss in any month not in excess of
$1,000,000.
Except for the above-described modifications, the Agreement shall remain
unaltered and in full force and effect.
Please acknowledge your approval by signing and returning the original of
this letter to me.
Sincerely,
/s/ Sunita Patel
Sunita Patel
Assistant Vice President
Emerging Growth Industries
<PAGE>
Extricity Software, Inc.
November 18, 1998
Page 2 of 2
- --------------------------------------------------------------------------------
Accepted and agreed to:
EXTRICITY SOFTWARE, INC.
By: /s/ [ILLEGIBLE]^^
-----------------------------
Title: Vice President, Finance
-----------------------------
Date: 12/4/98
-----------------------------
<PAGE>
[LETTERHEAD OF IMPERIAL BANK]
April 6, 1999
Extricity Software. Inc.
555 Twin Dolphin Drive, Suite 600
Redwood Shores, CA 94065
Attention: Stephen Albertolle
Eric Niiya
Re: Imperial Bank Loan No. 00720000111
Gentlemen:
With reference to the Amended and Restated Loan Agreement dated September 8,
1998 between Imperial Bank ("Bank") and Extricity Software, Inc., formerly
Crossroute Software, Inc, ("Borrower") in connection with the above-referenced
loan ("Loan"). and as amended from time to time, the Bank and Borrower hereby
modify the following numbered terms and conditions of the Amended and Restated
Loan Agreement (hereinafter referred to as the "Loan Agreement"):
1. Section A of Paragraph 10 of the Loan Agreement is deleted in its entirety
and is replaced with the following:
A. At all times maintain a Minimum Tangible Net Worth of not less than
$3,000,000, except for the period beginning with the month ending
February 28, 1999 through the earlier of 1) the month ending June 30,
1999 or 2) upon maintaining a Minimum Tangible Net Worth of not less
than $3,000,000 during which time no further advances under Facility
A, Facility B or Facility C will be made by Bank to Borrower. As used
herein, "Tangible Net Forth" shall mean all assets, excluding any
value for goodwill, Trademarks, Patents, Copyrights, organization
expense and other similar intangible items, less all liabilities
(excluding deferred revenue), plus Subordinated Debt;
Except for the above-described modifications, the Agreement shall remain
unaltered and in full force and effect.
<PAGE>
Extricity Software, Inc.
April 6, 1999
Page 2 of 2
- --------------------------------------------------------------------------------
Please acknowledge your approval by signing and returning the original of this
letter to me.
Sincerely,
/s/ Sunita Patel
Sunita Patel
Assistant Vice President
Emerging Growth Industries
Accepted and agreed to:
EXTRICITY SOFTWARE, INC.
By: /s/ Steve Albertolle
--------------------
Title: VP Finance and Administration and CFO
-------------------------------------
Date: April 7, 1999
-------------
<PAGE>
April 6, 1999
Extricity Software, Inc.
555 Twin Dolphin Drive, Suite 600
Redwood Shores, CA 94065
Attention: Stephen Albertolle
Eric Niiya
Re: Imperial Bank Loan No. 00720000111
Gentlemen:
With reference to the Amended and Restated Loan Agreement dated September 8,
1998 between Imperial Bank ("Bank") and Extricity Software, Inc., formerly
Crossroute Software, Inc, ("Borrower") in connection with the above-referenced
loan ("Loan"), and as amended from time to time, the Bank and Borrower hereby
modify the following numbered terms and conditions of the Amended and Restated
Loan Agreement (hereinafter referred to as the "Loan Agreement"):
1. Section C of Paragraph 10 of the Loan Agreement is deleted in its entirety
and is replaced with the following:
C. Borrower to maintain a Maximum Net Loss in any single month not in
excess of $1,500,000, except for the month ending June 30, 1999, in
which Borrower is to maintain a Maximum Net Loss not in excess of
$1,650,000;
Except for the above-described modifications, the Agreement shall remain
unaltered and in full force and effect.
Please acknowledge your approval by signing and returning the original of this
letter to me.
Sincerely,
/s/ Sunita Patel
Sunita Patel
Assistant Vice President
Emerging Growth Division
<PAGE>
Extricity Software, Inc.
August 5, 1999
Page 2 of 2
- --------------------------------------------------------------------------------
Accepted and agreed to:
EXTRICITY SOFTWARE, INC.
By: /s/ Stephen Albertolle
----------------------
Title: VP Finance and CFO
------------------
Date: 9-7-99
------
<PAGE>
[LETTERHEAD OF IMPERIAL BANK]
September 7, 1999
Stephen Albertolle
Extricity Software
555 Twin Dolphin Drive
Suite 600
Redwood Shores, CA 94065
Re: Loan # 00720000111/ 05 Note Number/ $750,000 Note Amount
Dear Steve:
Imperial Bank has approved an extension of your credit facility shown above as
evidenced by the Loan Agreement dated September 8, 1998, from its current
maturity of September 7, 1999 to December 7, 1999.
Except as modified and extended hereby, the existing documentation as amended
concerning your obligations remains in full force and effect.
Sincerely,
/s/ Sunita Patel
Sunita Patel
Vice President
Emerging Growth Industries Group
Acknowledged and accepted on September, 9, 1999.
By:
EXTRICITY SOFTWARE, INC.
/s/ Steve Albertolle
- --------------------
Title: VP Finance and CFO
------------------
<PAGE>
[LETTERHEAD OF IMPERIAL BANK]
April 27, 2000
Extricity Software, Inc.
555 Twin Dolphin Drive, Ste. 600
Redwood Shores, CA 94065
Attention: Steven Albertolle
Eric Niiya
Re: Imperial Bank Loan No. 00720000111
Gentlemen:
With reference to the Amended and Restated Loan Agreement dated September 8,
1998 between Imperial Bank ("Bank") and Extricity Software, Inc., formerly
Crossroute Software, Inc. ("Borrower") in connection with the above referenced
loan ("Loan"), and as amended from time to time, the Bank and Borrower hereby
agree to waive for the periods ended January 31, 2000, February 28, 2000 and
March 31, 2000, the requirement under Section C of Paragraph 10 of the Loan
agreement, requiring a Maximum Net Loss in any single month not in excess of
$1,500,000, except for the month ending June 30, 1999, in which Borrower is to
maintain a Maximum Net Loss not in excess of $1,650,000.
This waiver should not be construed as a permanent waiver of any terms and
conditions. Except for the above waiver, the Agreement shall remain unaltered
and in full force and effect.
Please acknowledge your approval by signing and returning this original letter
to my attention.
Sincerely,
/s/ Dan Sanchez
Dan Sanchez
Vice President
Emerging Growth Division
<PAGE>
Extricity Software, Inc.
April 27, 2000
Page 2 of 2
Accepted and Agreed to:
EXTRICITY SOFTWARE, INC.
By: /s/ Steve Albertulle
-----------------------
Title: CFO and VP of Finance
-----------------------
and Administration
-----------------------
Date: April 27, 2000
-----------------------
<PAGE>
[LETTERHEAD OF IMPERIAL BANK]
April 27, 2000
Stephen Albertolle
Extricity Software
555 Twin Dolphin Drive
Suite 600
Redwood Shores, CA 94065
Re: Loan # 00720000111/ 05 Note Number/ $750,000 Note Amount
Dear Steve:
Imperial Bank has approved an extension of your credit facility shown above as
evidenced by the Loan Agreement dated September 8, 1998, from its current
maturity of April 7, 2000 to May 7, 2000.
Except as modified and extended hereby, the existing documentation as amended
concerning your obligations remains in full force and effect.
Sincerely,
/s/ Dan Sanchez
Dan Sanchez
Vice President
Emerging Growth Industries Group
Acknowledged and accepted on April 27, 2000.
EXTRICITY SOFTWARE, INC.
By: /s/ Steve Albertolle
---------------------
Title: CFO and VP of Finance and Administration
-----------------------------------------
<PAGE>
FIRST AMENDMENT
TO
AMENDED AND RESTATED
LOAN AGREEMENT
--------------
This First Amendment to Amended and Restated Loan Agreement is entered into
as of May 1, 2000 (the "Amendment"), by and between IMPERIAL BANK ("Bank") and
EXTRICITY, INC., formerly known as CROSSROUTE SOFTWARE, INC. ("Borrower").
RECITALS
--------
Borrower has changed its name from "CrossRoute Software, Inc." to
"Extricity, Inc." Borrower and Bank are parties to that certain Amended and
Restated Loan Agreement dated as of September 8, 1998 as amended thereafter (the
"Agreement"), that certain Amended and Restated General Security Agreement dated
as of September 8, 1998 (the "Security Agreement"), and that certain Collateral
Assignment, Patent Mortgage and Security Agreement dated as of September 8, 1998
(the "Collateral Assignment"). Since execution of the Loan Documents, Borrower
has since changed its name from CROSSROUTE SOFTWARE, INC. to EXTRICITY, INC.
The parties desire to amend the Agreement in accordance with the terms of this
Amendment.
NOW, THEREFORE, the parties agree as follows:
1. Wherever the name "CrossRoute Software, Inc." appears in the Loan
Agreement and any related documents (the "Loan Documents") it shall mean
"Extricity, Inc." Any reference in the Loan Documents to Borrower, the
undersigned or other terms that refer to "CrossRoute Software, Inc." shall mean
and refer to "Extricity, Inc."
2. The reference in Section 1.B. to "$750,000.00 (the "Facility -B
Commitment")" is hereby revised to read "$1,500,000.00 (the "Facility -B
Commitment")".
3. The last sentence in Section 1.B. is hereby replaced with the
following:
"Borrower promises to pay to Bank the entire outstanding
unpaid principal balance (and all accrued unpaid interest thereon) of the
Facility-B Loan Account on or before May 1, 2001. ("Facility-B Maturity Date").
4. In Section 10.D., after the words "an internally-prepared financial
statement", add the following: "prepared in accordance with GAAP,".
5. Section 10.E. of the Agreement is hereby replaced in its entirety with
the following:
"Beginning with the fiscal year ended March 31, 2000, as soon
as it is available, but not later than one hundred twenty (120) days after the
end of Borrower's fiscal year, deliver to Bank unqualified copies of Borrower's
consolidated financial statements together with changes in financial position
audited by an independent certified public accountant selected by Borrower but
acceptable to Bank;"
6. The following new Section 10.I. is hereby added to the Agreement:
"I. At all times, maintain, a ratio of Quick Assets to
Current Liabilities minus Deferred Maintenance Revenue of at least 1.50 to
1.0.; and
Section 10.C. of the Agreement is hereby replaced in its entirety with
the following:
Beginning with the fiscal quarter and the month ending June
30, 2000, Borrower shall not suffer a loss (excluding expenses related to
amortization of deferred compensation) in excess of
1
<PAGE>
30, 2000; $9,000,000 for the fiscal quarter ended December 31, 2000; $6,500,000
for the fiscal quarter ended March 31, 2001.
7. The following new definitions are hereby added to Exhibit A of the
---------
Agreement:
"Bank Expenses" means all: reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
reasonable Collateral audit fees; and Bank's reasonable attorneys' fees and
expenses incurred in amending, enforcing or defending the Loan Documents
(including fees and expenses of appeal), incurred before, during and after an
Insolvency Proceeding, whether or not suit is brought.
"Current Liabilities" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Credit
Extensions made under this Agreement, including all Indebtedness that is payable
upon demand or within one year from the date of determination thereof unless
such Indebtedness is renewable or extendible at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination.
"Deferred Maintenance Revenue" is all amounts received in advance of
performance under maintenance contracts and not yet recognized as revenue.
"GAAP" means generally accepted accounting principles as in effect
from time to time.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Quick Assets" means, at any date as of which the amount thereof
shall be determined, the unrestricted cash and cash-equivalents, accounts
receivable and investments with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
8. The definition of "IP Security Agreement" is hereby deleted in Exhibit A
---------
of the Agreement.
9. The Exhibit B, Compliance Certificate and Exhibit C, Borrowing Base
--------- ---------
Certificate of the Agreement are hereby replaced in their entirety with the
Exhibit B, Compliance Certificate and Exhibit C, Borrowing Base Certificate
- --------- ---------
attached hereto and incorporated into the Agreement by this reference.
10. Bank will not be requiring specific filings on the Borrower's
Intellectual Property at the United States Patent and Trademark Office or the
Copyright Office.
11. Unless otherwise defined, all initially capitalized terms in this
Amendment shall be as defined in the Agreement. The Agreement, as amended
hereby, shall be and remain in full force and effect in accordance with its
respective terms and hereby is ratified and confirmed in all respects. Except as
expressly set forth herein, the execution, delivery, and performance of this
Amendment shall not operate as a waiver of, or as an amendment of, any right,
power, or remedy of Bank under the Agreement, as in effect prior to the date
hereof. Borrower ratifies and reaffirms the continuing effectiveness of all
promissory notes, guaranties, security agreements, mortgages, deeds of trust,
environmental agreements, and all other instruments, documents and agreements
entered into in connection with the Agreement.
12. Borrower represents and warrants that the Representations and
Warranties contained in the Agreement are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.
2
<PAGE>
13. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.
14. As a condition to the effectiveness of this Amendment, Bank shall have
received, in form and substance satisfactory to Bank, the following:
(a) this Amendment, duly executed by Borrower;
(b) any Bank Expenses incurred through the date of this Amendment;
(c) Corporate Resolutions to Borrow;
(d) UCC-2 Amendment evidencing Borrower's name change; and
(e) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
first date above written.
EXTRICITY, INC.
By: /s/ Stephen Albertolle
----------------------------------
Title: VP Finance, CFO and Secretary
IMPERIAL BANK
By: /s/ Dan Sanchez
----------------------------------
Title: Vice President
3
<PAGE>
EXHIBIT B
COMPLIANCE CERTIFICATE
TO: IMPERIAL BANK
FROM: EXTRICITY, INC.
The undersigned authorized officer of Extricity, Inc. hereby certifies that
in accordance with the terms and conditions of the Amended and Restated Loan
Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in
complete compliance for the period ending _______________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
<TABLE>
<CAPTION>
Reporting Covenant Required Complies
- ------------------ -------- ------------
<S> <C> <C> <C>
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 120 days (beg. 3/31/00) Yes No
10K and 10Q (as applicable) Yes No
A/R & A/P Agings, Borrowing Base Cert. Monthly within 20 days Yes No
A/R Audit Initial and Annual Yes No
IP Report Quarterly within 30 days Yes No
Financial Covenant Required Actual Complies
- ------------------ -------- ----------- ------------
Maintain on a Monthly Basis:
Minimum Adjusted Quick Ratio 1.50:1.00(1) _____:1.00 Yes No
Maximum Term Liquidity Coverage Ratio 1.50:1.00 _____:1.00 Yes No
Minimum Tangible Net Worth $ 3,000,000 $________ Yes No
Maximum Loss $ ________(2) $________ Yes No
</TABLE>
(1) At all times, maintain, a ratio of Quick Assets to Current Liabilities
minus Deferred Maintenance Revenue of at least 1.50 to 1.0.
(2) Maintain, beginning with the fiscal quarter and the month ending March 31,
2000, Borrower shall not suffer a loss, in excess of $6,000,000 for each fiscal
quarter.
<TABLE>
<CAPTION>
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
<S> <C>
Received by:_______________________________________
Sincerely, AUTHORIZED SIGNER
Date:______________________________________________
___________________________________________________ Verified:__________________________________________
SIGNATURE AUTHORIZED SIGNER
___________________________________________________ Date: _____________________________________________
TITLE
Compliance Status Yes No
___________________________________________________
DATE
</TABLE>
4
<PAGE>
EXHIBIT C
---------
BORROWING BASE CERTIFICATE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Borrower: Extricity, Inc. Lender: Imperial Bank
Commitment Amount: $1,500,000.00
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ___ $___________
2. Additions (please explain on reverse) $___________
3. TOTAL ACCOUNTS RECEIVABLE $___________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $___________
5. Balance of 50% over 90 day accounts $___________
6. Concentration Limits
7. Foreign Accounts $___________
8. Governmental Accounts $___________
9. Contra Accounts $___________
10. Demo Accounts $___________
11. Intercompany/Employee Accounts $___________
12. Other (please explain on reverse) $___________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $___________
14. Eligible Accounts (#3 minus #13) $___________
15. LOAN VALUE OF ACCOUNTS (75% of #14) $___________
BALANCES
16. Maximum Loan Amount $___________
17. Total Funds Available [Lesser of #16 or #15] $___________
18. Present balance owing on Line of Credit $___________
19. Outstanding under Sublimits (Letters of Credit) $___________
20. RESERVE POSITION (#17 minus #18 and #19) $___________
</TABLE>
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Imperial Bank.
EXTRICITY, INC.
By: _______________________________________
Authorized Signer
5
<PAGE>
CORPORATE RESOLUTIONS TO BORROW
Borrower: EXTRICTY, INC.
- --------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of EXTRICITY, INC. (the
"Corporation"), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the state of its incorporation.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation
duly called and held, at which a quorum was present and voting, (or by other
duly authorized corporate action in lieu of a meeting), the following
resolutions were adopted.
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
<TABLE>
<CAPTION>
NAMES POSITIONS ACTUAL SIGNATURES
- ----------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Barry M. Ariko Chairman and CEO /s/ Barry M. Ariko
Stephen J. Albertolle VP Finance, CFO and Secretary /s/ Stephen Albertolle
Vicki L. Randall General Counsel and Assistant /s/ Vicki Randall
Secretary
</TABLE>
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Imperial Bank ("Bank"), on
such terms as may be agreed upon between the officers, employees, or agents and
Bank, such sum or sums of money as in their judgment should be borrowed, without
limitation, including such terms and sums as are specified in that certain First
Amendment to Amended and Restated Loan Agreement dated as of May 1, 2000 (the
"Amendment").
EXECUTE AMENDMENT. To execute and deliver to Bank the Amendment and related
documents, and also to execute and deliver to Bank one or more renewals,
extensions, modifications, consolidations, or substitutions therefor.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Amendment, which security interest shall secure all of the
Corporation's Obligations, as described in the Amendment.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the account of the Corporation with Bank, or to cause such other disposition
of the proceeds derived therefrom as they may deem advisable.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any
6
<PAGE>
and all fees and costs, and to execute and deliver such other documents and
agreements as they may in their discretion deem reasonably necessary or proper
in order to carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
I FURTHER CERTIFY that attached hereto are true and correct copies of the
Certificate of Incorporation and Bylaws of the Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand on May 1, 2000 and attest
that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X
--------------------------------------------
================================================================================
7
<PAGE>
Exhibit 21.1
Subsidiaries of the Registrant
The Registrant owns 100% of a United Kingdom company that was duly formed under
applicable law on September 13, 1999 called "Extricity Software Limited",
Registration Number 03843149.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
Registration Statement.
Arthur Andersen LLP
San Jose, California
May 15, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED MARCH 31, 2000 CONTAINED IN THE
COMPANY'S FORM S-1 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 0.01
<CASH> 6,587
<SECURITIES> 1,274
<RECEIVABLES> 5,062
<ALLOWANCES> 801
<INVENTORY> 0
<CURRENT-ASSETS> 12,553
<PP&E> 2,251
<DEPRECIATION> 983
<TOTAL-ASSETS> 14,196
<CURRENT-LIABILITIES> 11,100
<BONDS> 0
0
18,450
<COMMON> 35,168
<OTHER-SE> (14,956)
<TOTAL-LIABILITY-AND-EQUITY> 14,196
<SALES> 9,185
<TOTAL-REVENUES> 9,185
<CGS> 4,918
<TOTAL-COSTS> 4,918
<OTHER-EXPENSES> 24,452
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75
<INCOME-PRETAX> (19,889)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,889)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,889)
<EPS-BASIC> (4.64)
<EPS-DILUTED> (4.64)
</TABLE>
